MCBASSI & COMPANY

How Investors Rank Companies

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Bottom line
How investors “grade” a company is almost identical to how the company’s employees grade it.

Implications

  • In a world of increasing transparency, where employees’ ratings of their employers are easily made public (see, for example, Glassdoor.com), shareholders’ interests are increasingly aligned with employees’.
  • Investor relations departments need to be paying more attention to what their company’s HR department is doing, and how that is being communicated to external stakeholders.

The Evidence
Over the past few years, we have been collecting data on how both employees and investors rate companies on 12 attributes measuring company actions and attitudes in three domains: Employers, Sellers, and Stewards (of the community and environment).  For example, one of the attributes measured in the Employer category was whether the well-being of employees was of great importance to the organization being rated.

After assessing each of the 12 attributes, the raters were asked to assign an overall Good Company grade from “A” to “F” to the company they were rating.  We then used combined data from all respondents to analyze statistically the relationship between each separate attribute and the overall company grade.  This made it possible to determine which attributes were, on average, of greater or lesser importance in shaping a respondent’s overall assessment of a company.

Our analysis found the relative importance assigned to the various attributes is virtually identical between investors and employees.  Items in the Employer domain are overwhelmingly the most important for both groups.  For both groups, all four Employer attributes are among the raters’ five most important attributes.

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Tools for tapping the wisdom of the workforce

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Under increasing pressure to innovate – without adding more to the research budget – companies are systematically attempting to tap into the insights and good ideas of employees. 

An array of software products is now available to help firms solicit, gather, sort, sift and synthesize their employees’ ideas for saving money, improving customer satisfaction, and growing revenues.   

But unless a company has already earned the goodwill of its employees, these new efforts (which we heartily endorse) are unlikely to ever reach their full potential.  The wisdom of the workforce is a gift that will be given only to employers who are worthy of it.