Building an Index to Rank Companies on Their Influence
To help Handshake – a reputation and influence agency – better understand what makes organizations influential and how they can best use influence to achieve positive change for society, Ludke worked with the team at Handshake to create a bespoke index to rank companies on their influence.
Handshake’s Index is the first time that a standardized approach to measuring an organization’s influence, both positive and negative, is applied to a comprehensive range of metrics that together represent an organization’s financial, cultural, and social capital. The result is a measurement tool that provides leaders unique data about the scale, composition, and reach of their influence, and a tool that can be used to formulate strategy, promote effective resource deployment, and achieve competitive advantage.
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n developing the index, we questioned current orthodoxy on everything, from inherent biases in financial metrics to the importance of more established ESG indicators. This often led to the development of bespoke sub-indices made up of customized indicators.
The Three Drivers of Influence
Over the course of developing the Index, three metrics were identified that best measured the level of influence of an organization:
- Financial Capital – The financial resources the organization is capable of leveraging as a result of investor confidence in its earning potential.
- Cultural Capital – The internal social capital of an organization, as reflected in its governance practices(such as its board composition) and internal culture (such as the confidence of the employees in the vision of the management team).
- Social Capital – The external social capital of an organization’s relationships with stakeholders (such as its philanthropy, engagement on public policy issues, and management of its carbon footprint).
Key Takeaways
The results of the Index provided three important insights:
- Companies that invest in the Cultural and SocialCapital often outperform the market in financial performance.
- Measuring influence can help predict future outcomes.Companies with weak governance structures or low employee perception of the management team can find themselves in crisis situations where their reputation and financial strength is at risk.
- Influence is biased. The sector and underlying business model of a firm often dictates the relative ease with which it can grow its influence. This gives certain firms a competitive advantage over others.
