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Microsoft tops the best-managed companies of 2022




Microsoft Corp. held its ground, ranking No. 1 in this measure of the best-run companies in the U.S. for the third straight year. But unlike last year, when tech companies took the first five spots in the ranking, this year’s top five include General Motors Co. at No. 4 and Whirlpool Corp. at No. 5.

Apple Inc. and International Business Machines Corp. round out the top five of 2022, ranked second and third, respectively.

Other big names in technology didn’t fare as well. Companies such as Meta Platforms Inc. and Inc. have seen revenue growth slow following two years of a pandemic-driven boom. Those two and Google parent Alphabet Inc., Uber Technologies Inc. and Salesforce Inc. all dropped in this year’s ranking, compiled by researchers at Claremont Graduate University’s Drucker Institute.

Amazon stayed in the top 10, but slipped to eighth from second and recorded the biggest decline in overall score of any company in this year’s Top 250. Meta posted the fourth-largest decline in overall score in the group and dropped from No. 31 in last year’s ranking to No. 130 this year.

“What you are seeing is some weakness in financials relative to where they’ve been in past years and also some deterioration in customer satisfaction” in the tech industry, says Rick Wartzman, head of the KH Moon Center for a Functioning Society, a part of the Drucker Institute. But, he says, “tech companies are still riding quite high overall, and they still by and large dominate the top of the list.”

Car companies posted big gains that Drucker researchers attribute in part to a growing focus on making electric vehicles, which helped auto makers’ social-responsibility scores. General Motors climbed into the top five from 16th place last year, while Tesla Inc. and Ford Motor Co. also jumped higher. Analysts also attribute the industry’s rise in the ranking to an easing of supply problems, which aided some car companies’ customer-satisfaction scores.

The Management Top 250 ranking is aimed at highlighting companies that have done a commendable job across a range of what can sometimes be competing management priorities. It uses the late management guru Peter Drucker’s principles to identify the companies that are most effectively managed. This year, more than 900 companies were graded in five categories: customer satisfaction, employee engagement and development, innovation, social responsibility and financial strength.

Companies that are in the top 15% to 20% in each of the five components of the ranking are designated all-stars, and those that receive notably weak scores in particular categories are tagged with “red flags.”

Seven companies made the all-star list this year: Apple, Mastercard Inc., Procter & Gamble Inc., HP Inc., Pfizer Inc., Accenture PLC and Visa Inc.


Microsoft’s edge

Microsoft ranked in the top 10 in each of the five component categories except customer satisfaction, where it ranked 519th. The company, which got the top mark for innovation, unseated Amazon for the No. 1 spot overall in 2020 and has held the position since.

Microsoft has benefited greatly from a big bet it made on the cloud in recent years, focusing on its Azure business since Chief Executive Satya Nadella took over in 2014.

Nearly three years into the pandemic, Microsoft’s cloud business continues to pay dividends despite today’s high inflation, rising interest rates and gloomy economic outlook, the company said on its most recent earnings call. The cloud business’s growth rate is lower than it was during the height of the pandemic. But in the most recent quarter, as other parts of Microsoft’s business reported revenue declines, the company’s revenue from cloud computing services grew 35%.

“We continue to have a sharp focus on our people, and while we’re not immune from macro impacts, we feel good about the businesses we are investing in, our position in those markets, and our ability to help customers optimize their IT budgets and cloud spending,” said Microsoft’s chief marketing officer, Chris Capossela.

Amazon has also been bolstered by its cloud business, but the company still fell out of the top five in the ranking for the first time since the Management Top 250’s inception, due to declining scores in every category except social responsibility.

The company in November was considering whether it should focus on adding new capabilities to its Alexa virtual-assistant technology. The unit that includes Alexa had an operating loss of more than $5 billion a year in some recent years, according to internal documents viewed by The Wall Street Journal.

Additionally, the percentage of Amazon customers who are satisfied with the company has slipped in recent years. That could be a result of numerous issues, including customer-service concerns, shipping delays and frustration over search results that are saturated with advertised products, analysts and former Amazon employees have said. Amazon didn’t respond to requests for comment for this article.

For high-profile tech companies in general, “there’s been so much talk about inordinate power and market concentration,” says Mr. Wartzman. “That may affect some of their social-responsibility scores, depending on how the different ESG rating agencies look at it. But I do think that begins to erode consumer confidence as well. People just feel less good about shopping at these places or using these platforms.”

