Published by:
Harvard Business Publishing
Length: 11 pages
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Abstract
The classic business ratios for measuring performance--return on equity, return on assets, and return on sales, to name a few--may be useful. But none is designed specifically to reflect how well a company implements its strategy. Enter return on management (ROM), a new ratio that gauges the payback from a company''s scarcest resource: managers'' time and energy. Unlike other business ratios, ROM is a rough estimate, not an exact percentage. Still, it is expressed like other business ratios by an equation in which the output is maximized by a high numerator and a low denominator: Knowing which organizational factors conspire against or work to maximize an organization''s productive energy will help managers calculate a rough measure for this equation. Harvard Business School Professor Robert Simons and HBS doctoral student Antonio Davila offer five "acid tests" to help managers measure their company''s ROM.
About
Abstract
The classic business ratios for measuring performance--return on equity, return on assets, and return on sales, to name a few--may be useful. But none is designed specifically to reflect how well a company implements its strategy. Enter return on management (ROM), a new ratio that gauges the payback from a company''s scarcest resource: managers'' time and energy. Unlike other business ratios, ROM is a rough estimate, not an exact percentage. Still, it is expressed like other business ratios by an equation in which the output is maximized by a high numerator and a low denominator: Knowing which organizational factors conspire against or work to maximize an organization''s productive energy will help managers calculate a rough measure for this equation. Harvard Business School Professor Robert Simons and HBS doctoral student Antonio Davila offer five "acid tests" to help managers measure their company''s ROM.