Page 136 - Finance for Non-Financial Managers

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Critical Performance Factors
Lessons Learned from the Stock Market—
or Maybe Not Learned
Much stock market analysis and commentary is based on 117
the premise that what happened in the past may be projected to some
degree into the future—with all the usual caveats that the analysts
don’t guarantee that any of this is true or predictable or even relevant.
We’ve learned how inaccurate they can be in predicting the future
from the past, but there are ample stacks of evidence to suggest the
premise is true, even if the application is decidedly imperfect.Anyone
who has studied technical stock market analysis can point to countless
examples of stocks acting pretty much like they did before, given simi-
lar market influences.The trick is to judge with acceptable accuracy
the variation between past experience and future expectations.

six months or six weeks of metrics on a single page as part of a
regularly published, monthly or weekly management report.
How much should you pack onto that one page? If there’s too
much information on the page, it will be overwhelming to those
not comfortable with financial reports and it will likely go
unread. If there’s too little information on it, it will raise more
questions than it answers, with resulting delays in taking action.
The ideal combination, in our experience, is a page with six
to 12 metrics presented over the past six to 12 periods, along
with the benchmark or standard that is desired for each metric.
That could be the budgeted result at year-end, or the ratio set
out in the covenants of the company’s lending agreements, or
the amount needed to take the company to the next level in its
growth. Figure 7-1 shows a representative CPF trend report for
a manufacturing company.
Which Metrics to Track? Where Do You Want to Go This Year?
Which metrics are most meaningful to a company depends on a
series of factors, including management goals and objectives,
problem areas that bear watching, and improvement projects
under way. A sales-driven company may be heavy on the sales-
related indicators, while a company deeply into research and
development of leading-edge products might have metrics relat-