Apple tops the list of best-managed companies of 2024

Rounding out the top four are Nvidia, Microsoft—which came in at No. 1 the previous four years—and Intel.

Two other tech companies scored in the top 10: Alphabet in eighth place, falling from fourth place last year, and Adobe, rising to ninth place from 19th.

Four nontech companies are represented in the top 10, one more than last year. Mastercard placed fifth, rising from 24th in 2023. (International Business Machines, No. 5 last year, fell to 20th place this year.) Philip Morris International jumped to 10th place from 32nd. Johnson & Johnson rose to sixth place from 13th. And Procter & Gamble held on to its No. 7 spot.

The Management Top 250 ranking compares companies using the late management guru Peter Drucker’s principles to identify the most effectively managed businesses. This year, 842 companies were graded in five categories (customer satisfaction, innovation, social responsibility, employee engagement and development, and financial strength) based on 35 indicators supplied by third-party data providers. The statistical model that produces the ranking was created by researchers at Claremont Graduate University’s Drucker Institute. Bendable Labs, a private firm, works with Drucker to perform the calculations and interpret them.

Companies that are in the top 15% in each of the components of the ranking are designated “all-stars," and those that score in the bottom 25% in any category are tagged with “red flags."

The ranking captures the year ended in June—a year of rising interest rates, cooling inflation yet persistent consumer perceptions that prices are still too high, tension ahead of the November election, continued debates about returning to the office and increased employee dissatisfaction.

Apple’s winning formula

Tech companies were the clear winners in this year’s ranking, having been able to emerge from a downturn that saw them laying off thousands of workers after a period of overhiring.

“Technology is thriving," says Michael H. Kelly, executive director of the Drucker Institute. “Companies that know how to best incorporate technology into their organization, not just for innovation, but that realize their workers are customers, too, and what their employees experience is what their customers will also experience, are companies that thrive."

Apple not only nabbed the No. 1 spot on the list but also managed to emerge as the lone all-star in this year’s ranking. This marks the first time the list has had just one all-star; typically, there are about half a dozen. Some other companies, including Nvidia and Microsoft, came close this year, missing this designation by a hair.

Apple’s financial strength was particularly notable. After starting the year with faltering iPhone sales and new competition from smartphone rivals in China, Apple revived and beat Wall Street expectations in the quarter that ended in June. The company’s services unit, which includes App Store revenue and streaming services, provided a cushion for declining iPhones sales, with the services unit’s sales increasing by more than 14% in the quarter to $24.2 billion. Apple also said sales rose in the period for iPads and Macs.

The company went on to report record revenue for the September quarter, propelled by a modest rebound in iPhone sales.

Apple had been trying to catch up to rivals in the artificial-intelligence arms race, unveiling an array of new AI tools in June that investors hoped would encourage users to upgrade their iPhones. Apple said its new “Apple Intelligence" software will retrieve information from across apps, and scan personal information to help users proofread text, call up photographs of specific family members or gauge traffic patterns ahead of an atypical commute. Users can create images and emojis and even convert rough sketches into polished diagrams.

Apple joined with OpenAI, and its ChatGPT, for some of the new AI functions.

In an interview with WSJ. Magazine earlier this year, Apple Chief Executive Tim Cook acknowledged that the company wasn’t the first to do artificial intelligence, but said it did it in a way the company thinks is best for the customer.

“While he hasn’t been the pioneer in areas like AI, he’s very wisely a quick adapter," says Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management. “And in a company that used to be resistant to partnerships on the outside, what he’s done with the very promising Apple Intelligence, working with OpenAI, is an example of why people are so excited about the company."

Sonnenfeld also cited Cook’s public championing of consumer privacy and his collaborative style as things that make Apple stand out in areas like social responsibility and employee engagement.

“Steve Jobs would often have a fair bit of internecine warfare and Tim Cook had none of that. He got these folks to work together collaboratively," says Sonnenfeld. “Employees feel really engaged. They feel really valued."

The nontech high performers

One of the biggest gains in this year’s ranking was achieved by Mastercard, powered largely by its high score for innovation.

Company officials have said in annual stockholder letters and investor-day presentations that it is working to enhance the convenience and security of payment technology through contactless cards and tokenization. It’s also building banking and retail experiences that can be more personalized through technologies like augmented reality, as well as AI-powered cybersecurity that thwarts potential scammers.

The company’s chief innovation officer, Ken Moore, has described the company as a technology company that operates more broadly in commerce, beyond just payments.

Johnson & Johnson benefited from a high score for innovation. In 2023, the company had 19 U.S. and EU regulatory filings for market registration across its Innovative Medicine division, and 15 major product launches in its MedTech division. This year, the company continued to fill its innovation pipeline with 28 regulatory filings in the U.S. and EU for its Innovative Medicine business, and 10 major product launches in the U.S. and EU for MedTech as of Dec. 2.

Tobacco giant Philip Morris International rose on the strength of increases in its scores for innovation and social responsibility. The company has been on a yearslong mission to transition from cigarettes to smoke-free products, including Zyn flavored nicotine pouches and a device called IQOS that heats but doesn’t burn tobacco.

