World-class companies

How does South Africa research and rank its vaunted Top 500 best-managed companies every year?

This year, the top 5 South African companies across 100 sectors, from coal to business colleges, will once again be listed in the index of our eagerly-anticipated tenth anniversary collectors’ edition set to be read and referenced by 10 000+ key decision makers in business and government.

What leads to a company being placed first in its sector?

The qualification is strictly research-based, using objective criteria designed in conjunction with UCT’s Development Policy Research Unit (DPRU), against which roughly 2 000 prominent companies are measured every year. Morne Oosthuizen, DPRU Deputy Director, explains that in order to place top of their sector, companies must excel in three key spheres, namely financial performance, empowerment, and policy and accreditation.

Financial performance speaks to the nature of top companies being large, growing and productive institutions; leaders by virtue of their size and dynamism. It is also measured by four indicators: turnover, rate of turnover growth, rand turnover growth and turnover per employee.

Size is both an indicator and an outcome of whether or not a company is a top company.

Turnover is used to proxy company size and this indicator has large weight within the measure. The dynamism of top companies is reflected in their ability to expand and grow, and so two indicators are included – one relative, one absolute – of growth in the score sheet. The former is the rate of turnover growth over the year – since top companies are faster growing – while the latter is the rand value of that turnover growth. Absolute turnover growth is included to account for the fact that top companies’ growth should make a large contribution to increased total output. These two indicators have a medium weight within the scoring system. Top companies are more productive than other companies and the final performance indicator, turnover per employee, which has a medium weight, speaks to this characteristic.

Delving deeper, our researchers assess how companies promote equity and social transformation. Top companies are committed to fulfilling this role, and this commitment is measured using six criteria. Two focus on companies’ commitment to the goal of transformation as demonstrated in their employment profiles, namely the shares of employment accounted for by female employees and by black employees respectively.

Top companies, however, go further than just employment and are demonstrably committed to greater diversity at the level of management and control. The proportions of black and female executive and non-executive directors are evaluated to complete scoring for this sphere.

Wider afield, top companies are involved within communities and are committed to improving the universal quality of life for the society they operate in. This sphere of policy and accreditation accounts for the remainder of the total score. In gauging companies’ engagement and involvement in communities, their total spend on corporate social investment activities relative to net profit is measured. Companies are also judged on the existence of written policies regarding employment equity, skills development, health and safety, HIV/Aids, and the environment. The final criterion within this sphere, commitment to quality, is proxied by the number of SABS-approved accreditations held by companies.

For more details on our research, e-mail Head of Research