Gartner on Investor Communication

The McKinsey Quarterly recently ran an interview here with Gartner CFO Christopher Laford. In the interview, he explained that:

When our new CEO, Gene Hall, joined, we established a long-term financial road map as a key element of our investor communications. We told our investors how we were running our businesses and where we thought we could drive performance over the long term-key measures, like revenue growth by business segment and margins.

And when we did that, we also identified the two or three metrics, for each segment, that would help investors understand whether we’re on track. We wanted to be really thoughtful and clear with our investors about which metrics they should watch closely and why-and then we promised to disclose our performance, good or bad, on those metrics every quarter.

He explained that the metrics were designed for the needs of long-term investors. This strategy has actually enabled the company to shift away from the high-turnover investors that dominated their ownership in the past.

Leading metrics are an important management and reporting tool of the knowledge era company. The need for new metrics arose from the increased importance of knowledge assets to the strategic results of a company. These knowledge assets cannot be seen in traditional financial statements that were designed to describe industrial companies and the factories that drove their revenue. Companies today need to educate their stakeholders–paint a picture of their intangible “factory.”