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Performance Measures:Insights and ChallengesPerformance Measures:Insights and Challenges
David F. LarckerDavid F. Larcker
Management Accounting Research Group ConferenceMarch 25, 2004
Management Accounting Research Group ConferenceMarch 25, 2004
1
Traditional Approach to Performance Drivers ...Traditional Approach to Performance Drivers ...
DuPont ModelDuPont Model
Sales/Assets x Profit/Sales = Profit/Assets Future Cash Flows Stock Price
Residual Income ModelResidual Income Model
[Profit/Assets - Cost of Capital] Future Cash Flows Stock Price
2
Critiques of the Traditional Approach ...Critiques of the Traditional Approach ...
4Financial measures alone are inadequateToo narrowToo lateToo backward looking
4Drivers of financial performance are unknown
4Little insight into intangible assets
4Value-based management, balanced scorecards, and other related methods are now commonplace for selecting an expanded set of performance measures
4Financial measures alone are inadequateToo narrowToo lateToo backward looking
4Drivers of financial performance are unknown
4Little insight into intangible assets
4Value-based management, balanced scorecards, and other related methods are now commonplace for selecting an expanded set of performance measures
3
Internal and External
Communicationand Control
Translatestrategic goals into numerical objectives
Translatestrategic goals into numerical objectives
The Theory ...The Theory ...
Objectives8% increase in ROS10% asset turnover increase 7% EVA growth
Adjust objectives based onresults
Adjust objectives based onresults
Translate objectives into
actionable strategies
Translate objectives into
actionable strategies
StrategiesExpand global marketsProcess cost reductionIncrease new products
Translate strategies into measurements
Translate strategies into measurements
Success IndicatorsWorking capital levelsCustomer satisfactionTime-to-market
4
The Theory ...The Theory ...
4Develop an explicit causal business model describing how value drivers are linked to strategy
4 Identify specific value propositions or hypotheses
4Tabulate and integrate available data across functions (and identify what data are missing)
4Actually test the hypotheses (and determine whether your model and/or data is inadequate)
4Communicate and debate the results, develop new value propositions, and test again
4Develop an explicit causal business model describing how value drivers are linked to strategy
4 Identify specific value propositions or hypotheses
4Tabulate and integrate available data across functions (and identify what data are missing)
4Actually test the hypotheses (and determine whether your model and/or data is inadequate)
4Communicate and debate the results, develop new value propositions, and test again
5
The Reality …The Reality …
4 78% of companies that have implemented strategic performance measurement systems do not rigorously assess the links between strategies and performance measures (Gates)
4 71% of companies have not developed a formal causal model or value driver map (Wharton/PwC)
4 50% of companies do not use non-financial measures to drive financial performance (Mercer Consulting)
4 79% of companies have not attempted to validate the linkages between their non-financial measures and future financial results (Wharton/PwC)
4 78% of companies that have implemented strategic performance measurement systems do not rigorously assess the links between strategies and performance measures (Gates)
4 71% of companies have not developed a formal causal model or value driver map (Wharton/PwC)
4 50% of companies do not use non-financial measures to drive financial performance (Mercer Consulting)
4 79% of companies have not attempted to validate the linkages between their non-financial measures and future financial results (Wharton/PwC)
6
The Reality ...The Reality ...
477% of organizations with a balanced scorecard place little or no reliance on business models (Ittner et al)
4There are relatively few cases where companies with a balanced scorecard test their hypotheses or value propositions even after they have several years of data
4When business models are developed, it is often a one-time event with little influence on ongoing measurement practices
477% of organizations with a balanced scorecard place little or no reliance on business models (Ittner et al)
4There are relatively few cases where companies with a balanced scorecard test their hypotheses or value propositions even after they have several years of data
4When business models are developed, it is often a one-time event with little influence on ongoing measurement practices
7
The Reality …The Reality …
445% of balanced scorecard users found the need to quantify qualitative results to be a major implementation problem (Towers Perrin)
455% of companies stated that the biggest implementation problem for strategic performance measurement systems is not measuring difficult-to-measure activities (Gates)
4Many companies simply ignore qualitative measures or exclude them from their performance reports
445% of balanced scorecard users found the need to quantify qualitative results to be a major implementation problem (Towers Perrin)
455% of companies stated that the biggest implementation problem for strategic performance measurement systems is not measuring difficult-to-measure activities (Gates)
4Many companies simply ignore qualitative measures or exclude them from their performance reports
8
Gaps Between Drivers and Measures …Gaps Between Drivers and Measures …
0
1
2
3
4
5
6
Custom
er
Quality
Operatio
nsS-T Finan
cial
Innovatio
nCom
munity
Employee
Ittner, Larcker, and Randall, 2003
Extremely Important asa Driver for Long-Term
Success
Extremely Important asa Driver for Long-Term
Success
Not at All ImportantNot at All Important
High QualityOf Measurement
High QualityOf Measurement
Extremely LowQuality of
Measurement
Extremely LowQuality of
Measurement
9
So What Are Companies Doing? ...So What Are Companies Doing? ...
