Financial Planning & Analysis and Performance Management

10MEASURING AND DRIVING WHAT'S IMPORTANTInnovation, Agility, and Human Capital

There is a strong tendency in FP&A and performance management (PM) to focus on areas and activities that are easy to measure. In addition, we also tend focus on those areas that are traditionally measured, principally financial and operational measures.

In this chapter, we provide an introduction to critical areas that are difficult to measure but of vital importance to today's challenging environment:

• Innovation
• Agility
• Human capital management (HCM)

While difficult to measure and to directly link to overall performance and value creation, there is little doubt of the role they play in an organization's success.

INNOVATION

Innovation has been hailed as a magic source of value. In fact, it has been the basis for value creation in a number of enterprises over the past 25 years. As an intangible, innovation is difficult to measure.

While difficult to quantify, key conditions and enablers of innovation can indeed be measured. Innovation can be aimed at product development, business processes, or business models – or at a combination of these. In particular, measurement of innovation requires identifying key performance indicators of critical business processes and activities that are targets for innovative practices, for example radical improvements in time to market. It is also possible to identify and assess certain conditions that tend to support and encourage innovations.

Types of Innovation ...