Evidence that employee well-being boosts long-term performance

Pitting investor returns against worker satisfaction is a lose-lose situation.

by Alex Edmans

Henry Ford’s assembly line was one of the most successful management inventions of the early 20th century.  Why?  Because it squeezed as much effort out of workers as possible by forcing them to keep up with the pace of production.  

Indeed, extracting from employees has historically been viewed as the role of management. The value that a company creates is seen as a fixed pie. A CEO’s duty is to maximise profit – investors’ slice of the pie. If the pie is fixed, this requires her to reduce the slice taken by workers, so, she pays them rock bottom wages and works them to the bone. 

While this might seem a caricature, many elements of this pie-splitting mentality still remain prevalent today. Scandals at Sports Direct and BHS arose because these companies failed to pay the minimum wage or fund employee pensions. Amazon’s value crossed the $1 trillion mark last February, but this value may have been created at the expense of workers.  

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