Do our Good Company ratings predict stock performance?



The grade that a company earned on the Good Company Index™ is a powerful predictor of subsequent stock performance.  We examined this question this summer, one year after we assigned company grades, to see how companies had fared in the market over the 12 month period that had followed.

To ensure that we were comparing only similar companies to one another, we looked at all “industry-matched pairs” (pairs of companies in the same industry) in the Fortune 100.  We found twelve pairs in which the companies’ Good Company grades differed by one or more grade levels (for example, a grade of B versus a grade of C).

Across those twelve pairs, the stock price of the company with the higher grade outperformed that of its competitor with the lower grade by an average of 19.8 percentage points in the subsequent 12-month period.

For example, in June 2010 (when we finalized companies’ grades), Walgreen and CVS Caremark’s Good Company grades were a B- and D, respectively.  In the 12 months following the assignment of those grades (June 2010 to June 2011), Walgreen’s stock price outpaced that of CVS by 30.7 percentage points.

Another example is Chevron and ExxonMobil: in June 2010, the companies’ grades were C+ and F, respectively.  Between June 2010 and June 2011, Chevron’s stock return was 6.0 percentage points higher than that of ExxonMobil.

These are exciting findings for us.  One of the main themes of our book is an exploration of the direction the world will be moving in the future, but this represents evidence that being a good company is already paying off.

This post originally appeared on the Good Company blog earlier this week.


How mobile technology will influence human capital analytics


A recent Market Watch article highlighted improvements in human capital management through increased use of mobile technology. The most common uses were for scheduling activities, learning programs, streamlining workflows, talent acquisition, and approval processes. According to the study companies that utilized these processes saw a 13% improvement in year-over-year manager efficiency (compared to just 6% for those organizations not utilizing mobile devices).

While this information is encouraging and it’s promising to see that technology is being used to drive business results and improved human capital management processes, it does beg the question what are the hidden costs and time involved with teaching people how to use all of these new technologies? Furthermore with the inherent distractions that come with mobile browsing, will there be any losses to employee efficiency as a result?

The important, and as yet unanswered question is, “When all costs are properly considered, how much will this “advance” actually contribute to the bottom line?”

HR told to prove its worth


With significant public sector budget cuts on the way in the United Kingdom (and elsewhere, of course), HR directors are assessing what they need to do to preserve their jobs.

According to senior HR leaders quoted in a new article in the UK’s HR Magazine, what HR personnel need to do is “give the business good, pragmatic, common-sense solutions…the future of HR is about realising how what you do can affect the organisation’s finished product.”

As we’ve mentioned once or twice previously, one of the most important things that HR professionals can do is focus on adding value to the organization by determining what people-related factors are the most important in improving organizational performance. 

While McBassi provides such services to our clients, we also provide free documents on how to begin doing this yourself (go here and download “A Guide to Using Your Human Capital Data to Improve Business Results.”)

Employee engagement – and organizational processes


Great post on the Fistful of Talent blog yesterday, exploring the link between employee engagement and workplace processes.  The post discusses a quote from Steve Church, Chief Operational Excellence Officer at Avnet:

“If you help employees fix broken process, you’ll gain employee engagement.”

We couldn’t agree more.  And we’re always delighted to encounter perspectives in which employee engagement is tied to work elements that directly affect an organization’s bottom line.