9 minute read
How Fortune ranks the world’s most admired companies
Updated on November 3, 2020 by Reputation X
The world’s most admired companies based on a nine-point ranking system
- Fortune Magazine has another well-respected, powerful list: Fortune's World's Most Admired Companies
- The peer-judged list is scored and determined by business insiders within each industry.
- List candidates are rated based on nine key attributes running the gamut of business performance indicators.
You’ve heard of the Fortune 500, a well-respected ranking of the largest companies by revenue in the United States, but you might not be aware of another annual list Fortune produces that ranks the admirability of global companies based on key attributes as perceived by a large audience of qualified professionals.
This list of outstanding corporate reputation and performance is the World’s Most Admired Companies.
Who is Fortune?
Fortune was founded in 1929 by Henry Robinson Luce, co-founder of Time magazine, as a magazine for the business elite. Volume 1, Issue 1 stated that “Fortune’s purpose is to reflect Industrial Life in ink and paper and word and picture as the finest skyscraper reflects it in stone and steel and architecture.”
“Fortune’s purpose is to reflect Industrial Life in ink and paper and word and picture as the finest skyscraper reflects it in stone and steel and architecture.”
In the original prospectus, Luce wrote that Fortune would be designed for “wealthy and influential” readers and that the price would present “a barrier so high that only the reader both enthusiastic and well-to-do will vault it.” His approach to the targeting of this magazine seemed to be on-point for its content.
Fortune sold for $150 million in 2018 to Chatchaval Jiaravanon, a member of one of Asia’s wealthiest families whose combined net worth is over $36 billion.
The Cover of Fortune’s Prototype Issue, Which Featured the Prospectus
What makes a company most admired?
The World’s Most Admired Companies list is different than the Fortune 500 in that the ranking isn’t based on size or revenue. The candidates for the list are chosen based on their revenue, and then the ranking is determined by the perception of certain attributes.
Instead of generating a corporate reputation score based on the perception of the general public, these attributes are judged by a large, but select, panel of professional peers who generate insight into how well the company is managing itself.
How are Fortune companies ranked?
The list of candidates starts with the top 1,000 U.S. companies with the highest revenue and non-U.S. companies from Fortune’s Global 500 that have revenue of at least $10 billion.
This list is then narrowed down to the companies with the highest revenue in each industry, leaving a total of 680. These businesses are evaluated by their peers within each industry. Evaluators provide a numeric value for each of nine attributes, with one being the best possible score. A company must rank in the top half of its industry to be listed.
Now let's take a closer look at the nine key attributes used to rank companies for the World’s Most Admired Companies list.
Who decides the ranking?
Korn Ferry, a global management consulting firm, collaborates with Fortune to provide the research needed to create the World’s Most Admired Companies list. Korn Ferry has conducted and provided the research for this list for 23 years.
The network that weighs in on the Most Admired list is made up of board directors, executives, and analysts who watch these high-revenue companies daily. These 3,770 business insiders have an active interest in the relevant markets, qualifying them to rate enterprises in their industries on the selected criteria.
Nine key attributes
- Quality of Management and Leadership
- Quality of Products and Services
- Community Responsibility
- Wise Use of Company Assets
- Effectiveness in Running a Global Business
- Value as a Long-Term Investment
- Soundness of Financial Position
- Ability to Attract and Retain Talent
What are the five leadership skills?
- Team development
- Strategic thinking and acting
- Ethical practice and civic-mindedness
What makes a product good quality?
Product/service quality is determined by whether the product solves a real problem, is user-friendly, is efficient, and becomes something that the user depends on.
What are the four types of innovation?
There are four common types of innovation that businesses utilize to improve their products, services, and processes:
- Architectural innovation is when existing technology is applied in new markets.
- Incremental innovation is when existing technology is used to increase value to the customer in existing markets.
- Disruptive or stealth innovation is when new technology is implemented in existing markets.
- Radical innovation is when new technology is applied to new markets (this is the definition most people think of when they think of innovation).
