Pete Gombert is the founder of Goodwell, a nonprofit organization that certifies organizations such as companies or local governments using eleven metrics related to the treatment of employees.
Gombert is an entrepreneur who created Balihoo, a Boise software company that he sold last year. With Goodwell, he is hoping to encourage companies and consumers to consider sustainability targets when making financial decisions. In doing so, he says, they will also help shareholders and the bottom line. Goodwell started certifying companies in March and has about 20 organizations, covering about 2,500 employees, certified. One is the city of Boise.
Gombert grew up in suburban Chicago knowing he wanted to be an entrepreneur, and he studied accounting at Villanova University in Pennsylvania as training for running a company. He was recruited immediately by the now-defunct accounting giant Arthur Andersen and within two years of graduating from college in 1994 had joined forces with others from the company to start a new firm that grew to 75 employees and $15 million in business per year.
Goodwell came out of a 10-month trip that Gombert took around the world in 2014 and 2015 with his wife and two children, ages 15 and 13. After seeing the working conditions in countries like Cambodia, he came back determined to help create a system to reward companies that practice principles of human rights, among other things. There are other certifying organizations, such as B Lab, Fair Trade, and the Rainforest Alliance. Gombert said Goodwell is the only one he knows that certifies companies based on their treatment of workers
The company’s virtual offices have five full-time employees, four part-time employees, and about 10 volunteers, many based in Boise but some in other states. Gombert spoke to Idaho Business Review about Goodwell. The interview has been edited for length and clarity.
How did you get into ownership of a company at such a young age?
My nickname in high school was “happy” because I was always the mature one playing above my age, so to speak. So it was a natural thing for me to take the lead.
There wasn’t anything I felt I couldn’t do. I was never uncomfortable walking into a situation where I didn’t know everything and figuring out how to get done what I needed to get done.
And I went bald at 15, so I have always looked older than my age.
How did Balihoo come about?
I started a new company, ENERX, in Boise in 1997 and sold it to a UK-based firm in 2000. I started looking at new things to start, and one of my friends down in Phoenix whom I had grown up with had started an ad agency. He said, “You should come down and look at how media works. We need software help with media.”
As I started to learn about it, it looked a lot like what had just happened in energy. The impact of digital on the media landscape had similar characteristics to energy deregulation in that when you look at the big picture of media, you had big buyers and big sellers who did big contract deals together. It was really inefficient; there was a lot of money on both sides of the table.
This was 2003. I said, as things move digital, you’re going to have audience fragmentation and you’ll see these big trades becoming smaller and smaller, with the transaction volume becoming smaller. The whole market has become a trading operation, and digital led the transformation.
That was a really, really high-margin business. It was just an eye-opening lesson in so many different things. I learned more at Balihoo than I had learned in my entire life.
How did Goodwell come out of this?
The real story starts in around 2009 when I was at Balihoo and we had come out of the Great Recession. I was just trying to keep Balihoo alive, and once we got to the point that I knew the company was going to make it, 2010, 2011, I looked up and said, “What am I doing here? What am I killing myself for?” I was 38 but it was a midlife crisis. I always do things a little bit earlier in my life.
We had 80 or 100 employees, I had raised a bunch of venture capital, and it wasn’t like I could just leave and go do something else. I had a responsibility to my investors and employees. So that’s where I started thinking about the role I am playing as a leader, in the broader community.
But it wasn’t until our trip to Cambodia that I learned that the people who we were trying to help worked. Most of them worked in factories supplying parts to the U.S. military.
Before staying in Cambodia, why did you think the developing world was in such bad shape?
A whole mess of reasons. My focus is more on macroeconomics than on the microeconomics of why an individual person was living in one way. I did feel like the pervasiveness of whether it be education or lack thereof, drugs, gambling, abuse, whatever it might be, those systemic issues were incredibly prevalent in the areas we were working in, and some of them were.
But the fact that the majority of the people there put in 40 hours and the conditions they lived in, that was an eye-opening moment for me. Until you go and experience these things first-hand you can’t grasp it, you just can’t.
Isn’t it the business of companies to make money?
I’m an entrepreneur. But we have created an environment where capital is overly valued, and the focus on shareholder return is creating destructive returns not only for society but for the companies themselves.
The focus on short-term gains and short-term thinking is having a real negative impact on business in general. I think about this from not only the moral imperative of doing the right thing, for example equal pay for equal work, but also because it’s good business.