4Heavy reliance on management intuition, “organizational folklore”, and unsophisticated guesses
4Fixation on the “four buckets” of the balanced scorecard (with the belief that these categories are all encompassing)
4Attempting to apply a seemingly endless set of measurement frameworks, models, and laundry lists of measures being pushed by consultants
4Measuring an ever-increasing number of measures to avoid missing anything important
4Heavy reliance on management intuition, “organizational folklore”, and unsophisticated guesses
4Fixation on the “four buckets” of the balanced scorecard (with the belief that these categories are all encompassing)
4Attempting to apply a seemingly endless set of measurement frameworks, models, and laundry lists of measures being pushed by consultants
4Measuring an ever-increasing number of measures to avoid missing anything important
10
Resulting in Models Like ...Resulting in Models Like ...
Add & Retain High Value and High Potential Value
Customers
Migrated New
• Time Savings• Security• Price• Reliability
• Multiple Channels• Service• Features/Ease of Use• Products
Value PropositionBasic Requirements Differentiators
Maximize Reliability Manage
Attrition
Develop and Implement Cost
Effective Marketing Programs
Continue Leadership in Superior Product
and Features Development
Develop Superior Service Capability
Attract and Retain Key OFS Players and Staff
in General
Enhance OFS Bench Strength and
Succession Planning
Increase Manager Competency and
Functional Technical Competency at All Levels
Continue Development of OFS Organization
and Culture
Deploy Scorecard and Embed in OFS
Grow Revenue Maximize Profit Reduce Cost Per Customer for the Bank
Increase Revenue Per
Customer
Cross-Sell WF-Branded
Products and Services
Grow Revenues from Non-Branded Sources
Increase Fees and Balances
Grow International Revenues
Develop and Implement Cost-Effective Marketing Plans, Sales Tools and Evaluation Techniques
Including the Effective Use of Data
Identify and Develop Third Party
Relationships
Migrate Wells Fargo Customers to
OFS
Migrate WF Mass Consumers
to On-line
Increase Customers’ Use
of On-Line
Increase Efficiency
Within OFS
Manage Alliance Costs
Develop Customer Self-
Service
Develop Customer Self-
Help
Automate OCS Processes
Streamline Manual
Processes
Lear
ning
&
Gro
wth
Fina
ncia
lC
usto
mer
Inte
rnal
“Add and Retain High Value and High Potential
Value Customers”
“Increase Revenue per Customer”
“Reduce Cost per Customer”
11
Some of the Fundamental Questions …Some of the Fundamental Questions …
4How confident are you that business model incorporates the right drivers of financial success?
4How do you use the business model to allocate resources?
4How do you set targets for the measures?
4How can the business model be used to design an effective compensation?
4How confident are you that business model incorporates the right drivers of financial success?
4How do you use the business model to allocate resources?
4How do you set targets for the measures?
4How can the business model be used to design an effective compensation?
12
Identifying the Right Drivers ...Identifying the Right Drivers ...
