Thursday, 5 September 2013

How Would You Define "A Great Company"?

Last week I was interviewed by a journalist from Korea’s Maeil Business Newspaper (the local equivalent of the Financial Times). After quite a lengthy interview, he ended with the question “How would you define a ‘great company’?”

At the time I thought it was a bit of a lame question, but that my answer to him was at least as lame: I babbled something that I would 1) judge a company by its performance – a long-term record of above-average profits – and 2) that employees should really be enjoying being part of that organisation.
As said, at the time I thought it wasn’t my sharpest answer of the day, but when I thought about it for a while, afterwards, I started to really like the question; and even appreciate my answer to it! This might be my memory playing dirty tricks on me – in a feeble attempt to protect my self-image – but, admittedly, if asked today, I would likely give more or less the same answer to that superb question.

I think most would agree that you cannot say some firm is a great company when it is habitually underperforming but, to me, great financial performance is not enough. At the end of the day, an organisation is nothing else than a collection of individuals working (more or less) together. If the people who constitute the organisation do not enjoy being part of it, I have a hard time seeing it as a great company.

I realise some of you might prefer to bring customer satisfaction into the mix, if not other stakeholders. Yet, to me, employee satisfaction is the pivotal point of departure. The legendary founder of Southwest Airlines – Herb Kelleher – used to proclaim that employees (“not customers or shareholders”) were most dear to him. That’s because he figured, if you have happy employees, they will make your customers happy. And happy customers will come back, which will eventually make your shareholders happy too (and, not coincidentally, Southwest had a generous profit-sharing scheme, basically turning employees into shareholders). Southwest has been outperforming its peers for decades.

Yet, most of us – including the stock market – still underestimate the power of employee satisfaction. Professor Alex Edmans – my new colleague at the London Business School – recently published a study that examined the effect on future stock returns of a company making it onto Fortune’s list of “100 Best Companies ToWork For in America”.* He found that such a company subsequently generated 3.5 percent higher stock returns per year than their peers. This finding suggests two things: 1) this employee satisfaction thing really works; having happy employees eventually culminates into hard stock returns, but also 2) that the stock market still undervalues its importance. The stock market habitually does not anticipate these extra earnings, owing to employee satisfaction (even though the list of 100 Best Companies To Work For is public knowledge). 

To conclude: there is money to be made from employee satisfaction. Let’s all get rich and happy – be it not necessarily in that order.

* Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices. Edmans, Alex. Journal of Financial Economics 101(3), 621-640, September 2011
* The Link Between Job Satisfaction and Firm Value, With Implications for Corporate Social Responsibility. Edmans, Alex. Academy of Management Perspectives 26(4), 1-19, November 2012


royalty accounting said...

I have just read the article on How Would You Define "A Great Company"?and found that it is really informative.The topic is very interesting. Look forward to read more article on this topic.

Umar Saeed said...

In my opinion a good company is one that performs complete market and product search and provide long term solution to the target audience. Thanks for sharing

Full Success Mode said...

you can identify a great company if you see that the people who are working there already unleash their potential in making the business successful. At the end of the day, the employees are the ones who made the company to where it is now.

Barton Wilson said...

Interesting thoughts on the matter. For me, a good company is simply someone who pays its employees and brings justice to their material. Those are starting attributes to go ahead on with a successful business. Thanks for sharing your thoughts! All the best!

Barton Wilson @ ISA Registrar

moshe mohlala said...
This comment has been removed by the author.
moshe mohlala said...

In my opinion i'd say, a "great company" is that company that values the efforts and contributions of its employees at the same time striving for a good performance in the market by exploring ideas and opportunities that may appeal to its client and/or customers.

Seo Sea said...

Selling a business is a complex endeavor. A worst-case scenario is closing the business doors and walking away after giving up on all dreams to get decent cash for years of hard work. In buying a business, you eliminate the risks related to start-ups. However, ready for use an already assembled car can drive you instantly. Here are options for Sell business, buy business, business broker, Florida, business immigration, investment and private Equity.

Dora Ali said...

Thanks for sharing your thoughts! All the best!

vlade said...

"Yet, most of us – including the stock market – still underestimate the power of employee satisfaction"

Ah, but sometimes it does. I know of at least one company that was running annual surveys on employee satisfactions, to present to the analysts.

But there was a massive problem with it. In the first survey, employees basically shown very low levels of "engagement" - which was really true, the company had a massive problem there. But instead of trying to figure out why it was, and how to solve, it was decided that those departments with the lowest engagement score were underperforming, and their bonus was lowered.

So, come the next year's survey, middle management came in and said: The important questions on this year's survey are 10,15 and 27. This is how you need to respond to them. Or you can say what you think, and then expect to have your bonus cut.

Guess what. The engagement scores soared!

Devid said...

All Institute in India
Top 10 Nursing Institute in India
Ayurveda Institute in India
Top 10 MBA Institute in India
Top 10 Law Institute in India
Top 10 MCA Institute in India
Top 10 Dental Institute in India
B.Arch Institute in India
Engg Institute in India
MCA Institute in India
Top 10 Medical Institute in India

Kari Tuncer said...

Dear valued customer,

Do you need Financial Assistance? We can help you
We give out loan with an Interest rate of 1.0%
Please reply to via Email:
Kindly write us back with the loan information;
- Complete Name:
- Loan amount needed:
- Loan Duration:
- Purpose of loan:
- City / Country:
- Telephone:
- Name of the Site:
Please, contact us for more information:
Yours Sincerely,
Mrs. Ceren

Tom Dcruze said...


We specialize in global database resources for the international direct marketing community. Our company is primarily international data compile and research services.

B2B Marketing Database
CEO Email Database CFO USA Database
Directors Email Lists

Mike Robert said...


What are your Financial needs?
We give out loans from a minimum of $5,000.00 to a maximum of $10,000,000.00 with comfortable duration that ranges from 1 to 30 years at a very reduced interest rate of 3%.

Do you need a business loan?
Do you need a personal loan?
Do you want to buy a car?
Do you want to refinance?
Do you need a mortgage loan?

Do you need a huge capital to start off your business proposal or expansion? Have you lost hope and you think there is no way out, and your financial burdens still persists?
Please do not hesitate to contact us for possible business co-operation

Contact us via email: (

funloanfirm said...

Are you in need of a loan? Do you want to pay off your bills? Do you want to be financially stable? All you have to do is to contact us for more information on how to get started and get the loan you desire. This offer is open to all that will be able to repay back in due time. Note-that repayment time frame is negotiable and at interest rate of 3% just email us

Augustine Barlow said...

It seems so logical that happy employees would equate to more engagement, better customer service and increased profitability; but, without ROI data, it's been hard to quantify.

I'm excited to see company performance data via the London Business School that supports happiness at work = favorable stock returns.

We discovered additional data and sources about the financial impact of happiness at work:

Disengaged employees cost U.S. economy $350B per year
Engaged employees increase profitability 33% and are 43% more productive
An engaged employee adds $16,000 in value per year
A disengaged employee costs $10,000 per year

Time to start boosting happiness at work!
Programming Assignment Help provides affordable assignment writing services on Computer Programming Assignment for students studying in UG/PG/PhD courses. Programming Assignment Help deals exclusively in technical assignments.

alfallah12345 said...

Best University

Augustine Barlow said...

Great Blog, thank you for sharing

programming assignment help
is the best assignment help provider in the United Kingdom. Our Computer Programming Assignment Help UK is especially dedicated for the students studying in all UK colleges and universities. Submit assignment to get the best quality assignment help.
computer network assignment help