This measure of business performance is the best indicator of corporate success.
Content: Article | Authors: Greg Rotz, Ken Favaro | Source: strategy+business | Subjects: Finance, Management
Use a combination of three measures — revenue growth, economic profit, and free cash flow — to set business targets, track strategy execution, and evaluate management performance. These three measures capture virtually all the high-level financial information that is important for an operating unit. As long as internal management reporting processes are designed to report these measures accurately, they provide excellent feedback on whether the … [ Read more ]
Content: Quotation | Authors: Greg Rotz, Ken Favaro | Source: strategy+business | Subjects: Corporate Governance, Finance, Management
A common pitfall is tying incentive compensation, such as annual bonuses, to performance against a predetermined plan or budget. This inevitably leads people to restrain their aspirations for the business in order to make it easier to “beat plan.” In turn, this is interpreted as sandbagging by corporate headquarters or investors. The end result is a time-consuming, soul-destroying, and ultimately unproductive gaming of the planning … [ Read more ]
Content: Quotation | Authors: Greg Rotz, Ken Favaro | Source: strategy+business | Subjects: Management, Planning