Why ranking tables are a poor substitute for EFQM Assessment?
Comparisons are useful. Along with Trends and Targets, and an understanding of the Causes behind business results, companirsons let you know how well you are doing against the others. But the increasingly popular use of corporate ranking is a poor substitute for making a detailed assessment of where you actually stand on the key issues that concern your business. Journalists and academics cannot replace the role played by informed and experienced Assessors.
Providing comparisons, in the form of corporate ranking tables, is big business. If you want to know where you stand in terms of your size or greatness, there is a very wide range of different ranking tables to look through, published in business journals or by rating agencies, business schools and non-governmental as well as governmental organisations.
Ranking can be controversial. Those at the top of a positive list rarely complain that the index has been badly calculated, while poor performers may spend a disproportionate effort complaining about the methodology. In many of the business rankings that are receiving increasing attention - such as innovation or green ranking tables - the exercise seems to be about 'naming and shaming' rather than rewarding. It's fine to be at the top of the list, but very embarrassing to have your corporate reputation publicly dragged down in relation to your competitors.
Rankings used to be mostly about 'bigness'. Where are you positioned in each market or sector? Who are your biggest competitors? Who has the highest salary? These are the concerns of the traditional indices published as the Fortune 500, the FT 100, the Forbes list (of the richest men and women), and even the UNCTAD report on world's most multi-national companies.
Some ranking tables are becoming more ambitious than mere indices of performance. Rather than base the index purely on published results, some incorporate opinion research or combine opinions with market data. Newsweek gained a lot of publicity, and some critical reaction, to its tables of America's most green companies published in September 2009. At the top of the list were the electronics companies such as HP, Dell and IBM, all who benefit from outsourced production and can themselves claim to be relatively ecological. The Newsweek rankings, which combine several different data sources, incorporate a survey of public opinion about the green image of companies so may be influenced by PR as well as what the companies are actually doing to be greener. The NGO Greenpeace is not so kind to HP and Dell, criticising them for their failed promises to eliminate certain harmful chemicals in their production, while it ranks Europe's Nokia in first place in its 'Guide to Greener Electronics'.
CEO pay is another 'hot topic' which has brought special attention to rankings. Forbes has long published a list of the best paid CEO's, which used to be just for those with a curiosity about rich people. In today's activist shareholder climate, the Forbes rankings are being more closely studied to understand who makes value, and who doesn't. The European business school, INSEAD, published a study of 2,000 CEO's in december 2009 and gave an insight into how 'hidden gem' leaders create value for their companies - many of whom have 'risen through the ranks'.
During the downturn, it may be especially important to know where you are in relation to effective investment in innovation. Here you can find various rankings of the most innovative companies, including for example the Businessweek Innovation Top 50, which rewards the 'usual suspects' like Apple, Google, GE and Microsoft with top placings. Europe's Nokia makes it into the top 10, and BMW is not far behind at number 14, but otherwise all of the top 20 innovators are apparently American or Asian (including firms such as Toyota, Tata, Nintendo and Sony). A major problem with this listing is that it is backward looking: rewarding Apple for its widely admired product innovation doesn't carry too much insight for others wanting to understand how to do it.
Rankings are great tools to promote interest in the particular cause of an NGO, research focus of a business school or simply to create publicity for a business journal. They must be taken seriously by the PR departments of corporations, but for those seeking a deepter insight into the true state of the organisation, and its relative standing on more fundamental capabilities, Assessment of the sort taught and promoted by EFQM is a better guide to future performance.