Newsletter Archive
February 2007
ORGANIZATIONAL CAPABILITY AND WALL STREET
Research has found that the importance of quarterly earnings in predicting future stock prices has declined markedly, paradoxically even as firms take a tremendous beating in the market for missing their quarterly earnings targets by as little as a penny.
What's going on here? First, intangible assets have become the primary source of wealth creation, and hence have become primary determinants of both future earnings and stock prices. Second, because analysts don't have good measures of intangible assets, any metrics that actually are readily available to them (even things like minor differences between expected and actual quarterly earnings) have a disproportionate impact on stock prices in the short-term.
The time is right for leaders within publicly-traded organizations to actively manage the conversation with Wall Street analysts, rather than being managed by them. In order to do so, they'll need systems for measuring, reporting, and managing those key aspects of organizational capability that are critical to future productivity and profitability.
Balanced scorecard efforts typically fall short of the mark
in this regard, particularly in the domain of "human capital." But
this need not be the case. The predictive metrics that are needed
to fill this hole are now readily available. For additional information
on this topic, download Laurie Bassi's presentation "Wall
Street & Human Capital: From Problem to Solution".
LAUNCHING THE McBASSI EDUCATION CONSORTIUM
Superintendents and school boards have a problem that is similar to the one CEOs face (as outlined above). They need forward-looking, predictive measures of student achievement that will enable them to more effectively manage the key process and practices that generate student growth (rather than relying on backward-looking measures such as annual state standardized tests).
For the past five years, McBassi has been working on measurement systems for addressing this challenge in the education sector (for a longer discussion, download "The Business of Learning".
In April 2007, a consortium of school districts will be simultaneously deploying the McBassi measurement methodology for the purpose of improving student achievement within their districts. For additional information on the consortium, please contact us.