What can your employees' LinkedIn and Glassdoor activity tell you about a company's prospects? More than you might think. From competition for top talent to out-of-sync business prospects, these platforms offer valuable insights — but are leaders paying attention? Assistant professor Nan Li joins Executive Summary to unpack what employees are really signaling and why companies must start listening.
What can your employees' LinkedIn and Glassdoor activity tell you about a company's prospects? More than you might think. From competition for top talent to out-of-sync business prospects, these platforms offer valuable insights — but are leaders paying attention? Assistant professor Nan Li joins Executive Summary to unpack what employees are really signaling and why companies must start listening.
Show notes
[0:00] Are you listening to what your employees are and aren’t telling you about your company’s prospects?
[0:29] Meet Nan Li, an assistant professor of accounting at the Rotman School of Management who studies human capital – that is employees – and its impact on company performance.
[1:46] Big changes are coming to the reporting standards world. Starting in 2027, companies in the U.S. will have to disclose how much of their expense line items (think R&D, administration, marketing) is spent on compensation.
[3:22] This news makes Nan and other researchers excited, since it’s a goldmine of insights.
[4:00] The changes are long overdue. While once a company’s output and profits were driven by things like machinery and widgets – so that was a primary focus on reports; as we shift into a knowledge economy, employees are becoming the biggest asset.
[5:11] What are peer firms, and why does it matter when it comes to talent pools?
[5:30] LinkedIn is changing how we define peer firms.
[7:13] Why is it important to know that, says, a car company isn’t just competing against other car manufacturers for talent?
[8:29] Glassdoor reviews, specifically “employee business outlook,” is predictive of firm performance. A bad employee outlook will likely mean a bad earnings report down the line.
[9:46] So why aren’t company leaders and financial analysts paying attention to social media as a source of information?
[11:36] Certain types of labour costs are directly tied to future sales growth. More money into R&D translates into greater profit down the line, while fixed costs like administration can make it easy to grow in good times, but dampen growth in hard times, Nan’s research finds.
[13:34] Employees certainly pay attention to company earning calls, and adjust their own outlook on a company accordingly. So perhaps it’s time employers start doing the same.
[15:11] “All the information there is public. So as a manager or analyst, you can just sign on to Glassdoor, write your own review about your company. And there are some academics and also practitioners already noticed or recognize that we are kind of falling behind.” That’s because employees aren’t just workers; they’re insiders. They are on the ground seeing how your company is really performing. So maybe it’s time leaders start treating employees not just as assets, but as one of their most valuable sources of insight.
Megan Haynes: Are you paying enough attention to your employees?
You know the drill — you have to pay attention to prevent burnout, ensure they have the right resources, and keep them engaged. Research shows that happy, well-supported employees drive productivity and profits. But that’s not what we’re talking about here.
Are you paying attention to your employees… from an accounting perspective? We’re not talking about auditing your employees – but rather, are you listening to what they are and aren’t saying about your company’s prospects?
Nan Li: Employees are not only your most important assets of the firm, but they're also insiders of the firm. They work for this company. They know how the testing of the products goes, so they definitely have lots of information about the firm.
My name is Nan Li. I'm an assistant professor of accounting at University of Toronto. I work on human capital and its implication for firm performance and the capital markets.
Human capital you can think of it as an input of firm. Traditionally, when we think about how a product is made, you think about capital, such as machines. Over the past few decades, people, your employees, which we call human capital, are becoming more and more important in the production process of a firm.
MH: And if human capital is so important, it raises a big question: Are leaders and investors paying close enough attention to their teams? And what, exactly, can these employees’ insights really tell us?
Welcome to the Executive Summary, I’m Megan Haynes, editor of the Rotman Insights Hub.
Musical intro
MH: We’re going to nerd out a little here – and that’s ok. Nan is excited about some changes coming to accounting standards and regulations.
New regulations from the Financial Accounting Standards Board will require publicly listed companies to disclose their labour costs, in much more detail. Historically, most companies – with the exception of financial firms — only had to disclose broad spending categories. So on an annual report, a company had to release that it invested say $10 million in R&D or $5 million in administrative costs, while overall labour overhead – that is salaries, bonuses, etc., was, $7 million.
NL: So, for example, a tech company, they may report cost of services as selling general and administrative cost and also research and development cost on their income statement. Under this new rule, they also have to tell what is the labour cost component out of each of these line items.
MH: Financial firms currently have to disclose this information and about 20 per cent of companies released this information voluntarily, but starting in 2027, all publicly listed organizations in the US will have to disclose how much they’re spending on compensation for each income statement expense line item — including salaries, bonuses, stock options, and benefits.
