Investors are increasingly using information about how employees feel about companies to decide where to put their money. Jeanne Yurman reports.
Beyond balance sheets and financial statements, gauging how a company's employees feel is an offbeat tool big investors are using to gain an edge. The thinking - good or bad workers' feelings affects company performance. Reuters reporter Jessica Toonkel: SOUNDBITE: JESSICA TOONKEL, REUTERS REPORTER (ENGLISH) SAYING: "By tracking employee sentiment they hope that, if workers are happy and they can see that, then they'll be more productive, and that will result in a better bottom line for the companies." A unit at BlackRock, one of the world's largest and most successful asset managers, for example, uses automated Internet searches to keep tabs on key positive and negative words about companies on blogs, social media and chat rooms. Such 'unstructured' or sentiment-type data make up a fifth of the info they use to steer investment decisions. A popular source for tracking grousing or praise is Glassdoor, a website where employees can post anonymous company reviews. Its research shows that the stocks of companies, which are ranked as 'good places to work,' have beat the S&P 500 over the past six years. Glassdoor chief economist Andrew Chamberlain: SOUNDBITE: ANDREW CHAMBERLAIN, CHIEF ECONOMIST, GLASSDOOR (ENGLISH) SAYING: "When we followed portfolios of those companies with great internal culture, they significantly outperformed the overall stock market, in some cases, doubling the return of the S&P 500." And how employees feel about their employer can predict stock market moves, according to research conducted for Reuters by analytics firm, Accern. In the case of Cumulus Media - the country's top operator of radio stations - in late 2013 its stock was climbing, but so too were negative reviews. As its ranking on Glassdoor fell, so did the stock. Two trends are driving a surge in the use of employee sentiment in deciding where to invest. SOUNDBITE: ANDREW CHAMBERLAIN, CHIEF ECONOMIST, GLASSDOOR (ENGLISH) SAYING: "The first is a rapid growth in service sector companies, where the main asset of the firm is inside the heads of the employees, so sentiment is more important than ever. The second trend is the growth in online sources of information in real-time, information about hundreds of thousands of these companies, not just a handful of dozens or hundreds or thousands of companies through traditional surveys." Using emotional inputs may offer extra insight, but also carries risk. Employee reviews may not always reflect overall sentiment at a firm. And those using it can't always be sure postings were made by actual employees.