MCBASSI & COMPANY

Should Companies Disclose More Human Capital Information?

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CFO Magazine recently hosted an online/print discussion on the long-running debate over whether companies should expand their human capital disclosure.  They invited McBassi CEO Laurie Bassi to participate as one of four debaters.

It will come as little surprise to our loyal readers that Laurie weighed in on the side of more disclosure, arguing that it’s crazy to report a company’s most important assets as nothing more than costs:

“Yes, companies surely should disclose more information about their human capital.

“Looking at the issue from the perspective of major stakeholders – including companies, shareholders, employees, and society as a whole – increased disclosure on human capital is unambiguously a good thing.  It’s a bad thing only for companies that do a lousy job on the ‘people side’ of their business, and human resources executives who would prefer to avoid accountability for human capital performance.”

Read the full article here.

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Should You Be Worried About Your Company’s Glassdoor Scores?

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Glassdoor.com has created a high degree of transparency about what it’s like to work in any given organization.  This new reality has spawned a variety of different reactions from individuals and from company representatives.  One fairly common reaction among executives has been to dismiss employees’ Glassdoor ratings as representing just the “whiners” within their firm.

We think it’s important to take a closer look.  For one thing, companies with high Glassdoor scores have consistently outperformed the stock market as a whole (see figure below).  And this means the investment community is beginning to pay more attention to Glassdoor ratings.

And what about the impact of scores on potential job applicants?  They’re the main audience on Glassdoor, and they’re systematically combing through scores and reviews for you and for your competitors.  So if your scores are lower than your competitors, it’s likely you’re going to have a tougher time getting high-quality job applicants.

The bottom line? If your Glassdoor scores are lower than your competition, yes, you should indeed be worried.  Your next step should be some “analytics sleuthing” to figure out what you can do about it.  (By the way, we can help you with that!)

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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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3 Meta-Trends to Harness in 2014

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As 2013 draws to a close, the economies of most of the developed world continue to recover from the Great Recession at a painfully slow pace.  But a convergence of three meta-trends is laying the foundation for a brighter future:

1.  Sustainability is becoming mainstream.  After decades of operating at the periphery of corporate operations, sustainability is increasingly seen as a  source of competitive advantage.   As a result, it is now receiving an unprecedented level of attention from Boards of Directors.

2.  Corporations are increasingly naked.  Although there is a lot of kicking and screaming, corporate transparency is on the rise.  “Technology-fueled people power“, combined with initiatives that are underway to force greater transparency, are chipping away at corporate secrecy and beginning to usher in a new era of more open corporate behavior and decision-making.

3.  Human potential is being unleashed.  There are (at least) three aspects to this:

  • MOOCs (Massive Open Online Courses) are making learning available to anyone with internet access
  • “ObamaCare” is making health care more accessible in the United States, thereby reducing people’s need to stay at jobs just for the health insurance
  • The increasingly diverse generational mix of the workforce fosters a fertile environment for innovation (even as it simultaneously creates new managerial challenges)

Separately, but especially together, these trends create tremendous opportunities on the “people side” of the business for those organizations understanding and embracing these forces, and put them to work to create sustainable competitive advantage.

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Six Attributes of Companies Worthy of Your Business

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In our ongoing research for the book we are working on (Good Company) we have done extensive interviews with executives as well as front-line employees.  In these interviews we have been seeking to understand how the convergence of “meta-forces” (globalization, technology, demographic change, political and regulatory change, and environmental change) is shaping the future of business.  No small undertaking.

This process has led us to the identification of six key attributes that organizations must develop in themselves (and their leaders) to thrive in the future.  Companies that exhibit these attributes are also the types of companies with which we’d want to do business ourselves.

  1. Reciprocity—a mindset of seeking mutual benefit (rather than exploitation)  
  2. Connectivity—using the fundamental need and emergent power of human beings to be connected, informed, and effective through new forms of electronic sharing and collaboration 
  3. Transparency— a  willingness to expose the reasoning behind decisions with stakeholders (essential to rebuilding trust) 
  4. Balance— the wisdom to make judgment calls amid competing priorities, such as short-term versus long-term goals and the desire for transparency versus a legitimate need for secrecy (e.g.,  mergers or new products)  
  5. Courage doing what is right despite possible adverse consequences in the short-run
  6. A Purpose for Being—Henry Ford’s words of long ago are more true today than ever: “A business that makes nothing but money is a poor kind of business.”

The future is clear

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If you haven’t done so already, you definitely should take a look at www.glassdoor.com. This is an amazing web site, created by some incredibly visionary people (more on that later).

As its name implies, Glassdoor allows you to see inside—of companies. It has anonymous ratings of over 37,000 companies and their CEOs, based on “employee surveys.” (BTW, it also has salary information and the inside scoop on what job interviews are like at companies.)

A look around the Glassdoor site reveals that Southwest Airlines is the top-rated organization (no surprise there), followed by Mary Kay, General Mills and Slalom Consulting.

Here’s a feature I love. Glassdoor names names. At the end of 2009, Glassdoor listed the 25 companies with the lowest ratings (of those that had at least 25 ratings from U.S.-based employees within the past year). Guitar-maker Gibson Guitar was the worst-rated employer, followed by United Airlines (no surprise there) and staffing firm Spherion.

You might wonder why folks take the time to provide ratings of their employers. One of the major incentives that Glassdoor creates for doing so is that you have “to give to get.” In order to get the greatest level of inside detail, you have to provide information (fill out a survey) on your employer (or recent past employer).

Now a bit about Rich Barton, one of the founders of Glassdoor. I had the good fortune of doing a telephone interview with Rich for a book that I am writing (The Worthiness Era, or some such title) with several co-authors. I discovered Rich, who is also the CEO of Zillow, through Glassdoor. Zillow has incredibly high employee ratings, and so I called them up to ask for an interview with Rich. It was promptly and graciously granted, and talking with Rich was a true delight.

[Zillow is also a fascinating web site that you might want to check out, if you haven’t already done so. You can look up your house, or that of a friend or enemy, and get an estimate of its market value—along with square footage, number of bathrooms, etc.]

Rich is and has been a busy guy. In addition to being the Chair of the Board of Glassdoor, and the CEO of Zillow, he was a founder of Expedia. You may be beginning to see a pattern here. Rich’s purpose in life is to use technology to bring “power to the people.” He has the technology, the smarts, the vision, and the capital to do just that.

Transparency is here. It is real, it is unavoidable, and people love it.

Employers may try to resist, but there is no stopping this train. Firms will either learn to adapt and use transparency to their advantage, or not.