The Institute of Enterprise Risk Practitioners (IERP®) is the world’s first and leading certification institute for Enterprise Risk Management (ERM).

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Measuring Corporate Performance: The Barriers

When we speak of Measuring Corporate Performance (MCP) we usually mean the indications of how the firm is doing. This is normally done by continuous data gathering throughout the firm that forms the basis of the measurement by which the firm’s progress can be estimated. Corporate performance requires measurement because it is important to know if the company is indeed on track to achieve its objectives. Not only that, MCP can pinpoint where resources need to be reallocated for optimum performance. If this is done on a regular, ongoing basis, any existing issues may be properly managed before they become too difficult to handle.

 

What can be measured can be managed, but the processes involved may be complex, depending on the organisation, and how employees respond to management’s efforts to put MCP in place. There may be suspicion and resentment as the data collection and information-gathering necessary to give an accurate picture of how the firm is doing, may be time-consuming and viewed as intrusive. Employees could become resentful of management constantly requiring reports and information, and start to feel themselves under continuous scrutiny and evaluation. This perception is difficult to avoid, even if management’s requests are intended to improve performance, and not apportion blame.

 

Another reason for resistance to any form of measurement could be that there is no integration between departments. Everyone is working in their own silo, and any request for, or exchange of information is perceived negatively. When setting in place methods and processes for measuring, therefore, management needs to be aware of the existing culture of the organisation and adapt its strategy, policy and framework accordingly. One MCP method to consider is Kaplan and Norton’s Balanced Scorecard (BSC), which provides a framework for integrating a company’s strategic objectives and competitive demands with its performance measurement system.

 

BSC helps firms evaluate corporate performance, allowing financial measures to be augmented with measures of customer satisfaction, internal processes, innovation and improvement. It can also be used to devise a customized scorecard to fit an organisation’s mission statement, strategy, technology and culture. Another factor that management should be aware of is the changing expectations of stakeholders where corporate governance is concerned. This should spur board and management to make MCP as transparent and accurate as possible, as doing anything less has the tendency of reflecting badly on them, and creating perceptions of poor governance.

 

Part of MCP is the identification of existing core competencies of the organisation, and what the business will require, going forward. The lack of skills and knowledge could severely retard its progress, particularly in a market increasingly shaped by the speedy delivery of information. Also, the constant vigilance and evaluation that comes with MCP goes a long way towards the long-term transformation of the organisation. Companies today need to be proactive about transformation, in the same way they should approach competitiveness and sustainability. Each one of these elements complements the other; together they present an entity that is focused, goal- and future-oriented.

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