A healthy balance sheet means nothing. Business performance indicators cannot be found in financial data alone.
Growing a company from concept to industry leader requires a special breed of individual – someone who sees opportunity in every problem, someone who won’t take no for an answer. They are called entrepreneurs.
Entrepreneurs are creative individuals who have an uncanny ability to find solutions to complex problems. Entrepreneurs do not seek risks, but manage them. And successful entrepreneurs maintain a delicate balance between risk and recklessness. How are successful entrepreneurs and their performance measured What are the measures that matter?
Bottom lines are crucial to any business. Entrepreneurs who have marginal number skills are rarely successful and that is a widely held belief. So are all successful entrepreneurs also accountants? Are balance sheets corporate horoscopes?
Generally, little distinction is made between money and wealth. And the same goes for a businessman and an entrepreneur. Entrepreneurship involves vision, leadership and determination. Entrepreneurship is all about building great enterprises. Great enterprises are built on passion, and the passion has to be about the business, the product or service, the market, the customers, the people who work with you – and not about just stock options and IPOs and mere numbers. Clearly entrepreneurs are people who enjoy working to create value, to create an enterprise, to create successful teams, believing that the money and the rewards will follow in due course.
A businessman can be said to be more focused on making money, preferably as quickly as possible, while an entrepreneur is more concerned with creation of wealth. After all, all students can’t be called scholars.
A healthy balance sheet means nothing.Business performance indicators cannot be found in financial data alone.Quality of strategy, customer retention, innovation, market share, ability to attract and retain talent, quality of executive compensation, efficacy of major processes, research leadership, quality of governance and similar elusive assets often reflect a company’s economic well being and growth prospects than its balance sheet. These and many other non-financial intangible assets are increasingly dwarfing the value of recorded tangible book assets in many businesses.
When it comes to corporate performance measurement, there are advocates of both purely financial and purely operational measures. But there is no need to choose between the two- there is a middle path that steers midway between the two and yet keep both in view. This is a balanced scorecard that comprises measures that really matter – financial measures that reveal the results of actions that have already been taken, complemented by three sets of perspectives relating to customers, internal processes and the organizations ability to innovate and improve. ( i.e. activities that drive future financial performance) The balanced scorecard is more than just a performance measurement tool. It has even greater relevance in today’s information age, when a company’s competitiveness depends more decisively on its ability to exploit its intangible assets than its physical assets. It is important to measure how much you made, but it is equally or more important to measure how you made it.
Aggressive business leadership in a highly competitive environment has in the recent past transgressed boundaries.The method of taking money from investors and reporting of corporate performance calls for a thorough revamp. Globalisation has created many opportunities including the odds for large-scale fraud. Unscrupulous leadership fuelled by insurmountable greed has driven all unruly corporate behavior in the recent past. The centerpiece of what seems to be a big jigsaw puzzle is human values in work place or the lack of it.
The belief that all individuals have dignity, that we are all capable of finding our inner compass and that a magnificent being or force defines purpose in all that we do is not alien to management thinking.When companies employ people and deploy them in teams, these individuals are not mindless robots or mercenaries. They are capable of respecting each other and their calling go beyond the bottom line. Leadership that do not respect this fundamental and innate quality of human being is making serious mistakes and will have to pay for it dearly. And many have already.
( A variant of this article was published in Business Today – September 29 , 2002)