Nearly 3,000 UK firms of all sizes and from all sectors were surveyed and ranked in a Company Performance Index (CPI). The results show that in terms of added value the top third of firms out-perform the bottom two-thirds by £1,600 per worker per annum.
This means that if just 10 per cent of the UK’s lower performing firms moved to the performance levels of the top third of UK firms by acting on the recommendations in this report, the UK’s productivity growth rate would increase by 0.25 per cent per annum.
The year-long research project into performance and productivity has confirmed that the CPI accurately measures firm performance. It breaks the ‘code’ of company performance by measuring strategic drivers and their implementation across five core areas. The research also delved into the black box of the firm conducting over 20 case studies to understand the ‘how’ of high performance as well as the ‘what’.
CPI measures strategic effectiveness in the following areas: Customers and markets, Shareholders and governance systems, Stakeholder relationships, Human resource practices, Creativity and innovation management.
The share price performance of the listed firms at the top of the CPI index outperformed those at the bottom by 20 per cent over the last year. This strong correlation is evidence of the way in which high performing firms can deliver shareholder value along with high levels of performance in other areas of the CPI.
Furthermore, the CPI is a powerful reader of any company’s performance ‘code’. The survey evidence shows that over 25 per cent of the added value per employee is explained by the way the elements of the CPI plus basic factor inputs are combined and delivered.
The impact of the CPI on basic factor inputs explains 3 per cent of the difference in revenue growth across firms and 6 per cent of the difference in gross profit.
The five core clusters of the CPI have a powerful impact both on firm-level performance and on total factor productivity. Acting on basic factor inputs they explain 76 per cent of the difference in productivity across firms.
The five core areas of strategic inter-dependency captured by the CPI are translated into productive action through five ‘intangible’ factors of production.