The Value of Respect

Barron’s recently published results from its annual survey of institutional investors about their views of the world’s top 100 companies, based on market cap as of May 12, 2014. This cross section of U.S. money managers ranked companies on the basis of 1. Strong management, 2. Ethical business practices, 3. Sound business strategy, 4. Competitive edge, and 5. Product Innovation. Barron’s has been conducting this survey since 2005, and uses a numerical scale relating to four statements of Highly Respect , Respect, Respect Somewhat, and Don’t respect.

The results are a ranked list of the World’s Most Respected Companies. The top 5 this year are Apple, Berkshire Hathaway, Boeing, Google, and Johnson & Johnson. 19 of the top 20 companies listed are based in the US, even though 51 of the top 100 largest companies are based outside the US.

Some respondents based their answers on financial metrics such as profitability or cash flow, while others responded from the perspective of strong management or stock price performance. Other more difficult to measure determinants of respect are qualitative, such as value to society, or treatment of stakeholders in the value chain, such as suppliers, employees, or customers.

Apple is the number 1 most highly respected company for the 4th year running. This great company introduces its faithful customers to a constant stream of valued products. As a result, it reports strong financial metrics.  Although Customer Experience is not listed as an measurable attribute, its my guess each of the top five have a strong customer orientation, with processes and products mapped to that experience.

Facebook is a prominent new company added to the top 100 this year. We might have expected this newcomer to rank higher on the list, given their IPO performance and strong financial performance, even though they are paying high amounts for companies with little revenue. However Facebook did not fare so well, ranked 83rd overall. Their ‘don’t respect’ scores were among the worst, comparing to Tobacco companies in the view of institutional investors.

Anecdotal comments by some of the respondents might have negatively impacted their score, but in fact they may have earned their position outright. One respondent noted that “Facebook sticks things into services it doesn’t tell users about, and makes it hard for users to opt out”. Not exactly a strong customer focus.

The Value of Respect seems to be highly correlated to Customer Experience. Companies must have a Customer Experience Strategy that runs deep to their core if they expect to ever make this list, no less survive as a company. It is telling that companies with a strong Customer Experience model do very well in the Highly Respect category.