Good Companies Are Changing Their Behaviors

Laurie Bassi is the CEO and a co-founder of McBassi & Company. She is also the chair of the board at Bassi Investments Inc. Bassi is an authority on the emerging decision science of human capital management—the processes and practices within an organization that align the management and development of employees with its business results. She helps organizations improve performance through targeted, effective strategies for managing and developing their people. Bassi also has overseen the development of the McBassi People Index, a tool for pinpointing and improving the unique people-related drivers of an organizations business results.

LXB: In your book, Good Company, what do you mean by the Worthiness Era in economic, political, and social terms?

Bassi: The thesis of our book maintains that a convergence of economic, political, and social forces is compelling companies to behave better. Technology-fueled people power is enabling the public to demand better behavior from firms by exposing their bad behavior. Essentially, it is creating naked corporations. Although the Internet has been around a while, it has gained force and momentum over the past five years because people have learned how to harness its power.

From an economic perspective, we are in the midst of what economists refer to as a skill-biased technology evolution, which favors highly skilled, intelligent, and capable people. This in turn favors firms that are very good at attracting, managing, and retaining those people. Another economic force we point to is the shift in consumer preferences. Consumers are seeking transformative experiences. For example, Disney parks bill themselves as the happiest place on earth and all employees have to be a part of creating that experience. This includes everyone from top management to the people who push the broom, who are customer-facing employees. So it is up to Disney to select, hire, motivate, and train people to provide the happy experience that it has promised its customers.

In the book, we define political very broadly; it includes things such as shareholder activism. Again because of the Internet, even small shareholders can organize and create coalitions. Another political trend we've observed is workplace democratization. Here in the United States, the prolonged, high unemployment rate has (at least temporarily) given employers the upper hand. However, in China, tech-savvy workers are using cell phones to capture images of abuse in the workplace. Because of technology, they are able to organize themselves to seek better outcomes in their workplaces. Another issue around the world (but somewhat less so in the United States) is increased regulation. Bad behavior on the part of corporations has generated a feeling of outrage. From the Tea Party to Occupy Wall Street, people are exhibiting this outrage. The indignation is there, although each group may have different ideas of how to fix the problems.

A social example is the Millennials, who are both very tech savvy and have different ideas about the workplace. They have a culture of sharing their experiences, both as consumers and employees. A single blog entry can garner so much attention, that CEOs have been forced to step in and change behaviors of their firms.

LXB: How did you come up with the Good Company Index Scores?

Bassi: Along with my business partners Dan McMurrer and Ed Frauenheim, we debated for hours over the course of many months on how to wrestle the framework from different data points. In the end, we agreed that the three pillars of the Good Company Index are the good employer, the good seller, and the good steward (of communities and environment).

LXB: How did you compose the index and who rates the companies?

Bassi: There were 11 data feeds that went into the index. Most of them are publically available sources of information. One data feed we used is the Dow Jones sustainability index. Another was looking at a company's fines and penalties. Although this was a laborious effort, it was possible to do. We also systematically looked at corporations contribution strategies.

LXB: How did you evaluate companies against your three pillars?

Bassi: To determine who were the good employers we used two data feeds. The first is the well-known Fortune Magazines best places to work. The limitation there is Fortune only looks at 100 companies. Also its only a positive indicator and doesnt include anything negative. We also used a firm called Glassdoor (www.glassdoor.com), which gives an inside look at more than 140,000 companies. Its website is tech-fueled by people power, and is a great example of what is creating the naked corporation by exposing the good, the bad, and the ugly. Its all out there for public viewing.

We consider the information on Glassdoor to be quite authentic. We have had corporatevice presidents of social responsibility complain about this site saying, We have no control over that website, and thats the point. When examining good seller, we used only one data feed: wRatings (www.wratings.com). This company rates more than 4,000 companies using input from consumers. It assesses companies based on 17 dimensions of consumers experiences such as branding, fairness, and quality. This is a great example of technology-fueled people power; wRatings collects vast amounts of information from consumers, which it couldnt have done without the power of the Internet.

Determining which companies are good stewards was our most complex task. We looked at firms penalties and fines, which we use as an indication of excessive greedy behavior. In addition, we looked at CEO compensation, the use of offshore tax havens, and two green indicators (the Dow- Jones sustainability index and the Newsweek magazine green rating).

In addition, we looked at how companies use their core capabilities to help solve significant problems in the communities in which they are located. For example, Proctor & Gamble (P&G) discovered that many young women in India missed several days of school a month because they didnt have feminine hygiene products. As a consequence, the girls got behind and dropped out of school, married, and had children at a young age, perpetuating a cycle of child mortality and poverty. When P&G made feminine hygiene products available, it had a great impact on delaying childbirth and reducing child mortality.

LXB: Can you touch on the growing importance of Asia?

Bassi: The Indian school of management is a good example of a management perspective focused on people and learning. Many Indian CEOs are people-focused, and believe that their companies need to be a force for good in society. Peter Cappelli has both a book and an article in the Harvard Business Review about how Indian leaders manage with a sense of mission, employee engagement, and a unique persistence for addressing hard problems. And people-centric U.S.-based firmsthose that invest in people in good times and bad are the ones that have thrived.

LXB: Have you had to revise your ideas about the Worthiness Era in light of some of the recent headlines with Goldman Sachs and the bad behavior of banks? Are they a setback to the progress of the Worthiness Era?

Bassi: Were not arguing that greed is a thing of the past. As long as there are humans, there will be greed. What we are saying is that its harder to get away with. Some of the companies recently in the news, such as Citigroup and Goldman Sachs, got caught and they paid a fine for it. It may be monetarily small potatoes from their perspective, but they have paid a big penalty in the court of public opinion. A good example of people exercising their power is when Bank of America wanted to charge customers for accessing their own money with monthly debit fees. People were able to organize, and they did; vast numbers of people took their money out of that institution and the bank changed its policy. What is happening is a social phenomenon—people identify themselves as standing together as citizens of the world, and technology helps them to do so.

LXB: What can CLOs do to drive their companies in the direction of becoming worthy?

Bassi: By making good sound business cases for the power of learning and the power of investing in learning. There is a growing body of evidence that learning pays. Its a really good investment, and we think top-level managers should focus on making learning a priority on both an organizational and individual level. From a purely logical point of view, to innovate you have to learn something new. Hence, its increasingly important. From a hardnosed business level, investing in employee learning and development is an important part of being a good employer and a good seller. We talk about doing business in an all-win way.

Paradoxically, technology-fueled people power has reinforced the old-fashioned Golden Rule. I think weve been confused for the past few decades, when we celebrated greed. Now, weve collectively awakened to the fact that greed is a vice. Given the turmoil that it has caused in the last few years, this is a lesson that will not soon be forgotten.