Top firms focus on R&D

08 May 2012

NEW YORK: Innovation, a focus on customer insights and encouraging collaboration are among the core qualities of the firms boasting the best leadership and delivering strong shareholder returns, a study has found.

The Hay Group, the consultancy, polled 7,000 executives from 2,300 organisations globally, who named General Electric, the conglomerate, as the company with the most effective management team.

It was followed in the rankings by Procter & Gamble, the FMCG manufacturer, IBM, the business services provider, Microsoft, the IT specialist, and Coca-Cola, the soft drinks expert.

McDonald's, the fast food chain, Accenture, the consultancy, Wal-Mart, the retailer, Johnson & Johnson, the healthcare company, and Unilever, from the consumer goods category, completed the top ten.

Over a ten year period, the top 20 operators – also housing Toyota, the carmaker, Nestlé, the packaged food group, and Shell, the energy giant – logged a 5.4% shareholder return, versus 2.9% for the S&P 500 index of major corporations.

The pre-eminent players did exhibit certain shared characteristics. For example, 94% of this cohort ran "unprofitable projects to try new things", beating the 49% posted by all other firms on this metric.

Figures here reached 90% and 47% respectively when it came to staff spending time discussing customers' needs, essentially matching scores for supporting employee learning in areas outside their main competencies.

Additional traits shared by the best-regarded enterprises included taking a dynamic approach to problem solving, balancing local and international talent among senior leadership, and recruiting cultural minorities.

"Leadership clarifies strategies and customer needs; elicits new insights from diverse, collaborative teams; and earns the focused effort and dedication that innovation requires," the Hay Group said. "Leadership creates a climate in which innovation is the expected norm, not the miraculous exception."

As further proof, 90% of the top 20 businesses had processes in place letting individuals circumvent the usual chain of command if they had an "excellent idea", compared with 63% for other firms.

Similarly, all of the top-ranked organisations provided "structured opportunities" for younger staff to promote creative ideas, falling to 68% for their less effective peers.

Moreover, senior executives from all of the 20 premier companies "celebrated" research and development successes, bettering the 49% recorded elsewhere.

Data sourced from The Hay Group; additional content by Warc staff