The co-author of the book Good Company has the numbers showing companies that do the right thing reap the rewards.
A growing number of companies believe that treating employees and customers with respect, and acting as good stewards of the community and the environment, can boost business performance. While that’s good news, even better is that there is research to back up this belief.
The authors of the book Good Company: Business Success in the Worthiness Era graded 300 of America’s largest companies on their “worthiness”—how well they rate at being a “Good Employer,” a “Good Seller,” and a “Good Steward.” The results of their research found that companies with higher grades than their industry peers had stronger stock performances over one-, three-, and five-year periods. In other words, it pays to be good.
Laurie Bassi, Ph.D., a co-author of the 2011 book and CEO of the consulting firm McBassi & Company, talked to GO about what it means for a company to be good, the surprises she found in the data, and why showing employees gratitude is a worthwhile practice.
GO: The subtitle of your book is “business success in the worthiness era.” How do you describe the concept of worthiness?
BASSI: Worthiness means doing the right thing. The hypothesis here is that a convergence of sources—economic, social, and political—is creating what we call the Naked Corporation. It’s harder and harder to get away with less-than-worthy behavior, and so there’s an increased payoff for good behavior.
GO: How did your research into good companies begin?
BASSI: We had evidence that the firms that were doing smart things—especially with regard to training and developing their workforces—seemed to do better. But when you look at it honestly you realize that if all you did was be a good employer you’d probably drive yourself out of business, because people are, in fact, a cost as well as an asset. So that took us into the broader inquiry of what does it really take to be good to your customers as a good seller. The emerging focus on good stewardship is also something that firms are being forced to attend to. When it gets right down to it, basically you’ve got to be a good employer, you’ve got to be a good seller, and you’ve got to be a good steward to communities and the environment.
GO: Which is most important, being a good employer, a good seller, or a good steward?
BASSI: I really do believe that both the evidence and the logic continue to point to being a good employer—you absolutely have to get that right. That is the foundational piece, because, for example, you just can’t sustain being a good seller into perpetuity without taking care of the people side of the business.
GO: Consumers probably know more about how well companies do as stewards than how good they are as employers. How do you account for that?
BASSI: The stewardship piece is certainly the easiest for people to get at least some information on, although there are plenty of very deep dark secrets on that front, as well. Consumers have direct experience as to whether a firm is a good seller. I think the good employer is the hardest piece for buyers or investors to get direct information on. But there are web sites, like Glassdoor.com and Indeed.com, that are making the employer side of the equation more readily transparent to people who want to know more. In fact, we looked at data from Glassdoor.com as part of our research.
GO: What were the biggest surprises in your research?
BASSI: There were two surprises on the stewardship front, which were really two sides of the same coin. First, we were appalled at the bad behavior—the seemingly purposeful law-breaking by some of these large firms. Some of them are clearly just breaking the laws and paying the associated fines and penalties as the cost of doing business. It’s built into their profit-maximizing calculus. That was pretty appalling to me; maybe I was a little naïve on that. The flip side of that was that I was also just delightfully surprised at the extent to which large corporations seem to have gotten the message. They are using their core capabilities to solve major problems in the world in ways that are really heartwarming. So you can observe both of those behaviors.
GO: Did you receive any feedback from companies that graded well or did not grade well, and what they’re taking away from their ranking?
BASSI: When we compiled our original grades, in the spirit of fairness and objectivity and transparency we mailed a special-delivery letter to each CEO that explained exactly how their grade had been derived.
One story really sticks in my mind. A large company to which we had given a grade of B- called and said, “We’re not happy with that grade—we’re not disputing the grade but we’re not happy with it. What could we do to improve it?” And I said, “You’ve got some big problems on the people side of your business.” And the woman said, “Yeah, we know, that’s too hard to fix. What else can we do?” I said, “You could stop using offshore tax havens.” And there was this long silence and she said, “We use offshore tax havens?” And I said, “Yes you do.” She said, “I was unaware of that. I am going to hang up the phone and walk down to legal and have a discussion with them about that.” And I thought, yes, that’s exactly how we’d like this information to work. People outside the firm can actually know things that some very high-level people in the firm themselves might not know. And we think that kind of transparency is the tipping point here.
GO: Is part of the issue that companies look at their competitors and think, “If we’re going to be the only ones doing this and it’s going to cost us money, then why should we do it?”
BASSI: The evidence seems to suggest you should do it because you can beat the socks off your competitor. And, yes, there may be some cost to it, but the benefits more than outweigh the costs. But some of this stuff is really not that expensive. Learning to express your gratitude to your workforce, for example, doesn’t really have to cost a whole lot, if anything.
Bassi’s book, Good Company: Business Success in the Worthiness Era is available at bookstores and through major online booksellers.