4Develop a causal business model thatIs linked to organizational strategyArticulates the key, hypothesized drivers of financial performance
4Construct reliable and valid measures for the key drivers
4Verify the linkages in the business model
4Develop a causal business model thatIs linked to organizational strategyArticulates the key, hypothesized drivers of financial performance
4Construct reliable and valid measures for the key drivers
4Verify the linkages in the business model
13
A Major Fast Food Chain …A Major Fast Food Chain …
4Company operates or franchises 6,000+ stores
4Overall profitability was not growing enough to meet either internal or external expectations
4A series of meetings involving senior-level executives from all functional areas produced a consensus business model
4The consensus business model was developed using only management intuition (i.e., without any real data analysis)
4Company operates or franchises 6,000+ stores
4Overall profitability was not growing enough to meet either internal or external expectations
4A series of meetings involving senior-level executives from all functional areas produced a consensus business model
4The consensus business model was developed using only management intuition (i.e., without any real data analysis)
14
A Major Fast Food Chain …A Major Fast Food Chain …
SelectionAnd
Staffing
Employee-AddedValue
EmployeeSatisfaction
•Enablement•Alignment•Accountability
•Enablement•Alignment•Accountability
•Supervision•Support•Fairness
•Supervision•Support•Fairness
•Quantity•Education•Work Experience
•Quantity•Education•Work Experience
CustomerBuying
Behavior
CustomerSatisfaction
•Quality•Shopping Experience•Timeliness
•Quality•Shopping Experience•Timeliness
•Frequency•Retention•Referral
•Frequency•Retention•Referral
SustainedGrowth
ShareholderValue
•Each outlet•Over time•Better than competition
•Each outlet•Over time•Better than competition
•Growth•Earnings•Free Cash Flow
•Growth•Earnings•Free Cash Flow
Consensus Business ModelConsensus Business Model
15
A Major Fast Food Chain …A Major Fast Food Chain …
4Employee turnover became the primary measure used for decision-making and performance evaluation (“we just know this is the key driver”)
4Expensive human resource programs (retention bonuses) were put into place to reduce turnover
4However, subsequent statistical analysis revealed:Stores with same overall turnover, but very different financial performanceMore profitable stores had higher employee turnoverOnly turnover among supervisory personnel had any relation to store financial performance
4Employee turnover became the primary measure used for decision-making and performance evaluation (“we just know this is the key driver”)
4Expensive human resource programs (retention bonuses) were put into place to reduce turnover
4However, subsequent statistical analysis revealed:Stores with same overall turnover, but very different financial performanceMore profitable stores had higher employee turnoverOnly turnover among supervisory personnel had any relation to store financial performance
16
A Major Fast Food Chain …A Major Fast Food Chain …
4Management intuition was only partially correct
4The turnover measure was changed from overall turnover to turnover by employee category
4Further analysis provided an estimate for the financial cost of turnover (and an upper bound for the size of the retention bonus)
4Presently analyzing the relation between employee measures, customer measures, and store profitability
4Management intuition was only partially correct
4The turnover measure was changed from overall turnover to turnover by employee category
4Further analysis provided an estimate for the financial cost of turnover (and an upper bound for the size of the retention bonus)
4Presently analyzing the relation between employee measures, customer measures, and store profitability
17
A Large Operator of Convenience Stores …A Large Operator of Convenience Stores …
4Company owns and operates thousands of convenience stores across the country
4Stores sell gasoline and various food products
4Management intuition:“Gasoline sales are unrelated to food sales”
Managed using two different profit centerSeparate P&L’s
“Only beer and cigarette sales explain profits from food sales”“Employee and customer measures have no impact on profits from food sales”
4Company owns and operates thousands of convenience stores across the country
4Stores sell gasoline and various food products
4Management intuition:“Gasoline sales are unrelated to food sales”
Managed using two different profit centerSeparate P&L’s
“Only beer and cigarette sales explain profits from food sales”“Employee and customer measures have no impact on profits from food sales”
18
Drivers of Store Financial Performance …Drivers of Store Financial Performance …
Employee Turnover Customer Satisfaction Food Profit/Sq Foot
Notation: +/- refers to a strong statistical positive/negative link(precise numbers are not reported due to company request)
Gasoline Gallons Sold
# of Workplace Injuries
Beer Sales/Food Sales
Cigarette Sales/Food Sales
- +
+ +
+ -
+
Food Profit/Sq Foot
19
A Large Operator of Convenience Stores …A Large Operator of Convenience Stores …
4Management intuition was not very insightful
4Combined the food and gasoline profit centers
4Began an internal dialog concerning reducing gasoline prices (with a low margin) to increase food sales (with a high margin)
4Started tracking employee satisfaction, customer satisfaction, and workplace injuries
4 Incorporated these non-financial measures into the quarterly bonus plan
4Management intuition was not very insightful
4Combined the food and gasoline profit centers
4Began an internal dialog concerning reducing gasoline prices (with a low margin) to increase food sales (with a high margin)
4Started tracking employee satisfaction, customer satisfaction, and workplace injuries
4 Incorporated these non-financial measures into the quarterly bonus plan
20
Allocating Resources ...Allocating Resources ...
