Business Insight #2


Strategy Series

 

A company is assessed based on its mission as it relates to goals, values and performance measures. The key points that are most meaningful to any organization are values and how they focus on the key stakeholders’ interests along with the main performance measures which relate to the mission and goals.

 

One viewpoint that resonates with my own is the realization of how complex the decision making process is for the senior executives in organizations. For example in a publically traded company, these top executives are responsible to produce profits for the shareholders while managing the interests of the various stakeholders. The reasoning for this behaviour in my opinion, is that many employees own shares in the company and it is in the organization’s best interest to recognize them as stakeholders at the same time. This does explain why some of the decisions from top management seem clouded due to the difficulties of balancing those interests.

 

A personal learning from this topic is the Net Present Value (NPV) which measures profitability and how this relates to performance. This is utilized to assess any new proposed venture or project’s probable return on investment and the decision to pursue. This value is closely monitored on reports as a way to compare the relative profitability of the ongoing ventures or for the duration of projects to ensure optimized performance. The fluctuation of the NPV value will indicate the level of performance for the venture or project throughout their lifecycle. A higher NPV reveals the venture or project is performing to expectations and a lower NPV signals poor performance along with declining profits. In addition, if the venture or project’s NPV is close or equal to zero, this indicates that the cash flows are equivalent to the costs and the performance objectives have not been met.

 

There is a term that I have also discovered to be useful which is the Net Promoter Score (NPS) and is implemented as a tool for measuring value. Upon further investigation and research of course, the following website link provides additional information https://www.netpromoter.com/about-net-promoter/. This metric is a management tool that is used to evaluate the loyalty of an organization’s customer and employee relationships which is interconnected with revenue growth. The NPS tool measures the degree of loyalty that exists in the relationship by a series of survey questions. This is a more effective alternative to the familiar customer satisfaction surveys as it uses value-creating behviour questions which are directly linked to profitability.