Total Performance indicator is a quantitative measure of the executive team's ability to effectively manage the resources of the firm. It considers both the historical performance of the firm as well as how well the firm is positioned to compete in the future. As such, it measures the action potential of the firm.
The index employs what is called a balanced scorecard to measure the executive team's performance. The most important measure is the team's financial performance, and thus its ability to create wealth for the investors. However, the focus on current profits has caused many executives to stress the present at the expense of the future.
The long-term viability of the firm requires that the executive team be good at managing not only the firm's profitability and marketing activities but also investments in the future. These expenses might depress the creation of wealth for the firm, but are vital to creating new products and markets.
In short, top managers must be good at managing all aspects of the firm. The balanced scorecard puts this perspective into practice. It focuses attention on multiple performance measures, and thus multiple decision areas. None can be ignored or downplayed. The best managers will be strong in all areas measured.
The Total Business Performance measure is computed by multiplying several indicators of business performance. This model underscores the importance of all measures. This is because any strength or weakness will have multiple effects on the final outcome, the Action Potential of the Firm.
The following is a summary of the measure of the firm's Total Business Performance and its key performance indicators. The computational details follow. Note that a negative score in any of these indicators will result in a Total Performance of "0".
Primary segment: Innovator
Secondary segment: Workhorse
Total Performance = Financial Performance * Market Performance * Marketing Effectiveness * Investments in the Firm's Future * Creation of Wealth
= 24.248 * 0.120 * 0.628 * 3.027 * 0.933
= 5.157
Financial Performance: 24.248
Market Performance: 0.120
Marketing Effectiveness: 0.628
Investments in the Firm's Future: 3.027
Creation of Wealth: 0.933