In search of "Common Sense"

Jan 19, 2009

Language of Metrics – Stake-holder Trust (Part 3)

Any organization that aspires to survive on a long term basis has to strive to be perceived as trustworthy by all its stakeholders – Investors, Customers, Associates and Society. It needs to strive to be actually held in very high regard by each of the stakeholders. Ignoring anyone of the stakeholder will in the long run result in others also starting to distrust the organization.

TRUST is very abstract and very difficult to put one's hands around. We can only look at signs of trust or distrust.

To me TRUST and SIMPLE are two faces of the same coin. SIMPLE inspires TRUST and what we TRUST on closer inspection turns out to be SIMPLE.

We resort to have an intricate web of metrics to keep a tab on how the organization is faring with regards to expectations of different stakeholders. We also come across frequent internal and external surveys conducted amongst a sample or the entire stakeholder population to gauge the health of relationship with the stakeholder community. The survey results are fed into involved set of formulae to calculate various indices e.g. Associate Delight Index, Customer Delight Index (both for internal and external). Apart from this, organizations nominate themselves to external awards given out by ostensibly independent and un-interested agencies. Winning an award is considered to reflect organization having reached the pinnacle of glory and have a rub-off on the image amongst the stakeholders.

My belief is that all the above is started in good faith initially. Over a period of time, managers / leaders fail at re-evaluating the efficacy of these steps and take measures to replace with more relevant and appropriate steps. Continuity provides a semblance of safety due to familiarity. After an initial period of euphoria, conducting these surveys and publishing the indices becomes a routine.

The following can be considered a basics or hygiene metrics that keep the real picture of stakeholder relationship rooted to firm ground. The metrics are by nature 'Lag' measures:

  1. Investors
    1. Investors' basic interest is to get returns over a period of time. They allot a portion of their investible funds to an organization's shares with an expectation of returns. Simple metric is the consistency and growth of the "Return on Equity".
    2. Apart from this all the investor related interests are captured in the P/E multiple that the company share commands on the stock exchange in comparison with other companies in the same or related sectors.
  2. Customers
    1. Growth rate of revenues in comparison with the competition and market segment per-se.
    2. Percentage of customers giving repeat business
    3. Percentage of total revenues accounted by existing customers
    4. Price premium enjoyed by the firm's products and services compared to competition
    5. Percentage of existing customers eschewing competitive bidding on a large scale when the service business contract is up for renewal.
  3. Associates
    1. Attrition
    2. Presence of 360 degree appraisal at all levels
    3. Presence of credible internal fora where associate involvement is sought and valued. The essence here is credibility and is reflected by the number of suggestions given by employees implemented in the right spirit.
    4. Percentage of new recruitment attributed to employee referrals
    5. Percentage of top positions filled by internally promoted employees
    6. If the company visits campuses for entry level recruitment, then the priority given to it in the campus recruitment process reflected by the slot made available on first, second or later day. This is in most parts a reflection of the entry level salaries offered by the company in comparison with other organizations who are in the fray for attracting fresh talent off the campus.
  4. Society / Ecosystem
    1. Extent of integration of the company's processes with the vendors' / suppliers'. This indicates the confidence of the organization in opening itself to transparent involvement of the vendors or the TRUST that the company is ready to lend to others.
    2. Supplier selection based on reliability, quality and responsiveness and not just on price.

There is a case of demonstrating seriousness in winning TRUST of all the stakeholders concerned.

There are no easy solutions and one can debate on the approach endlessly.

The idea here is to have a comprehensive set of 'Lag' measures which cater to all the stakeholders and at the same time the set is so SIMPLE and Common-Sense that it can be understood by each and everyone in the organization. The above set has 15 metrics and the number can at best be stretched to 20 but as mentioned earlier, having more and complex set does not ensure completeness but more confusion.

1 comment:

  1. HBR Editors' Blog

    Rebuilding Trust: Why Capping Salaries Isn't Enough
    3:00 PM Thursday February 5, 2009
    by Diane Coutu