4Even if you have identified and validated the key drivers, you still need to determine how to allocation resources to improve these factors
4 It is necessary to determine root causes
4Ultimately, you need to estimate the financial consequences of non-financial improvements
4Even if you have identified and validated the key drivers, you still need to determine how to allocation resources to improve these factors
4 It is necessary to determine root causes
4Ultimately, you need to estimate the financial consequences of non-financial improvements
21
Computer Hardware Manufacturer …Computer Hardware Manufacturer …
4Company is a major supplier of computer equipment to consumers and businesses
4Senior-level management desired a model to explain customer behavior
4Model results to be used for justifying and evaluating expenditures on customer initiatives
4Company is a major supplier of computer equipment to consumers and businesses
4Senior-level management desired a model to explain customer behavior
4Model results to be used for justifying and evaluating expenditures on customer initiatives
22
Linking Drivers, Satisfaction, and Outcomes ...Linking Drivers, Satisfaction, and Outcomes ...
Customer Satisfaction75
.7
1.0
1.0
.4
.9
1.0
Relationship
Trust
Set Up
Physical
Troubleshooting
Shopping
Value
61
80
86
80
72
67
78
Retention
Recommendation
Share of Budget
Up Price Tolerance
Down Price Tolerance
Buy Additional
74
76
78
48
73
35
.2
.1
.5
.3
.8
.3
.1
23
Driver Priority Matrix …Driver Priority Matrix …
ImpactImpact
ScoreScore
Physical
TrustSet UpValue
ShoppingRelationship
Troubleshooting
HighHigh
HighHighLowLow
Low
24
Linking Perceptions and Behavior ...Linking Perceptions and Behavior ...
4RetentionIf the retention score was 90 or above (below 90), the customer bought the same brand again 56.76% (30.77%) of the time -- a change of 25.99%
4RecommendationIf the recommendation score was 90 or above (below 90), the customer recommendation resulted in 1.52 (0.87) purchases of the same brand -- a change of 0.65
4RetentionIf the retention score was 90 or above (below 90), the customer bought the same brand again 56.76% (30.77%) of the time -- a change of 25.99%
4RecommendationIf the recommendation score was 90 or above (below 90), the customer recommendation resulted in 1.52 (0.87) purchases of the same brand -- a change of 0.65
25
Computer Hardware Manufacturer …Computer Hardware Manufacturer …
4Based on this model, capital resources were allocated to:
Improving Relationship and Troubleshooting (e.g., improving technical service and quickly providing upgrade notices)Maintaining Trust, Set up, and Value (e.g., improving setup procedures and providing inexpensive migration and data backup services)
4Developed a NPV model for valuing customer initiatives using
Customer marginsEstimated impacts Linkages between perceptions and customer behavior
4Based on this model, capital resources were allocated to:
Improving Relationship and Troubleshooting (e.g., improving technical service and quickly providing upgrade notices)Maintaining Trust, Set up, and Value (e.g., improving setup procedures and providing inexpensive migration and data backup services)
4Developed a NPV model for valuing customer initiatives using
Customer marginsEstimated impacts Linkages between perceptions and customer behavior
26
Target Setting …Target Setting …
4Common intuition: “More is better”; “100% need to be 100% satisfied”
4Considerable difficulty setting goals for any non-financial performance measure
4Difficult to set targets for different measures when no common denominator exists (Is a 10% decrease in customer complaints equivalent to a 3% reduction in defect rates?)
4Non-linear functional relations and tradeoffs among financial and non-financial measures complicate goal setting
4Common intuition: “More is better”; “100% need to be 100% satisfied”
4Considerable difficulty setting goals for any non-financial performance measure
4Difficult to set targets for different measures when no common denominator exists (Is a 10% decrease in customer complaints equivalent to a 3% reduction in defect rates?)
4Non-linear functional relations and tradeoffs among financial and non-financial measures complicate goal setting
27
Manufacturer Study …Manufacturer Study …
0
0.2
0.4
0.6
0.8
1
Mea
n Po
sitiv
e R
ecom
men
datio
n
1 2 3 4 5Prior Wave Self-Reported Customer Satisfaction
0
0.2
0.4
0.6
0.8
1
Mea
n N
egat
ive
Rec
omm
enda
tion
1 2 3 4 5Prior Wave Self-Reported Customer Satisfaction
28
Customer Satisfaction and Financial Results ...Customer Satisfaction and Financial Results ...Major U.S. Telecommunications Firm (n = 2,156 customers)Major U.S. Telecommunications Firm (n = 2,156 customers)
1.221.24
0 20 40 60 80 1001.041.061.08
1.11.121.141.161.18
1.2
Customer Satisfaction in Year 1
Year
2 Re
venu
e / Y
ear 1
Rev
enue
Ittner and Larcker, 1998
29
Investor Advisor Rating and Assets Invested ...Investor Advisor Rating and Assets Invested ...
