Impact investors aim to achieve measurable financial returns while maintaining positive social and environmental impacts. Recent empirical research has shown that value investors consider Environmental, Social, and Governance (ESG) practices in their investment decision-making processes, although the emphasis on these indicators varies across industries.
However, impact investing is not a new concept. In fact, it could be traced back to 1928 when the first screened investment fund was established in the United States. As environmental awareness grew, the concept of responsible investing gained more traction within the investment community. This trend continued to evolve until the rise of Stakeholder Capitalism Theory in the 1950s and 1960s, which advocated maximizing value for all stakeholders, including customers, employees, suppliers, and local communities.
During the ’60s and ’70s, socially conscious investors began avoiding funds with investments in industries like tobacco or weapons. Presently, many companies are embracing balanced performance goals known as the Triple Bottom Line (TBL). Some investors are even willing to pay a premium for companies demonstrating positive ESG impacts, indicating a growing preference for environmentally and socially responsible investments.
Given the varying ESG priorities across sectors, there is no one-size-fits-all strategy or performance measures to be adopted by companies that want to attract and retain value investors and their equity capital. To illustrate this, former Forbes staff writer Kathryn Dill said, “Certain indicators are prioritized over others across industries. For example, safety rankings are not particularly important to banks, as the financial sector work doesn’t pose physical danger. But safety performance is an important measure of sustainability in the transportation industry, where physical well-being can be at stake”. Henceforth, strategists and performance management professionals may need to emphasize specific aspects of ESG based on their investors’ preferences, as shown in the figure below:
Energy Sector: Due to the energy industry’s inherently high carbonated emissions and the amount of waste generated and water used, strategists within this sector should focus on initiatives related to lowering CO2 Emissions, material use, waste production, and water usage. To measure this, they may use KPIs such as % CO2 reduction, $ Material waste, and # Water usage reduction, respectively. In this regard, the environmental aspect of ESG takes precedence.
Consumer Sector: Similar to the energy sector, there is an emphasis in the consumer sector related to reducing emissions, material use, and waste production as part of the environmental dimension of ESG. However, this is in addition to the need for further focus on decent labor practices—falling under in the social dimension of space of their ESG strategy—which could be measured using the # Labor Satisfaction Index.
Financial and Insurance Sectors: In these sectors, organizational culture, diversity, and inclusion matter with regards to the environmental dimension. Meanwhile, governance structures, advocacies, and business ethics matter in the governance dimension. The potential KPIs used in these industries may include: # Culture Profile Index, % Employees trained in business ethics and compliance, # iNPS, and # CGI.
Pharmaceutical and Medical Sectors: Strategists in these sectors need to worry about community impact and labor practices, which fall under the social dimension. They must also focus on business ethics in the governance dimension. Candidate KPIs here may include # Culture Profile Index and $ CSI spending.
All the strategic themes and underlying indicators proposed above should only be considered guides at best. A better approach is for companies to communicate with their communities and involve stakeholders in their policies, decisions, and operations to cultivate a fully supportive investment strategy implementation system.
In conclusion, performance management professionals should collaborate closely with strategists to align sustainability objectives and KPIs with strategic initiatives through cascading and appropriate KPIselection techniques, regular measurement frameworks such as the strategic scorecard, and implementation of performance improvement best practices such as regular performance review meetings which are all crucial to ensure that the company remains on track with its sustainability goals relevant to today’s investment community.
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About the Author
Tarig Malik is a seasoned Strategy and Performance Management Professional with extensive expertise in enhancing strategic, operational, and individual performance. Holding multiple certifications (SPP, C-BSC, C-OKR, C-KPI), Tarig leverages a strong academic foundation and practical experience to drive continuous improvement and foster a performance-oriented culture across various organizations.
Assessing core competencies should be a top priority for all organizations that want to distinguish themselves from the competition and seek to gain competitive advantage. The concept of core competencies gained traction in the ‘90s, when academicians C.K. Prahalad and Gary Hamel emphasized its importance in an article titled The Core Competence of Corporation, linking its utility to the organization’s evaluation of strengths and weaknesses.
In the article, Prahalad and Hamel assert that managers should consider identifying and evaluating the company’s unique skill sets and the technologies that distinguish them from their competitors to improve resource allocation, leverage current strengths, and select opportunities based on their alignment with those strengths. Thus, the conceptualization of core competencies has led to a rethinking of the concept of corporation, shifting the focus from restructuring and decluttering to identifying, cultivating, and exploiting competencies.Recognizing and leveraging these competencies can be the key to gaining a sustainable competitive advantage, yet this begs the question: how do we evaluate and identify core competencies?
