Toronto, August 21, 2008 — To succeed during an economic downturn, many private business owners respond by battening down the hatches and cutting any fat that may have built up. Yet, according to PricewaterhouseCoopers (PwC), private companies need to get out of their ruts and set up very clear and precise measures—or performance metrics—to succeed in bad times as well as good.
Proper performance metrics highlight whether a company is achieving its strategic objectives. They measure not only financial outcomes, but also drivers of performance related to customers, people and innovation. According to PwC, while the majority of private companies create business plans and strategies, many of them are not setting targets or establishing metrics. Only 56.1% of private companies surveyed by PwC had metrics in place to track their business performance.
“Identifying proper performance metrics is critical,” says Scott McLean, partner in PwC’s Performance Management, Private Company Services practice. “Instead of concentrating on just financial metrics, which look to the past and focus primarily on profitability and revenue growth, a balanced set of performance metrics help companies keep their eyes on the road ahead, so that they can manage through an economic downturn.”
According to McLean, private companies need to understand strategically what the business is trying to achieve and have metrics that indicate whether they’re executing well against the strategy. Private companies should also share the strategy and vision with employees to enable them to understand their role in the overall strategy.
McLean suggests that private companies use leading indicators as part of their performance metrics, so that they have an idea of what their business is facing and the direction they are going. Some examples include:
- Customer feedback and satisfaction
- Inventory accuracy and health
- Safety
- Employee engagement
- Business processes productivity
- Sales activity
Details on these indicators can be found at www.pwc.com/ca/businessinsights.
This is the second in a series of articles from PwC that aim to help private companies increase their understanding of some of the critical issues and opportunities that can affect the performance of their business. PwC’s 2008 Business Insights® Survey, an annual survey that analyzes the opinions of private business leaders and provides benchmarking for similar companies, will be available after the summer.
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 5,200 partners and staff in offices across the country.
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