Earlier this year, Philip Morris said its Zyn pouches had become so popular that the brand’s sole U.S. factory couldn’t churn them out fast enough. The company has since said the shortage has eased.

Philip Morris sells Marlboros and other cigarettes outside the U.S.

One of the company’s top social-responsibility goals is to stop selling cigarettes. The company reports business-transformation metrics that track the progress of its transition in addition to its traditional disclosures on ESG (environmental, social and corporate-governance goals).

Stakeholders can see things like the number of factories once used to make cigarettes being transformed to make other products and how the volume of cigarettes being made is declining year after year. “So that any person that says, ‘Well, they can say whatever they want. Is this really happening?’ can actually see it," says Jennifer Motles, chief sustainability officer.

Philip Morris also developed a sustainability index in 2021 to measure and communicate its progress, using product transformation as the index’s most important metric and linking 30% of the company’s executive compensation to the index.

Some 38% of the company’s revenue comes from cigarette alternatives as of the third quarter of this year, Motles says. According to the company’s business-transformation metrics, the estimated number of users who have switched to IQOS and stopped smoking has risen to 20.8 million in 2023, from 17.8 million in 2022 and 15.3 million in 2021.

Notable newcomers

Notable newcomers to the Management 250 list include Airbnb and Netflix. Airbnb just missed the list last year at 279th and rose to 135th this year. It benefited from strong scores in innovation and financial strength. The company reported higher revenue and profit in the first quarter, but a bigger-than-expected decline in earnings in the second quarter, though revenue was a little stronger than forecast, with major sporting events such as the Olympics in Paris and the Euro Cup in Germany driving European bookings growth.

Netflix, which rose to 148th this year from 293rd last year, had higher scores across the board except for in employee engagement. The streaming company continued to add new customers in the second quarter—8.05 million subscribers in the quarter, compared with 5.89 million net new subscribers during the same period a year earlier—and raised the low end of its forecast for full-year revenue growth. Revenue rose nearly 17% year over year to $9.56 billion in the second quarter, beating the company’s projections.

The strong performance is a sign that Netflix’s efforts to change its plan pricing and lineup, limit password sharing and expand the advertising tier of its service are bearing fruit.

Companies that got dinged with red flags include Meta Platforms—parent company of Facebook, Instagram and WhatsApp—Walmart and Tractor Supply, a rural retailer that is known for selling animal feed and workwear.

Tractor Supply, which dropped to 229th from 178th last year, received a low score on employee engagement. In June, the company said it is eliminating all jobs focused on diversity, equity and inclusion and withdrawing its carbon-emissions goals. The retailer also said it is retiring its DEI goals and would stop sponsoring pride festivals for the LGBTQ community and voting campaigns ahead of the presidential election.

The moves came after weeks of criticism on social media from Robby Starbuck, a conservative political commentator. A Tractor Supply spokeswoman noted that the company was cited in several 2023 listings as one of the best places to work.

Though Meta rose to 46th from 124th last year, it got a red flag for its low customer-satisfaction score. The company continues to be dogged by criticism of its data-privacy practices, handling of misinformation and its algorithms, which continue to promote problematic content including underage sex content. Meta had no comment for this article.

Walmart moved up in the rankings to 21st from 26th last year but received a red flag for employee engagement. Over the past year, the retailer has changed pay and titles for corporate staff, including a reduction in stock compensation for about 4% of corporate workers as part of a reorganization; changed its wage structure for hourly workers, cutting pay for some new store hires; laid off hundreds of corporate workers; and asked most remote workers to move to offices.

A Walmart spokeswoman pointed out a number of ways the company has invested in its associates, including raising average store-manager salary, starting a new bonus program for store hourly associates, and launching a program that helps hourly store and supply-chain associates learn new trade skills and move into higher-paid technician roles.

Significant drops

A number of healthcare, life-sciences and pharmaceutical companies dropped down the list as their Covid boost has faded.

Pfizer, which dropped to 45th from 12th last year, has struggled to escape its postpandemic slump. After the Covid-19 emergency receded, sales of the company’s vaccine and antiviral products tanked much more than executives forecast. At the same time, new drug launches underdelivered, and Pfizer’s first stab at the booming anti-obesity market flamed out.

Eli Lilly, which fell to 35th place from 11th last year, had a bumpy start to 2024 as supply constraints for a popular class of diabetes and obesity drugs limited its first-quarter sales growth. But the company signaled that a big increase in production capacity was on the horizon. By the following quarter, the drugmaker ramped up its supplies, and sales of its diabetes drug Mounjaro and weight-loss injection Zepbound beat analysts’ estimates.

Beyond pharmaceuticals, other companies that saw significant drops included Tesla and Chevron.

Tesla, which dropped to No. 199 from 103 last year, got lower scores on every category except innovation.

Chevron, which fell to 229th from 99th last year, had lower scores in customer satisfaction, innovation and financial strength.

Pfizer, Chevron and Eli Lilly had no comment. Tesla didn’t respond to inquiries.

Ray A. Smith is a staff reporter in The Wall Street Journal’s New York bureau. Email him at ray.smith@wsj.com