Where Talent Can Rise, Results Can Too

The Bay Area leads the way for No. 1 California when evaluating HQ locations of high-performing companies in the American Opportunity Index.

Photo courtesy of Visit California/Hub

If you want to know how well companies develop their people, Rule No. 1 may be this: Don’t begin by asking the companies.

Based on “an independent, big-data analysis of the career trajectories of nearly 5 million workers from 2018 to 2022,” The Burning Glass Institute, Harvard Business School’s Managing the Future of Work Project and the Schultz Family Foundation on Nov. 30 launched the 2023 American Opportunity Index (AOI), calling it “a groundbreaking ranking that measures how effective companies are at developing talent to drive business performance and advance individual employees’ careers.”

In a release, the team said the “results are drawn from how employees reported changes in their work history on social media and online resume platforms, as well as comprehensive salary and job-posting data.” Some of the parameters of the index include the following:

• The Index measures 396 of America’s largest employers. “We studied the 500 largest companies headquartered in the United States, but we removed 102 firms because we did not have sufficient data to measure them accurately. We removed two additional firms that went out of business in 2023.”
• “The Index tracks the experience of 4.72 million U.S. workers at the firms we measured. We focus on jobs open to those without a degree by excluding occupations in which 70% or more of workers nationally hold at least a bachelor’s degree.” That includes such occupations as computer and information systems managers and means the exclusion of 283 of 997 possible occupation groups.
• Companies are rated on hiring, pay, promotion, parity and culture, i.e. how well companies retain employees and build their careers.

Among the results:

• Workers at top-performing companies are two-and-a-half times more likely to receive promotions, and they are paid, on average, 68% more for the same jobs. That has “a lot of implications if you are a worker in a job search and you’re thinking about which companies to choose,” says Shrinidhi Rao, chief of staff at The Burning Glass Institute.
• The Index’s top 100 companies aren’t confined to one sector; they represent more than three-quarters of the industries evaluated. However, within a given sector, “competitors in the same industries with similar workforces and business models can have very different results based on how they manage talent.” Rao notes that there are top and bottom performers in every industry, including some counter-intuitive findings. “There is a lot of dialogue today around how retail firms are finding it really hard to hold onto their workers,” he says. “In large part it is true and bears out in the data with higher turnover. But we also are seeing that there are retail firms that do well. That shows the business models of these firms are important. You are not a prisoner of the industry you are in. There are companies who do right by their workers and are strong in most metrics.”
• Large companies that significantly outperform their peers in retaining employees are saving as much as $400 million a year on turnover costs, offering ample opportunities for promotions in addition to competitive wages. “Being in the top quartile of retention vs. the bottom quartile can add approximately a half-point to the bottom line — between $101 million and $424 million for the average Fortune 500 company — as firms benefit from reduced costs associated with attrition,” the report concludes. “Having a strong track record of promotion is almost as important at driving retention as pay itself.”

In other words, performance in the AOI may help ROI.

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“At a time when so many are questioning the vitality of the American promise, it’s crucial that CEOs and corporate directors look inward and examine how effectively they are nurturing and developing their people,” said Howard Schultz, co-founder of the Schultz Family Foundation and former CEO and chairman emeritus of Starbucks Corporation. “The American Opportunity Index demonstrates the greatest lesson I have learned in business: When you invest in your people, you’re investing in the future of your company.”

Which Companies and Where

As it happens, the top two companies are also in the food and beverage business (Starbucks is No. 81). Here are the top 10, three of which are based in California:

1. Coca-Cola Co.
2. J.M. Smucker Co.
3. W.W. Grainger Inc.
4. PNC Financial Services Group
5. ServiceNow Inc.
6. Meta Platforms Inc.
7. Capital One Financial Corp.
8. Bank of America Corp.
9. Costco Wholesale Corp.
10. Intuit Inc.

Professor Joseph Fuller of Harvard Business School noted that “the variation in outcomes across and, especially, within industries yields an obvious conclusion: What companies choose to do to help workers gain economic security, and how they go about doing it, drives outcomes more than factors like their business model or location.”

Nevertheless, location can have a lot to do with a company’s culture, growth and success. (At least that’s been part of Site Selection’s raison d’etre for the past 70 years.) Since geographic location was not part of the report, I reached out to the Schultz Family Foundation and The Burning Glass Institute to see if those data were available for us to examine.

They were.

We chose to look at the designated top 100 companies, awarding 100 points for being No. 1 and one point for being No. 100. And we tallied how many top 100 companies were in particular states and cities. Here’s how the list shakes out by place:

Of note:

• The location data are by city, not metro area. A glance down the list bumps up the numbers for such metro areas as the Bay Area, Chicago, Charlotte and Seattle, while also pointing out locations that depart from that pattern, such as No. 2 J.M. Smucker’s hometown of Orrville, Ohio, located just southwest of the Cleveland-Akron region in northeast Ohio.
• While the entire field of 396 companies may be distributed across many sectors, the FIRE sectors (financial services, insurance and real estate) dominate the top 100, with 32 companies represented, many of them New York-based.
• New York City tops the points count, its highest-ranking companies being No. 13 JPMorgan Chase and No. 16 MetLife. Purchase, the affluent suburb in Westchester County, also claims two top-20 companies with No. 18 Mastercard and No. 19 Pepsico.
• While Georgia can proudly claim No. 1 Coca-Cola, its only other top-100 company is No. 55 The Home Depot.

The creators of the AOI state it was designed “to fill a key void in the marketplace: an outcomes-focused tool employees, employers and policymakers can use to benchmark corporate progress in advancing opportunity across their workforce … In recognizing the companies where workers and firms thrive symbiotically, and showing areas where each company can continue to improve, the Index seeks to spark a new focus on sustainable talent management across American business.”

Further analysis by Site Selection encompassing all 396 companies and cross-indexing their AOI performance with their facility location and expansions worldwide will be forthcoming in a future Site Selection Snapshot and could be incorporated into the publication’s annual Sustainability Rankings in July 2024.

Why? Because an environment that sustains people is the essence of economic development within the broader context of planetary and environmental sustainability.

“People are the soul of every great company,” said Bill McDermott, chairman and CEO of Santa Clara, California-based ServiceNow. “That’s why I believe that the best talent is the ultimate competitive advantage. Our success reflects our commitment to investing in our people — so they deliver the best for our customers, our community and the world. — Adam Bruns and Daniel Boyer

JPMorgan Chase, ranked No. 13 in the American Opportunity Index, in November celebrated the raising of the final steel beam for the company’s new 60-story, 14,000-employee HQ in New York City. Rendering courtesy of Foster + Partners and JPMorgan Chase