It pays to pay people. And promote them.
That’s one of the main takeaways from the 2023 American Opportunity Index, a comprehensive report focused on how large companies’ investments in internal talent affect business performance.
The index—published on November 30 as a joint effort of the Burning Glass Institute, Harvard Business School, and the Schultz Family Foundation—is now in its second year. It ranks the top 100 companies across five categories, and puts them into one of four quartiles. Categories assessed include “hiring,” “pay,” “parity,” and “culture,” and the top five firms overall were Coca-Cola, J.M. Smucker, W. W. Grainger, PNC Financial Services Group, and ServiceNow.
None of those companies were among the top 10 last year, and AT&T, last year’s top-ranking company, ranked 30th this year. One of the main reasons for that shakeup is some changes to how the index was constructed this year, compared to 2022. It’s also what makes the index a unique measure among other company rankings out there.
The Burning Glass Institute gathered millions of data points from workers (including social media profiles, salary information, and job postings) and pulled them into a data set, which it then processed to assemble career histories of five million workers, says Rajiv Chandrasekaran, managing director of the Schultz Family Foundation. “The insights are based on what’s really happened to those workers between 2018 and 2022,” he says.
“The index provides workers with a level of data that they haven’t had access to before,” he adds, and “at the same time, the breadth of the index and how it assesses corporate performance, not just overall, but by sector, provides valuable new insight for those in the boardrooms and C-suites of corporate America.”
In effect, the granular nature of this year’s index compares the same job or occupation at different companies, giving workers an idea of how much more (or less) they could be paid, how much more likely they are to be promoted, and more, depending on if they work at a top or bottom-quartile company. That offers workers some much-needed guidance when they’re looking at career opportunities.
“The index is really about trying to quantify outcomes for workers,” says Matt Sigelman, president of the Burning Glass Institute. “Worker mobility is really the core of the index, and it makes some pretty compelling estimates of relative mobility inside organizations.”
The findings
In terms of individual data points unearthed in the index that help exemplify the difference between organizations by quartile, perhaps none stands out more so than this: Firms in the top quartile pay 68% better wages for workers in similar occupations than firms in the bottom quartile. Furthermore, those firms are 4.3 times more likely to hire candidates without significant work experience, 2.5 times more likely to promote from within, and 2.5 times more likely to promote each worker overall. The index also finds that companies that tend to promote women in an equitable way also do the same with Black and Hispanic workers, helping boost “parity” and “culture” scores.
And when it comes to providing opportunities for workers without college degrees (a component in the “hiring” category, one of the five categories analyzed in the index), companies that ranked within the top quartile include ExxonMobil, Alphabet, Microsoft, and General Motors. Digging further into the data, companies ranking in the top quartile in relation to helping workers overcome “first jobs” and “degree barriers,” include ExxonMobil, Alphabet, Ford, General Motors, and Meta.
Meanwhile, the overall industries that excelled at removing barriers to entry by hiring workers without college degrees include retail, which stood out for helping workers achieve promotions externally; and banks and telecom, which stood out for promoting internally.
In short, “where you work matters, and it matters a lot,” says Sigelman.
That’s a point that Chandrasekaran drives home as well. “There is a real, material impact on people’s lives depending on where they work, and by extension, the choices made by their employer,” he says.
As for what it means for employers? Huge potential savings and a bigger bottom line, in many respects. Between companies in the top and bottom quartiles, Chandrasekaran says “we’ve estimated that the additional cost of turnover is between $100 and $400 million dollars,” he says. “Companies that get this right are ultimately saving millions of dollars, and that’s money that’s flowing back to shareholders, helping the business grow.”
Joe Fuller, a professor of management practice at Harvard Business School, says that the index’s findings aren’t entirely unexpected. “They substantiate a lot of the research that I’ve done previously,” he says, that “shows very consistently that companies making a specific implementation of policies and procedures have a profound effect on outcomes.”
Fuller adds that businesses that are costing themselves resources by failing to retain employees due to low pay or few advancement opportunities should be given the benefit of the doubt, too, as they were, in all likelihood, making decisions that they deemed to be the best at the time.
“It’s not a story of inattentive or incompetent bureaucrats making mistakes, it’s that companies having an incomplete understanding of the consequences of their decisions are prone to make mistakes and don’t detect their error,” he says.
Meanwhile, “the better employees have a better command of how their own economies work, how their approaches were falling short, and most importantly, have figured out how the types of policies we would advocate for,” such as higher pay, parity, and career progression support, Fuller says, “have a business case underneath them.”
That can be helpful to employers, and the information gleaned from the index has obvious use cases for workers. “One of our goals is to make sure that workers can be empowered with information that will enable them to make better decisions in their careers,” says Sigelman.
“We want workers to have a ‘nutrition label’ for their job,” he says.
The subhead of this post was updated to reflect the involvement of all three partners in the report.
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