Do Nice Guys Really Finish Last? 719.1

“Nice guys finish last.”

This maxim originated with a fiercely competitive baseball manager named Leo Durocher who shamelessly advocated ruthlessness, cheating, and dirty play. It is also used to explain why sweet, thoughtful men lose out to self-centered jerks in the world of dating.

Lots of people believe the philosophy applies in business as well. The rationale: Nice is the same as weak, and worrying about the other guy is stupid and counter-productive.

Firms of Endearment, an exceptionally interesting book published by the Wharton School of Business, explodes this myth with persuasive case studies and data. Authors Raj Sisodia, David B. Wolfe, and Jag Sheth used an extensive screening process to identify the most loved companies in the U.S., companies that customers, employees, and suppliers raved about. They labeled these companies “firms of endearment” (or FoEs) and set out to see what they did to win so much devotion and how they fared in the dog-eat-dog world of capitalism.

It wasn’t hard to discover why these companies were loved. Though each went at it a bit differently, a common element was that firms like Costco, Southwest Airlines, Whole Foods, and Commerce Bank are seen to bend over backwards to please their customers. They are also more generous to their employees and their suppliers than their competitors, going out of their way to show the people they work with that they are valued and appreciated. They are more likely than other companies to humanize their interactions with fun and acknowledgement. They also are more likely than their competitors to be good citizens – paying their fair share of taxes, contributing to community projects, and protecting the environment. Finally, FoEs tend to be led by CEOs who clearly care about people and principles and truly believe they have an obligation to all stakeholders, not just shareholders.

By any standard, these companies are “nice.” But this niceness doesn’t come cheap. The ultimate question is, with all their extra costs, how do they do on Wall Street?

The most surprising conclusion of the researchers was that nice works. In fact, FoEs beat the pants off competitors whose more traditional business practices focus on the bottom line.

Cumulatively, the 30 companies that earned the FoE designation returned 758% over 10 years, versus 128% for the S&P 500. Over the past five years – a particularly tough period during which the S&P lost 16% – these firms returned 205%. Perhaps even more impressively, they substantially outperformed the “great” companies identified by Jim Collins in his classic book, Good to Great. In the three years most recently studied, the FoE firms did more than twice as well as the Good-to-Great firms (106% to 51%).

The authors contend that the world is changing dramatically, imposing new requirements for business success and what they call “the social transformation of capitalism.” This is one of my “must read” books for 2011.

This is Michael Josephson reminding you that character counts.

* The commentary broadcast was a slightly abbreviated version of the above. Here are the companies identified as FoEs:

FoEs.jpg
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Comments 6

  1. I don’t buy it. Your definition of “nice guys” seems to apply only to how a corporation treats the customer. How about how the management treats their employees? I am not speaking of just benefits or parties, I am asking if management actually LISTENS to their employees and will act upon suggestions that come from the “shop floor”. I just retired from an insurance company that was good to its employees regarding parties and benefits, and salaries, but they would not listen to anyone, nor make any improvements in process or procedure that did not originate in the executive suite. And, as a result, the employee morale was very poor.
    In fairness, we were then taken over by two other insurance companies that epitomized the concept of hostile work enviornment, which is ongoing. Their employees hate them and leave any chance they get, and or take demotions to get away from the moronic, vicious claims management.
    I am certain this company will fare very poorly when (if ever) the economy improves, and their employees are able to leave. When that happens, there will be a mass exodus.

  2. I think it’s great that these companies refuse to fit into the prefabricated cold corporate and cynical environment that exists today. These companies value the social interactions that makeup great societies and civilizations and also reap the financial benefits that are commensurate with it. These companies continue to raise the bar of ethical good business practice and lead by example. Let us value each other as human beings and citizens a of this nation and do away with cold insensitive disposable social interactions and create positive longterm business and customer relationships.

  3. Any endeavor (relationship) has a better chance of fulfilling its purpose if it is based on Trust. Trust is earned and sustained when competence and character are demonstrated in decisions and actions. Trust does not guarantee success; and it does not preclude failure — we are finite human beings. However, without Trust, any activity is compromised and will likely deteriorate. Being “nice” is consistent with the Value known as Respect: recognition of the intrinsic dignity and worth of all people. However, being a person of competence and character transends the virtue of being nice.

  4. I do buy it, and it sounds like John in his post does to. Firms of Endearment are defined as:
    “…companies that customers, EMPLOYEES, and suppliers raved about.”
    The article doesn’t say that employers with employee morale depleting practices never make profits, only that firms who are customer and employee “friendly” tend to do a lot better over the long haul.

  5. It sounds like John & Harley are disgruntled employees. While they make a somewhat valid point, it doesn’t matter if they don’t ‘buy it.’ FoE customers do, I do and the comparative ‘stats’ prove it.

  6. The very fact that the survey focused on “the most loved companies in the U.S., companies that customers, employees, and suppliers raved about” is indicative that the facts you’ve recounted constitute a form of “cherry-picking”. In the sub-culture of FoEs, nice guys may well do better. And perhaps the FoE culture is the wave of the future (hope so). But in the world that most of us inhabit, nice guys are severly handicapped. In this world, character does, indeed, count — but it often counts against you, not for you. That’s not an argument for living ruthlessly; but I’d argue that it’s a more honest assessment of the way that most of the world works. And honesty is one of those character traits we’re striving to strengthen, right?

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