The gold standard:
Neutralize business cycles and distortions to reveal real performance.
For effective corporate governance, leadership needs the right picture of financial performance. Yet this picture is often distorted by business cycles, exchange rate fluctuations and other external factors. For over 20 years, Obermatt has therefore focused on relative or indexed performance measurement.
Indexed performance measurement eliminates external influences as well as extraordinary events such as mergers & acquisitions and restructuring programs. Indexed performance measurement steers the company through market comparisons. Performance is assessed based on deviations, not from targets, but from the market, so that effective performance becomes visible.
Relative performance measurement is used in compensation, ESG reporting and strategic controlling, so companies can be managed based on effective facts.
52% of Swiss listed companies already use Obermatt's indexed performance measurement.
Strategy Controlling
- Everyone is in the same boat with the same goal: to beat the competition.
- Performance becomes visible and avoids costly budget negotiations.
- External disruptions are neutralized in the performance report.
Executive Compensation
- Payouts become more reliable, retention risks are reduced.
- Compensation remains motivating even during economic downturns and avoids unrealistic compensation expectations after boom phases. The transparency leads to broader acceptance, internally and externally, and reduces reputational risks.
- Growth-inhibiting target negotiations are avoided.
ESG Report / Triple Bottom Line
- The position relative to peers shows the real ESG performance, even when the industry suffers from sustainability weaknesses, such as the tobacco industry.
- The indexed Triple Bottom Line shows the real performance across all performance indicators, a well-founded management instrument.
The surprising result
The chart shows the company compared to the market (the median is the blue middle line; the two blue bars mark 50% of the market from the first quartile (25th percentile) to the third quartile (75th percentile)).
Interesting: You can see that the performance relative or indexed to the market was best in year 3, even though this was the lowest absolute number. Year 5 with the second-highest number (2.0%) was the worst year.
Displayed on the 0% - 200% scale of the Triple Bottom Line method (median = 100%), this becomes immediately apparent: Year 3 is the best and year 5 is the worst:
Because the 0% to 200% scale is used again, indexed or relative performance can be integrated directly into the Triple Bottom Line, regardless of the type of metric. Financial metrics such as share returns and revenue growth can be measured relatively just as well as ESG metrics.
In the ESG area, CDP (Carbon Disclosure Project) metrics such as emissions, waste, water consumption and energy efficiency are typically measured relative to comparable companies.
What you receive
On the gold standard path of indexed performance measurement, Obermatt recommends the following steps to achieve a pragmatic and concrete result.
| The steps | ESG, Triple Bottom Line | Strategy | Compensation |
|---|---|---|---|
| Defining the peer group, the peer universe | |||
| Selecting the relevant financial and/or ESG metrics | |||
| Target-setting for each metric: relative to plan, relative to the past, or relative to peers | |||
| Determining weighting, scaling and measurement periods | |||
| Calibrating the scaling of target compensation and defining the compensation function | |||
| Documentation of the compensation regulations: periodicity of compensation programs (STI and LTI) |
The master of performance measurement
Obermatt has refined performance measurement for over 20 years and holds a market share of 52% in indexed performance measurement of Swiss listed companies, the majority of which have been clients for many years. Obermatt has a unique data set and methodology, published in award-winning books and dozens of articles.
Ready for better performance measurement?
Let us shape your performance story together.
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