Assets Invested
Index
Assets Invested
Index
Customer Satisfaction with Investment AdvisorCustomer Satisfaction with Investment Advisor
Note: Assets invested is measured as a composite index that reflected the dollar amount invested, profitability of the products selected by the customer, etc.
0
20
40
60
80
100
120
140
1 2 3 4 5 6 7
30
Target Setting …Target Setting …
4 In some cases there are diminishing returns from increases in non-financial measures, but other situations require very high performance
4Notable thresholds are commonly observed
4Sophisticated analysis is required to identify appropriate targets for non-financial measures
4 In some cases there are diminishing returns from increases in non-financial measures, but other situations require very high performance
4Notable thresholds are commonly observed
4Sophisticated analysis is required to identify appropriate targets for non-financial measures
31
Compensation Plan Design …Compensation Plan Design …
4Most companies use their balanced scorecard or non-financial measures in their reward systems (i.e., If you know the value drivers, why not use them in the bonus plan?)
4Difficulties in using multiple performance measures in formula-based bonus plans:
Assigning weights to each measure“Gaming” associated with a formula-based planBonuses may paid even when performance is “unbalanced”
4One suggested solution for these problems is greater use of subjectivity and discretion in compensation plans
4Most companies use their balanced scorecard or non-financial measures in their reward systems (i.e., If you know the value drivers, why not use them in the bonus plan?)
4Difficulties in using multiple performance measures in formula-based bonus plans:
Assigning weights to each measure“Gaming” associated with a formula-based planBonuses may paid even when performance is “unbalanced”
4One suggested solution for these problems is greater use of subjectivity and discretion in compensation plans
32
Formula-Based Bonus Plan at Citibank …Formula-Based Bonus Plan at Citibank …
4Hurdles or targets (must meet to obtain bonus):Customer satisfaction at or above region meanOperations control audit must be satisfactory
4Potential bonus as a % of salary:Margin growth – 3%Growth in large customers – 1.5%Checking balance growth – 3%Revenue growth – 3%Liability/asset growth – 1.5%Expenses/revenues – 0.5%Total balance/household – 0.5%
4Hurdles or targets (must meet to obtain bonus):Customer satisfaction at or above region meanOperations control audit must be satisfactory
4Potential bonus as a % of salary:Margin growth – 3%Growth in large customers – 1.5%Checking balance growth – 3%Revenue growth – 3%Liability/asset growth – 1.5%Expenses/revenues – 0.5%Total balance/household – 0.5%
33
Balanced Scorecard Bonus Plan at Citibank … Balanced Scorecard Bonus Plan at Citibank …
Manager Bonus
Overall Par Score
FinancialPar
Score
StrategyPar
Score
CustomerPar
Score
ControlPar
Score
PeoplePar
Score
3 Measures 7 - 18 Measures 2 Measures 3 AuditJudgements
StandardsPar
Score
5 QualitativeAssessments
5 QualitativeAssessments
LaborGradeLaborGrade SalarySalary
34
Outcomes at Citibank …Outcomes at Citibank …
4Performance evaluations were primarily influenced by financial results, despite the corporate strategy of emphasizing all of the balanced scorecard categories
4Little weight was placed on “softer,” qualitative measures (after the initial quarters)
4Some of the non-financial measures emphasized in the performance evaluations had no ability to predict future financial performance, whereas some that were ignored were highly predictive
4Performance evaluations were primarily influenced by financial results, despite the corporate strategy of emphasizing all of the balanced scorecard categories
4Little weight was placed on “softer,” qualitative measures (after the initial quarters)
4Some of the non-financial measures emphasized in the performance evaluations had no ability to predict future financial performance, whereas some that were ignored were highly predictive
35
Citibank Branch Manager Survey …Citibank Branch Manager Survey …
45%45%23%23%32%32%Overall, I am satisfied with the scorecard processOverall, I am satisfied with the scorecard process
25%25%20%20%55%55%When it comes to scorecard bonuses, I have no idea who gets what and why
When it comes to scorecard bonuses, I have no idea who gets what and why
40%40%21%21%39%39%My scorecard goals cover all the important parts of my jobMy scorecard goals cover all the important parts of my job
31%31%28%28%41%41%With scorecard, it is easy to see the connection between individual and branch performance
With scorecard, it is easy to see the connection between individual and branch performance
21%21%18%18%61%61%I have a good understanding of the scorecard processI have a good understanding of the scorecard process
DisagreeDisagreeNeutralNeutralAgreeAgree
36
Explicit Statements by Citibank Managers …Explicit Statements by Citibank Managers …
4“Eliminate the scorecards! Promotions and bonuses are still given to those who kiss-up to their supervisors, with little regard to performance, educational background, and experience”
