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Recalibrating the 'Most Admired': How the Numbers were Crunched

Friday, December 1, 2006
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Every year, analysts at The Hay Group, the Philadelphia-based management consulting firm, poll thousands of executives, directors and securities analysts to rank top companies within their industries, using a 1-to-10 scale, according to a set of "attributes of reputation." The result is what Fortune magazine immodestly calls "the definitive report card on corporate reputation."

Some of those attributes -- including financial soundness, long-term investment value and use of corporate assets -- are essentially dollar-based. Others -- specifically, innovation, quality of management, people management and product/service quality -- are more subjective and, in general, more directly linked to the quality and effectiveness of the company's HR function.

While financial performance is also heavily influenced by HR, extracting the financial-performance indicators has the statistical effect of creating a more pure rating of a company's reputation based on the most HR-dependent criteria of judgment.

In this year's ranking method, Human Resource Executive® asked the analysts at Hay to perform a two-step calculation. The first step is to average those four HR-oriented attributes of reputation, then rank companies in the order of that average score.

The second step was to remove all companies that were not ranked in at least the top half of their respective industry group, based on their reputation for "global orientation."

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Finally, of the survivors of that round of elimination, only those companies whose average HR attribute score was at least a seven (on that 1-to-10 scale) remain on the list. The result is a list of companies deemed to be highly regarded, both according to their HR practices and their success as players on the global business stage.

While relatively insignificant statistical differences separate one company from the next one a few rungs down on the list, a company whose HR attribute average rating is a full point above a competitor's probably has something to crow about. So, for that matter, do all of the companies that made it to HRE's global HR-customized Most Admired list.

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