By Chris Kornelis
Facebook raked in more than $21 billion in revenue in the third
quarter, has upward of 50,000 employees, and more than three
billion people use at least one of its products in any given month.
But it came in dead last in customer satisfaction among the top 100
U.S. companies in this year's Management Top 250 ranking, drawn
down in part by a low net promoter score -- which shows customers'
willingness to recommend the company -- from J.D. Power.
For a growing company with a healthy balance sheet, does it
matter?
Rick Wartzman, head of the KH Moon Center for a Functioning
Society at the Drucker Institute, which created the statistical
model used to rank the companies in the Management Top 250, argues
that it does. Few companies, he says, perform well in all of the
categories that Drucker measures -- customer satisfaction, employee
engagement and development, innovation, social responsibility and
financial strength. But ranking below the 25th percentile in any
one of those categories, he says, amounts to a red flag, a warning
sign that the company is especially weak in that area.
"And that weakness," he says, "if it's severe enough and left
untended over time, may ultimately undermine the whole
enterprise."
He notes that Eastman Kodak Co., which filed for bankruptcy
protection in 2012, had a healthy balance sheet and many happy
employees for years. Had Drucker been tracking the company in the
mid-to-late '90s, he believes it would have performed well overall
-- but with a persistent red flag in innovation.
"And we all know how that story ended." he says.
There are 12 companies in the top 100 with a red flag in one of
the five categories. Here is a closer look at some of them:
AT&T Inc.
Red Flag: Customer Satisfaction
AT&T's customer-satisfaction score landed in the 19.2nd
percentile, hurt in part by a consistently low American Customer
Satisfaction Index score. David VanAmburg, managing director at
ACSI, says that customer-satisfaction scores generally tend not to
be much of an issue when you look at wireless service itself. But
when you start to look at wireless companies that are also pay-TV
and internet-service providers, such as AT&T and Verizon
Communications Inc. -- which also has a red flag in customer
satisfaction -- you start to see scores hit rock bottom. He says
customers pay a lot for these services and expect a lot from them
-- particularly now that they are home using them all day.
"And then we find that, generally speaking, the quality isn't up
to our expectations," he says, adding that common complaints
include spotty internet service and slow download speeds.
AT&T said in statement that "as of October 2020, our net
promoter score (NPS) [from market-research firm Kantar] is up
year-over-year across all of our products, and is at an all-time
high for AT&T Fiber and wireless service." What's more, the
company said, "J.D. Power's most recent study also ranked
AT&T/DIRECTV number one nationally among TV providers and
number one for broadband internet providers in every region we
serve."
Verizon didn't respond to requests for comment.
Boeing Co.
Red Flag: Financial Strength
Struggling with the grounding of the 737 MAX following a pair of
crashes, and fewer orders as the pandemic crippled air travel,
Boeing earned a red flag for its financial performance, ranking in
the 10.5th percentile. Boeing's struggles were reflected in
multiple sources that Drucker looks at for financial strength,
including total shareholder return and economic profit, which is
calculated by corporate analytics firm ISS EVA, a division of
Institutional Shareholder Services, and measures operating profit
minus a charge for use of capital. Rich Cleary, a vice president at
ISS Corporate Solutions, a division of ISS, says Boeing's defense
business has remained relatively stable, "but, obviously,
commercial aviation has taken a hit this year."
A representative for Boeing pointed to CFO Greg Smith's comments
in the company's third-quarter earnings call: "We're taking
comprehensive action to preserve liquidity, navigate the pandemic,
adapt to our new markets, improve performance, and position our
company for the future."
Bristol-Myers Squibb Co.
Red Flag: Customer Satisfaction
Bristol-Myers Squibb landed in the 20.7th percentile for
customer satisfaction, which can be attributed in part to a low
quality gap score from wRatings, which tracks how well a company
meets customer expectations. Gary Williams, chief executive officer
of wRatings, says Bristol-Myers's score was pulled down by changes
in consumer expectations for the pharmaceutical industry amid the
pandemic "and the lack of Bristol-Myers Squibb participation in the
Covid vaccine development."
