Accounting for labour: What your employees can reveal about company success

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.