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| The A.T. Kearney team: (seated L-R)
Vivek Gupta, MD; Kaustav Mukherjee, Principal; (standing L-R)
Satyajit Lahiri, Marketing Manager; Anshuman Maheshwary, Associate,
Mragank Jain, Business Analyst and Bhavya Kishore, Business
Analyst |
The best managed company study was
launched two years ago with a rather simple objective. There were
a number of surveys that Business Today (and some others) did
on identifying the best companies in a variety of areas: Most
valuable in terms of market capitalisation, best employers, biggest
wealth creators, fastest growing companies, best marketers...While
these surveys are important for the sharp focus they bring to
one parameter, BT felt the need to launch a study that would assess
a company on its entirety. Ergo, the Best Managed Company Survey
looks at financial performance as well as the qualitative, non-numerical
facet of corporate dynamism: How does a company innovate, learn,
create a culture of excellence, anticipate and deliver on stakeholder
needs-all of which are critical to sustained value creation.
BT's partner, global consulting firm A.T. Kearney, brings its
globally tested and validated Value Building Growth Matrix to
the study. The matrix maps market value growth adjusted for changes
in equity against revenue growth (see Value Growth Matrix). Companies
that lie on the top right of the matrix are the value builders-they
manage the tricky balance between profit and growth. But as mentioned
earlier, that's just one step in the four-step analysis the study
adopts. Here's a detailed look at what the four-step process involves:
The Four-step Process
Financial performance is tangible, and one can accurately measure
earnings, profits and growth in market value. However, assessing
an organisation on qualitative dimensions is relatively more difficult.
It requires in-depth understanding of processes and practices
that drive value creation, and identifying differentiators across
organisations.
For added rigour, we adopted a four-step approach to identify
India's Best Managed Company.
1. Financial Screening Stage
The first step of the exercise was to shortlist, from the universe
of listed companies, a sample. To make the cut, companies had
to: have been publicly listed no later than 1996 (hence, no Maruti
Udyog, no Bharti Tele-Ventures); have minimum revenues of Rs 100
crore; minimum market capitalisation of Rs 50 crore; and have
declared profit in at least two out of the past four years. More
than 500 companies across 12 industries-agri/process, automotive,
chemicals, energy and utilities, financial services, FMCG/retail,
it-telecom-entertainment, metals and minerals, pharmaceutical
and healthcare, textiles and apparel, other manufacturing, and
other services made the grade.
| KEY QUESTIONS |
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What's a Best Managed Company?
Simply put, it's a company that not just delivers superlative
financial performance, but is also adept at anticipating
changes, learning and staying ahead of its peers. That apart,
it must have a high social commitment. In other words, a
corporate all-rounder.
How are the best managed companies
identified?
Through a four-step process. At the first stage, companies
are filtered out on certain financial parameters. For example,
companies must have Rs 100 crore in revenues and Rs 50 crore
in market cap. At the second stage, we find out whether
the company has attributes critical to long-term value growth.
The next step, which only 13 companies made it to, involves
interviewing the top management for greater insights into
the companies. Finally, a panel of independent judges, based
on their experience and knowledge, pick one final winner.
Is the methodology globally tested?
Yes. The study uses A.T. Kearney's proprietary Value Building
Growth Matrix, which is used to assess the financial performance
of the companies. A.T. Kearney has conducted a series of
global studies using the Value Building Growth Framework
to analyse companies' past growth movements and future growth
potential.
Is the Best Managed Company methodology
a better indicator of overall performance of a company?
Yes, since it does not focus merely on financial performance,
which is a good indicator of past performance but pretty
much useless when it comes to gauging sustainable performance.
Also, a good financial performer may not necessarily be
adept at learning or anticipating stakeholder needs-aspects
crucial to long-term competitiveness.
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These companies were plotted on the Value Building Growth Matrix
framework. A total of 49 companies across the 12 industries from
the value-building quadrant were selected. This was based on quantitative
criteria as well as qualitative ones (consistency of appearing
in this quadrant over time; present size of operations; potential
for future growth).
2. Qualitative Assessment Stage
In line with our approach of going beyond financial measurement,
we looked at three perspectives, other than financial perspective
described in the financial screening stage, which are important
for long-term sustainability and continued value creation:
(a) Internal Perspective: How does the company identify stakeholder
needs and find ways to deliver/ exceed on them?
(b) Learning and Growth Perspective: To achieve its vision,
how does the company sustain the ability to change and improve?
(c) Customer Social and Investor Perspective: To achieve its
vision, how should the company manage customer, social and investor
relationships?
To assess these companies on the three perspectives, we disaggregated
each perspective into measurable business parameters (see Qualitative
Assessment). A detailed survey comprising over 150 questions was
developed around these parameters by A.T. Kearney, and administered
to these companies by Synovate, a market research firm. A.T. Kearney's
global experience and assessment of best practices in technology
and organisational transformation, process design and reengineering,
human resource management, strategic and business planning, supply
chain management, globalisation strategy, customer relationship
management, and corporate governance, among others were leveraged
to measure the level of evolution of these companies on various
processes and practices.
After analysing the responses of the survey, 13 companies were
identified for the pre-final stage. Normalisation of ratings was
done to address industry specific idiosyncrasies. The companies,
alphabetically, were: Dr. Reddy's Labs, Eicher Motors, e-Serve
International, Goodlass Nerolac, Gujarat Gas, HDFC Bank, ICICI
Bank, Infosys, L&T, Ranbaxy, Satyam, Tata Power and Wipro.
3. Pre-final Stage
Based on the survey responses, hypotheses were developed around
strengths, weaknesses and strategy of individual companies. Subsequently,
senior leadership of these companies were interviewed to develop
a greater level of understanding and insight in these areas. Initial
ratings were then fine-tuned based on interviews with senior leadership,
and six companies were short-listed for the final round. These
were: ICICI Bank, Infosys, L&T, Ranbaxy, Tata Power and Wipro.
Finally, the findings of the study were put to a panel of judges,
comprising Kiran Karnik, President, Nasscom; Jairam Ramesh, Member
of Rajya Sabha and Secretary, All India Congress Committee's Economic
Affairs Department; G.N. Bajpai, former Chairman of the Securities
and Exchange Board of India (SEBI); and G. Raghuram, Professor,
Indian Institute of Management, Ahmedabad. Based on the judges'
rankings, a final winner of the Best Managed Company award was
selected.
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