Friday, November 14, 2008

Ending an interesting trip to North America

I'am in New York and about to take my flight back to Europe. This trip to North America has been an interesting one mainly because of the stuff I learned as part of my current efforts to understand a bit better business performance measurement in a number of fields. It's also been a good opportunity to meet business contacts and friends. Anyhow, here are a few reasons why I am currently so interested in performance measurement:

  1. the seemingly unending financial crisis is in part the result of inadequate measurement of the actual business performance of quoted companies in general and banks more specifically. The rating agencies messed up, the regulators messed up, the quants messed up, senior management was caught off-guard and crucially the "financial reality" of the stock exchanges had been increasingly divergent from the reality of real businesses out there, especially when it came to measuring value creation. Now the question is to find out whether or not we will be capable of measuring properly the rescue programs and that starts with proper definition of objectives in the first place, which is far from "mission accomplished";

  2. I've had yet another couple of opportunities recently to witness the very material consequences ill-focused performance metrics can have, from misguided sales efforts to chaotic software development. Of course the trouble gets compounded usually since a company that fails to focus on what matters to the successful development of its "system" will mess up all facets of its business operations;

  3. for the past couple of years, working in the field of online and interactive marketing, I came across situations in which advertisers were demanding "return on investment" and in 99% of those situations they had no specific idea of what that concept actually meant, but they were complaining about the actual impact of viral or buzz campaigns. Now, the issue here was even more basic: they did not know what their marketing objectives were in the first place, something that I think is attributable to the fact that they were carrying out their first major online initiatives... which means that as the market becomes more educated it will also become more demanding and that's not necessarily good news for new agencies that emerged out of the blue thesepast few years, unless they considerably improve their discipline. So I took the opportunity of my trip to attend a training seminar of 2 days with the American Management Association on the topic of ROI (more in a separate post);

  4. the issues of the environment and the imperative to change our ways of dealing with the planet show how critical it is to actually measure the performance of companies by integrating into the performance measurement model the impacts of each company on the environment and on local communities... which calls for expanding the scope of business performance measurement to include "systems of companies" and "systems of systems of companies"... which means that the approach that characterized financial analysts' meetings on Wall Street is dead wrong and misleading;

  5. I have a little project on which I am currently working that will need a different framework for assessing performance because it is aimed at making a contribution to durable development... but I'll tell you about that later :)

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