Explanation of Current Methodology

The Top 500 aims to identify the top five companies in each of 100 business sectors monitored by the Topco Research Department. In order to do so, some measure of the qualities that we consider to be characteristic of top companies must be designed in order to rank companies. To be classed as one of South Africa’s best companies, we expect companies to excel in three key spheres, namely financial performance, people, and policy and accreditation.

The criteria within financial performance speak to the ideas of top companies being large, growing, profitable and productive institutions that are leaders by virtue of their size and dynamism. Financial performance is measured by four indicators: turnover, rate of growth, rate of profit, and employee contribution rate. Topco’s Research department feels the weightings are proprietary and is not happy to publish the actual weightings attached to the criteria. This section has been rewritten by referring simply to ‘high’, ‘medium’ and ‘low’ weight criteria.

Size is both an indicator and an outcome of whether or not a company is a top company. From the perspective of financial performance, turnover is used to proxy company size and is the single largest component in the scoresheet, accounting for the highest weighted points in the criteria. The dynamism of top companies is reflected in their ability to expand and grow, and so we include relative indicators of growth in the scoresheet, accounting for Medium points. Top companies are more profitable than other companies and the Profitability indicator, which gives a relative indicator of Profitability in the scorecard, accounting for medium points.

Top companies are more productive than other companies and the final performance indicator speaks to this characteristic. Overall, the financial performance sphere is the most important sphere in our understanding of being one of South Africa’s best companies, and it accounts for two-thirds in the overall score.

The business sector has an important role to play in promoting equity, social transformation and training, and the people criteria account for one-fifth. Top companies are committed to fulfilling this role, and this commitment is measured using 6 criteria. Two of these criteria focus on companies’ commitment to the goal of transformation as demonstrated in their employment profiles, the shares of black and women employment accounting for Low points. Top companies, however, go further than just employment, and are committed to ensuring greater diversity at the level of management and control. The shares of Black and women executive and non-executive directors contribute low points each to companies’ scores. Top Companies are required to be at the forefront of people development and thus training is essential and the last indicator in the people criteria, indicated as a low contributor to the companies score.

Top companies are involved within communities and are committed to quality. This sphere of policy and accreditation contributes less than one- fifth out of the total. In gauging companies’ engagement and involvement within communities, this indicator contributes low points of the weight to the overall score. Companies are also judged on the existence of written policies and will be awarded low points. Commitment to quality is proxied, contributing low points to the overall score.

The final rankings of South Africa’s top companies are calculated after a series of steps:
- Data collection
- Identification of leading company according to each individual criterion
- Allocation of points
- Calculating scores and ranking companies Composition of the Top 500 Score sheet

Turnover high
Share of female employees low
CSI expenditure (percent) low
Growth med
Share of black employees low
Written company policies low
Profitability med Share of black executive directors low
Company accreditations low
Productivity med Share of female executive directors low
Training low

To be recognised as a Top Company there are three spheres of achievement, namely performance, people and policy. Performance is very important in our understanding of a top company, and so it receives two-thirds of the weighting. Using a top-down approach – first defining what is being measured, then identifying spheres of achievement, and then specifying relevant criteria – makes for a coherent, logical, transparent scoring system.

Developed by Topco Research Department in partnership with Morné Oosthuizen Deputy Director, University of Cape Town
Development Policy Research Unit.