What is social responsibility in a community?
Social responsibility is the obligation companies have to act in a way that serves society’s best interests. In a community, the responsibility of the company is to act in a way that is beneficial, or at least not detrimental, to the community.
How can a company manage its assets?
Keeping an accurate inventory of assets is essential, including keeping track of type, location, and person responsible for each asset.
Using asset management software as opposed to simple spreadsheets can help reduce human error in inventory and valuation. The software can help schedule maintenance, calculate depreciation, and report on assets. Asset management hardware like tags and barcodes helps identify assets, which is crucial when dealing with a large inventory to track. New assets should be added to the system immediately.
What is the concept of effectiveness?
A company’s effectiveness is its ability to produce the desired results or output. When a business plan has the intended results, the company is considered effective. For this list, Fortune considers effectiveness on a global scale.
What is long-term value creation?
Companies should implement measures to secure long-term financial, social, and environmental value for a sustainable economic model.
How do we ascertain the financial position of the business?
“Financially sound” is a term used to describe a state of financial wellbeing. The financial position of a business is measured by cash-flow statements, profit and loss statements, and the balance sheet.
How do companies attract and retain top talent?
Certain practices are implemented by companies to improve the results of recruiting efforts. By identifying their mission and values, companies can recruit based on the skills necessary for advancing them. Maintaining an employee-centric culture improves the ability to recruit and retain while increasing innovation, customer satisfaction, and profits.
Benefits Most Important to Employees, 2016 Society for Human Resource Management
What is the most admired company in the world?
In 2020, and for the 13th year in a row, Apple came in at number one in corporate reputation. For some readers this might be a bit of a surprise, considering one of Google’s most frequently asked questions about the brand is “Why is Apple so bad?”
Remember, Fortune’s list isn’t the same as the online reputation a company has with the general buying public (though the latter is arguably just as important, if not more). It’s more a measure of a company’s actual proficiency in key business performance areas. In a sense, it is the company most admired by other businesses.
Experts had speculated that 2020 might be the end of Apple’s reign, considering the poor results they received in the fourth quarter of 2018. Fortune’s Douglas Elam told John Koetsier of Forbes, “They scored well this year. Next year, we’ll see what happens.”
How did Apple score as the most admired company?
Apple is a global tech company based in Cupertino, California headed by CEO Tim Cook. They design, develop, and manufacture consumer electronics, software, and online services.
Apple's overall score
Based on the nine attributes as evaluated by Korn Ferry’s network of experts, Apple received a score of 8.19. It received the top ranking in all nine attribute categories, including the quality of products and services. Naturally, in retaining the top rank of Most Admired Company overall, the also kept the top spot in their industry.
Companies on the Top 10 Fortune list?
- Amazon 7.75
- Microsoft 8.30
- Disney 8.49
- Berkshire Hathaway 7.64
- Starbucks 7.92
- Alphabet 7.68
- JP Morgan Chase 7.24
- Costco 7.33
- Salesforce 7.53
How do I get my company's Fortune ranking?
Fortune is no longer publishing the World’s Most Admired Companies. You can obtain your company’s score and ranking by calling List Department Reporter Douglas Elam at 212-522-6841 or contacting him by email at firstname.lastname@example.org.
For 2020 and previous years, you can go to Fortune’s World’s Most Admired Companies list, select the year, and filter for your industry and headquarters location.
What companies are not ranked?
Only aggregate industry scores and ranks are available for the industries of food and drug stores, general merchandisers, construction and farm machinery, crude-oil production, network and other communications equipment, metals, mining, and wholesalers: healthcare because of the weak distribution of responses. Industries excluded due to insufficient responses are cable and satellite providers, pipelines and U.S. energy, and petroleum refining.
What is meant by online reputation?
A company’s online reputation is the public perception of a company based on online activity like content distribution, interaction with and between web users, social network activity, online reviews, and more. Reputation can impact the value of a company and should be carefully monitored and managed.