Chinese firms prominent on Crowe corporate decision-making index

17 July 2018 Authored by Consultancy.asia

Chinese firms have crowded the top of the index in a recent analysis report on effective corporate decision-making released by the international audit, tax, advisory and risk network Crowe.

In its inaugural ‘Art of Smart – Crowe 100 Decision-Making Index and Report’, the recently rebranded Crowe network – the eighth largest accounting and professional services network in the world – has assessed ‘strong, effective decision-making’ in corporate leadership with a comparative analysis of the world’s most profitable businesses (based on 2017 figures) operating in the industries which the consulting firm most frequently serves – manufacturing, healthcare and real estate.

The study methodology looked into four key areas of corporate decision making - Growth, Diversity, Boldness and Innovation – with businesses assessed over a five-year period beginning 2013 and the four components granted equal weighting to arrive at an overall tally. Emerging on top were the joint Swedish leaders Atlas Copco and the Volvo Group – awarded 29 points each out a possible 40 – yet, firms from China managed to command seven of the top 20 placings.

The strong showing of Chinese firms at the top of the list – including household goods and electronics manufacturer Gree Electric Appliances in sixth spot, and the real estate entities China Vanke, Country Garden Holdings (Hong Kong) and Greenland Holdings in equal eighth – compared favourably to the US presence at the pointy end of the index, likewise with seven entries in the top twenty, and eclipsed the showing from a combined Europe with six.

Crowe 100 Decision-Making Index and Report 2018

However, while the top five firms on the Crowe index (with Apple, Medtronic and Cisco following the Swedish duo) all scored particularly strongly in the boldness and innovation categories, with only the one mark below 7.5 between them across the two categories, the Chinese quartet in the top ten returned more middling results – boosted in part by a clean sweep of full marks for market capitalisation in the growth segment: a baseline indicator for strong decision-making.

Here, the report notes that the ten largest companies on the index by 2017 market capitalisation – including Apple, Toyota, Cisco and Boeing among others – scored on average one and half points higher on ‘boldness’ and almost two points more on ‘innovation’ compared to the list’s ten smallest by capitalisation, as well as performing better in the categories on average overall – with the correlation highlighting, according to the report’s authors, an important relationship between size and maneuverability.

“The largest companies often benefit from economies of scale and their roles as trendsetters but must also maintain increasingly bold and innovative actions to sustain their places in the pack,” the authors note. For the Chinese firms in the top ten, the highest awarded across the innovation and boldness categories was Country Garden Holdings with a combined 15 points out of 20, while both Gree Electric and Greenland Holdings managed a more middling 12.5 a piece – indicating the need to boost future innovation and boldness if these firms are to continue to capitalise on their growth.

Leadership diversity

Another area where these firms can potentially further enhance their success is through increased diversity, which has been outlined in numerous recent reports as having a direct bearing on business profitability, with one such report earlier this year by McKinsey & Company finding that companies in the top quarter-bracket for gender and cultural diversity at the executive level were 21 percent more likely to outperform competitors with a less diverse profile. Here, the top overall performing Chinese firms on the Crowe index ranked from a high of five points down to just two – indicating a considerable future opportunity.

Beyond the cultural imperative, the business case for increased diversity is reasonably straightforward; as a true reflection of the world-at-large and in providing a more balanced range of perspectives, greater diversity can aid better decision-making. David Mellor, CEO of Crowe Global, says overall; “In making any significant decision, all companies face a range of variables and carry a host of unforeseen biases. By learning more about the process of decision-making, companies can make smarter decisions and create lasting value… More than any other factor, it remains the key component to determining successful companies and predicting future success.”

News