By Chip Cutter
America's best-run companies today include some of the nation's
oldest corporate giants and many of its most nimble technology
This year, Amazon.com Inc. unseated Apple Inc. to earn the No. 1
spot in the Management Top 250, an annual ranking that uses the
principles of the late management guru Peter Drucker to identify
the most effectively managed companies.
The online retailer was bolstered by its relentless focus on
innovation. Microsoft Corp. rose to the No. 2 position, followed by
Apple Inc., with Google parent Alphabet Inc. and
networking-equipment giant Cisco Systems Inc. rounding out the top
five. (How does your company rank in the 2019 analysis of well-run
companies for customers, employees and investors? Explore the full
Management Top 250 here.)
A team of researchers at Claremont Graduate University's Drucker
Institute compiles the list using dozens of data points to evaluate
companies on five performance dimensions: customer satisfaction,
employee engagement and development, innovation, social
responsibility and financial strength.
Those principles reflect the teachings of Mr. Drucker, long
considered the father of modern management, who emphasized a
comprehensive approach to leadership. He argued that highly
functional organizations should benefit not only investors but also
society, a viewpoint that has gone in and out of vogue.
"This was a breakthrough year" for such holistic thinking, says
Rick Wartzman, head of the KH Moon Center for a Functioning
Society, a part of the Drucker Institute. "Big companies are
thinking about their role in society, and more explicitly, how to
serve all of their stakeholders, not just the shareholders. That's
what our ranking is all about."
Though technology companies dominate the top of this year's
list, a wide spectrum of sectors is represented in the ranking,
including retailer Walmart Inc., beverage maker PepsiCo Inc.,
delivery provider United Parcel Service Inc. and auto makers Ford
Motor Co. and General Motors Co.
Red flags and controversy
While every company has flaws, the ranking aims to point out
those firms that are particularly good at balancing what are often
competing management priorities. The metrics include employee pay
compared with industry averages, patent applications and three-year
average total shareholder return, among others.
Researchers examined 820 companies this year and added new
components to the mix of 34 indicators, which helped account for
some movement on the list. This year's Management Top 250 includes
48 newcomers, such as insurer Progressive Corp., cloud software
company ServiceNow Inc. and money-management giant BlackRock
The researchers also rolled out a "red flag" system,
highlighting companies with particularly weak scores in one
dimension of Drucker's scorecard. Facebook Inc. earned a red flag
this year for its weak customer-satisfaction score; the company has
been embroiled in controversy over its data-privacy practices and
misinformation on the platform. (The full methodology of the
ranking can be found at WSJ.com/ManagementTop250.)
Drucker researchers say even the most robust rubric can't fully
account for every problem a company may have, and some metrics may
have a time lag. A handful of organizations on the 2019 list are in
the midst of significant controversy. Johnson & Johnson, No. 8,
earlier this year faced more than 100,000 lawsuits over its safety
and marketing practices involving products such as opioids and baby
powder. In October, a jury awarded a man $8 billion in damages
after he claimed use of J&J's antipsychotic Risperdal as a
child caused enlarged breasts. J&J is appealing the ruling.
In a statement, the company said that it has won many of the
cases related to its talc powder and noted that all verdicts
against the company are on appeal. The company also says its
products accounted for less than 1% of opioid prescriptions written
in the U.S.
A J&J spokesman added the company is committed to social
responsibility, and notes it has donated 500,000 doses of its Ebola
vaccine to stem the outbreak in Africa and is on track to produce
and donate one billion doses of the deworming drug Vermox.
Boeing, No. 31, is navigating the worst crisis in its history
after two deadly crashes of its 737 MAX planes killed 346 people,
setting off a firestorm of criticism about the company's culture
and sparking investigations into whether Boeing cut corners that
jeopardized safety and provided incomplete or misleading
information to regulators and airlines.
A Boeing spokesman said the company is working toward the safe
return of the MAX. He added that Boeing has "taken steps to further
strengthen our company culture and reinforce our enduring values of
safety, quality and integrity."
An innovation powerhouse
Amazon catapulted to the top of the list this year by earning an
off-the-charts ranking in innovation. Its score in that dimension
of performance is more than double that of any other company.
Amazon outpaces others in patent applications, trademark
registrations and spending on research and development. It also
abandons patent applications at a higher rate than others, a sign
of its commitment to move past obsolete technology, Drucker
Amazon also rated highest for the number of cutting-edge job
postings in fields such as artificial intelligence, augmented
reality and robotics. Longtime Amazon employees credit an intense
focus on writing as part of the creative process for helping the
organization sharpen its ideas and come up with new products and
Amazon culture, set from the top down by founder and chief
executive Jeff Bezos, has long shunned lengthy slide presentations.
Instead, employees present a memo that can be no longer than six
pages and that is silently read at the start of a meeting by
everyone present. Mr. Bezos praised the memo process in one of his
letters to investors: "Some have the clarity of angels singing," he
wrote. "They are brilliant and thoughtful and set up the meeting
for high-quality discussion."
