posted by Dan McMurrer
One of the central elements of Good Company is our Good Company Index™, in which we rate companies on their behavior as employer, seller, and steward of the community and environment.
Thinking back, it’s possible we co-authors spent more time debating and constructing this rating system than we did on any other part of the book. (And believe me, we devoted a long time to some other parts too, so that’s really saying something!)
Most fundamentally, the Index rating reflects our views about what constitutes a good employer, a good seller, and a good steward. (After defining those characteristics, we were delighted to find that they also proved to be associated with stronger stock performance – a finding we’ll explore in more detail in future blog entries.)
Once we settled on those characteristics, we set out to find data that would tell us how good (or not-so-good) was the behavior of companies in each of those areas. We sought data that ideally had all of the following attributes:
- Closely reflected the characteristics we had defined
- Reliable and of high quality
- Available for a large number of companies
- Publicly available
There were certainly some areas where we were delighted by the data options available. We’re big fans of the information available on Glassdoor.com, which publishes employee ratings of their employers.
That’s a core component of our “good employer” rankings. And the Newsweek Green Rankings, a key element in our “good steward” scores, are very impressive in their comprehensive ranking of the environmental footprint (and management of that footprint) among the 500 largest publicly-traded companies in the United States.
Reflecting the early stage of much of this work, however, it turns out there were significant obstacles in capturing information in many of the areas we wanted to rank.
In some areas, no data existed at all and we had to decide whether it was possible to create our own database, or whether it would simply be impossible to measure a given area. (After telling ourselves for months that surely a consolidated list of major government-imposed fines and penalties must exist, we finally yielded and ended up creating our own database, largely through manual company-by-company searches across multiple government websites.)
And not surprisingly, even many of the good data sources focus on large companies only. (In fact, this was such a significant factor in so many categories that we made the decision to limit our 2011 rankings to only the publicly-traded companies listed in the Fortune 100 – the largest 100 companies in the United States.)
In one area (customer rankings of companies that could be compared across industries), we became convinced that the best source of data was from a company called wRatings, which – unfortunately for our purposes – did not make its data publicly-available. Fortunately, however, their CEO Gary Williams kindly agreed to work with us to use their data to construct a “Good Seller” index, and allowed us to publish the results for the Fortune 100.
In the end, we’re pleased with the index we created. At the same time, however, we recognize it’s still just a first step. We fully expect it to become more robust (and available for a larger number of companies), in the years ahead.
Stay tuned – over the next few weeks, we’ll explore in more detail how we actually assigned scores to companies on their behaviors as employer, seller, and steward.