Non-financial measures key creators of long term value

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By: Wise Marketer Staff |

Posted on April 24, 2002

The executives of multinational companies rate performance measures such as customer loyalty and satisfaction higher than financial measures as creators of long term value.

Top executives at multinational companies consider non-financial performance measures such as product and service quality and customer satisfaction and loyalty more important than current financial results in creating long-term shareholder value, according to a Management Barometer survey from PricewaterhouseCoopers.

Shareholder return
When asked what contributed to long-term shareholder return, the executives named product and service quality (89%), customer satisfaction and loyalty (83%), operating efficiency (75%), current financial results (71%), innovation (62%) and employee satisfaction and turnover (47%).

Management decisions
When asked about the key factors involved in making ongoing management decisions, the executives chose product and service quality (83%), current financial results (81%), customer satisfaction and loyalty (73%) and operating efficiency (72%).

According to PricewaterhouseCoopers' Frank Brown, "Executives increasingly recognise the importance of non-financial measures such as customer satisfaction and product quality in determining how the markets value their companies."

Value driver maps
Some seven in ten multinational companies have attempted to link a broad range of measures of key business performance factors with future financial performance or share price. More than half said they had completed or nearly completed formal, causal "value driver maps" or models, linking together the key financial and non-financial factors that lead to long-term total shareholder return. Overall, those attempting to link business performance factors to future financial outcomes had greater revenue growth than those that do not. Companies that had value driver maps were the fastest growing among the survey sample, projecting 12-month revenue growth of 7.5%, compared with 5.4% for those who do not use them.

The Management Barometer is developed and compiled by PricewaterhouseCoopers with help from BSI Global Research.

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