Measurement/metrics

My good friend Bob Eccles, professor of management practice at Harvard Business School, wrote an article (The Performance Frontier) that just appeared in the Harvard Business Review.  Here is a PDF. I’ve been extremely interested in his work on integrated reporting for awhile now. What is integrated reporting? Essentially it is One Report that combines financial and non-financial information interactively into one document. A good example of a company that has done this is Natura. Although integrated reporting is voluntary today, it is required of all companies on the Johannesburg Stock Exchange. But integrated reporting is much more than an online CSR showcase. When it is done right, it is an authentic and innovative two way conversation where a company convenes its stakeholders to discuss its progress meeting its financial and nonfinancial goals. For example, Natura does this through Natura Conecta where the public is invited to have a discussion on environmental and social issues related to the company. It is a living exchange, not a static one that is one-way and more push than pull.

Bob’s article has an interesting slant which he points out in the introductory sentence . . .”But a mishmash of sustainability tactics does not add up to a sustainable strategy.” He argues, along with his co-author George Serafeim also at Harvard Business School, that we need a solid framework for simultaneously boosting financial performance as well as doing good. Tactics alone won’t do the trick. They provide a model for identifying the most environmental, social and governance (ESG) factors that drive shareholder value so that both financial and ESG performance are enhanced, not just one. A company that focuses on sustainability without paying attention to the financial costs is not going to have a genuine sustainability strategy that meets everyone’s interests. Similarly, a company that focuses solely on financial performance to the exclusion of good ESG performance will lose out as well in terms of public opinion and support. A major component of reaching this perfect balance, according to them,  is by identifying major innovations in products, processess and business models that achieve these improvements and accomplishes superior financial and sustainability performance. A good example is the one with Natura mentioned above. They also cite innovative business models from Dow and Hong Kong-based CLP Group. And then, of course, Bob argues that these activities are ideally communicated through integrated reporting.

What fired me up was the SASB (Sustainability Accouting Standards Board) Materiality Maps that have been created for 88 industries in 10 sectors.  Each industry has its own map that prioritizes 43 ESG issues and ranks them in terms of materiality. Not all the maps are complete but take a good look at this one for the health care sector. It shows which ESG factors impact financial performance so that a company knows what to prioritize. It’s a great contribution to understanding ESG factors as well as what drives strong corporate reputation. Don’t miss it.

And congrats to Bob and George for raising an important question about how to better balance financial costs and sustainability costs so that they complement one another instead of taking away.

Each year Fortune publishes the 100 Best Companies to Work For in the U.S. While the bulk of the company evaluation rests on a comprehensive employee survey, Fortune publishes a wealth of employer statistics about benefits, diversity and jobs. Weber Shandwick has been cataloguing this data since 2006, enabling us to look at how each factor is changing over time and how reputations can be shaped by being a best company to work for.

Most Best Company statistics for jobs, diversity and benefits were unchanged between 2012 and 2013. However, this leveling off could be taken as a sign of good news. 2010 and 2011 were mediocre years for jobs and the improvement in job and diversity statistics in 2012 suggested that the market was starting to strengthen and reputations are stabilitzing. Similar numbers in 2013 may signify that improvement is still underway.

Below are insights into these jobs, diversity and benefits trends:

Jobs: The Best Companies reported virtually the same job statistics in 2012 and 2013, including median job growth (6%) and median voluntary turnover (7%). In fact, with the exception of 2010 and 2011 which were poor years for jobs statistics, median job growth has maintained a steady rate since 2006, only fluctuating between 5% and 7%. Perhaps this job growth range is a Best Company standard.

Improvement in negative growth may be a sign of recovering job market. After hitting a low last year (11%), the number of companies experiencing negative job growth remained steady in 2013 (12%). This is a drastic improvement from 2011 when 45% of Best Companies reported negative job growth.

The rate of Americans quitting is on the rise, suggesting that people across the country are becoming more confident in leaving their jobs to find work elsewhere. Best Companies, however, maintained the same voluntary turnover rate between 2012 and 2013 (8%). The difference between these two trends may reflect the impact that a good reputation can have on retaining a company’s workforce.

