54 Business The EconomistAugust 3rd 2019
2 Apple and Foxconn will chip in, joining a
string of Japanese financial institutions
and Kazakhstan’s sovereign-wealth fund.
One notable absentee is the sovereign-
wealth fund of Saudi Arabia, whose $45bn
stake made it the largest investor in the
first fund but became a huge source of con-
troversy following the murder of Jamal
Khashoggi, a dissident Saudi journalist.
SoftBank itself will be the biggest con-
tributor: it promises to put in $38bn. That is
where the Sprint deal comes in. The merger
is unwelcome news for American consum-
ers, notwithstanding requirements for thetwo firms to divest assets and share spec-
trum with Dish, a satellite-tvprovider. It
still faces antitrust challenges from state
attorneys-general. But if the deal goes
through, it would reduce the amount of
debt on SoftBank’s consolidated balance-
sheet by around $40bn, potentially lower
the discount that the stockmarket cur-
rently applies to the firm and sharpen its
focus on tech investment.
Sceptics of the megafund model still
have plenty of arguments. It is too early to
judge the success of the first fund, which
runs until 2029. Those who think that Soft-Bank has been inflating tech valuations
will be closely watching WeWork, which
many see as a property company masquer-
ading as a tech firm. Its initial public offer-
ing is expected in September. The gover-
nance worries that surround the first fund
are unlikely to be quelled by SoftBank’s
still-larger stake in the second. Even if one
$100bn fund can be put to work, how many
other tech startups are there able to absorb
such huge investments? But simply by rais-
ing a second gargantuan pot of money, Mr
Son has given the doubters a big black eye
and himself a day to remember. 7Bartleby Nice work
Economist.com/blogs/bartlebyO
ur staff are our most important
asset. Many managers have intoned
this mantra over the years but plenty of
employees have probably thought to
themselves that, deep down, executives
place a higher value on the machines on
the factory floor or cash in the bank.
That impression can be reinforced
when executives refer to the need to
maximise “shareholder value”. The
implication is that keeping equity in-
vestors happy is a company’s main prior-
ity. Employees fall into the lesser catego-
ry of “stakeholders”, along with
component suppliers.
To many American businesspeople,
the concept of “stakeholder capitalism”
is often seen as a woolly European no-
tion. The assumption is that firms that
focus on stakeholders will struggle to
survive in the Darwinian world of multi-
national business.
It is easy to be cynical about some of
the language used by those who argue
that employees should be treated better.
One obvious example is a book called
“Humane Capital” by Vlatka Hlupic,
which includes a foreword by the Dalai
Lama and is dedicated, portentously, “to
humanity”.
But there is a serious point hidden
amid its grandiose statements. Too many
companies operate a top-down “com-
mand and control” system, Ms Hlupic
argues, when they would be better served
by giving employees more freedom to
make their own decisions.
However, hard-headed executives
will be won round only by hard facts. A
convincing case can be found in a recent
paper* by Christian Krekel, George Ward
and Jan-Emmanuel de Neve. The study,
based on data compiled by Gallup, a
polling organisation, covers nearly 1.9m
employees across 230 separate organisa-tions in 73 countries.
The authors studied four potential
measures of corporate performance: cus-
tomer loyalty, employee productivity,
profitability and staff turnover. They
found that employee satisfaction had a
negative link with staff turnover and a
substantial positive correlation with
customer loyalty. It was correlated with
higher productivity and, less strongly,
with profitability.
Of course, correlation does not prove
causality. It could be the case that working
for a successful company makes employ-
ees more contented, rather than the other
way round. However, the authors cite
studies of changes within individual firms
and organisations which seem to show
that improvements in employee morale
precede gains in productivity, rather than
the reverse.
What might explain the link? One
school of thought, known as human-
relations theory, has long argued that
higher employee well-being is associated
with higher productivity, not least because
happy workers are less prone to absentee-ism or quitting. However, as the authors
of the paper admit, there is precious little
research on the best measures that man-
agers can take to improve employee
well-being, or indeed which are the most
cost-effective.
Rather like the judge’s famous dictum
about obscenity, a well-run company
may be hard to define but you can recog-
nise it when you see it. Workers will be
well informed about a company’s plans
and consulted about the roles they will
play. Staff will feel able to raise problems
with managers without fearing for their
jobs. Bullying and sexual harassment
will not be permitted. Employees may
work hard, but they will be allowed
sufficient time to recuperate, and enjoy
time with their families. In short, staff
will be treated as people, not as mere
accounting units.
That may be a difficult approach for
executives brought up on the philosophy
of Frederick Winslow Taylor, an efficien-
cy guru of the late 19th and early 20th
century, who wrote of the danger that
workers “tend to become more or less
shiftless, extravagant and dissipated”.
Armed with a stopwatch, Taylor dra-
gooned employees into increasing pro-
duction in the iron and steel industries.
Most employees no longer cart heavy
loads around all day, of course. Their
tasks involve creativity and empathy
when dealing with the public. In service
industries, staff really are a company’s
most important asset. And that is why
the best executives will realise that a
contented workforce is a prerequisite for
corporatesuccess.Employee happiness and business success are linked.............................................................
* Employee Wellbeing, Productivity and Firm
Performance, Saïd Business School, WP 2019-04