Transcript
"We like to espouse the concept of conscience deviation from market norms. So the three areas where you can consciously deviate from market norms: One would be with peer group selection, so typically from a market standpoint you establish a peer group of comparable companies for both an industry and size standpoint. We would argue that companies establish multiple reference points in terms of peer group development. These could include companies that you aspire to be at one point in your life as a company. If you're trying to pursue more of an innovation strategy, these could be around companies that look at innovation as a key way to drive differentiation in the marketplace.
The second area would be around performance metrics. It's not the defaulting to market norms, which would dictate that you use EPS, Earnings per Share, operating income, or revenue as a well-established metric, just because those are common in the marketplace. We would argue to look more at a balance between lead and lag metrics. EPS and revenue, they're more lag metrics, they reflect the execution on existing products and services. We would argue for companies to use more of a balance with lead metrics, which reflect strategic value drivers, for long-term value creation.
The third area would be around the area of performance measurement periods. This would argue that typically you look at one- or three-year measurement periods as the norm. We would argue that companies could look at shorter measurement periods, or longer measurement periods, depending on their lifecycle of their business, and what they're trying to accomplish."
