Intangibles Measurement IV: Indicators and Performance Management
August 23, 2009 by Mary Adams
Here’s the next post in my intangibles measurement series. The last two posts have provided details on investment and assessment. This time, I am going to talk about the third kind of data: indicators.
Indicators and performance management are the most widely used forms of intangibles management today. This approach arose in direct response to the limitations of financial data in understanding the knowledge era business. Common approaches build a dashboard to show key performance indicators (KPI’s) of the company’s operations. Sometimes the dashboard is associated with a balance scorecard as well.
The idea is to identify data points that are leading indicators of strategic success and track them closely. The best way to understand leading indicators is to think of what has to happen to achieve a financial goal. Leading indicators of sales growth include numbers of new customers, new proposals, sales backlog, for example. Generally, best practice is to have a small number of meaningful indicators that are tracked regularly.
Indicators are a great way to track your performance and even to communicate it externally. The problem comes when you use them without developing the other two kinds of intangible management: investment and assessment. These measures dig deeper and look at the full picture of your intangible knowledge factory.
Using indicators without investment and assessment data is like driving a car based exclusively on your dashboard without ever looking under the hood. The warning lights on your dashboard will tell you about the main indicators of engine performance. But would you want to drive your car for a year without ever looking under the hood? Not a good idea.
One last post is on the way where I will explain that the new bottom line of business performance in the knowledge era is reputation. Stay tuned!