4“I hate this new process. Favoritism comes too much into play”
4“Scorecards only reflect certain parts of your job”
4“This is a black box process, no one knows anything”
4“I would have liked to have known what my evaluation was going to be based on before the quarter began”
4“Eliminate the scorecards! Promotions and bonuses are still given to those who kiss-up to their supervisors, with little regard to performance, educational background, and experience”
4“I hate this new process. Favoritism comes too much into play”
4“Scorecards only reflect certain parts of your job”
4“This is a black box process, no one knows anything”
4“I would have liked to have known what my evaluation was going to be based on before the quarter began”
37
Compensation Plan Design …Compensation Plan Design …
4Many companies have experienced serious problems after incorporating non-financial measures into their bonus plan
4One explanation is that subjectivity helps to combine disparate measures, but is very difficult to use in practice
4Another explanation is that companies do not have a validated causal business model and they use unreliable and invalid measures in the bonus plan
4Many companies have experienced serious problems after incorporating non-financial measures into their bonus plan
4One explanation is that subjectivity helps to combine disparate measures, but is very difficult to use in practice
4Another explanation is that companies do not have a validated causal business model and they use unreliable and invalid measures in the bonus plan
38
Financial Benefits of Using Causal Models …Financial Benefits of Using Causal Models …
Broad Industry Survey of CFOs (n = 157)Broad Industry Survey of CFOs (n = 157)
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Raw ROA Raw ROE Ind Adj ROA Ind Adj ROE
Little Attempt to Use Causal Models and Link Non-Financial Performance to Future Financial PerformanceExtensive Effort to Use Causal Models and Link Non-Financial Performance to Future Financial Performance
39
Why is This So Hard?...Why is This So Hard?...
4 Insufficient model development (e.g., simply relying on generic measurement frameworks or “best practice” is unlikely to work)
4Difficult to determine which measures are useful without sophisticated analysis
Measurement proliferation and disintegrationMeasurement choice becomes more political
4 Inadequate existing measuresPoor reliability and validityInconsistent definitions, units of analysis, and time framesNo common identifier to link data across functions
4 Insufficient model development (e.g., simply relying on generic measurement frameworks or “best practice” is unlikely to work)
4Difficult to determine which measures are useful without sophisticated analysis
Measurement proliferation and disintegrationMeasurement choice becomes more political
4 Inadequate existing measuresPoor reliability and validityInconsistent definitions, units of analysis, and time framesNo common identifier to link data across functions
40
Why is This So Hard? …Why is This So Hard? …
4Organizational barriers stop the sharing data across functions (“data fiefdoms” and “islands of analysis”)
4Some managers do not want to know the results
4 Inadequate analysis skills and resources inside organizations
4Technology (CRM, ERP, etc.) alone is not the answer
4Organizational barriers stop the sharing data across functions (“data fiefdoms” and “islands of analysis”)
4Some managers do not want to know the results
4 Inadequate analysis skills and resources inside organizations
4Technology (CRM, ERP, etc.) alone is not the answer
41
Research Opportunities …Research Opportunities …
4How much emphasis should be placed on intuition versus sophisticated analysis when selecting performance measures?
4How should companies select and combine performance measures that are defined in different dimensions (e.g., money, time, survey scores, etc.)
4How much subjectivity should be used in compensation systems?
4How useful are “soft” or qualitative measures for directing managerial actions?
4How much emphasis should be placed on intuition versus sophisticated analysis when selecting performance measures?
4How should companies select and combine performance measures that are defined in different dimensions (e.g., money, time, survey scores, etc.)
4How much subjectivity should be used in compensation systems?
4How useful are “soft” or qualitative measures for directing managerial actions?
42
Research Opportunities …Research Opportunities …
4How should targets be set for non-financial (and financial) performance measures?
4What are the financial consequences of changing performance measurement systems?
4Are observed financial consequences simply the “Hawthorne Effect?”
4When should non-financial measures be disclosed to external analysts and shareholders?
4How should targets be set for non-financial (and financial) performance measures?
4What are the financial consequences of changing performance measurement systems?
4Are observed financial consequences simply the “Hawthorne Effect?”
4When should non-financial measures be disclosed to external analysts and shareholders?