Week 3 DiscussionCOLLAPSE
Measuring What Matters
There is an adage in business that says, “You get what you measure.” This suggests that we must introduce performance tracking metrics if we want to improve business results like increasing productivity, mitigating costs, or improving employee engagement.
- What is an important performance tracking metric that your company uses, and what is the likely business result they are trying to influence (such as increasing revenue, lowering costs, managing risks, etc.)?
- Briefly describe how your company calculates and communicates this metric, and share your opinion on the extent to which this performance tracking is helping to improve business results.
- Share your ideas on how else the company could improve this performance tracking process.
Post your initial response by Wednesday, midnight of your time zone, and reply to at least 2 of your classmates’ initial posts by Sunday, midnight of your time zone.
- The CFO Guidebook, Chapter 5: Performance Management
- Read 10-K Reports, Item 1A Risk Factors, for Assignment 1 in Assignment Resources
- Read Morningstar Analyst Reports in Assignment Resources
- Visit www.Morningstar.com
Additional Resources
1st person to respond to
Keaton,
- What is an important performance tracking metric that your company uses, and what is the likely business result they are trying to influence (such as increasing revenue, lowering costs, managing risks, etc.)?
One of the most important performance tracking metrics we use at Wolf Creek is First Aids and OSHA Recordable injuries. Safety is the number one concern at our site and that includes plant, personnel, and public safety. The reason we track these things is so that we can see how well we are performing against ourselves and other plants. The safer we are, the less injuries and the more likely we are managing risk in other areas.
- Briefly describe how your company calculates and communicates this metric, and share your opinion on the extent to which this performance tracking is helping to improve business results.
A weekly safety summary is sent out and a daily tracker is provided on the front page of our Operational Focus sheets that we go over every morning. Bringing safety to the front of the discussion every day in our morning meetings helps improve our work by keeping us engaged in a safety mindset. If we always have safety at the front of our minds, then the more likely we will stop when unsure and manage risk when performing daily tasks. Safety in the workplace reduces the risk of employee fatalities and injuries, as well as increase productivity (1).
- Share your ideas on how else the company could improve this performance tracking process.
The company already does a very good job with the performance tracking process. However, I think that the safety program could benefit from some incentive programs to help further engagement in the safety mentality.
Thanks for reading,
-Keaton
Reference:
2nd person to respond to
Thiago Andrade
Hello Professor JP and Classmates
What is an important performance tracking metrics that your company uses, and what is the likely business result they are trying to influence (such as increasing revenue, lowering costs, managing risks, etc.)?
The key to earning more profit and maximizing stockholders’ value is to have the right performance measures in place to identify areas of improvement. Halliburton uses many different tools and metrics when measuring performance, such as Trend Analysis, Comparative Analysis, Gross Profit, Fully Burdened Operating Income (FBOI), Quarterly conference call, Vehicle Incident Rate (VIR), Cash Value Added (CVA), and Net Operating Value Added NOVA.
Briefly describe how your company calculates and communicates this metric, and share your opinion on the extent to which this performance tracking is helping to improve business results.
CVA and NOVA use information from income statements, the balance sheet, and cash flow statements. Halliburton uses CVA as a performance measure that indicates how much additional financial value the company creates for shareholders as a return on their investment. There is a strong link between CVA and stock price appreciation. NOVA is a modified form of CVA for divisions and regions. They are both calculated by taking operating cash flow less a capital charge, but the items that make up the capital charge for NOVA are slightly different from the items included for CVA. The NOVA capital charge is adjusted to fit only items under direct or indirect Division or Region control. Halliburton communicates the results quarterly in the Earning calls and Town Halls. The executives briefly explain the business cycle and performance, showing the results comparing regions and departments and what is expected in the near future, leaving the last minutes open for questions.
Share your ideas on how else the company could improve this performance tracking process.
Halliburton does a great job in the performance tracking process. However, there is always room for improvement. My suggestion is to train more people in financing basics, which opens their minds and gives them a better understanding of the language of the business, increasing their performance. As Jack said, too often, we measure everything and understand nothing.
Sincerely
Thiago Andrade
References:
- Delivering Financial Performance. Halliburton Internal Course.
- JWI513, Financial Management II. Week 3. Lecture Notes.
