BOOK REVIEW: FIONA ROSSreviews The Admirable Companyby Michael Brown and Paul Turner; Profile Books; 2008; £15.00 (€17)
ONE CAN just imagine the groans that emanated from Fortune magazine headquarters when they realised it was time once again to conduct their annual "Most Admired Company" survey. Is this really the right time to ask 12,000 senior executives what they think of one another's management teams, financial soundness, use of corporate assets and ability to attract and retain talent people? Tough enough questions in good times but definitely a bit awkward in current times. Yet this is precisely what they will do as the Fortunesurvey, the gold standard of corporate reputation rankings since 1983, gears up for the next survey.
In their new book, The Admirable Company, Michael Brown and Paul Turner convincingly establish the value of a good reputation and through their research show which companies rank well and why.
Most of us are familiar with the rankings but are probably less familiar with the criteria. Nine are commonly used: quality of management; financial soundness; quality of goods and services; people management; value as a long-term investment; capacity to innovate; quality of marketing; community, social and environmental responsibility; and the use of corporate assets.
Brown and Turner go through each variable in what is a very accessible book written almost like a corporate self-help book full of tips and insights. They make liberal use of quotes from chief executives and other senior figures.
In places it is a little repetitive as it covers multiple locations, sectors and timeframes. For those with “rank envy” the fact that almost one-third of the book is taken up with appendices of rankings allows plenty of scope for seeing precisely who did well, when and where.
So what companies did well? Top scores in four categories – quality of management; ability to attract and retain employees; capacity to innovate; and use of corporate assets – went to Kinder Morgan Energy Partners, a name most of us won’t know. The other consistent high scorers were Microsoft, FedEx, Exxon Mobil and UPS. In the UK the names are more familiar and include Tesco, BP, GEC, Cadburys, Glaxo, Rentokil and British Airways.
Of particular note is the fact that Irish PLC Kingspan came ninth in the UK’s Top Ten in 2008, an impressive feat indeed.
So much for the rankings: what most readers will want to know is what they have to do to improve their ranking. At this point it is important to point out that not all of the variables are created equal. There is, not surprisingly, a high correlation between financial measures and the rankings.
In most cases those that rank highest have scored well on these financial variables. There is also circularity as the rankings themselves drive financial performance via increased share prices, sales and profit so the cycle continues. For Irish PLCs struggling with deeply discounted share prices all is not lost as the financial halo does include two other important financial variables: long-term value and wise use of corporate assets.
The next most highly correlated variable is quality of management and within this there is an even closer connection between the ranking and the perceived quality of the chief executive. What the book demonstrates to Irish readers is the need – currently not met – for the development of the next generation of managers and leaders. The cult of the chief executive seems to be dead.
The ability to attract and retain talented employees will be an interesting variable to watch over the next few years. Capacity to innovate is a variable that many Irish companies can score very well on and perhaps more needs to be done to raise the profile of this important component of overall reputation. Last but by no means is least the CSR-type variable – community, social and environmental responsibility – which was won in 2007 by UPS, followed by Alcan and Disney. Given the impact to reputation of the failures of governance in Ireland we are likely to see companies place a greater emphasis on their CSR agenda in the future.
We are regularly reminded of the cost of Ireland Inc’s lost reputation. The focus needs to shift to the restoration of the reputation. The question is, as asked by Michael Brown and Paul Turner, do we have what it takes to be ranked the best? At least we may now know where to start.
Fiona Ross consults with Irish companies in the field of corporate governance and reputation. She is a lecturer at the Michael Smurfit School of Business in UCD.
