The performance measurement manifesto

The leading indicators of business performance cannot be found in financial data alone. Quality, customer satisfaction, innovation, market share--metrics like these often reflect a company's economic condition and growth prospects better than its reported earnings do. Depending on an accounting department to reveal a company's future will leave it hopelessly mired in the past. More and more managers are changing their company's performance measurement systems to track nonfinancial measures and reinforce new competitive strategies. Five activities are essential: developing an information architecture; putting the technology in place to support this architecture; aligning bonuses and other incentives with the new system; drawing on outside resources; and designing an internal process to ensure the other four activities occur. New technologies and more sophisticated databases have made the change to nonfinancial performance measurement systems possible and economically feasible. Industry and trade associations, consulting firms, and public accounting firms that already have well-developed methods for assessing market share and other performance metrics can add to the revolution's momentum--as well as profit from the business opportunities it presents. Every company will have its own key measures and distinctive process for implementing the change. But making it happen will always require careful preparation, perseverance, and the conviction of the CEO that it must be carried through. When one leading company can demonstrate the long-term advantage of its superior performance on quality or innovation or any other nonfinancial measure, it will change the rules for all its rivals forever.