Putting Money Where It Matters

Targeting the metrics most relevant to a company’s strategy and allocating funding where it will do the most good are essential for excellent long-term performance and overall financial health.

Where are forward-thinking companies focusing their performance measurement efforts these days? On the measures that give them a better picture of where they’re going — specifically, on nonfinancial metrics such as customer satisfaction levels, employee turnover rates and process improvements. These leading indicators have been proven effective at improving a company’s overall financial health and long-term performance. What may be less apparent is how much they enhance the budgeting and planning process.

By implementing a performance measurement system that includes nonfinancial metrics, companies gain better insight into what parts of the business most need funding and where to allocate resources in order to reap the greatest returns. Planning becomes more focused, and businesses have better yardsticks to determine how they are performing in relation to their strategic plans. Giving everyone involved in the budget-creation process access to this information helps ensure they’re all going to be on the same page when determining how to make allocations.

Software products have made it easier for planners and forecasters to access the key bits of performance data that become the basis for budgeting decisions. Applications can give them a convenient dashboard look at their company’s progress. And automating the measurement process increases its credibility because it reduces the likelihood that someone will manipulate the metrics.

Instead of producing only bulky performance reports that provide more data than most people want, the software enables planners to generate streamlined, custom reports that meet the needs of different users throughout the organization. "For example, in the accounts receivable category, senior management is usually looking for just one high-level number that represents how the company is doing in that category, but people in the accounts receivable area want more specific, process-oriented measurements that focus on cost, time, quality and productivity," says Jeffrey A. Berk, manager of benchmark services and development in the global best practices division of Arthur Andersen LLP in Chicago.