When the fundamentals are so critical to success, a review is helpful. In his book, What the CEO Wants You to Know, Ram Charan lists five core elements of business: cash, margin, velocity, growth, and customers. Each of these five factors are important. Each of these five factors are imperative for success. However, when a company identifies its most impacting few elements and evaluates success based on these areas, then management or stakeholders may have confidence that the other keys will also improve. Once these key areas are identified, management would do well to communicate them to all staff and to structure reviews and rewards based on an individual’s ability to advance the company in these areas.

A quick review of the core elements:

• Cash – A key factor in a wide range of scenarios including start-up initiatives (where burn-rate refers to this key element). Additionally, it is important in markets where growth opportunities are limited whether it is in an industry or broader economy. Cash is a key indicator of health in companies that have been loosely managed and need to or are in the process of a turn-around. Also a key factor for companies that are looking to impact their shareholders through cash dividends or buy shares back.
• Margin – Dealt with on a gross basis, benchmarking margin helps to be aware of trends that could be disruptive or positive in their long-term implications.
• Velocity – See Wal-Mart, Apple’s iPod, etc.
• Growth – To the old adage, if it’s not growing, it’s dying, there is a lot of merit here. For large system build-outs such as cellular networks, manufacturing, etc., this is a often a key factor.
• Customers – Often a key metric in volume operations whether brick and mortar, e-based, or service-oriented, customers are key. These may be broken down to number of visitors, ranking of customers in terms of quality, demographic, socio-economic scale, etc.

To managers: identify the few (1, 2, or 3) core elements that are key to your success and communicate them clearly and regularly.

To professional staff: understand from your manager or management team what the key indicators are and seek to find ways that you can positively impact these as you fulfill your role and responsibilities.

For more articles on related topics, visit GHP’s skills development resource page. Also, information is available about the western MBA program in Moscow available through GHP.

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