Why The ’100 Best Companies’ To Work List Is Useless

February 10, 2011 by Douglas A. McIntyre

Anyone who enters one of the 77 high-end supermarkets owned by Wegmans Food Markets Inc.  throughout the Northeast or clicks on the website of the Rochester,  NY-based company quickly learns that it has been designated as one of the 100 Best Companies to Work For by Fortune magazine for more than a decade.   Many other companies, including search engine giant Google Inc. (NASDAQ: GOOG) and hip Internet retailer Zappos.com, are not shy about touting their rankings on the list either.   These  warm and fuzzy public relations moments, however, are based on sloppy research by list creator, the Great Place to Work Institute, that is tainted by financial relationships that violate the best practices of the polling industry.

For instance,  the Great Place to Work Institute is a consulting firm that does business with some of the companies on the list among others,  something not disclosed by Fortune. Among its former clients is Wegmans, which finds the list a useful recruiting tool when it enters new markets, says spokeswoman Jo Natale. Similar or worse conflicts exist in the dealings of Great Place overseas.

“We had been on the ‘100 Best Companies to Work For’ list for 10 years before we even considered working with Great Place to Work on a project,” she says.  “We never felt pressure to use their consulting services prior to that; we didn’t then, nor have we since.   And the one thing we know for certain is that the application process, including the survey results, have helped us to become an even better place to work …  and ultimately a better place to shop.”

The 100 Best Companies to Work For list has indeed morphed into an unofficial Good Housekeeping Seal of Approval for job-seekers and an opportunity for corporate America to pat itself on the back for treating its workers well in a tough economic environment.   While we have no reason to suspect that workers at Wegmans are not treated well, the company’s inclusion on the list doesn’t prove that is the case.  In fact, it doesn’t really prove anything.

24/7 Wall St. spent six weeks looking at Great Place and its practices both inside and outside the US. and found them to be lacking.
Unlike polls such as those done by Gallup, “Best Companies” is not scientific, not by a long shot.  Companies interested in being on the list must apply to the Institute, which despite its academic-sounding name is a for-profit institution.  To be eligible, companies must meet a list of criteria including having 1,000 or more U.S. employees and having been in operation for seven years.  The 100 “Best” are only the best of the 311 that applied, one large national polling firm which does not compete with Great Place, told 24/7 Wall St.  In addition, Fortune tells the winners 24 hours before the list is published while the Institute informs the losers at the same time.

“… our methodology for selecting the best is rigorous and considers the results of an employee survey and an extensive questionnaire,” the Institute says on its website.

The surveys, though, are done at the office where employees may feel intimidated about sharing their true feelings, an independent polling firm not involved in employee evaluations told us.  Firms interested in finding out if their employees are happy can also chose to be bench-marked against other firms in their field for a fee of $3,000 or  $12,000 depending on the level of complexity involved.

Theses fees are even higher overseas, and are pushed relatively hard in promotion material for the lists and the Great Place Institute.  The Great Place affiliate in Italy charges for packages that help companies improve employee satisfaction. In India, the package for application even has a long list of feedback and benchmark services. The promotion of the Australian list, which runs in the Fairfax Media BRW magazine, has a description of paid consulting service.  The overseas affiliates will eventually operate independently of the U.S. operation, according to the Institutute.

Great Place does not disclose anywhere which publications actually make money on these listings through advertising or a share in consulting fees. All parties 24/7 interviewed said Fortune does not. The marketing benefits for Fortune are many. Great Place in the US offers a Best Companies Executive Strategies Network. The forum is only open to firms that have been on one of the Fortune lists for the past three years. Membership fees are $7,500 per year for one person. Member companies include American Express (NYSE: AXP), Goldman Sachs (NYSE: GS), and KMPG. When 24/7 Wall St.  raised questions to Fortune about Great Place’s business practices and questionable polling methods, a spokeswomen for Fortune parent Time Inc replied in an email: “We stand by the reporting, extensive methodology and independence of FORTUNE’s Best Companies to Work For List.”

Great Place co-founder Robert Levering told 24/7 Wall St. that Fortune 1000 are invited to participate in the US list each year. Other companies apply without invitation. If Levering and his staff see a media report about a firm that appears to fit with the Insitute’s rules, it is asked to be part of the survey. This last part of the process for getting candidates is random. Levering and an associate write the article for Fortune and are paid as freelancers.  By his reckoning, companies that treat their workers well always apply. “Why would someone who was one of the fastest runners in  the world stand on the sidelines? No company would claim it was among the best and withhold applying for the awards,” Levering says.

Great Place to Work refused to publicly disclose the names of other clients, a stance that puts it at odds with other companies in the survey business.   According to the ethics code of the American Association for Public Opinion Research, information about how publicly released research is being funded should be disclosed.  The Institute’s Web site alludes to its consulting business.  Fortune does not disclose it at all even though its website features job ads from “Best Companies.”

Some contacted by 24/7 Wall St., such as Google,  The Container Store, and Boston Consulting Group, say they had not used the consulting services of Great Place to Work.  Many declined to elaborate further.  Zappos CEO Tony Hsieh is due to address one of the group’s conferences even though his company also is not a consulting client, says spokeswoman Holly Jobbagy.

“While its nice to get outside recognition for what we do at Zappos we still continually survey our entire employee base to ensure that we are always staying on top of our employees needs and concerns,” she says. “We rely much more on the data we collect internally than from that which Great Place to Work provides as part of the process.”

A look at the Fortune 100 shows that only 10 of companies make the Best Places including Google, Goldman Sachs and General Mills.  Twenty-eight companies with under 2,000 workers are on the Best Place to Work list, a remarkable number since the target for invitations is Fortune 100o  companies. Many of these companies are also only barely large enough to make the cut based on number of employees.

Great Place to Work Institute was founded in 1980 by Levering, an author, and Amy Lyman, a former professor a the University of California, Davis.  Levering, the Institute’s board co-chair, boasts of having studied what makes workplaces great for more than three decades.  He was a co-author of the 1984 best-seller The 100 Best Companies to Work for in America and has been cited in the New York Times, Newsweek and USA Today.  In addition, he has appeared on CNN, CBS Evening News and Oprah.  Lyman serves as director of corporate research and is a frequent speaker at Institute conferences.

The San Francisco-based company began providing the list for Fortune in 1998.   Its website says it now produces Great Place lists in more than 40 countries.  The list is a money-maker for some of the media companies that publish it.  In Canada, the list appears as an advertorial in the Globe & Mail, the country’s largest newspaper.  Brian Trotter, the G&M business editor, told 24/7 that his paper would not run the list if it did not make the newspaper a profit. The winners in the G&M are notified weeks in advance of the list’s publication and are solicited to advertise in the insert in which they are praised. In the UK, the Best Places list is published by an annual publication  distributed by The Sunday Times and distributed through British Airways.  The Financial Times, used to run the insert but told 24/7 Wall St. that it was dropping the list this year as is The Guardian.

“The Best Workplaces in the UK” was an independent supplement which we used to have in the paper, but our relationship with them is now discontinued,” says Esther Kissiedu, an FT spokeswoman.   Adds Helen Hodgson, Assistant Readers’ editor, The Guardian: “The answer is, that although we ran it in 2009 and 2010, we will not produce this supplement in the future.”   Neither publication would elaborate further. Levering says he had no idea why the papers dropped the list.

Jonathan Berr,  Douglas McIntyre