Depending on the industry and organization, core competencies can vary among: buying power, company culture, customer service, partnerships, adaptability to product design, low product prices, or niche specializations. However, there are three criteria that Prahalad and Hamel consider of greatest importance when assessing core competencies: rare, challenging to imitate, and beneficial to customers. Those criteria represent the starting point for developing a competency framework.
For example, The University of Newcastle, Australia has developed a competencies framework to map individual competencies for professional staff, with the main competencies evaluated being: communication & engagement; organisational [sic] planning & project management; professional & technical expertise; business understanding & business intelligence; and creative & strategic thinking. Although the same principle applies when assessing competencies at the organizational level, the context is different because the focus shifts from the staff to the organization as a whole, covering processes, activities, technology, products, partnerships, culture, synergies, etc. Building a competency framework can be done in various ways as long as it respects the three criteria mentioned earlier.
Establishing a Core Competency Framework
Start by reviewing the organization’s foundation, like the mission and value statements. Afterward, identify competencies embedded into the foundation, create competency levels, and interview or survey internal staff and major clients. Last but not least, use valuable, rare, imitable, and organization (VRIO) analysis to measure competencies on a scale and determine which of them meet all the criteria to be considered core competencies. The final step should be to validate your core competency framework with both internal and external stakeholders, i.e. top management, managers, supervisors, employees, and partners.
Leveraging Core Competencies
Below are some examples of core competencies identified among globally recognized brands that shaped and consolidated their market position, helping them build an undeniable reputation. McDonald’s managed to stand out and achieve supremacy in the fast-food industry due to positive brand awareness and portfolio of trademarks, Netflix excels in innovation, brand equity, and product mix, while Starbucks’ core competencies include high-quality products, aesthetically appealing locations, and strong market position.
Here’s the bottom line: knowing where you stand out as an organization can impact the entire business, outlining areas of improvement, contributing to better resource allocation and driving innovation.
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“What constitutes a good KPI example?”, “How should KPIs be measured?”, “Which KPI is suitable for our organization?”, and “How well will employees understand and participate in tracking these KPIs?” These questions often loom large for companies seeking to select the right KPIs to accurately measure their performance and progress toward strategic objectives.
According to The KPI Institute’s (TKI) State of Strategy Management Practice Global Report – 2023, choosing the right KPIs ranks as the second most significant obstacle in strategy planning.
The report further reveals a concerning trend regarding the challenges associated with working with KPIs. Results indicate a surge in the hurdles associated with KPI selection compared to the previous year.
Several factors contribute to the challenging nature of KPI selection, including the need to align with strategic objectives; the common practice of defining initiatives before KPIs rather than defining KPIs and targets first and then developing initiatives to reach them; clearly differentiating between strategic and operational KPIs at the departmental level; and focusing too much on task-related KPIs rather than impact KPIs at the employee level.
3 stages of KPI selection
Selecting the right KPIs requires careful planning, analysis, and collaboration across various organizational areas. A rigorous KPI selection process typically involves three major stages (see Figure 1).
Your initial step in the process is to set a clear direction for KPI selection by recognizing the business objectives and goals that must be attained. This is essential to ensure that all personnel are working towards the same objectives and that progress can be efficiently monitored. This stage clarifies the necessity and application of measurement while precisely defining the intended purpose of the KPIs.
Next, conduct thorough research to gather a range of KPI examples. This serves a dual purpose: educating your internal stakeholders and fostering meaningful discussions about KPIs. This process, labelled as the KPI expo, entails compiling a comprehensive list of KPIs that will later be filtered based on a set of criteria.
You should review both internal and external data sources (see Figure 2) to leverage existing practices while also gaining insights into industry best practices. The KPI expo can include existing KPI lists from various organizational levels, which may already be in use or have been tested within your organization.
In the next stage, use intelligence gathering and conduct workshops to identify suitable KPIs. You can obtain insights from a diverse range of stakeholders, including clients, suppliers, employees, and management. This approach will foster broader buy-in and support.
TKI recommends the following selection methods to ensure the identification of relevant KPIs:
Question framing: Guide discussions toward relevant contexts and gather participant perspectives. Questions might include, “How many KPIs should we select?” or “What is the procedure for validating the selected KPIs?”
Value flow analysis: Examine the flow of value within business processes—from inputs to outcomes—to understand how objectives can be measured from different perspectives.
