I have long agreed with those in the investment community that argue analysts drive short-term thinking by managers of many publicly listed companies, which in the end destroys value. While reading this article by McKinsey entitled “Building the healthy corporation” I realised that many organisations are now fighting back. McKinsey report that a number of firms have brought “Performance and health” into the corporate lexicon. They explain further with:
“Just as people may seem reasonably well today but may not have the physical condition for the rigors of a long and active life, so too companies that are profitable in the short term may not have what it takes to perform well year after year.”
A good point they make is that most investors do highly value health as well as performance and that it appears the noisy few investment analysts are the ones that are often heard and reacted to.
The McKinsey list for a healthy corporate body:
• Strategy
• Metrics
• Communication
• Leadership
• Governance
While you can argue a list like this until you are blue in the face, it is a sound list. In my experience, the one management has pushed the least in the modern organisation is “Metrics”. So many facets of an organisation are challenging to measure, however, if something is important it should be measured otherwise your subjective assessment of your performance will more likely be a long way off the mark.
Metrics using hard data and proxies for hard data can and should be developed. In my experience, once you get going with metrics, you will find the process somewhat intriguing and highly rewarding.
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