For example, under costs of products sold, how much is attributable to compensations of your distribution, manufacturing and marketing teams; over on the R&D line item how much is spent on compensating engineers and scientists.
That’s why Nan is excited. Financial reports are gold mines for researchers – rich with all kinds of publicly available information about firms, that allow academics to learn more about what makes successful companies tick. It’s also really good news for investors – who until recently didn’t necessarily have a great source of information about what employees can tell us about firms. Companies themselves aren’t totally on board. There’s the predictable pushback from firms like Cigna, Starbucks and Boeing, which say the costs of breaking this information down quarterly will outweigh the benefit.
But, these changes are probably long overdue, especially when you think about where we are today. Fifty years ago, a company’s success depended largely on how many widgets it produced, so the cost of machinery and raw materials was a bigger financial focus. Today, knowledge-based companies are dominating.
NL: If you look at the firms nowadays, these big seven big, big tech firms, their most important assets, are probably not the physical assets they have, but the kind of people driving the innovation or leading these firms in the cutting edge… the employees, the talents they have.
MH: Stats vary, but as of today 45 to 60 per cent of workers in the U.S. could be classified as knowledge workers – and as new technologies like AI enter the manufacturing space that number is likely to grow.
So it’s surprising that companies haven’t been required to break down employee compensation until now. Because without this data, we’re probably missing crucial insights into an organization's overall health and long-term sustainability.
Musical interlude
MH: So what can employees tell us about a company? Well, for her dissertation, Nan looked at what social media could tell us about shared labour pools and quote “peer firms” – which have traditionally been considered companies that sell or produce similar products. Car companies like BMW and Ford would be considered peer firms; same with grocery retailers like Loblaws and Sobeys. Using LinkedIn and Glassdoor, Nan looked at what our browsing and digital job-hunting behaviour might tell us about companies’ shared talent pools.
NL: If you are an employee at Amazon you may be also interested in working for Google and Facebook. So you may have also viewed the company home pages of Google and Facebook on LinkedIn. In that case, LinkedIn would classify these companies, Amazon, Google and Facebook as “people also viewed companies.” I use this to classify labour market peers, meaning that firms that share the same talent pool, or in other words, firms compete for the same talents.
MH: And there’s traditional overlap – if people are looking at, say, a car company like Ford on LinkedIn, they probably also looked at BMW and Mercedes. But, as car companies become more tech-forward…
NL: You see these hardware or companies that hire engineers, such as Apple and Google. So these companies are linked together, probably when these manufacturing engineers or software engineers or automobile engineers are looking for jobs.
MH: A company like DOW Chemicals is probably also being viewed alongside fellow chemical firm Dupont, but Nan’s research also showed overlap with biotech firm Monsanto and even the consumer packaged goods brand Proctor and Gamble.
NL: One thing they have in common is that they may all use oil as one of their input. So these companies may be linked by two ways. The first way is that these chemical engineers or industrial engineers are looking for jobs, then they link these companies together. And other thing is that these companies may all be subject to price fluctuation of oil as their input.
MH: This is important information for both leaders and investors to understand. For one, when it comes to listings on stock exchanges, companies that have a shared labour pool tend to move in tandem. If one company’s stock moves up, other organizations that share that talent also tend to see a rise in their stocks.
If you’re looking at the stock of car companies, and comparing it only to other car companies and failing to take into account that they share a talent pool with tech companies, analysts and investors might be missing some broader market trends. It also means managers and company leaders might miss bigger trends that are going to affect their business.
NL: Knowing your labour market peers will help you to capture the shocks to the labour market, because you also compete with other companies for human capital, and there may be a shortage of engineers or a shortage of data scientists, just because industries that you have never thought about is now stepping into this area, and they're also hiring the same pool of talents which would drive up the salaries.
MH: Employees are also a wealth of information about the overall health of a company. In 2019, Nan looked at what Glassdoor could tell us about an organization. The online site aggregates anonymous reviews about what it’s like to work at a company. It’s a give-to-get platform – To access the juicy info about what it’s like to work for one firm, you have to leave a review or past salary range in exchange. Because it’s anonymous, it’s not 100 per cent accurate, but one key piece of data stood out to Nan. Glassdoor asks users to rate their employer’s business prospects as either positive, neutral or negative — and that’s the metric she focused on.
NL: So we compare employee business outlook of the employer versus the actual financial performance of the company and also the analyst forecast of the company's future performance, and we find that employee business outlook is actually predictive of a firm's future performance and also predictive of a firm's future stock returns.
MH: Basically, if your employees think your business outlook is good, then it probably will be. If they think it’s bad, it’s likely going to be reflected in your future earnings – and probably time to start paying attention. So how come companies and financial analysts aren’t paying attention to this source of information?
For financial analysts, Nan can understand why they aren’t flocking to Glassdoor and LinkedIn to scrape this data.
