The Harvard Business Review (HBR) has been publishing its list of the top 100 CEOs for years. To CEOs, it's a best practice guide, and to boards around the world, it's a shopping list. You can be sure that at least a couple of the named CEOs will get a golden handshake and a fast-track to the next level.
In previous years, the criterion for getting on the list was success; that success could be created in anyway, and to the HBR all that mattered was the name of the CEO at the top. Essentially the list comprised the top 100 poster boys for business: leaders who had created huge revenues, who had seen revenues rise exponentially and who had garnered the most media coverage.
The forgotten factors
This year, however, things have changed – and it's a change that was anticipated by the introduction of the CEO scorecard in 2010. What the CEO top 100 had not previously acknowledged were the other factors in a business' success, as well as the CEOs' long-term strategies. Effectively, the earlier lists emphasised and rewarded short-term growth, measured in business turnover, and CEO popularity.
The thinking seemed to be: if you can grow the business' turnover by 500% in a year and get your picture on the cover of Forbes, you must be a good CEO. The fact that the market was on the up, 300% of that growth was going to happen regardless, and $100 million of venture capital meant you could get your brand in the public eye was neither here nor there.
A new way to measure ability
What it didn’t reward were those businesses who had increased profits continually and whose long-term strategies meant that they continued to grow, no matter the state of the market.
The new top 100 is based on sensible, hard facts. The list is now compiled by INSEAD academics Morten T. Hansen, Herminia Ibarra, and Urs Peyer, and is based on rigorous analysis of more than 3,000 CEOs around the world. The analysis is based on three metrics: industry-adjusted shareholder returns, country-adjusted shareholder returns, and the increase in market capitalisation during each CEO's tenure.
While shareholder returns are valuable, it's the last piece of information that makes all the difference. With this metric, the long-term heroes who provide a stable and well organised business can be separated from the short-term bandwagon-jumpers who are only as good as this year’s turnover figures. Proof that this is working is the inclusion at number two of CEO Jeff Bezos of Amazon.com, who over the last 19 years has delivered industry-adjusted shareholder returns of 12,266% and saw the business' value increase by $111 billion.
When you’re an established business, recruiting top talent in all the areas you need can seem like a never-ending challenge.
If you’re a start-up or small business, how can you put together an attractive employee package to appeal to top talent – graduate and…
More than one million incidents of financial fraud occurred in the first six months of 2016, according to official figures released by…
Santander’s Head of SME International Mark Collings discusses why exporting to new global markets may provide businesses with new and…