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SCMP Reporter

Hong Kong firms are overly reliant on financial indicators in tracking company performance and lag behind their US and European counterparts in taking a balanced approach, according to Danny Lau, managing director of Deloitte & Touche Management Solutions.

In a recent survey of second-tier companies in Hong Kong, including listed firms, Deloitte found that company focus was skewed towards customer service.

Thirty one per cent of companies evaluated themselves as faring best in customer service, with proper performance measurement tools in place, the survey found. But 90 per cent neglected areas such as employee education, organisational growth and internal processes.

Mr Lau said local companies could be commended most for their 'customer is king' approach and their ability to adapt in a highly competitive environment. But with most resources invested in customer service, other areas were being overlooked.

He said the difficult economic times that set in two years ago were compelling companies to rethink their strengths, strategies and the allocation of resources.

' 'Customer is king' has to be supported by good co-ordination between departments. A company without a balanced performance management system may compromise overall competitiveness and development,' Mr Lau said.

Dramatic changes in the economic environment have led to downsizing and delayering across all industries, adding to the need to streamline company operations and increase efficiency.

Companies needed to realign their resources in order to move forward, Mr Lau said.

'This is an ideal time for companies to focus on improving themselves internally while the market may be slow, to prepare themselves for the future pick up,' he said.

Mr Lau said an increasing need for accountability meant companies should incorporate management tools that gave an accurate view of the company's non-financial performance. 'This gives a 'big picture' of how the organisation is performing and whether its strategies have been converted into action,' Mr Lau said.

He said some Hong Kong companies who were aware of the need for a 'holistic' management approach had not yet made any moves because they did not know where to begin.

Balanced performance management also contains a high degree of transparency, requiring companies to be open about their purpose, strategies, and areas in which they are excelling or lagging.

Most Hong Kong companies are family-style organisations with patriarchal management systems, however, and are not ready to introduce such changes.

'Such organisations may not be so eager to have the degree of transparency that is required for a balanced performance management system,' Mr Lau said.

Internal processes and employee education were also regarded as back-office jobs by Hong Kong firms, he said, although these areas had been proven to contribute to overall growth.

But in the current difficult economic climate, companies are being compelled to rethink their strategies.

'High unemployment, low economic growth, weak markets - because of all these now, companies are more interested in looking at their management systems and how to improve the organisation itself,' Mr Lau said.

'Before that business would just roll in even if there was a certain degree of inefficiency in the way companies were run.'

A shrinking economy means streamlining and a rise in mergers and acquisitions, adding to the need for sound management to aid structural change. Companies undergoing a merger, for example, would need to ensure strategies were aligned in the new entity, Mr Lau said.

He said companies expanding into the mainland would also find sound internal management systems were necessary to have a better grip on the processes and performances of their subsidiaries.



Balanced approach manages best