Art of the Smart cover

Methodology Statement

How Do You Measure Decision-Making?

As business practices become increasingly quantified in the academic realm and tested at business schools across the world, researchers who work with corporate executives on effective leadership still struggle to answer one of the corporate world’s most fundamental questions: what makes for a good decision? And rightly so. The number of variables, both measurable and intangible, that decision-making affects make it difficult to focus on any one particular decision or course of decisions that impacted the bottom line more than other influences.

Nevertheless, as has been observed by many, we know a good decision when we see it. From Bill Gates’ licensing of his operating system to IBM rather than selling it, to Samsung’s sabbatical program, which sent young employees to build international networks and turned the South Korean company into the global behemoth it is today, to Tata Steel’s decision that was characterized as “crazy” and “irrational” to continue paying nonworking employees instead of conducting mass layoffs, strong decisions are scattered throughout the history of top companies.

Granted, measuring decision-making relies strongly on the advantage of hindsight. Gates’ noted masterstroke is held to acclaim only because of Microsoft’s corporate superiority that resulted. This begs a meaningful question: does a good decision rely on strong foresight, or can a seemingly random choice that ends well be characterized as a good decision? Short of probing a statistically significant sample of top decision-makers around the world, this question will remain unanswered.[1]

We considered these challenges when creating the Crowe 100 Decision-Making Index 2018, using objective and subjective signifiers to isolate successful firms.

Some metrics, such as profits and market capitalization, signal the results of strong decision-making. A strong decision ultimately earns success, so — though not perfect — investors are one accurate source for rating a company’s performance and evaluating its likelihood of future performance.

Additionally, we analyzed five years of corporate history to isolate examples of top decisions. Did the firm introduce new technology and products, or launch into a new market in a particularly innovative way?

By combining years of data and subjective analysis, a story begins to develop behind top decision-making firms. Our methodology is by no means flawless, but it is a means to define the tangled threads of decision-making using a combination of related objective data and subjective analysis.

Methodology Overview 

First, we collected a list of the top-performing public companies worldwide using data from the Forbes Global 2000 and broke down the list into sectors where Crowe’s industry expertise is strongest. Private companies are not part of our index, as their nature precludes them from the type of analysis available for publicly held companies.

Strong decisions, and indicators of strong decisions such as financial performance and corporate activity, differ for different-sized firms. Decision-making at a startup is different than that at an established firm. Therefore, we targeted only large-cap firms in three industries where Crowe has deep experience and expertise, and where we could verify and best analyze the data: healthcare, real estate and manufacturing. This segmentation also allowed us to better compare decisions within a similar structure and market environment.

Next, we segmented the top firms in these industries by 2017 profit performance. This is a rudimentary but effective filter: unlike startups, established firms must have made good decisions to have had success year over year. Our process resulted in an efficient list to evaluate firms using our primary parameters. We also removed companies that, regardless of profit performance in recent years, faced major corporate scandals.[2]

From here, we broke our analysis of firms along four main components: Growth, Diversity, Boldness and Innovation. Two of these components are purely objective: Growth is based on publicly available information from annual financial reports and Diversity on board and corporate suite composition. In some cases, we used third-party investment reporting and research to augment information. The final two components, Boldness and Innovation, are subjective and based on analysis from a news audit.

Each firm was given a point score for each component, ranging from 0 to 10, for a total possible score of 40.


Good corporate decisions gather good results. Therefore, one of the strongest indicators of a wholly good-decision-making company is strong corporate performance. For public companies, performance means profit, longevity, revenue and a host of other financial and structural factors, often best summed up in market value, or market capitalization. As an amalgamation of financial data and future predictions, crowd-sourced by millions of active and passive investors, market value and its primary component, share price, remain sensible indicators for investor assessment of a company’s current and future performance.

As with any variable, market value is not perfect; companies can be misvalued and share price can rely too heavily on short-term gains. Nevertheless, companies whose decision-making is successful will naturally perform better in both the long and short terms, over a multitude of decisions. When this capacity is recognized accurately by investors, these firms will see a higher share price. Investors may harbor differing opinions on a successful company but by combining a litany of purchasing options, a consensus over corporate performance forms.


We measured growth by calculating the five-year change in market capitalization from the period 2013 to 2017. We used the last date of open markets for the calendar year and assessed market capitalization using basic or primary-class shares.

Companies have varying share classes and issuances of stock. We made our calculations using the generally accepted benchmark share. In some cases, companies issued stock splits or reverse stock splits. In these cases, we adjusted prices accordingly.

Additionally, some firms do not have a five-year history of data. In these cases, we calculated the market capitalization change using all years available. Lastly, as this is an international index, there are many variances in currency. We conducted analysis primarily in US dollars; when reporting nominal data, we converted to USD using exchange rates from the same day of share price analysis.[3]


We calculated scores for Growth by creating an even distribution of companies’ five-year growth levels. The range for these levels varied considerably and featured a number of outliers. To ensure that outliers did not heavily impact scoring and that a majority of company scores ranged in the middle of the scoring band, we created a scoring range that matched a standard distribution of the 100 firms, minus extreme outliers. Companies with the largest market capitalization growth over the five-year period were scored the full 10-point allocation.


The benefits of diversity are obvious. More difficult is measuring how corporations incorporate diversity into their decision-making processes. We confronted this challenge by focusing on the core components of a firm’s decision-makers, namely, their corporate board and executive C-suite. Diverse boards and C-suites inherently incorporate more diverse perspectives as part of their decision-making processes, relative to homogenous groups.

