Performance Metrics That Make a Difference
This morning’s plenary on “Performance Metrics That Make a Difference,” brought together the two co-chairs of the 2010 NACD Blue Ribbon Commission on Performance Metrics, John Dillon and Bill White, as well as NACD Chairman Barbara Hackman Franklin and Jannice Koors from Pearl Meyer & Partners.
When it comes to financial metrics, NACD Chairman Franklin stressed that the board “sometimes… just takes what management gives us.” The board must “make sure that senior management really buys into [the established] strategy, goals, and performance measures,” agreed Jan Koors. It’s important to “trust, but verify,” and for the board to take a more proactive role in overseeing performance metrics.
The panelists agreed that a conversation on performance metrics easily lends itself to a discussion about compensation. However, what boards should be trying to accomplish is a wholesome, deeper dive into all of the various components of the enterprise. Understanding information about your company provides clarity into what can be improved and ultimately perform better.
John Dillon, who serves on boards including Caterpillar and DuPont, emphasized that, while boards currently address performance metrics in proxy statements, the board needs to think more broadly and engage leadership to get an appropriate number of financial and nonfinancial metrics to understand what is going on in the company.
Jan Koors summed it up best when she said “boards do a good job at telling shareholders what the metrics are, but less good at telling why these metrics were chosen and how they relate to strategy and moving the company forward.”
Click here to purchase your copy of the Report of the NACD Commission on Performance Metrics’ Performance Metrics: Understanding the Board’s Role.