Good News — The Good Guys Are Winning!
It’s a thrill to be writing my first post for Glassdoor. I originally got to know the folks at Glassdoor when my co-authors and I were in the early stages of writing Good Company: Business Success in the Worthiness Era. We were looking for a way to get the inside scoop on what it’s really like to work for a wide range of companies, and Glassdoor provided us with the opportunity to “see inside.”
This ability to see inside is an example of a hugely important and very hopeful phenomena, which we call “technology-enabled people power.” It is forcing companies to become “good companies” – by being good to their employees, their customers, the communities in which they operate, and the environment.
I realize you may be skeptical. Examples of the “bad guys” doing well are discouragingly common: companies shirk taxes while padding profits, firms foul the planet but keep raking in revenue, and reckless greed on Wall Street goes largely unpunished. But quietly, thanks to technology-enabled people power, a different and more hopeful era – which we refer to as the “Worthiness Era” – is unfolding. Increasingly companies will have to do good in order to do well. Current concepts of “social responsibility” – which are all too often little more than PR efforts or considered nice but not necessary – are ceding to more genuine efforts by companies to become worthy of their employees’ best efforts, their customers’ loyalty, and their investors’ money.
Proof is in the numbers. We created the Good Company Index™, based on a quantitative rating system of how good companies are as employers, sellers, and stewards. (Employee ratings on Glassdoor were used as a component of our rating system.) We used this system to assign a grade – from A to F – to each of the publicly traded Fortune 100 firms. Then we compared how firms in the same industry performed in relationship to the Good Company grade. The results are clear and compelling.
Over the previous three years, the company with the higher Good Company Index score performed, on average, more than 4 percentage points better per annum in the stock market than the paired company from the same industry with the lower Good Company Index score.
Most of the differences in stock performance occur when the difference in Good Company Index scores between the two paired companies is three points or greater, corresponding to at least a letter grade in our overall ranking system. Companies outscoring their peers by three points or more on the Good Company Index outperformed them, on average, by 11 percentage points annually in the stock market over the previous three years. T he relative annual performance of each of these twelve industry-matched pairs over the three-year period is displayed in the figure below.