Diversity: Diversity initiatives at Best Companies have also remained mostly unchanged. The average percentage of women and minorities working at Best Companies has been consistent since 2008. But with women already comprising, on average, nearly half the Best Companies’ workforces, it is very possible that we will see this trend continue into the coming years. 2013 was another solid year for gay-friendly policies and benefits. Nearly all Best Companies this year have gay-friendly policies (99%) and the number of those offering gay-friendly benefits has hit a record-high (93%).

Benefits: The most noticeable change in employee benefits offered by Best Companies since last year is the decrease in number of companies extending compressed workweeks (down from 80% in 2012 to 73% in 2013). Also taking a small hit is on-site childcare, which fell below 30% for the first time since 2008. The Fortune evaluation, however, does not look at companies that offer flexible workweeks, which could be taking the place of these two benefits. Best Companies could be giving employees the opportunity to better balance their work lives outside of a formal perk. We may be starting to see this trend happening at companies not on the best-of list too. For example, while Yahoo CEO Marissa Mayer was recently in the media spotlight for banning working from home, it is possible that Yahoo employees have other options for work flexibility aside from telecommuting. The benefit with the greatest improvement is on-site gym, which hit a high this year (73%). All other perks remained largely unchanged from 2012.

It is that time of the year. Last day of 2012 and the start of a new 2013. I posted an article to Huffington Post on what I see ahead by looking backward at reputation trends bubbling up and trends on the vast horizon.  Here is the post if you want to settle into the new year with a clear lenses on reputation possibilities.

Wishing you a happy new year!

Totally fascinating to me that China releases a list of its wealthiest citizens, similar to the Forbes 400. The list, Hurun Report, had some amazing facts worth sharing and which I learned about reading The Economist. The leading source of wealth came from individuals making their living off of manufacturing and not real estate as it was one year ago.  There were also interesting correlations between wealth and zodiac signs with those born in the year of the Rabbit outranking those born in the year of the Snake (2^nd) and year of the Dragon (3^rd). At the bottom of China’s wealthiest 1000 individuals are those born in the year of the Ox. The reputation of the Ox is in danger.

But most interesting was the downfall of some of those who make the Hurun or the Forbes Wealthiest people list. There is greater scrutiny from tax collectors, regulators and the public. There is even a book titled “The Curse of Forbes” which describes the problems that surface when being lauded as one of the nation’s richest.  In a report that the article cites, researchers found that those companies headed by entrepreneurs who make the list find that their market value declines sharply three years afterwards.  Clearly, being on a rich list in China brings the bad with the good and puts reputations in jeopardy.  The Economist title was “To Get Rich Is Not Always Glorious.” An apt headline.

 A recent study just came out saying that CEOs think that marketers are losing sight of their jobs. In the survey from Fournaise Marketing Group, 70% of the CEOs surveyed said that marketers and communicators are disconnected from business results and are living “too much in their creative and social media bubble.” There did not appear to be a separation between marketing and communicators so I imagine that CEOs consider them one and the same.  Although CEOs consider the marketing metrics of the day (Likes and Twitter followers) interesting, they do not consider them critical to advancing the business. The metrics CEOs were most interested in were market share, sell-in, sell-out and linking communications spending to gross profit and other tangible returns. As the CEO of Fournaise says, “They will have to transform themselves into true business-driven ROI marketers or forever remain in what 65% of CEOs told us they call ‘marketing la-la land.’” Quite the indictment.

This report on CEOs was in direct contrast to what we learned in our survey with Spencer Stuart on what is on the minds of CCOs (chief communications officers) around the world who believe that their senior management wants them to improve reputation and get their social media operations up to par. This made me wonder whether CEOs do not fully understand the impact that social media can have on their businesses and therefore consider it less than mission-critical today. Or whether marketing communications professionals were missing the boat altogether and picking up on the wrong signals. Like most things, I tend to think it is somewhere in-between. CEOs need to understand how the ground under their feet is shifting when any individual can harm a company’s reputation and bottom line and marketing communicators need not only beef up their business acumen but better explain the ROI on social media.  The two studies provide a study in contrast, to say the least.