Other tech companies that fell in the rankings include Cisco Systems Inc., Intel Corp., Adobe Inc. and HP Inc. One of the companies to have garnered some of the biggest headlines this year, Twitter Inc., didn’t make the top 250. The rankings reflect data captured through the end of June, before Elon Musk bought the company.


Car makers move up

As tech companies slipped in this year’s ranking, car makers gained ground.

“What happened is that everybody wanted cars, couldn’t get them—it was too expensive or long waiting lists, And now they’re able to get them, and if you demand something and you finally get it, you like it,” says Arthur C. Brooks, a professor of management at Harvard University’s business school.

In addition to improved customer satisfaction, several of the auto companies’ social-responsibility scores improved, which the Drucker researchers and other analysts say can be attributed in part to their increased efforts in the electric-vehicle market.

“Their views have been oriented toward safety, clean environment and responsible stewardship of the company. So I can certainly see that showing well in these rankings,” says Mark Wakefield, global co-leader of the automotive and industrial practice at consulting firm AlixPartners.

As of November, electric vehicles only accounted for about 6% of overall U.S. vehicle sales. But that market share has tripled in the past two years, according to research firm Motor Intelligence. General Motors, Ford and others said this fall that their waiting times for new electric models stretched longer than a year.

GM executives say they expect to be able to quickly scale up electric-vehicle output given the company’s new battery-cell factory in Ohio and more planned facilities. They have also said they expect to be solidly profitable in the sector in North America by 2025, in part due to new federal subsidies. The company posted gains in this year’s ranking in its scores for customer satisfaction, innovation, social responsibility and financial strength.

Ford jumped into a tie for 15th in this year’s ranking from No. 26 last year. In the spring it said it was creating a separate division to develop electric vehicles and software, and in September it named a new chief product officer, who is expected to supervise the company’s $50 billion electric-vehicle investment.

Ford has set a goal of producing two million electric vehicles a year by the end of 2026.

“For a lot of these companies, including GM and Ford, they’ve broken through the public’s consciousness that they are really now all about electric vehicles,” Mr. Wartzman says.

But they have a way to go in that market to catch up with longtime electric-vehicle leader Tesla. The company delivered a record number of electric vehicles in the third quarter and has boosted production capacity across its plants in the U.S., Europe and China. It accounted for about 70% of all U.S. electric-vehicle sales in the first half of the year, according to Motor Intelligence.

Tesla, which came in at No. 249 in last year’s ranking, jumped all the way to No. 76 this year.


Whirlpool’s leap

Among other big gainers this year, Whirlpool’s leap to No. 5 from No. 39 last year came as the company improved its scores in customer satisfaction, social responsibility and especially innovation. It posted the fourth-biggest gain in innovation score of any Top 250 company.

Whirlpool continues to launch new products, including a washer with a built-in filter to remove pet hair and appliances that can connect to the internet. It also recently acquired Emerson Electric Co.’s InSinkErator business.

Whirlpool hasn’t been known as an innovation leader in the past due to strong competition from Samsung Electronics Co. and LG Electronics Inc., but that’s changing, says Longbow Research analyst David MacGregor.

“Samsung, LG, their growth has slowed down over the last two to three years,” he says. “Their level of innovation is still good, but it’s not as strong as it was in the past. So in relative terms, Whirlpool is probably moving up and looking within the cohort a little stronger.”

Whirlpool earlier this year also announced that it would review its businesses in Europe, the Middle East and Africa with the aim of increasing revenue growth.

Among decliners this year, Starbucks Corp. dropped to No. 109 from No. 82 last year, following the company’s struggles to meet increased consumer demand. Many of the cafes are also overdue for remodeling. Having so much demand is a privilege for Starbucks, but also a problem, Katie Young, Starbucks’ senior vice president of global growth and development, said in August.

In March, Starbucks said its chief executive, Kevin Johnson, would retire and Howard Schultz, who served as CEO twice before, would return on an interim basis. Mr. Schultz said the company made mistakes and needed to change. In an earnings call early last month, Mr. Shultz said Starbucks is investing to make it easier for its employees to do their jobs and satisfy growing demand in the company’s stores.

Another prominent decliner this year is Meta, which dropped nearly 100 spots and received one of the lowest scores for customer satisfaction of all the companies reviewed for the ranking. Last fall, before the company rebranded to Meta and shifted its focus to the metaverse, The Wall Street Journal reported on a series of documents that showed among other things that the firm was well aware that its platforms are riddled with flaws that cause harm, particularly to teenage girls. Meta declined to comment for this article.

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