NL: Compared with other financial statements data, I think Glassdoor data is probably more noisy because, you know, bigger companies have more people reviews based on the law of large numbers, perhaps the employee business outlook on Glassdoor also more accurate. And for smaller companies, maybe there are less people review.
MH: But while employee reviews aren’t as precise as official financial reports, they do add to a growing pool of social-media platforms that analysts can use, and researchers in accounting are increasingly looking at these platforms as sources of insights.
And yes, social media tools like Glassdoor and LinkedIn are user-generated, which means they’re not always perfect. And there is a stigma around Glassdoor that only disgruntled ex employees like to useit. But dismissing them entirely feels like a missed opportunity for company leaders.
Isn’t it useful to know that you’re suddenly competing for talent against outside industries that can pay more?
And wouldn’t you want to know if your employees aren’t exactly bullish on your company’s prospect – especially if that doesn’t line up with your own views of future success? Why aren’t leaders and CEOs paying more interest in the type of information employees can offer?
NL: I thought about this. I don't have a good answer for this.
MH: I mean, you see where we’re going here: Company CEOs absolutely should be paying attention to their employees, not just as workers, but as valuable data points.
Musical interlude
MH: Nan’s current research is looking at labour costs as an indicator of future performance and growth. And her early results are pretty interesting.
NL: So we find that labour cost is positively correlated with future sales growth, meaning that higher labour cost higher future sales growth. But on the other hand, also it is negatively correlated future return on assets, which is profitability, so higher labour cost, but lower future profitability.
MH: That makes sense: the ongoing costs of your talent pool isn’t stagnant; it will increase as you add more people or provide raises, which will likely cut into your profit – even as you’re earning more revenue. But importantly, Nan’s research shows that not every type of labour cost is created equal.
NL: You can think of sales and marketing more as a variable labour cost. When the sales is good, then you have more sales people, more marketing people. But for R & D, you may think of it as more of a long-term investments, and that is consistent with what we find. We find that sales and marketing labour cost is positively correlated with future sales growth, but only for two years, while R & D is related with future sales growth, but it can go as far as five years.
MH: In comparison – administrative costs don’t have any relation to sales growth. Though that’s not to say you should axe your entire admin team.
NL: You can think of administrative labour costs more as a fixed cost, so you have to have them there. In good times, if you have more administrative labour, it may be easier for you to expand. Of course, the downside is that in bad times, you may have more fixed cost that you have to bear.
MH: And here’s something many leaders might not realize: Even if they aren’t paying close attention to their employees, their employees are definitely paying attention to them – particularly during those bad times.
NL: When we think about financial reporting or organizational health, the traditional audience may be investors, however, employees, they have their career in your company, and they may also be paying attention to the financial reporting of the company.
MH: In a 2023 study, Nan and her colleagues looked at how usage of Glassdoor changed around earning reports. Just a reminder, Glassdoor is a give-to-get system; to unlock company reviews, you have to provide salary information or a review of your own, which is usually done as job hunters start scoping out other work places.
After a positive earnings report, Nan’s team didn’t find much in the way of increased activity on Glassdoor. But after a negative report….
NL: What we find there is that first employees do pay attention to your to the earnings announcement of a company's. That is when a firm announces its earnings, your employees are listening. And second, employees would update their business outlook based on the earnings released in earnings report.
MH: So, employees aren’t just tuning into earnings calls — they’re adjusting their outlook on and at the company based on what they hear.
Which raises an important question: Are companies ready to listen to what their employees are saying in return? Nan points out that so much of this information is already available to leaders — they just have to look.
NL: All the information there is public. So as a manager or analyst, you can just sign on on Glassdoor, write your own review about your company.
And there are some academics and also practitioners who already noticed or recognize that we are kind of falling behind. Human capital is only recorded as labour cost, and even for labour cost it is kind of part the operative cost in a firm. There’s very little information about a firm’s human capital from a financial reporting perspective but the standard setters are thinking about other ways to kind of push firms to have more disclosure about the human capital of the firm.
MH: After all, as Nan said earlier, employees aren’t just workers; they’re insiders. They are on the ground seeing how your company is really performing. So maybe it’s time leaders start treating employees not just as assets, but as one of their most valuable sources of insight.
Outro music
MH: This has been Rotman Executive Summary, a podcast bringing you the latest insights and innovative thinking from Canada's leading business school. Special thanks to assistant professor Nan Li.
This episode was written and produced by Megan Haynes. It was recorded by Dan Mazzotta, and edited by Avery Moore Kloss.
This marks the end of our third season. We’ll be back in September with fresh insights and research into various topics — like persuasive writing habits, healthcare woes, employee incentives and more.
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