By Chris Kornelis
Even the best-managed companies have Achilles' heels.
Among the top 100 U.S. companies in the Management Top 250
ranking, eight have a "red flag" in one of the Drucker Institute's
five categories of corporate effectiveness, meaning they fall below
the 25th percentile in customer satisfaction, employee engagement
and development, innovation, social responsibility or financial
strength.
Only two of the red flags for these eight companies are in
financial strength, but Rick Wartzman, head of the Drucker
Institute's KH Moon Center for a Functioning Society, says a flag
in any category has implications for a company's bottom line if the
issues it raises are left unaddressed. All the categories are
interrelated, he says.
"Over time, if you have particularly weak customer satisfaction,
odds are you're not going to be a very financially strong company,"
he says. "If you don't innovate, you're not going to have good
customer satisfaction. If you don't have engaged employees, you're
not going to have customer satisfaction or much innovation. We know
that all these things are bound up together."
Here's a look at the issues behind the red flags for these
top-100 companies.
Chevron Corp.
Red Flag: Customer Satisfaction
The energy giant landed in the 13.7th percentile for customer
satisfaction. One indicator Drucker considered that weighed down
the company's score in the category was Chevron's score from
wRatings Corp., which measures how well a company meets customer
expectations.
Gary Williams, chief executive of wRatings, says that in many
ways Chevron's score is an indication of the way consumers view the
energy industry, which many associate with environmental damage and
global warming. Mr. Williams says he has yet to see an energy
company redefine itself the way, say, Waste Management Inc. was
able to identify itself more closely with recycling than landfills.
He sees that as a missed opportunity for Chevron and its
competitors.
"You can reset" expectations, Mr. Williams says. "And if you're
a market leader, that's what you do."
In a statement, Chevron said: "While we are not clear on the
Drucker Institute's methodology, we know that direct market
research demonstrates consistently that both the Chevron and Texaco
brands score very highly with customers relative to the industry,
particularly when it comes to fuel quality, the appearance of
stations, and the customer service provided while there."
Cummins Inc.
Red Flag: Customer Satisfaction
The engine manufacturer's customer-satisfaction score, which put
it in the 22.5th percentile, was also dragged down by a low score
from wRatings. Mr. Williams says Cummins typically puts up better
numbers, but he believes a dragged out recall of trucks because of
problems with Cummins engines took its toll this year.
In a statement, Cummins said: "Cummins prides itself on helping
our customers be as successful as possible by delivering excellent
sales, service and support....We are committed to delivering on our
brand promise and are taking the necessary steps to ensure we
provide a positive experience for our customers."
Facebook Inc.
Red Flag: Customer Satisfaction
Facebook is in the 21.6th percentile for customer satisfaction,
a ranking driven largely by its score from J.D. Power on customers'
willingness to recommend Facebook to a friend or colleague.
Overwhelmingly, consumers asked by J.D. Power say they aren't
likely to recommend Facebook.
Michael Vermillion, vice president of global business
intelligence at J.D. Power, says this question essentially asks
consumers how willing they are to stand up for a company publicly.
In this regard, he says Facebook trails social-media colleague
Twitter, which he likens to McDonald's trailing some of its major
competitors: "Even if they like the french fries, people aren't
willing to put their personal reputation on the line" to recommend
the brand.
A Facebook representative didn't respond to requests for
comment.
Philip Morris International
Red Flag: Customer Satisfaction
The tobacco company that sells Marlboro outside the U.S. is in
the 0.6th percentile for customer satisfaction. The score was
affected by a number of indicators. Put simply, Mr. Williams says,
given the health concerns around tobacco, "it's going to be really
difficult to get people to like you as a company."
A representative for the company said: "Philip Morris
International has been very clear about our smoke-free vision -- to
create a world without cigarettes. PMI is undergoing a massive
transformation to shift our business entirely out of conventional
cigarettes to scientifically substantiated smoke-free products --
those that don't heat or contain tobacco -- that are better choices
than continued smoking, the most harmful form of tobacco use."
Walmart Inc.
Red Flag: Employee Engagement and Development
Walmart is in the 23.1st percentile for employee engagement and
development in large part due to its job-satisfaction score from
PayScale Inc.
In a statement, Walmart said: "We are proud to offer some of the
best jobs in retail, and the opportunity to grow a career. In the
past four years we have significantly invested in wages, benefits,
training, and education for our associates."
Kelly Tang, the Drucker Institute's senior director of research,
says improved compensation has shown up in Walmart's scores. "What
we don't know," she says, "is whether there's simply a lag -- and
job satisfaction will start to catch up with the higher pay. Or it
might reflect some other, lingering issues that affect morale,
which Walmart has yet to address."
UnitedHealth Group
Red Flag: Customer Satisfaction
UnitedHealth Group scored in the 18.9th percentile for customer
satisfaction. Its score was driven heavily by low scores in J.D.
Power's customer-satisfaction index and from wRatings. Mr. Williams
says insurance companies often score low on customer satisfaction,
adding that "there are few insurance companies, I think, that are
liked." But UnitedHealth's scores, he says, have been low enough
for long enough that he believes they reflect more than general
consumer views of the industry.
In a statement, the company said: "At UnitedHealth Group we are
driven by a clear vision, grounded in achieving the triple aim of
improved outcomes, lower costs and a better health-care experience.
Improving health-care experiences for everyone is one of our core
focus areas, and we have developed a rigorous feedback system
across our various businesses dedicated to listening and responding
to our customers and members. UnitedHealth Group uses the Net
Promoter System as a proven operating discipline to help raise
quality, deliver value and simplify the health-care experience.
While we have made progress, we know we have more work to do."
General Electric
Red Flag: Financial Strength
One of the indicators that pulled down General Electric's
financial-strength rating -- which put it in the 2.3rd percentile
-- is its score on economic profit from ISS EVA. Economic profit is
a measure of a company's operating earnings minus the opportunity
cost of the capital tied up in its business.
Anthony Campagna, ISS EVA's global director of fundamental
research, says steps GE has taken to stabilize "since the wheels
fell off at the height of the financial crisis" haven't been
enough.
"Even as they've divested businesses and tried to right-size the
GE balance sheet, they haven't been able to be more efficient with
the assets that are left over," he says. "They've communicated that
this is going to be a process [that is] not going to happen
overnight. And that's taken into account. But what we can measure
is what they've done, and what they've done is fail to earn above
their cost of capital."
A GE spokesperson said: "We have enormous opportunities to drive
sustainable performance improvements across GE and within each of
our businesses. We are making progress improving our financial
position and strengthening our businesses, which will show up over
time in our financial results. We remain confident that we will
unlock value for GE's stakeholders as our transformation
accelerates."
Workday Inc.
Red Flag: Financial Strength
Workday's position in the 13.6th percentile for financial
strength is also largely a product of its score in the ISS EVA
economic-profit metric. "Through our lens, they earn below their
cost of capital," says Mr. Campagna.
He attributes Workday's low score in part to the company's heavy
investment in research and development, which he says hasn't "given
investors the required rate of return to justify that level of
investment just yet."
Workday didn't respond to requests for comment.
Mr. Kornelis is a writer in Seattle. He can be reached at
reports@wsj.com.
(END) Dow Jones Newswires
November 22, 2019 10:46 ET (15:46 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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