Admiration, and what it’s worth

Corporate accolades are nice when you get them, and easy to dismiss when you don’t.

Editor’s note: this article was written by freelance writer Haig Simonian and published by Ilona Braverman. The views expressed in this post do not necessarily reflect or represent the views of ABB or its employees.

Each year, Fortune, a leading US business magazine, publishes its ranking of the world’s most admired companies. The list concentrates on the biggest groups and divides them by industry categories.

Each company is assessed on nine criteria, including innovation, quality of products and services and financial soundness. “Softer” factors also count, such as quality of management, ability to attract and retain talent and social responsibility.

“The World’s Most Admired Companies have a clear sense of strategy and objectives, regardless of the economic conditions”, says Mel Stark, vice president and regional reward practice leader at Hay Group, the consultants that work with Fortune in compiling the league tables.

So you could hear the champagne corks popping across Zurich when this year’s list, just published, catapulted ABB to the top of the “industrial machinery” category. Not that the company had done badly before: ABB ranked sixth in both 2013 and 2012, one up on the seventh place achieved in 2011.

But of course there’s nothing quite like coming first, especially when the list, based on questionnaires to 15,000 senior executives, outside directors and industry analysts, ranks ABB number one in no less than five of the nine assessment areas.

The latest plaudits reinforce a good year for outside recognition. The prestigious MIT Technology Review and Thomson Reuters earmarked the company as one of the world’s foremost innovators. ABB won the Zayed Future Energy Prize, a coveted international award for sustainability and renewable energy. And just recently, data from the European Patent Office showed the group was Switzerland’s top patent filer last year. Of the country’s nearly 6,700 patent applications, more than 450 came from the leading electrical engineering group – ahead of pharma powerhouse Roche and even Nestle.

Of course, it’s easy to scoff at surveys. In some sectors, like banking, they are two a penny, and often slightly suspect. Fortune’s list is quite US-centric.

Some could also complain ABB’s ascendancy stems from its greater prominence in the US over the past couple of years. The group has spent almost $10bn snapping up electric engines maker Baldor, electrical component manufacturer Thomas & Betts and, most recently, Power One, a leading producer of solar inverters. Those takeovers filled gaps in ABB’s portfolio and reinforced a still somewhat patchy US presence. Though further opportunities may lie ahead, no one can say ABB is under represented Stateside any longer.

A real nitpicker might also cavil that one very, very big general electric company (which happens also to be US based) is, conveniently, not in ABB’s industry group. GE, which makes all manner of things alongside products competing with ABB’s, comes under “electronics” (where it commendably came top).

All such niggles aside, business academics agree outside recognition is welcome and valuable to a company – especially when coming from a respected source. Such rewards can be morale boosters – and therefore potentially important retention factors – for executives and staff. Although the benefits are virtually impossible to measure, recognition may help lift margins and profits (and thereby also the share price) by giving the company that little extra edge when it comes to pricing products at a slight premium.

Just by way of methodology, Fortune’s list of qualifying companies is compiled between July and September each year, with surveys distributed every October. Reminders go out late the following month, and all surveys are due back by mid-December. The results are released in Fortune’s March edition and also published on its website.