Corporations turning to non-financial performance to improve the bottom line: The Conference Board reports Stock market prices don't tell the full corporate story.

ADVANCE NEW YORK--(BUSINESS WIRE)--July 24, 1995--A growing number of U.S. and overseas corporations are turning to non-financial performance measures to track and enhance their success, according to a new Conference Board report.

"There is concern that traditional financial measures of corporate performance do not provide sufficient information about investments in vital intangibles, such as new quality processes and customer satisfaction," says Dr. Carolyn Brancato, The Conference Board's research director of corporate governance and strategy and author of the report. "Corporations feel that stock prices, while a time-honored barometer of corporate performances, don't always reflect the full value of the company because they are subject to fluctuations that may ignore fundamentals or even discourage effective long-term corporate strategies."

These newer performance measures, which incorporate both the financial and non-financial barometers, are being used to supplement more traditional quarterly and annual financial measures. While these tools are designed to give management a more comprehensive method to boost performance they also provide a better measure of the sustained value of the corporation.

The Conference Board study examines non-traditional measurements now being used by 10 leading companies in the U.S., U.K. and Australia. They include Polaroid Corporation, First Chicago Trust of New York, Kleinwort Benson Investment Management Ltd. (U.K.), Chase Manhattan Bank, Kellogg (Australia) Pty. Ltd., GenCorp, Pfizer Inc, Pitney Bowes Inc., Toyota USA and USG. The findings were developed by a Conference Board Working Group of international experts from the corporate, institutional investor, and regulatory communities.

In addition, in preparing this report, The Conference Board worked closely with the Royal Society for the encouragement of Arts, Manufactures & Commerce (RSA), which in June released its own study, Inquiry into Tomorrow's Company, of leading U.K. companies developing new valuation concepts.

Conference Board participating companies agree uniformly that the primary goal of corporate performance measurement programs is to find tools to better manage their businesses. Key performance measures pertaining to quality of output, customer satisfaction, intellectual capital, employee training and turnover, R&D investment and innovation, etc., are being used strategically and then converted into improvements in widely used financial results, such as sales, profits, and rate of return on investment.

Traditional accounting and financial measures were developed to meet regulatory and financial reporting requirements, not to run businesses. They are more effective in showing historic trends in how well corporate funds are being used than in charting the strategic direction of the business. Generally, financial measures are limited in helping companies develop long-term strategies because they are too historical; lack predictive power; do not capture key business changes until it is too late; reflect divisional, not cross-functional, processes within a company; and give inadequate consideration to difficult-to quantify resources, such as intellectual capital.

Source: New Corporate Performance Measures, Report No. 1118-95-RR, TCB 

(End of ADVANCE for release Monday, July 24, 1995)

CONTACT: The Conference Board

Carolyn Brancato, 212/339-0413