Peter Drucker: The Best Managed Companies In 2019

When I was a manager at Boeing, I remember a situation where an individual was transferred to our plant.  This person was given the responsibility of running our department. I kind of liked the person at first, but over time this person did some things that began to alienate others and eventually me. I understand that a manager doesn’t do the job to be liked, but as Peter Drucker pointed out, trust and employee engagement are critical to the high performance of an organization. As I read the Journal Report today on the best managed companies of 2019, I concluded that these companies are channeling what I learned by watching my peers at Boeing. Some of the managers just didn’t do well, for one reason or another, but the ones that did do well followed the principles illuminated by Peter Drucker.

Wartzman and Tang, The Business Roundtable’s Model of Capitalism Pays Off, start the Journal Report by presenting the new business model agreed to in August. “When the Business Roundtable said in August that its members had embraced a model of capitalism that takes into account the interests of all corporate stakeholders – and thereby renounced the idea that shareholders should always come first – it painted the move as one part affirmation, one part aspiration.” Some, as I have written earlier, are concerned that corporations are moving away from profit, but that is not the case.

181 CEO’s of the largest corporations signed the Business Roundtable statement. The statement called for, “meeting or exceeding customer expectations, investing in our employees by compensating them fairly and providing important benefits, as well as offering training and education so they can develop new skills for a rapidly changing world.” This statement reflects what Katzenbach and Smith, in their classic The Wisdom of Teams, calls high performance: Taking care of employees, who take care of customers, then take care of shareholders. Seems like a good thing.

My first question was, who are the companies? My second question, what was the criteria? In Chip Cutter’s journal report, he identified Amazon, Microsoft, Alphabet, Cisco Systems, Walmart, PepsiCo, UPS, Ford, Progressive, Boeing and many more. The article is clear to point out there are five different criteria, and even though a company has a good index result when looking at all five criteria together, there were many red flags. “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.” Now let’s answer the second question.

Peter Drucker is known as the father of modern management. I have read many of his books, and his management philosophy is sound and reasonable. If followed a company can be both profitable and a good place to work. The Drucker Institute, working with the Wall Street Journal, has created a “holistic measure of corporate effectiveness.” The institute defines this as “doing the right things well.” The institute describes why they are doing this, “the measure seeks to assess how well a company follows a core set of principle advanced by the late Peter Drucker, a professor, consultant, author, and longtime Wall Street Journal columnist.” As I stated, I have enjoyed Drucker’s work, and there is a vacuum in the business writing world since his death in 2005.

Drucker’s core principles were customer satisfaction, employee engagement and development, innovation, social responsibility and financial strengths. “These principles serve as touchstones for five dimensions of corporate performance,” used for the rankings. The scores are calculated to be statistically relevant. They describe this as using a range of 0 to 100 with the mean being 50, and a standard deviation of 10. This means, “If a company is one standard deviation above the mean (with a score of 60), its results are in the top 15% to 20% of a larger universe of companies assessed by the Drucker Institute.”

Each area of assessment has various indicators that are used to calculate the final number. The top 250 companies are a part of a larger population of 820 companies that represent the Dow Jones Industrial or the S&P Composite Index. The Drucker Institute uses appropriate statistical data collection and analysis methodology to ensure valid and reliable results. They do this to ensure it describes the companies accurately. It is not meant to be prescriptive. That is the job of those of us who analyze the results.

In looking at the list we can see the Amazon is number one. Microsoft is two, and Apple is number three. All tech companies that obviously reflect our economy. Facebook and IBM are tied for sixth. In that we see a mixture of old and new. Walmart is number fourteen, but it has a red flag in the area of employee engagement and development. The Boeing Company is number thirty-one. Its strengths are in the area of innovation and finance, while it is weakest in employee engagement. I think that is accurate. The farther we get down the list we see corporations that have been around for a while. Hershey, Clorox, Dell, Medtronic, Bristol-Meyers, and many more.

So, what is my point? If the narrative is correct that young people don’t want to work for corporations, then they are missing an opportunity to have a great career and explore many new possibilities. My work at Boeing definitely did that for me. If the millennials think they will find a perfect employer, then they are in for a huge disappointment. I like this assessment. It proves to me that forty years ago, those of us who were influencing the business world did our work well. When I started at Boeing in 1977, I was told in orientation that if I didn’t like my job don’t let the door hit you on the behind on my way out. They told me there was a 1,000 people who wanted my job. That does not happen today. Compared to that, the corporations of today have found employee engagement to provide better results. Valuing employees tend to be more productive than telling them to not let the door hit them in the butt on their way out.

And that is my thought for the day!

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