Why measure corporate performance? Evaluating corporate performance helps align it with Enterprise Risk Management, and develop an enterprise-wide strategy that supports business growth and sustainability. Corporate Performance is also monitored in order to strike a sustainable balance between daily business demands and long-term goals. To do this, the board and management must have access to the proper tools, such as clear, concise, current data. This is crucial for making informed decisions and assisting in managing the organisation’s challenges while maximising its opportunities.
The measurement of corporate performance implies a process of constant evaluation of the performance of management – how they are doing things and the identification of shortfalls that may be barriers to the organisation achieving its goals. This is not easy but there are tools and methods which can be applied. Traditional financial accounting measures do work but may not be adequate when it comes to keeping up with the skills and competencies that companies require today. A single measure alone is unable to provide clear performance targets or focus on critical areas of the business.
Traditional methods of corporate performance measurement do not highlight that enterprises are paid to create wealth and not to control costs. Wealth creation requires information to make informed judgements. Organisations may obtain this through foundation, productivity, and competence information management tools, together with information about the allocation of resources. Understanding the organisation’s external environment also requires relevant information, which may not be readily available. Misunderstanding – or a skewed understanding – of this may lead to business failure.
When it comes to corporate performance, we often assume that conditions must be what we think they are, or what we think they should be. This assumption can be counteracted through an adequate information system but the organisation’s board and management must first know what information is required, and be able to obtain it on a consistent basis. They also need to know how to integrate it into their decision-making process. Companies may also want to use this information to compare their operations against other organisations in the same industry, to understand how they are performing. This is benchmarking, another form of measurement.
Yet another example of measurement is Kaplan and Norton’s Balanced Scorecard (BSC) which is a set of measures that gives a fast but comprehensive view of the business or organisation. It consists of financial measures that highlight the results of actions taken, and operational measures such as measures of customer satisfaction, internal processes and the organisation’s innovation and improvement activities. It provides a valuable framework for integrating a company’s strategic objectives and competitive demands into its performance measurement system and enables it to see the breadth and totality of its operations. The BSC keeps a company looking and moving forward.
It also brings together many of the seemingly dissimilar elements of a company’s competitive agenda, forcing managers to focus on the most critical measures. The emphasis is on corporate performance which is bound with measuring the viability of the business, and how to carry on managing it to ensure that it stays around for the long term.
