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What Leaders at “Best Companies to Work For” Do Differently

The “best companies to work for” are likely the best because they have great leaders at all levels.

Publish Date: May 29, 2019

Read Time: 5 min

Author: Mike Hoban

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Shouldn’t companies recognized as great places to work also be among those companies that are most admired? Not according to two recent lists from the same business publication.

In March, Hilton Hotels claimed the top spot in the annual “Best Companies to Work For” list from Fortune magazine, a high-five worthy achievement. However, two months earlier, in January, in a different list—“World's Most Admired Companies”—compiled by the very same magazine, Hilton was a no-show on the top 50 list.

Huh? How can that be so?

There’s more to this head-scratcher. There is ample research (and massive amounts of common sense) to suggest that great places to work tend to create employee engagement, which in turn tends to create superior—and thus “admirable”—organizational performance.

Yet, only one of the top 10 “best companies to work for” (Salesforce) made the top 50 “most admired” list, and only eight appeared on both top-50 lists. In addition, not one of the top 10 “most admired” companies (Apple was number one) appeared on the “best companies to work for” list. This seeming disconnect was also true the last time I compared both lists, in 2005, for a newspaper column I wrote.

How can these prestigious beauty contest lists, compiled year after year by a well-regarded business publication, show such different results? And what does it say about our assumptions about the desirability of creating great workplaces?

The importance of methodology and criteria

It has everything to do with methodology and criteria. When they are different you get different results.

To be considered a “best company to work for,” a company must submit to an arduous application process, including extensive documentation of HR programs/practices, as well as a survey completed by a large sample of employees about their views of the company. In other words, like applying for the Malcolm Baldrige National Quality Award, it takes a ton of effort. (Note: DDI has four times applied for and been named a “best workplace” by the Great Place to Work Institute, which conducted the workforce study that produced the 2019 “Best Companies to Work For” list for Fortune.)

For many companies, investing time and resources to gain this recognition is seen as more work than reward, even though it can contribute to a company’s employee value proposition and prove an effective tool in attracting talent.

Companies named to the “most admired” list, meanwhile, generally have no trouble attracting talent, because they’re marquee brands and are very successful financially. Besides Apple, rounding out the top five “most admired” are Amazon, Berkshire Hathaway, Disney, and Starbucks. Those might all be good places to work (as is number 12, Costco) but they most likely did not apply for the award.

The “most admired” list is about corporate reputation as perceived by executives, directors, and outside analysts who are surveyed. There are nine criteria against which companies are evaluated, such as investment value, quality of management, and products and services. And one criterion is their perceived ability to attract talent.

There is also a minimum revenue threshold to be considered for “most admired,” so many of the companies on the “best companies to work for” list don’t qualify because of their size. And it appears all the “most admired” are publicly traded companies and, thus, are on the radars of the executives, directors, and analysts surveyed.

So, behind the apparent enigma of these two celebrated lists lies a logical explanation.

In Conclusion:

What their leaders do makes the difference

There’s an important point to be made about those companies deemed “best to work for,” and it’s this: while many provide wonderful benefits and perks, it’s more about their leaders at all levels intentionally building and maintaining positive cultures that encourage people to do their best and achieve great results.

One of those results is degree of innovation and this year, for the first time, the researchers developed an innovation metric and measured the companies against it. Spoiler alert! The 100 “best companies to work for” are much more likely to have innovative workplaces than other companies.

Fortune, in fact, states: “Leaders have a very strong influence on how employees perceive innovation at their company. Employees with managers who are approachable and easy to talk to are 31 times more likely to think their company is innovative.”

And when employees say management genuinely seeks and responds to suggestions and ideas, they are 14 times more likely to consider their workplace innovative.

Leadership practices that engender innovation are especially important at the front line. Senior leaders can create the overall conditions for success and have their hands on the levers of positive, culture-affirming systems, practices, and processes, but it’s the frontline leaders who “show up” every day to lead and support the people doing the work.

Check out DDI’s Frontline Leader Project to learn more about who gets the opportunity to lead, when they get the opportunity, and how their background contributes to their success and struggles.

Mike Hoban is a Senior Consultant for DDI who works with executives in many different industries. He lives right off Lake Michigan and takes way too many pictures of lake sunsets.

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