A Resilience Framework to Assess Job Quality and Financial Performance

Employment quality is a key aspect of the social dimension of the Environmental, Social and Governance (ESG) criteria that socially conscious investors use to evaluate firms. Several data vendors have provided their own matric of corporate employment practices encompassing compensation, engagement, diversity, equity, health, safety, and so forth; yet these matrixes are usually un-comparable and sometimes inconsistent across different sources. We present a novel quality jobs (QJ) conceptual framework that uses systems and resilience thinking to capture employment quality at the company level that can be applied on distinct datasets. The framework includes four dimensions (SVEF): 1) Security, which captures the dependability of a continued job; 2) Viability, which refers to a company’s reputation and how it relates to the community it operates in; 3) Equity, which focuses on fairness, diversity, and inclusion; and 4) Flexibility, which includes employees’ freedom of choice, degree of options, and potential mobility within the firm. We apply the SVEF framework on three distinct datasets to assess companies’ employment quality and strategies, and to examine the relationship between their QJ and economic performance. We document sharp differences in QJ scores among and within industries and show that QJ scores are highly associated with companies’ financial performances (measured by Tobin’s Q, ROA for public firms, and job growth/attrition for private companies). The results apply to both large US publicly traded companies and small or medium- sized private companies. Results also show that QJ scores are positively associated with product safety and customer satisfaction, illustrating a potential productivity and quality channel through which high employment quality creates value to firms. Our research suggests that adopting a high QJ strategy can result in a triple-win for the employees, companies, and investors.