KPI balancing: Avoid narrow perspectives by selecting at least two complementary KPIs per objective, ensuring the measurement of both quantity and quality, subjectivity and objectivity, and efficiency and effectiveness.
Additionally, among the existing criteria in practice, TKI suggests using these five to ensure KPI relevancy:
Measurable: Can the KPI result be quantified?
Accessible: Can your organization feasibly gather the necessary data?
Specific: Does the KPI address a specific issue you have?
Actionable: Does it provide information for decision-making?
Balanced: Does it reflect various facets of performance?
The final stage in the KPI selection process involves monitoring the selected KPIs for necessary recalibrations. This can be achieved through two key activities: KPIs documentation and the performance review meeting.
KPI documentation can reveal limitations associated with data collection or reporting and gaps in the cost-benefit analysis of the KPI’s usage. Develop a comprehensive set of information for each selected KPI to facilitate data collection, reporting, and analysis.
Use a standard template, known as a KPI documentation form (see Figure 3), capturing each KPI’s details, definition, calculation formula, target, data source, reporting frequency, KPI owner, and data custodian. For more examples, you can explore TKI’s comprehensive repository of KPIs at smartKPIs.com.
The first reporting and performance review meeting for the new KPIs will reveal their utility for decision-making. It provides managers with an overview of how the KPIs cover all aspects of the business and helps identify necessary adjustments to the corporate scorecard, ensuring that the most relevant data is available for decision-making. Facilitate this first meeting through your strategy office.
After this final stage, your KPIs can be maintained as initially selected, recalibrated and updated, or even phased out of use based on their effectiveness and relevance to your organizational goals.
By following these stages, you can select and implement KPIs that accurately measure performance and support strategic objectives, ultimately driving your business success and growth.
Ready to take your KPI selection to the next level? Head over to the KPI section on our website for more in-depth articles and expert advice.
To be competitive in today’s fast-changing business environment, companies must continually increase efficiency. Reengineering workflows and business processes may help accomplish this. Business process reengineering is a company management technique that analyzes and redesigns workflows and processes. It completely restructures company operations to increase quality and improve costs, service, and speed. In the early 1990s, BPR was introduced to identify, evaluate, and restructure an organization’s essential business processes to eliminate redundancies, reduce mistakes, and boost efficiency. It rigorously analyzes, rethinks, and redesigns mission-delivery processes. Business process improvement (BPI) differs from BPR. The latter rejects rules and revamps processes from a high-level viewpoint, unlike BPI, which only makes incremental adjustments.
Identifying the Triggers for BPR
Figure 1. BPR Triggers | Source: Adapted from LinkedIn
Businesses may realize the need for BPR when they observe certain signs that indicate inefficiencies or bottlenecks in their current processes. Here are some key indicators that suggest a business might benefit from BPR:
Non-value-added activities: These are tasks or processes that do not add value to the business or its customers.
Too many hand-offs: Processes involving too many hand-offs or transfers between different departments or individuals can lead to delays and miscommunication.
Process bloat: Overly complex or bloated processes can slow down operations and reduce efficiency.
Difficulty in scaling up: This occurs when a business struggles to scale its operations due to inefficient or poorly integrated systems.
Repetitive tasks: These are characterized by employees finding themselves doing the same thing repeatedly, especially tasks that could be automated.
Process mapping: This involves defining the scope, purpose, and goal of the project, and then mapping out the sequence of tasks or steps that are performed to achieve a certain goal or outcome. This can help identify gaps, redundancies, bottlenecks, delays, errors, and rework in the workflow.
Analyzing current processes: This involves reviewing the current workflows and processes to identify inefficiencies and areas for improvement. This includes looking for common inefficiencies such as overproduction, waiting, transportation, overprocessing, and motion.
Identifying redundancies: Redundancies are any processes, procedures, roles, reports, meetings, or other business activities that are duplicative, outdated, or otherwise unnecessary. Once these are identified, they can subsequently be eliminated.
Using workflow analysis tools: Workflow analysis tools can help visualize, analyze, and improve business processes. These tools can identify inefficiencies, streamline operations, and automate manual tasks.
Implementing automation: Workflow automation tools can help streamline routine business processes for optimal efficiency. These tools can reduce busy work and optimize processes, allowing employees to focus on more important tasks.
Benefits of BPR
Improved collaboration: Optimized processes, particularly those that are automated, provide a centralized system for tracking tasks and sharing data. This shared access to information can improve collaboration among departments, reducing the risk of miscommunication and errors.
