Higher Corporate Value Requires Expanding Management Measurements

Is your management performance system effective in helping you to achieve potential corporate value?

            If you are like most companies, the lion share of management’s performance is measured on financial results such as profitability and cash flow.

While items like sales growth; expense control; cash flow or profits are very important and should be measured, there is another basic question that management should ask:  What other measurements are needed to grow the value drivers of the company?

In addition, many leading edge companies are more effectively integrating their management team goals to drive technology and value innovation across the corporation.

Based on the today’s best practices, the most effective approach is a Three-tiered Management Reward System to drive value creation.   The objective of this system is to better align executive rewards with corporate value drivers. The three tiers are integrated goals for:

·         Financial Results;

·         Technology Innovation; and

·         Value Innovation

As mentioned, the first tier, Financial Results, is the most common way that executives are measured in today’s environment. They are usually evaluated by financial goals related to revenue, expenses, cash flow, & asset management and are measured accordingly. In many proposed three-tiered reward process very little changes.

The second tier of the new reward system is for their role in Technology Innovation which is the creation of a new product or service that increases the benefits and/or reduces the costs of that product or service. However, without a corresponding value innovation, this potential is unrealized. It is not just the technology management that can play a major role in successful technology innovation in a company.

The third tier of an effective reward system is for each member’s role in Value Innovation which is simply defined as creating exceptional value for the customer. Value innovation can occur with or without technology innovation in a company by improving processes in product, service and delivery. As with Technology Innovation, most key management team members can play a role in making value innovation successful in the company

We would be happy to discuss with you how many of the leading edge companies are more effectively integrating their management team goals to more effectively drive technology and value innovation across the corporation.

Please feel free to contact us with any questions about this or any other profit improvement service we provide.

Joseph Bonocore

jbonocore@bonocore.com