We live in an age of data, and companies are deploying it to measure everything from sales to warehouse productivity by the second. But when it comes to the performance of leaders—middle managers and up—many companies are operating in the dark. It’s easy to see why: Measuring the performance of leaders isn’t exactly straightforward.
That’s why Indiggo built ROL, a metric that calculates a company’s “return on leadership.” It looks at leadership performance from a stakeholder capitalism lens, and includes data on key areas ranging from integration of purpose and leadership execution, to employee satisfaction. In all, Indiggo looks at 17 key factors.*
Shareholders should pay attention to this metric, too: High ROL scores correlate with top-notch financial performance.
Coinciding with this week’s launch of the 2021 Fortune 500 list, we teamed up with Indiggo. They applied their Return On Leadership score to the top 100 companies of the Fortune 500—that is, to the 100 largest U.S. companies by revenue. This purpose-driven leadership ranking is called the ROL100.
The findings are striking. Take a look.
The numbers to know
3x higher
- … how total three-year shareholder return (TSR) of companies in the top 25 of the ROL100 compare to companies in the bottom 25 of the ranking.
7x higher
- … how three-year revenue growth of companies in the top 25 of the ROL100 compare to companies in the bottom 25 of the ranking.
5x higher
- … how EBITDA (per employee) of companies in the top 25 of the ROL100 compare to companies in the bottom 25 of the ranking.
No. 1
- … where Facebook ranked on Indiggo’s ROL100. In the public eye the social media titan is perpetually embroiled in controversy. But inside the walls at headquarters in Menlo Park, Facebook’s managers are executing on the areas that actually drive value.
7
- … Number of health care companies, including Johnson & Johnson (No. 4) and Pfizer (No. 6), that rank in the top 25 on the ROL100. That’s the highest placement for one sector. Technology was second with five.
The big picture
- It’s very simple: Great leadership and strategy translate into greater financial results. Highly ranked ROL100 companies, as a group, outperform lower ranked ROL100 companies on every core financial result. Why? Indiggo finds these top-ranked companies have successfully connected work and strategy to a bigger purpose—something that leaves workers feeling more satisfied and thus more productive. You can find the full ranking here.
A few deeper takeaways
1. Want an example of great leadership? Just look at U.S. COVID-19 vaccine makers.
Globally, more people are expected to die of COVID-19 in 2021 than in 2020. But even as the pandemic intensifies in some countries, U.S. cases and deaths are plummeting. The health community tie it directly to the rollout of COVID-19 vaccines by Moderna, Johnson & Johnson, and Pfizer. Pulling off such a feat would obviously require great leadership at all levels inside those companies. That insight was confirmed by Indiggo’s data: Johnson & Johnson ranked No. 4 and Pfizer No. 6 on the ROL100. (Moderna, which isn’t in the Fortune 500, wasn’t included in the analysis).
While the placement of Johnson & Johnson and Pfizer on the ranking make perfect sense, the top spot is a bit of a surprise: Facebook came in at No. 1. Yes, this is the same company that has suffered from controversies ranging from election manipulation to security breaches. But Indiggo found that management inside of Facebook is doing a good job. Facebook employees are both happy and productive.
2. Top ranked ROL100 companies post better earnings.
The higher a company ranks on the ROL100, the more likely it has both higher profit growth and revenue growth. That’s striking, considering that the data used to create the ranking doesn’t focus on hard financial metrics. Maybe stakeholder capitalism is onto something after all?
I’d love to know what you think of the newsletter. Email me with feedback at lance.lambert@fortune.com.
Lance Lambert
@NewsLambert
*Methodology: The ROL100 ranking uses publicly available information to assess Return on Leadership scores for the top 100 companies on the 2020 Fortune 500 list. Return on Leadership measures an organization’s capacity for execution through its leaders and managers, based on four fundamental drivers: Connection to Purpose, Strategic Clarity, Leadership Alignment, and Focused Action. For each fundamental, a mix of three to five key indicators is assessed (17 in all) to determine the overall ROL score and ranking for each company. You can find the full ranking here.