Enhanced productivity: Process optimization can lead to significant increases in operational efficiency. By streamlining processes and automating routine tasks, employees can work more effectively and deliver quality work in a timely manner.
Empowerment: Reengineered processes often involve redistributing power and authority among functions and levels, empowering individuals to think, interact, use judgment, and make decisions. This fosters innovation and creativity among employees, leading to better solutions to problems and faster problem-solving times.
In 2008, Domino’s stock price hit an all-time low, rendering it nearly bankrupt. The transformation began with a complete overhaul of its ingredients, recipes, and menu, but the real game-changer was its focus on digital transformation.
Domino’s focused on three key areas for its digital transformation: customer experience, data analytics, and technology infrastructure. The company implemented a unified digital platform that integrated online ordering, customer feedback, and delivery tracking.
One of the most significant steps in this transformation was the introduction of the “Pizza Tracker” technology in 2008, which kept customers updated on the progress of their orders. This innovation, along with others, changed the brand perception of Domino’s from a pizza delivery company to a technology-driven company.
By 2018, Domino’s overtook Pizza Hut as the largest pizza delivery company globally, with a market share of 18.6%. The company’s revenue grew from $1.4 billion to $3.5 billion, and its net income increased significantly. The company’s stock price also saw a dramatic increase, from around $3.00 a share in 2008 to $211 in 2018-2019.
In Conclusion
BPR is a critical component of any organization’s quest for maximum efficiency. By identifying and eliminating inefficiencies, streamlining processes, and fostering a culture of continuous improvement, organizations can successfully reengineer workflows, enabling them to stay competitive in today’s rapidly changing business landscape.
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Today’s fast-paced and rapidly changing business environment is characterized by uncertainty and the interdependence of economies, societies, and markets. Thus, organizations are facing numerous challenges that can threaten their ability to survive and thrive. According to the Harvard Business Review, the key forces stressing the business landscape include the pandemic and geopolitical instability along with other factors, such as technological disruption, climate change, and globalization. Unsurprisingly, given these difficulties, business leaders decided to focus on organizational resilience in order to adapt to this dynamic environment, leverage opportunities, and deliver sustainable performance improvement.
In a report from Cranfield School of Management, Professor David Denyer defines organizational resilience as the ability of an entity to anticipate, prepare for, respond to, and adapt to incremental change and sudden disruptions to survive and prosper. His paper underlines the idea that organizational resilience requires special control over multiple independent and redundant layers of protection for all critical assets (people, products, property, information) and compliance (standard operating procedures, processes, and training).
Organizations can increase their resilience by adopting various frameworks and models (see Figure 1).
To increase resilience, organizations should develop capabilities, competencies, and principles that are aligned with their chosen resilience framework or model. Some of the capabilities and competencies that can enhance resilience include leadership commitment, risk management, business continuity planning, incident response planning, communication, training, and awareness, according to Stephanie Duchek’s article from 2019. In addition, the six principles stated by Harvard Business Review for enhancing organizations and decision processes to become more resilient can be consulted (see Figure 2).
The International Consortium For Organizational Resilience (ICOR), a global consortium of business continuity and resilience professionals, developed a model based on ISO 22316. The model is composed of three dimensions (leadership & strategy, preparedness & managerial risk, and culture & behavior) with nine strategies directly subordinated to them and six sets of corresponding behaviors. One benefit of the ICOR model is its structured approach to resilience management, which can help organizations better understand their vulnerabilities and develop more effective risk mitigation and response plans. The model also emphasizes the importance of ongoing evaluation and improvement of resilience plans, which can help organizations stay ahead of evolving threats.
There are some limitations to the ICOR model that may not be suitable for all types of organizations— particularly smaller or less complex ones—because, in comparison with big enterprises, most SME owners do not have access to resilience training and tools or their employees are not involved in the development of strategies to increase an entity’s resilience, as stated by the International Labour Organization. Additionally, the model may not adequately account for potential cascading or interdependent risks.
Despite its limitations, the ICOR model is widely used to measure resilience in a variety of industries, including healthcare, transportation, and manufacturing. It is important to mention that this model is not used in most cases by itself, but rather in combination with one or more frameworks or models mentioned above, depending on the needs and the industry in which the organization operates.
To thrive in today’s tumultuous business environment, organizations must develop the capabilities and competencies necessary to anticipate, prepare for, and respond to disturbances effectively.
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