Part 2: Preliminary Five-Year Analysis Suggests the EEA EEI Provides Strong Predictor of Profitability

A preliminary five-year-style analysis of 32 public companies across 11 industries suggests that the new EEA Enterprise Engagement Index™ (EEI) may have significant value as an indicator of organizational effectiveness, profitability strength, and operational quality—while also revealing limitations as a stand-alone predictor of stock market performance.

Strongest Correlation: Profitability and Operational Quality
The Most Predictive EEI Components
What the EEI Appears to Predict Best
Where the EEI Was Least Effective at Predicting Stock Price Performance
EEI Is Designed to Work Best Within Industries Than Across Industries

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The early findings indicate that companies with the highest EEI scores frequently demonstrated superior profit generation, stronger productivity per employee, higher operating margins, and, in many industries, stronger long-term shareholder returns than peers. In fact, in seven of the 11 industries analyzed—approximately 64% the company with the highest EEI score also produced the strongest stock market performance within its peer group over roughly the same period. Over 75% outperformed their competitors on profitability metrics.

The index is designed to be a S&P 500 index of companies based on how well they translate employee and customer investments into concrete value.

This analysis suggests the EEI is more predictive of actual profitability and operational quality than of stock price movements alone. Preliminary findings indicate that higher EEI scores reflect stronger directional relationship with superior margins, profit per employee, Human Capital ROI, and revenue growth than with broader stock market outperformance, which is often influenced by macroeconomic conditions, valuation multiples, sector rotation, commodity prices, interest rates, regulations, conflicts, and investor sentiment, etc.

It appears the factors identified by EEI provide useful metrics for organizations seeking strategies and tactics to promote both greater employee and customer engagement, as well as to detect future risks and opportunities.

The EEI, developed by the Enterprise Engagement Alliance Impact Council, evaluates how effectively organizations convert investments in people, customers, and stakeholder relationships into measurable financial outcomes using publicly available data. The framework combines revenue per employee, profit per employee, Human Capital ROI (HCROI), profitability ratios, and three-year revenue growth into a weighted score designed to measure organizational effectiveness rather than employee sentiment alone. It does not attempt to identify causations.

To help organizations use other data for further causation and correlation analysis, the EEA’s People Value Impact Indicator is being customized not only to support creation of the EEA EEI Index, but also for companies to enter additional survey, turnover, NPS (net promoter scores), and almost any data to better understand the source of strengths and weaknesses in the findings.

Strongest Correlation: Profitability and Operational Quality

The five-year performance analysis found the EEI was most effective at identifying companies with superior operational and profitability characteristics within industries. Across most industries studied, the EEI scores identify companies with:

Higher profit per employee
Stronger operating margins
Better long-term revenue growth
Higher productivity per employee
More consistent shareholder returns over time

Higher scores correleate with in many cases higher share price returns and in more cases higher profitability than industry sector peers.
The clearest examples include:

Industry	Highest EEI Company	Key Findings
Semiconductor Equipment	ASML	Highest profitability and strongest stock performance
Cruise Industry	Royal Caribbean	Strongest margins and dramatically superior shareholder returns over other cruise lines
Homebuilding	PulteGroup	Best operational and shareholder performance
Banking	JPMorgan Chase	Strongest banking profitability and market performance
Pharmaceuticals	Merck	Superior profitability and operational performance
Consumer Products	Procter & Gamble	Strongest profitability stability
Airlines	Delta/United vs. American	Higher EEI aligned with superior profitability and returns

The strongest relationship appeared between EEI scores and profitability-related measures, especially:

Profit per employee,
Operating margin,
HCROI,
And sustained revenue growth.

In many cases, companies with stronger EEI scores produced materially superior financial outcomes regardless of industry conditions. American Airlines, for example, generated one of the weakest airline EEI scores due to low profit per employee, weak margins, and lower growth—and also significantly underperformed both airline peers and the broader market. Royal Caribbean dramatically outperformed cruise competitors on nearly every EEI metric and subsequently generated shareholder returns far above both peers and the S&P 500.

The Most Predictive EEI Components

The study suggests some EEI factors may be materially more predictive than others.

Strongest predictive components.

Profit per employee
Operating margin/profitability ratio
Three-year revenue growth

These factors showed the strongest relationship with both profitability and relative shareholder performance.

Moderately predictive: revenue per employee and HCROI.

The findings also suggest the EEI may ultimately prove most valuable as:

An organizational quality indicator,
A profitability diagnostic,
A benchmarking tool,
A risk-identification framework,
A factor to consider in stock investments and mergers and acquisitions.

What the EEI Appears to Predict Best

The preliminary study suggests the EEI may be strongest at predicting:

1. Relative Profitability Within Industries

The strongest and most consistent relationship was between high EEI scores and superior profitability characteristics. Companies with high EEI scores demonstrate:

Higher margins,
Better capital efficiency,
Greater value creation per employee,
And better conversion of growth into profits.

