Harris Interactive released its 9th annual survey of perception of US top corporates. In rating the most and least respected Google, Intel and Microsoft made it into the top 10. While there are some telco’s in the bottom 10 tech companies have kept themselves out of it. This survey only looks at the 60 most visible US companies so not every company is part of the evaluation. What these results show are an indication of how well these companies do with their relationships with their employees, the community and to a growing extent the environment.
I have written before about how the focus we have on the short term financial movements of the company and ignore that for sustained long term performance the company needs to manage 4 key resources, money, staff, the community and the environment. In the end company law requires that companies give a financial return to their shareholders so making this return is important to their continued existence. Some companies realise though, that making decisions that give a financial return over any other consideration can make a company seem like it is being sucessful but ends up destroying value. Look at the current sub-prime mortgage crisis, Enron, S&L’s and many other examples from recent history.
If we take the results of the Harris survey as a proxy for how well the companies are doing in the non-financial measures, then we can gauge whether this is reflected in their financial results over time. I have taken the top and bottom 10 companies from the survey and looked at their financial results over the last 2 reporting periods, mostly 2006 and 2007. The top 10 companies averaged 16% revenue growth and 17% income growth, while the bottom 10 averaged a 3% decline in revenue and a massive 63% decline in earnings.
While this is by no means conclusive proof it is a strong indicator of a causal link. The sample size is too small to be statistically valid and there are a number of clouding factors like the different industries represented in both groups. The causality is also a two way one. While it is true that companies that think about employees, community and environment are more financially successful, companies that are financially successful can afford to be more generous in these areas.
So how do you think the company you work for would do in this survey? and would doing better improve their results? Let me know in the Ohana forum.