Getting that document right can become an obsession, with
employees repeatedly editing, soliciting feedback and aiming to be
as succinct as possible, says Jacqueline Underberg, a director in
Amazon robotics. A memo can take weeks to perfect, she adds.
An engineer by training, Ms. Underberg says she never
anticipated that she would be writing on the job. But after
crafting dozens of memos, she's found it to be an efficient way to
exchange information and prompt a smart discussion. "I despise
PowerPoint now," she says.
Memos have been the root of a number of innovations, from
Amazon's Prime Now delivery service, which offers customers items
in as little as an hour, to programs that were part of Amazon's
decision to retrain a third of its workforce.
Toni Reid, a vice president of Alexa Experience and a more than
21-year veteran of Amazon, coaches her team not to solve too many
technical problems in a memo or force a conclusion when one is
uncertain. "If you do that, you end up watering down the project to
average, because the technology likely doesn't exist," she says.
"It's something we may need to invent."
Amazon's Alexa, she says, started with a vision presented in a
memo, even though the company had to later build the technology to
power it. That's why Ms. Reid encourages her team to spend ample
time crafting the documents.
"You actually have to carve out space in your calendar and your
brain to really be able to think and spend the time writing," she
says. "Especially if you're trying to come up with something
visionary that hasn't been done before."
While Amazon stands out in innovation, the company is a more
uneven performer on other Drucker scores. It is below average on
measures of social responsibility, although the company has made
efforts to improve in that regard. Mr. Bezos earlier this year
unveiled a climate pledge, noting that the company plans to be
carbon-neutral by 2040.
Amazon has also been criticized for its treatment of workers by
labor groups and lawmakers, although it raised the minimum wage for
its U.S. employees to $15 an hour last year and has focused on
helping workers gain new skills, even in occupations outside of
Getting everything right
A handful of companies have particularly high scores across the
ranking's five dimensions of performance, setting them apart from
their peers. This year's eight "all-stars" include medical-device
maker Edwards Lifesciences Corp., ranked 25th overall, which boasts
one of the highest customer-satisfaction scores in the ranking.
Edwards operates by a set of values that says if it serves
patients and clinicians well, employee satisfaction will grow and
financial results will follow, says Michael Mussallem, Edwards's
chief executive. In the three years through the end of October, the
company's stock rose 164%, far outpacing the S&P 500's 48% gain
in the same period.
Mr. Mussallem says the company goes to extensive lengths to
connect employees to a broader sense of purpose. It hosts regular
events that bring patients to the company's offices so they can
meet with the employees who hand-stitched their heart valves.
"It fills our employees with a tremendous amount of joy," Mr.
Mussallem says. "It doesn't matter what role you might have in the
company -- we make the point that it takes all of us together to do
Another all-star this year is No. 15 Procter & Gamble, the
maker of Tide detergent and Dawn dish soap, among many consumer
products. Jon Moeller, P&G's chief financial officer,
emphasizes the company's focus on employee engagement and
development. P&G grooms its employees to work across multiple
product categories and industries, he says, and builds multiyear
career plans for them.
Many employees have long tenure, Mr. Moeller says, because they
feel heard and valued. "It's a culture that encourages contribution
and rewards it," he says.
A big move up
One of the biggest movers on this year's list is human-resources
technology company Automatic Data Processing Inc., which jumped 104
spots to No. 62, thanks to a gain of eight points in its overall
score, to 64.7 from 56.7.
The company handles payroll for 26 million American workers, and
is coming up with inventive ways to make sense of that data. It can
show employers, for instance, which departments may be encountering
unnecessary overtime costs or experiencing higher-than-expected
attrition. If a company's turnover is higher than its peers', ADP
can alert it. The company is also developing tools to show firms
how their structures may compare to organizations of a similar
size, for instance pointing out if a company has too many middle
Internally, ADP is finding creative ways to bolster employee
satisfaction. A few months ago, the company's president of major
account services, John Ayala, went undercover, donning a beard and
mustache to sit in a classroom for days with new hires, many early
in their careers, as they spent their first week on the job. He
eventually revealed himself, says Carlos Rodriguez, ADP's chief
executive, who adds that the effort was a valuable way to improve
the onboarding experience and understand what young workers'
ADP has 58,000 employees, so "getting just slightly better in
terms of their engagement or their productivity or whatever metric
you want to point to makes a huge difference in terms of the
success of the company, " Mr. Rodriguez says. "If you're only
focused on the financial results and you don't take care of the
employees, eventually that's not going to work."
Mr. Cutter is a Wall Street Journal reporter in New York. He can
be reached at email@example.com. Sharon Terlep, also a Journal
reporter in New York, contributed to this article. She can be
reached at firstname.lastname@example.org.
(END) Dow Jones Newswires
November 22, 2019 20:20 ET (01:20 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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