Organizations that are thinking more holistically about how they engage with workforce and community are out-performing organizations that are just thinking about shareholder value. So I come at this not just from a perspective of, “Boy it’s nice when you do the right thing.” It’s also good business.
How is running Goodwell different from your prior experience?
Everything that I’ve done in the past has been technology. Goodwell has a lot more to do with really creating cultural value within a business, and being able to deliver a message, a service offering, that is consistent across all the companies we’re working with.
Goodwell recognizes the uniqueness of each business we are working with, whereas software is about scale, about building something highly repeatable, solving the same problem over and over again.
Is there a software component to Goodwell?
That’s something we’re talking about now, as we go out to certify entities. The data we need to calculate metrics isn’t readily available. That’s what I’ll look at. If we’re seeing the same thing in every business we’re going to talk to, that’s a problem we can solve with software. But generally speaking, the approach to building the business is very much the same. The tools we’re using to execute that is considerably different.
What kind of response are you getting to Goodwell’s goals?
The most controversial metrics are the first two, which measure CEO compensation against average worker compensation, and executive team compensation. The ratios we have in there are not by any means progressive, so for CEO pay, 100 to one is considered quite capitalistic. But pegging any kind of limit to CEO compensation is seen as something that is anti-capitalistic, and so that particular measurement is the one, or those two are the ones that we receive the most criticism over.
With the growing sense of inequality globally, this has become a real issue. And it’s directly tied to what I was talking about earlier. It has created a situation where the average CEO-to-worker pay ratio in the ’70s was about 35 to one, and now it’s over 300 to one.
When we’re trying to talk to a business leader or influencer about what we are doing, and conveying the concept behind Goodwell, they review the metrics and they say, “I understand where you are coming from, but I am fundamentally opposed to limiting any individual’s pay.”
Beyond that, if somebody doesn’t have an issue with those particular ratios, we get pushback with, “We already do this stuff, we already pay everybody equally, we don’t have issues with any of the things you’re doing.”
If somebody had come to me with this idea in 2010, I would have said, “I am sure we already do all that stuff; I don’t need to implement this thing.” But I would have been wrong. Every time we have gone through and certified an entity to date, we’ve found a ratio that has been below our minimum threshold. Usually it is gender-based pay, but the second metric that has failed the most is attrition rates. People think their attrition rates are better than they are. They think they don’t lose people that often, but then it is 35 or 45 percent.
The pushback of thinking, “We’re covered” is just a sense of “We have the intention of being good in these areas, and therefore we assume we are,” and the numbers are really what tell the truth.
What are some companies that stand out for doing the right thing?
Oliver Russell is one in Idaho. Chobani is generally regarded as being a very progressive company when it comes to treating their workers well, hiring refugees, treating their animals well, not using pesticides in the grass that the animals are eating, and so forth. They are on the leading edge. The other in Idaho would be Clif Bar. They are incredibly progressive and have taken big stands on being long-term focused, vs. being shorter-term focused.
The city of Boise is another. Mayor Bieter does a tremendous job with his organization. It’s very progressive in thought and action; they were huge supporters early on of what we’re doing. They found the process to be incredibly valuable, to be able to ensure that their actions and intentions were aligned. They are an organization that is really trying to create a workplace culture and deliverables, broadly speaking, for the community that are good for everyone.
The leaders in the space have always been Patagonia and Whole Foods.
And Etsy, the first B Corp to go public, are now coming under pressure to create short-term gains. You start accessing public markets and public dollars, any kind of institutional capital, it becomes very difficult to maintain your independent ideals and align to the short-term thinking that is pervasive in the institutional capital markets.
What is coming down the road in this realm?
My feeling, or my hope, is that ultimately as all of the tensions that are bubbling up around environmental issues, social issues, inequality, as those start to become more and more prevalent, we’ll see consumers become more and more aware and demand more from the companies they’re supporting with their dollars.
The free market starts to drive how companies behave. It’s nascent now. At the end of the day, people still will buy based on the criteria of, “Does it meet my needs? Does it have an acceptable level of quality? How expensive is it?”
Only when you get down to a generation that really cares, and really has the discretionary ability to make a decision between product A and product B, do you have people saying they’ll buy from the better company.
The market is already built to reward whatever consumers want to buy. If consumers do want to buy from good companies, so if we start directing our dollars there, the market will move in no time and we’ll clean up lots and lots of big ugly problems.