What is the best indicator to Measure firm performance? Revenue? Profit? Liquidity? Gearing?
As a thought model I always like the 'organizational health' model of mcKinsey which focusses on three levels: Strategic, Operational and renewal
The ability of a firm to survive or sustain its performance over a business cycle would also be a good indicator.
Rafiq Idris none of these. The most important indicators are Customer based brand equity and customer experience. Companies taking care of customers and continuously innovating will survive.
-Netflux disrupted HBO & Cinema houses----As per CEO our achievement is customer trust
-Amazon disrupted Wallmart---As per CEO our success is because of customer experience
-Whatsapp has eaten $368 Billion revenue of telecom companies-- Customer ease of use
Book Customer Experience Management A Handbook to Acquire and Ret...
Article Customer-based brand equity and firms' performance in the te...
Article Measuring and Comparing the Desired and Actual Service Quali...
only Focusing on profit can mislead companies. For example Nokia was earning more than apple, they were just counting numbers, they were so busy in counting numbers they could not see changing customer preferences.
IMB was busy in counting the profit, meanwhile Steve job was focusing on design and user experience of Apple computer, what happend to IBM we all know.
I think with focus on Customer experience rest all things come automatically.
Muhammad Farrukh
I have explained this in shared links & also in my answer. Things have transformed over the years. The businesses have gone through multiple phases. Profit (As key performance indicator) was important in Production and sales era. Today the advantage of the companies is business model which is based on customer preferences.Profit is also an indicator but Rafiq Idris asked the best indicator. I believe best indicator is customer experience and customer based brand equity.
To understand this in depth my point of view, you can read the below book and articles.
Article Customer-based brand equity and firms' performance in the te...
Book Customer Experience Management A Handbook to Acquire and Ret...
Article Measuring and Comparing the Desired and Actual Service Quali...
Moreover, you can read these stories to understand my point of view.
https://www.linkedin.com/pulse/reason-why-google-successful-today-muhammad-farooq-buzdar/
https://www.linkedin.com/pulse/straw-wind-muhammad-farooq-buzdar-1/
https://www.linkedin.com/pulse/two-ways-can-save-future-marketers-marketing-muhammad-farooq-buzdar/
Muhammad Farrukh
"Numbers" cannot be achieved by just tracking "Numbers". You need to work on bottom line CX and CBBE to get the numbers. There is no "at the end of the day" in today's world, companies are operating in a state of flux. Customer preferences are changing, any person sitting in dorm room can replace your complete manufacturing capacity with one app and make your produced in store and in market products useless for example, All alarm clock producers, closed their factories, once alarm app was added in Google play & smart phones ). Everyday, every-month companies need to track the changing preferences and market situation.There is one another concept of customer life time value, companies intentionally stay in loss for years to gain lifetime customers, then get the value, For example whats-app is earning nothing from previous 10 years. If they follow the old strategy (Like Veon did in Pakistan, outdated profit tracking system) they would have disappeared like veon.
I tracked revenue of Ufone (ETISALAT) from 2012-14 & learned that by tracking and improving the CX & CBBE, the profit automatically increases
I tracked revenue of Telenor from 2014-16 & learned that by tracking and improving the CX & CBBE, the profit automatically increases
I tracked revenue of Zong (China Mobile) from 2016-18 & learned that by tracking and improving the CX & CBBE, the profit automatically increases
I am doing the same for my own company Buzdar insights. this is something I tested over the years, I have written it in my books & many practitioners endorse it.
Also I would recommend everyone to read my books, article and follow my project Buzdar Insights for more updates.
Book Customer Experience Management A Handbook to Acquire and Ret...
Article Customer-based brand equity and firms' performance in the te...
Article Impact of Digitalization on Holy Quran Readers; Experience a...
Article Measuring and Comparing the Desired and Actual Service Quali...
I dont want to reveal my many findings before publications, Anyone willing to learn can follow my project
https://www.researchgate.net/project/Buzdar-Insights-Research-Projects-Research-Papers-in-Progress
Muhammad Farrukh
Again, Sir, This is my philosophy, I am writing about it to challenge the previous thought of focusing and tracking profit. I thank you for your critical point of view, which helps me to improve my point.
business growth, netto income growth, market participation growth.
Muhammad Farrukh
I never see the profit as a single best measure of a company performance. Tracking profit as a single best performance indicator can mislead companies. in my point of view 1% increase in customer satisfaction increases 10% revenue. If somebody reports to me saying we have lost 10% of customer satisfaction index and gained 20% profit, I will worry about my company future. The only risk which any business cannot afford is the customer dissatisfaction. This is the core philosophy of my next book."The purpose of the company is not to earn the profit, the purpose of the company is to make a customer, who will bring another customer"
by the way, the satisfaction index of companies is becoming popular, the NPS is adapted by 90% companies world wide, Companies are hiring Chief Customer Experience Officers. CEM was top priority of 89% executives in 2019.
https://www.theacsi.org/acsi-benchmarks/benchmarks-by-industry
Also, CEM or CBBE is not a process, The company performance measurement has both subjective and objective measures. The subjective measures are becoming more popular these days.
Muhammad Farrukh
the proposition that core philosophy of the business is customer satisfaction but for what? for profit for sure. But the best indicator to track is CX & CBBE.If i am given option to track among two indicators Profit or Customer Satisfaction & Net promoter. I will track, the customer satisfaction & NPS, if satisfaction/NPS is growing, I will cross-sell & up-sell more products to earn more revenue.
If satisfaction is low/declining, Customers dont like my existing products, for sure, I will be in more trouble.
Now imagine, someone selected the profit , if his profit is increasing, he will assume that customer are satisfied, thats what Nokia did. They were looking at one side of the picture, the upper layer of Ice-burg.
just in case, if company found, it is losing profit (as tacking indicator), the company can lose its focus and try to up-sell/cross-sell the products to unsatisfied customers
One way is to see the movement of performance indicators in the last 5 years i.e. compare same indicators 5 years ago and now , which will indicate where the firm is heading to. Thanks.
Some researchers understand that 8 years is time horizont ideal. Contrary ´s laws can be important to the investigation. Then, after something and before something...
There is one key performance indicators I strongly recommend :
-can the firm deliver what it has committed to deliver.
In other words accuracy of self prediction year on year.
If this self-protection is accurate, I can trust the firm: they know what they are doing. Otherwise, they have no clue and work with no vision,in the dark.
Apart from profitability,market shares and.new competition can indicate the health of a company
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