1: define corporate strategy & KPIs

In assessing pay for performance, numbers are not enough. Companies need to have a clearly defined direction that all can see. Executives should be rewarded in line with progress towards that destination. So, strategy counts; it represents the keystone for what the company is trying to build.

Strategy and the key performance indicators (KPIs) by which its achievement will be measured can be articulated in many ways. For some companies strategy results from a sophisticated review process, for others a simpler set of statements is sufficient - for example:

• double revenues in three years
• hold costs flat
• increase return on capital (ROE) by 50%
• be represented in five countries.

Whatever the process by which it arises, an overall statement of intent focuses attention on where the company is going. From this, the milestones by which progress will be measured can be defined more clearly.

Any strategy should be capable of measure by selected parameters. The most obvious KPIs that can measure the success of the company's strategy are related to financial performance. The obvious ones are sales, costs, profits, ROE. There will also be non-financial KPIs. For example, if the intention is to be in the top three in all markets, this is a measurable factor.

For larger more complex corporations - with a multi-divisional structure operating in many countries - corporate strategy may seem distant from immediate priorities in business units.

For these companies, the corporate menu of KPIs provides a clear reference point for all business units (BUs), support units (SUs) and subsidiaries to define their goals and priorities in relation to the overall company strategy.

Step 2 >>

top

home - about us - what we do - contact us

site map