In a statement, the company said: "Bristol-Myers Squibb is
participating in several cross-industry groups and public-private
partnerships designed to foster collaboration and coordinate
industry response efforts, and thereby accelerate the development,
manufacturing, and delivery of diagnostics and treatments for
Covid-19. Among other things, we identified more than 1,000
proprietary compounds to be made available to collaborators with
high-quality assays to screen for possible molecules to treat
Covid-19. We look forward to continued collaboration with the
broader life-sciences community as we continue to advance our work
on behalf of patients in our core therapeutic areas."
DuPont Co.
Red Flag: Financial Strength
DuPont's ranking in the 20.2nd percentile earned a red flag in
financial strength. ISS's Mr. Cleary says that DuPont's financial
position has been hurt by the pandemic, which forced it to idle
some plants. It also is in the midst of a transformation, he says,
following the merger with Dow Chemical Co. in 2017 and the
subsequent spinoff of Dow Inc. and Corteva.
In a statement, a DuPont spokesperson said: "We are executing on
a plan to strengthen our financial position that focuses on prudent
cost actions, price discipline, continued investment in innovation
and active portfolio management. We will continue to take actions
within our control to keep our foundation for growth strong and
will be ready to capitalize when certain markets begin to
recover."
Facebook
Red Flag: Customer Satisfaction
Facebook sits in the 1.1 percentile for customer satisfaction,
drawn down in part by a low net promoter score from J.D. Power.
Michael Vermillion, vice president of global business
intelligence at J.D. Power, says Facebook likely is being hurt by a
very low brand trust, which didn't improve as it sat at the center
of the nation's political and cultural divide during the election
season.
"To me, Facebook used to be a platform where I could share
photos and experiences with friends and family," he says. This
year, it turned into a place where you go to have arguments with
strangers about politics, he says, adding "I spent a lot of time
hiding posts or turning people off or turning off all the stuff I
didn't want to see."
Facebook didn't respond to a request for comment.
Ford Motor Co.
Red Flag: Financial Strength
Ford Motor picked up a red flag for financial strength, scoring
in the 22.3rd percentile. Mr. Cleary at ISS says Ford lost revenue
as demand for new cars and trucks declined during the pandemic,
contributing to a low economic profit score.
Ford spokesman T.R. Reid says the company isn't satisfied with
its current performance and is in the midst of a companywide
transformation.
"Pandemic or not, and by whatever measure, we can and have to
create more value for everyone who relies on us, including
investors," Mr. Reid says. "On the plus side, our balance sheet is
very strong," he says, adding that "the strength of that balance
sheet, the cash and liquidity that we not only had access to, but
took advantage of, gave us the ability to not just withstand the
pandemic, but to strategically invest in that better value creation
that we think we're capable of."
General Electric Co.
Red Flag: Financial Strength
Sitting in the 10.3rd percentile for financial strength, General
Electric drew a red flag for the category just as it did last year.
Mr. Cleary says GE's turnaround efforts had been showing some
promise, but the pandemic's effect on its aviation business --
previously a bright spot for the company -- has meant fewer engines
sold and further declines for the company's economic profit.
"They had been moving in the right direction," he says, "but it
seems Covid threw a wrench into those plans."
A GE spokesperson points to comments CEO Larry Culp made in an
Oct. 28 earnings call: "We're encouraged by our progress amid a
challenging backdrop. We remain focused on the long term, not only
in terms of our ability to perform but to realize our purpose and
the full potential of GE."
Molson Coors Beverage Co.
Red Flag: Financial Strength
Though Americans haven't been shy about increasing their
consumption during the pandemic, it hasn't been enough to keep
Molson Coors Beverage out of red-flag territory. The beer giant
picked up a red flag for its financial strength, ranking in the
21.9th percentile. Anthony Campagna, ISS EVA's global director of
fundamental research, says that while at-home consumption of beer
has gone up during the pandemic, Molson's commercial business -- in
bars, restaurants, venues, etc. -- has been hit hard by
shutdowns.
