Question 4

In your experience, what is the linkage between financial measures of performance like shareholder value, and non-financial measures like customer satisfaction and employee satisfaction?

I referred a little bit to that earlier when I talked about the fact that there are some non-financial measurements that do have a direct correlation on the financial performance of the organization. Again, recall what I said before, if I was able to improve customer satisfaction at IBM by one percentage point, it was worth $257 million of additional revenue, at Johnson Controls it was $13 million in additional revenue. If you take a look at correlation between customer satisfaction and stock prices, for example, using 28 data points there was a direct correlation between customer satisfaction and stock price at IBM, at Nortel, at AT&T, and at Johnson Controls. Those are the only organizations that I had a direct exposure to, in order to do the analysis, but I can’t imagine it’s different outside the organizations. Also, we did correlation analysis at IBM to talk about the relationship of non-financial measurements, employee satisfaction as an example. You would be hard-pressed within an organization to say that if you’ve got poor employee satisfaction and high turnover, how you could be efficient, and [how] it wouldn’t have an impact on the bottom line, i.e. on the expenses to hire, train, and so forth for employees.