By Patrick Thomas
The technology giants that shape so much of our lives dominate
in yet another way: They lead the pack of the country's best-run
In a year when the coronavirus pandemic has devastated large
swaths of the U.S. economy and reconfigured the ways millions of
Americans shop, work, communicate and learn, tech stalwarts have
remained in the uppermost echelon of the Management Top 250, an
annual ranking based on the principles of the late management guru
In the 2020 lineup, Microsoft Corp. unseated Amazon.com Inc. as
No. 1 by performing consistently well across each of the five main
components of the overall ranking compiled by researchers at
Claremont Graduate University's Drucker Institute: customer
satisfaction, employee engagement and development, innovation,
social responsibility and financial strength.
While their analysis captures data from the first few months of
the pandemic, through the end of June, Drucker Institute
researchers say the health crisis likely had a limited impact on
their 2020 list. "What we've really noticed is that the companies
that scored highest in our ranking last year seemed in the best
shape to deal with the crisis," says Rick Wartzman, head of the KH
Moon Center for a Functioning Society, a part of the Drucker
Rivals in the cloud-computing market, Microsoft and Amazon have
both benefited from the shift to remote work, as companies and
employees embraced their products to adapt to office closures and
social-distancing requirements aimed at curbing the spread of the
coronavirus. But Amazon fell to No. 4 this year as Apple Inc. took
the No. 2 spot, followed by International Business Machines Corp.
Google parent Alphabet Inc. rounds out the tech-centric top five.
Overall, researchers examined 886 companies this year, using 33
indicators of management effectiveness.
Silicon Valley has faced mounting scrutiny from consumer and
privacy advocates as well as policy makers, including antitrust
investigations and calls for tighter regulation of digital
platforms after a contentious election season. Yet the firms that
lead the technology sector still have a lot going for them, says
Zachary First, Drucker's executive director.
"There is something going on in technology right now around just
basic management. These top tech firms are very well managed," Mr.
First says. "I think it speaks to their public prestige, the extent
to which they attract talent, customers, and they have this
relentless focus on being high-performance organizations."
Microsoft's winning formula
Microsoft moved into the top spot in this year's ranking by
scoring strong marks in innovation while doubling down on corporate
culture and social impact.
On the innovation front, the company notched increases in
research-and-development spending, patent applications and
trademark registrations. A high volume of trademarks is a good
measure of the extent to which a company can commercialize its
intellectual property, Drucker researchers say.
In the past, Microsoft missed key waves in technology innovation
such as the rise of search engines, social media and mobile phones,
says Suresh Kotha, a management professor at the University of
Washington's Foster School of Business. But since Satya Nadella
took over as chief executive in 2014, he has pushed to develop the
company's cloud-computing business, turning it into a serious
market competitor, Mr. Kotha says.
"They see these waves but they didn't take the action, and this
one [cloud computing] they did," he says. "They got this wave
Already an earnings driver before the pandemic, cloud computing
became more central for many of Microsoft's corporate customers as
they moved to support employees working remotely.
Mr. Nadella has also sought to make Microsoft a more vocal
corporate citizen, especially as the tech industry faces greater
government and public scrutiny, and its social responsibility score
ticked up this year in the Drucker ranking. In January, the company
pledged to eliminate its carbon emissions over the next decade and
invest $1 billion as part of a wider climate commitment. Microsoft
aims to remove as much carbon from the atmosphere by 2050 as it has
produced since its founding in 1975.
"The culture change was one of the things Satya Nadella did that
makes it a great company," says Mr. Kotha.
In addition to cloud computing, Chief Technology Officer Kevin
Scott touts Microsoft's progress over the past year in artificial
intelligence and gaming alongside its investments in sustainability
and collaboration software.
"We are constantly trying to pay attention to what the world is
telling us about what it needs," Mr. Scott says, "and constantly
looking for where the technology trends are heading."
Consumer sentiment's effect
Amazon dropped to No. 4 overall this year in part because its
innovation score fell from an unprecedented level a year ago,
though it is still the highest score for any company in that
category. Its innovation score a year ago was more than double that
of any other company's.
While Amazon stands out in innovation, its performance is more
uneven elsewhere on Drucker's measures. It is about average on
social responsibility, although the company has made efforts to
improve in that regard, including launching a $2 billion internal
venture-capital fund focused on technology investments to reduce
the impact of climate change.
Amazon also posted a lower customer-satisfaction score than last
year. The e-commerce giant, which has gone on a hiring spree this
year to meet exploding demand, also continues to face criticism by
labor organizers and lawmakers for its treatment of workers. It
raised U.S. employees' minimum wage to $15 an hour in 2018. The
company's score in employee engagement and development improved
slightly this year.