But the company's core financial hangups stem from the merger of
Molson and Coors in 2015, he says, adding that the merger hasn't
yet provided the kind of cost savings that the company had hoped
for. The company's share price, meanwhile, has been "meaningfully"
underperforming the Russell 1000 for years, he says. And though
Molson shares have seen a bit of improvement year to date, he notes
that they are still underperforming both the S&P 500 and the
Russell 1000.
Molson said in a statement that it has delivered more than $700
million in savings from 2017 to 2019, and is on target to generate
$600 million in savings from 2020 to 2022. In addition, the company
a year ago launched a revitalization plan to drive top-line growth.
"The decisions we've made over the past year, and quick actions and
investments we are making, helped us beat top- and bottom-line
expectations last quarter, and we believe will ensure the Molson
Coors Beverage Co. is built to succeed well into the future," the
company said.
Owens Corning Inc.
Red Flag: Financial Strength
Mr. Campagna at ISS EVA says Owens Corning is in a good,
profitable business, but over the past few years the company has
seen its sales growth erode to the point where sales are now in
decline. That was one contributing factor for Owens Corning's red
flag in financial strength, where it ranked in the 22.2nd
percentile.
Although consumers have been flooding home-improvement stores
during the pandemic, Owens Corning, the maker of products such as
roofing materials and Pink Panther-colored insulation, has been
losing ground to competitors.
"As simply as I can put it, they're selling less things, less
often [and] at lower prices," says Mr. Campagna.
In a statement, Owens Corning said: "In 2020, we have continued
to execute well while adapting to dynamic and challenging market
conditions that impacted our first-half results. We are encouraged
by the recovery in many of our key markets and delivered strong
financial results in the third quarter. We believe Owens Corning is
well-positioned to capitalize on near- and longer-term
opportunities to drive attractive returns for our
shareholders."
Philip Morris International Inc.
Red Flag: Customer Satisfaction
Philip Morris International, which sells products such as
Marlboro cigarettes outside the U.S., returns with another red flag
for customer satisfaction this year, settling in the 2.3rd
percentile. Its ranking was affected by a low quality gap score
from wRatings. Mr. Williams, CEO of wRatings, says Philip Morris
has continued to struggle to "break away from an industry that is
seen as unhealthy," and he expects the company to have a low
quality gap score until it expands its smoke-free product
lines.
A spokesman for Philip Morris said in a statement that the
company's goal "is to switch the world's one billion smokers, who
don't quit, to better alternatives as quickly as possible.
Replacing cigarettes with scientifically substantiated smoke-free
products is at the very core of our corporate strategy and sits
atop our sustainability priorities. We are disrupting our own
company to move faster toward this ambition."
Verizon Communications Inc.
Red Flag: Customer Satisfaction
Like AT&T, Verizon Communications' low customer-satisfaction
score -- it sits in the 24.1st percentile -- can be attributed to
the low scores seen industrywide for providers of pay-TV and
internet service, according to Mr. VanAmburg at ACSI. He also notes
that being one of the biggest players in the wireless industry --
alongside AT&T -- has made it ripe for criticism. Now that
T-Mobile, known for putting up high marks for customer
satisfaction, has merged with Sprint, which is known for just the
opposite, he says it will be interesting in years to come to see
how the combined company's customer-satisfaction numbers compare
with Verizon's and AT&T's.
Verizon didn't respond to requests for comment.
Workday Inc.
Red Flag: Financial Strength
The management-software company Workday put up a red flag for
financial strength, landing in the 18.6th percentile, in part due
to a below-average economic profit score. But Mr. Cleary at ISS
notes that Workday is in a very different place than some of the
other companies with red flags for financial strength.
Workday, he notes, is a young company, it is growing at a
healthy clip and its profit is being held back not by lagging sales
-- in fact, sales are growing steadily -- but by significant
investment in property, plant and equipment and research and
development, which isn't uncommon for growth-stage companies.
"They're still in that growth stage," he says, "where they're
investing lots of capital, trying to get scale and grab market
share before stabilizing."
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
December 12, 2020 10:26 ET (15:26 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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