Measures that matter: Non‐financial performance

Top management routinely accuses the investment community of being too “short‐term, bottom‐line‐oriented” in its assessments of share value. The difficulty of making strategic investments in such an environment is widely bemoaned. A new study by the Ernst & Young Center for Business Innovation, however, yields a surprising finding: major investors' decisions are in fact significantly influenced by non‐financial performance information. It turns out that over a third of the typical investor's allocation decision is attributable not to the Financials but to other information on performance areas perceived to be leading indicators of future profitability. These include perceptions of a company's strategic vision and the company's ability to execute against it, the credibility of management, the prospects of innovations in the pipeline, the ability to attract talented people, and so on.