"You have to have strength across the board to hold your own at
that level," Drucker's Mr. First says of Amazon's 2020 ranking.
"It's what makes Microsoft's ranking so impressive, that they are
not just innovation at all costs. They are excellent across the
An Amazon spokeswoman says the company strives to be the most
customer-centric company on the planet and notes that it topped the
American Customer Satisfaction Index for internet retailers last
year. She adds Amazon prioritizes the safety and health of its
employees and has invested millions of dollars to provide a safe
The spokeswoman notes that Amazon offers Covid-19 testing
opportunities to its employees, and points to several of its other
innovations during the pandemic, such as its Amazon Web Services
initiative to accelerate Covid-19 diagnostics, research and
Researchers also highlighted companies with particularly weak
scores in one or more dimension of Drucker's scorecard. Facebook,
for instance, had a disproportionately low customer-satisfaction
score, compared with its performance in other categories, amid
continuing criticism of its data-privacy practices and handling of
While the social-media giant has ramped up its efforts to police
political and coronavirus-related misinformation this year,
Facebook continues to face criticism in Congress, where bipartisan
calls for tighter regulation of online platforms are intensifying.
Drucker researchers note the company was in about the bottom 1% of
all companies they studied in customer satisfaction. In the overall
ranking, Facebook fell six spots from 2019 to No. 12 this year.
The Drucker researchers say Facebook's overall statistical
profile is comparable not to other tech companies but to big
tobacco firms. Similar to Philip Morris, Facebook scored well in
employee satisfaction and for its healthy balance sheet but
faltered with customers. Tim Kendall, the company's former director
of monetization, drew a similar comparison in testimony before
Congress in September, speaking about the platform's design.
"We took a page from Big Tobacco's playbook, working to make our
offering addictive at the outset," he told House lawmakers.
A Facebook spokesman declined to comment for this article.
Shifts inside legacy firms
While tech companies account for much of the top 10, some older
blue-chip companies have also risen on the list of most effectively
Procter & Gamble, the maker of Tide, Bounty and many other
consumer products, moved up to No. 8 from No. 15 a year ago thanks
to high scores across the ranking's five dimensions of performance.
The company has benefited from consumer shifts spurred by the
pandemic but also began making changes to its complex management
structure that had sometimes put brand managers and country
managers at odds.
One of the list's biggest gainers in the ranking this year was
General Electric Co., which rose 80 spots to No. 20, bolstered by a
higher innovation score and a slightly better financial score. GE
has struggled for years with declining profits and cash flow but
recently completed its sale of its biotechnology business for $21
billion in cash. Layoffs and cost-cutting have helped GE weather
Covid-19's damage to the commercial airlines that buy the jet
engines the company makes.
A GE spokeswoman pointed to Chief Executive Larry Culp's
comments on the company's Oct. 28 earnings call: "We're encouraged
by our progress amidst a challenging backdrop....We continue to
deliver for our customers and tackle the world's biggest
challenges, from precision health to the safe return to flight to
the energy transition."
IBM -- a blue chip before many of today's leading tech companies
existed -- climbed three spots to No. 3 this year amid efforts to
reposition itself as a cloud-services provider as customers flocked
to rivals such as Amazon and Microsoft. The company bought
open-source software firm Red Hat for around $33 billion last year
and named former cloud chief Arvind Krishna its CEO in April.
IBM has reported declining revenue in 30 quarters over the past
decade, and it's financial-strength score in the ranking slipped
this year. But the company recorded the eighth-highest innovation
score since the ranking process began in 2012. IBM abandons patent
applications at a higher rate than others, a sign of its commitment
to move past obsolete technology. The company's employee and
customer-satisfaction scores also rebounded after being down for
"IBM's investments in hybrid cloud and AI technology, as well as
in technologies of the future like quantum computing, are making
IBM an employer of choice and a valuable partner for clients," a
company spokesman says.
On the down side, it has been a tumultuous year for Occidental
Petroleum Corp., which fell off the Top 250 list entirely this year
-- from No. 180 last year -- after it posted a decline in financial
strength. The Houston-based oil producer slashed its dividend
earlier this year to conserve cash amid low oil prices and weak
demand due to coronavirus lockdowns. The company has also curtailed
its capital spending and cut executive and employee salaries
temporarily. Occidental has been saddled with debt following its
$38 billion deal to buy rival Anadarko Petroleum Corp. last year.
The company declined to comment.
Mr. Thomas is a Wall Street Journal reporter based in New York.
He can be reached at firstname.lastname@example.org.
(END) Dow Jones Newswires
December 12, 2020 10:25 ET (15:25 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.