Business Development Metrics

The objective of any measurement system should be to motivate all managers and employees to implement successfully the business units strategy. Those companies that can translate their strategy into measurement system will be able to execute their strategy because they communicate their objectives and their targets. The communication makes managers and employees focus on the critical drivers enabling them to align investments, initiatives and actions accomplishing strategic goals.

Historically, the measurement system for any business has been financial. Accounting was considered to be the language of business Innovations in measuring the financial performance of the industrial age companies played a vital role in their successful growth. And financial innovations, such as the Return on Investment (ROI) metric, and operating and cash budgets, were critical to the success of these corporations.

However, an over emphasis on achieving and maintaining short-term financial results can cause companies to over invest in short-term fixes and to under invest in long-term value creation, particularly in the intangible and intellectual assets that generate future growth.

The pressure for short-term financial performance often causes companies to reduce the resources spent on new product development, process improvements, human resource development, Information technology, databases and systems as well as customer and market development.

In the short run, the financial accounting model reports these spending cutbacks as increases in reported income, even when the reductions have cannibalized a companys stock of assets and its capabilities for creating future economic value.

In short, these organizations use the financial and non-financial performance only for tactical feedback and control of short-term operations.

You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.