Metric sales

This KPI has become the new reference indicator for CFOs

I spoke with Michael Schrage, a researcher with the Digital Economy Initiative at MIT Sloan School of Management, about legacy KPIs, such as cash flow, revenue, and customer acquisition costs. These coincide with the idea of ​​a balanced scorecard and metrics that drive performance, which Harvard professor Robert S. Kaplan and management consultant David P. Norton first explored in 1992, he says. Their research later became the 1996 book, “The Balanced Scorecard: Translating Strategy into Action,” resulting in a popular strategy management framework that many organizations still use as the basis for KPIs, Schrage says.

“A fundamental challenge for CFOs is the legacy of KPIs from 30 years ago,” he says. “The idea that the amount of data we have and the quality of algorithmic tools we have in 2022 remotely compares to what we had in 1992 is ridiculous,” says Schrage. Technological advances such as AI and machine learning are providing better understanding that needs to be reflected in updated KPIs, including a focus on human capital, he says.

Schrage believes that “smart CFOs” understand that their position is evolving and gradually incorporating aspects of the COO role. “It’s just not our financial capital; it is also our human capital,” he says.

This is where emerging KPIs come in: employee experience, customer experience, andthe big metric is customer lifetime value,says Schrage. “What is the correlation between employee experience, customer experience and customer lifetime value? ” he says. “That’s what I think needs to be discussed.”

I had a conversation with Harmit Singh, EVP and CFO at Levi Strauss & Co., about emerging KPIs. “As a metric, customer lifetime value has become important,” Singh says. “We are accelerating our direct-to-consumer business, namely stores and e-commerce. These are channels where you can build relationships with customers.

Prudential Financial has been undergoing a company-wide transformation since 2019. I spoke with Prudential EVP and CFO Ken Tanji about how the company approaches KPIs. “As we go through the transformation, we have focused on improving the customer experience,” says Tanji. “Establishing clear KPIs is key to tracking our progress.” And that includes analyzing customer experience metrics, he says.

In my report, “Many companies are still using KPIs from the 90s. Here’s how to modernize them,” you can read more about Schrage’s research on digital transformation and KPIs and more insights from Singh and Tanji.


Until tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

Big deal

From 2020 to 2025, Virtual Reality Market Size is Expected to Increase by $75.57 billion, at a compound growth rate (CAGR) of 55.34%, predicts Technavio, a market research firm. The market growth will be driven by factors such as the penetration of head-mounted displays (HMDs) in the gaming and entertainment sector, according to the report. The Asia-Pacific (APAC) region will account for the highest market share.

Courtesy of Technavio

Go further

In the study “The Future of Work is Here”, global consultancy Protiviti offers insights from interviews with chief auditors of large companies on what they have learned from the pandemic and how future of the internal audit profession. The report looks at the growing importance of the internal audit function to business in times of disruption. It also examines the ways many companies are developing the role of the internal audit professional.

Ranking

Nicole Strain, chief financial officer and chief operating officer of Kirkland’s, Inc. (Nasdaq: KIRK), a specialty retailer of home décor and furnishings, will leave the company effective August 31. Kirkland’s Home has launched an executive search process for a new CFO. Until the company appoints a successor, it will rely on a newly created Office of the Chief Financial Officer, which will be co-led by Anna Wilhoit, company controller, and Jessica Tatum, senior director of planning and analysis. financial. Duties within the COO role have been assigned to other senior members of the operations team.

Marella Thorel was appointed chief financial officer of Evelo Biosciences, Inc. (Nasdaq: EVLO), a clinical-stage biotechnology company, effective September 1. Thorell brings over 25 years of finance and operations experience. She most recently served as Chief Accounting Officer of Centessa Pharmaceuticals and previously as Chief Financial Officer. Thorell also served as chief financial officer at Palladio Biosciences prior to its acquisition by Centessa. Prior to that, she spent over ten years at Realm Therapeutics in various roles of increasing responsibility, including Chief Financial Officer and Chief Operating Officer.

Understood

“We see inflation deeply entrenched in the economy, and what is unusual in this particular period is that demand and supply are affected by exogenous events, namely the pandemic and the war on Ukraine.”

—David Solomon, CEO of Goldman Sachs, said on the company’s second-quarter earnings conference call with investors Monday, as reported Fortune.

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