Page 37 - Harvard Business Review (November-December, 2017)

FEATURE THE BEST-PERFORMING CEOs IN THE WORLD 2017

HOW WE CALCULATED THE RANKINGS companies. (Several companies had co-CEOs.)
They ran enterprises based in 31 countries.
To compile our list of the world’s best-performing Our research team, headed by Nana von
CEOs, we began with the companies that at the Bernuth and assisted by the coders Christina von
end of 2016 were in the S&P Global 1200, an index Plate and Phachareeya Ratchada and the data
that reflects 70% of the world’s stock market consultants Morand Studer and Daniel Bernardes
capitalization and includes firms in North America, of Eleven Strategy & Management, gathered each
Europe, Asia, Latin America, and Australia. We firm’s daily financial data from the CEO’s first day
identified each company’s CEO but, to ensure on the job until April 30, 2017, as compiled by
that we had a sufficient track record to evaluate, Datastream and Worldscope. (For CEOs who took
excluded people who had been in the job for less office before 1995, we calculated returns using
than two years. We also excluded executives a start date of January 1, 1995, because prior
who had been convicted of a crime or arrested. industry-adjusted returns were unavailable.)
All told, we ended up with 898 CEOs from 887 We then calculated three metrics for each CEO’s

THE PERFORMING

BEST-

BY DANIEL MCGINN

ore than 15 years ago the management performance measures over a chief executive’s en-
writer Jim Collins introduced the flywheel tire tenure—numbers that often hold steady. We con-
as a metaphor for the enduring power of tinue to view the ranking as a work in progress and
strong business leadership. A company to look for ways to improve the methodology—but
doesn’t shift from “good to great” over- this year we made no changes to our measurement
M night, he wrote in his 2001 book of that system, which accounts in part for the lack of big sur-
name. Rather, it achieves excellence by “relentlessly prises. (For more on our methodology, see “How We
pushing a giant heavy flywheel in one direction, turn Calculated the Rankings,” above.)
upon turn, building momentum until a point of break- This year’s top performer—his first time in that
through, and beyond.” And once that flywheel starts spot—is Pablo Isla of Inditex, the parent of the re-
spinning, Collins said, it tends to keep going. tail fashion chains Zara, Pull&Bear, Massimo Dutti,
The power of momentum is evident in our 2017 Bershka, Stradivarius, Oysho, and Uterqüe and of
ranking of the world’s best-performing CEOs, a list the housewares retailer Zara Home. Since becom-
that is remarkably consistent with last year’s tally. ing CEO, in 2005, Isla has led Inditex on a global ex-
Two of this year’s top three CEOs were among the top pansion during which the company has opened, on
three leaders in 2016, and 16 of the top 25 were in the average, one store a day. That growth has increased
top quartile. Seventy-two of last year’s 100 leaders are its market value sevenfold and made it Spain’s most
repeats, and 23 are appearing for the fourth straight valuable company. Colleagues describe Isla’s man-
year. Of the 28 CEOs who fell off the list after last year, agement style as humble and at times almost shy.
11 retired from their companies. (Most of the rest, in- Although he spends much of his time traveling to
cluding the CEOs of Heineken and Vodafone, dropped visit stores, he rarely attends store openings, choos-
off because of a significant decline in stock price.) On ing to avoid the limelight. At headquarters he prefers
average, these 100 CEOs generated a 2,507% return on management by walking around over holding formal
stock (adjusted for exchange-rate effects) during a 17- meetings—part of his attempt to maintain an entre-
year tenure, for a 21% average annual return. preneurial, small-company culture even as the firm
There are reasons for this consistency. Unlike has grown very large.
rankings that are based on subjective evaluations Among apparel retailers, Inditex stands out for two
or short-term metrics, our list relies on objective things: Its success in helping consumers easily migrate

66 HARVARD BUSINESS REVIEW NOVEMBER–DECEMBER 2017