This relationship was particularly strong in:

Banking,
Payments,
Pharmaceuticals,
Consumer products,
Semiconductor equipment,
And airlines.

The preliminary analysis suggests the EEI may have an 80% to 90% directional relationship with identifying stronger profitability structures within peer groups, stronger than its apparent relationship with stock market outperformance, which is subject to many factors not directly related to short term metrics.

2. Organizational Efficiency

The EEI appears highly sensitive to operational quality. High-scoring companies repeatedly reflect:

Better productivity systems,
More scalable operating models,
Better alignment between growth and profitability,
And stronger conversion of labor investment into value creation.

This may be especially important because the framework focuses on outcomes rather than engagement activities or survey results.

3. Competitive Positioning

The EEI also appeared useful in identifying which companies within industries had structurally stronger business systems. For example:

Visa and Mastercard dramatically outperformed American Express in productivity and profitability measures.
Merck substantially outperformed Pfizer in margins, growth, and profit generation.
JPMorgan significantly outperformed Citigroup on nearly every operating metric.

4. Risk Identification

The framework also appeared effective at highlighting operational weakness before it became fully reflected in market narratives. Lower EEI companies often exhibited:

Weak margins,
Declining growth,
Poor productivity,
Lower returns on labor investment,
And shareholder underperformance.

Estée Lauder, Pfizer, American Airlines, CVS/Aetna, and Carnival all showed weaker EEI profiles relative to peers.

Where the EEI Was Least Effective at Predicting Stock Price Performance

The analysis found the EEI becomes less reliable as a stock performance predictor in industries where external macroeconomic or cyclical forces dominate valuation.

Commodity industries. The weakest correlation between EEI and stock performance occurred in:

Oil and gas,
Steel,
And portions of healthcare.

For example, ExxonMobil and Chevron generated very strong EEI scores due to enormous productivity and profitability metrics; yet, still underperformed the S&P 500 during parts of the measured period because energy stock performance was heavily influenced by oil prices, geopolitical conditions, inflation, and interest-rate cycles rather than organizational effectiveness alone.

Similarly, steel companies produced inconsistent relationships between EEI scores and stock returns because steel pricing cycles often overwhelm operational quality differences.

Mature defensive industries. The EEI also appears less predictive of stock performance in slower-growth defensive sectors such as:

Healthcare,
Pharmaceuticals,
And consumer staples.

Many companies in these sectors generated strong EEI scores but still underperformed the broader market because investors prioritized AI, technology, and growth sectors during much of the measured period. For example:

Merck strongly outperformed pharmaceutical peers operationally but still lagged the S&P 500.
Procter & Gamble generated excellent EEI characteristics yet modest relative stock market outperformance.

Highly valuation-driven markets. The EEI does not directly measure:

Valuation multiples,
Investor sentiment,
Interest-rate sensitivity,
Sector rotation,
Momentum investing,
Regulatory risk,
or commodity cycles.

As a result, it appears better at identifying business quality than predicting short-term market enthusiasm.

These metrics were useful but more sensitive to industry structure and accounting differences. For example, oil companies naturally produce extraordinary revenue per employee because of capital intensity, while banks and payments companies benefit from scalable digital models.

EEI Is Designed to Work Best Within Industries Than Across Industries

One of the clearest findings is that the EEI works best as a peer-comparison framework rather than a universal ranking system.

Comparing Royal Caribbean against Carnival or JPMorgan against Citigroup produced meaningful insights. Comparing Visa against Chevron or ASML against Delta Air Lines was less useful because industry economics differ dramatically.

The analysis suggests the EEI may ultimately benefit from:

Industry-specific benchmark scales,
Sector-adjusted weighting,
Capital-intensity adjustments,
And better HCROI standardization.

Using the EEA’s People Value Impact Calculator, organizations easily add or change metrics to better diagnose causation and correlation.

Enterprise Engagement Alliance Services

Celebrating our 17^th year, the Enterprise Engagement Alliance helps organizations enhance performance through:

1. Information and marketing opportunities on stakeholder management and total rewards:

ESM Weekly on stakeholder management since 2009. Click here to subscribe; click here for media kit.
RRN Weekly on total rewards since 1996. Click here to subscribe; click here for media kit.
EEA YouTube channel on enterprise engagement, human capital, and total rewards since 2020

2. Learning: Purpose Leadership and Stakeholder

Management Academy to enhance future equity value for your organization.

3. Books on implementation: Enterprise Engagement for CEOs and Enterprise Engagement: The Roadmap.

4. Advisory services and research: Strategic guidance, learning and certification on stakeholder management, measurement, metrics, and corporate sustainability reporting.

5. Permission-based targeted business development to identify and build relationships with the people most likely to buy.

Contact: Bruce Bolger at TheICEE.org; 914-591-7600, ext. 230.