Measuring diversity is difficult. First, diversity is defined differently in different regions and cultures. As the Crowe 100 Decision-Making Index 2018 includes a wide range of international firms, with varying definitions of diversity, we attempted to take localized perceptions of diversity into consideration by focusing on diverse members by gender and nationality.

Second, inclusion of a wide range of diverse groups, such as the LGBTQ community, ethnic minorities and individuals from differing socioeconomic backgrounds, is not openly reported by corporate boards. While a perfect measure of diversity would encompass all forms of diversity available, corporate reporting is generally limited to traditional gender identities (male and female) and nationality.

Therefore, in an attempt to equally balance diversity measurement across all international firms, we measured only two forms of diversity: traditional gender definitions and nationality. Nevertheless, we hope future editions of this index can encompass a full range of individuals. Let this act as a call-to-action: corporations that place diversity as a premium should support their claims with transparency.[4]


We measured diversity by two components: the measure of average percentage of gender diversity on the board of directors and C-suite during the five-year period; and the measure of the increase in general diversity, both gender (i.e., the inclusion of more females, since males historically outnumber females in executive positions) and nationality, over the five-year period. We looked at companies’ annual reports and corporate board data to ascertain these diversity percentages.

Why break diversity into two components? First, it is important to note companies that have taken strong steps to increase their diversity in the past five years, but also, it is important to reward companies that were already more diverse to begin with. Our method balances both objectives and rewards companies that have both increased diversity fastest and are already at high diversity levels.


We calculated scores for Diversity by creating ranges of change in general diversity percentage and average gender diversity percentage over the five-year period. After establishing the full range of percentages, the top-scoring number for each component earned the full amount of points and all other amounts were held to the same proportional conversion.

Unlike with growth, company diversity data was far more standard, as most corporate boards are roughly the same size, and the range of diversity was not exceedingly large. A maximum five points were given to firms with the highest percentage of average gender diversity over the five-year period and a maximum of five points were given to firms with the largest increase in general diversity over the five-year time frame.

Boldness and Innovation

Boldness and innovation are far more subjective qualities to measure than growth and diversity. Nevertheless, they constitute a highly intrinsic factor of decision-making in that a good decision is not staid — it goes beyond the bounds of convention to find an appropriate response. Especially within the corporate world, commonplace moves leave a company in line with competitors. Therefore, we broke decision-making into two equally uncommon components: boldness, or action that goes beyond standard industry practice; and innovation, or action that employs new methods, processes or systems.

Boldness is a trait of companies that take aggressive and determined steps in new directions. Such decisions are often risky, but when successful, are eventful in distinguishing the leaders from the followers.

Though a pithy aphorism in corporate-speak, innovation really is the name of the game. Innovation, whether in the form of technological improvement to products or institutionalized management methods, requires understanding of the industry and its future.

Both traits have slightly different metrics depending on the industry. For example, Amazon, JPMorgan Chase and Berkshire Hathaway jointly launching a new healthcare company for employer-based health benefits is far bolder than the same action by CVS. Therefore, we generally defined boldness and innovation within reasonable scope of the industry. Routine R&D developments are not necessarily innovative but applying a growing technology in a unique manner, such as Jack Ma’s introduction of internet listings for Chinese companies, contains elements of unique thinking and bold action.[5]


We measured both boldness and innovation through a news audit. Researchers audited major international and national general business publications relevant to each company’s industry and geographic region. After collecting all relevant news, researchers noted corporate actions that fit our determinants of boldness and innovation. Examples of these include entrance into a new emerging market prior to competitors, the unveiling of a unique product, response to a new competition or the announcement of major future goals.

One requirement of this method is that relevant actions are covered in the news. Companies may have taken bold and innovative action but, unfortunately, if it is not reported our method does not easily pick it up. While this method places faith in news outlets that issues are equitably covered across firms — which may not always be the case — it also provides a reasonable bar for determining the importance of corporate actions. After all, if a company fells a tree in the forest and nobody is around to report it, does the tree make a sound?


Researchers rated each firm on a scale of 1 to 10 for both Boldness and Innovation using their news audit. After all scoring was completed, an overview of scoring was undertaken to ensure no variations in scoring due to anchoring heuristics or other variances.

Final Scoring

The four components of each firm were added and totaled, providing a ranking of top decision-making firms in the manufacturing, healthcare and real estate sectors.

Read the report

[1] However, it is certain that top corporate decision-makers do not engage in regular coin-flipping, and their decision-making processes, even if based on little information, affirm intent. Additionally, randomness and luck are presumed to affect all decisions more or less equally in the end. The best decision-makers are aware of the risks involved and decide in favor of one path regardless.

[2] While currently weak legal compliance regimes do not always ensure that corporate fraud impacts a firm’s bottom line in subsequent years, poor practices on the level of Enron accounting fraud are clear indicators of bad decision-making.

[3] Comparing firms across currencies means that some changes in market capitalization can be partially attributable to changes in the exchange rate.

[4] Some firms have already begun this by reporting diversity statistics of employees and staff beyond reporting requirements. Statistics of this kind, for the corporate board and C-suite all the way down to entry-level staff, have been useful in quantifying and clarifying diversity’s importance in reports such as McKinsey’s “Delivering through diversity.”

[5] For example, Apple’s abandonment of the headphone jack on the iPhone 7 is not a particularly innovative idea — it is not groundbreaking — but it does break strongly from industry norms and is thus bold.