Metrics That Matter Revisited: Elevate Your Playbook

Private Equity (PE) firms face pressure to deliver strong returns while managing downside risk. This necessitates a focus on performance metrics that measure value creation and overall health. However, the reporting shared by portfolio companies is often non-standardized and fails to provide real-time insights, leading to missed opportunities and inefficiencies. 

PE firms that adopt the Key Performance Index (KPI) Value Creation Playbook (The Playbook) can align portfolio companies with metrics that matter, establish a robust mechanism for reporting performance, and drive speed to insight. As a result, they can more effectively allocate resources, make informed investment decisions, and grow sustainably, ultimately gaining a competitive edge and maximizing returns.

Leveraging Technology: Empower Your KPI Value Creation Playbook

The Playbook is enabled by powerful technologies, including Enterprise Resource Planning (ERP) and Enterprise Performance Management (EPM) systems and more recently, AI. These technologies offer transformative possibilities when harnessed and applied tactically. They can enable management to rapidly understand a company’s value drivers, identify insightful metrics, and facilitate effective data integration, resulting in informed decision-making. Implementing The Playbook involves aligning KPIs with strategic goals and objectives, integrating advanced tools, and fostering continuous improvement through a metrics-driven culture.

Constructing The Playbook: A Tactical Guide for PE Firms

The Playbook serves as a tactical guide for PE firms seeking to realize the full potential of their data assets. It outlines a phased approach to building a robust KPI framework that supports strategic goals and drives value creation across the portfolio.

Phase 1: Evaluate Your Data Landscape

1. Assess Current Data: Data is ubiquitous, but the ability to distill meaningful information from the vast reservoir available is core to The Playbook’s successful implementation. The first step is understanding the breadth and depth of a company’s data sources. 
2. Acknowledge Current Reporting Shortcomings: Reporting typically only represents a moment-in-time historical view rather than a glimpse into the future. Such reports are often plagued by latency and disconnect, failing to capture the dynamic nature of business environments. While visually appealing, static dashboards rarely offer the agility needed to respond to real-time challenges. Consequently, firms face the risk of strategic decisions being made on obsolete or incomplete data. 
3. Gauge Technology Utilization: Static, retrospective reporting is often a result of poor technology utilization. Firms must leverage technologies that can transform data into actionable insights. 

Questions for Consideration:

• Do you understand the universe of data that your company has access to? Does a systems mapping exist, including data inputs and outputs?
• What data is crucial to success in your business? Who decides what constitutes success?
• What capabilities does your company currently have, and what must be done to improve them?

Phase 2: Align Value Drivers with Strategic Goals

1. Understand the Business Model: The investment thesis should guide the business model and expose the levers to improve the business. Pricing strategy, cost structure, customer acquisition channels, and competitive advantages are often a good starting point.
2. Align Drivers to the Strategic Goals and Objectives: Revisit and confirm the business strategy, management focus areas, and growth initiatives. Link the initiatives and drivers to the company's core competencies and market opportunities, ensuring they are achievable and translate to value creation. 

Questions for Consideration:

• What value does your business provide to customers and stakeholders?
• Do you currently quantify value creation?
• How is reporting information used to drive behavior?

Phase 3: Align Metrics with Business Drivers

1. Capture Forward-Looking Insights: Focus on metrics correlating with strategic objectives and value creation. These metrics encompass traditional financial indicators as well as operational, cultural, and customer-centric dimensions to offer a full view of a company’s health. 
2. Predictive Analytics: Use predictive analytics to back-test the metrics, evaluating their correlation and determining whether each metric is worth tracking for future growth.
3. Set Targets and Benchmarks: Communicate strategic goals with a quantitative frame to provide clear targets broken down by entity Company level. This structured approach enables all levels of the workforce to collectively execute toward the ultimate goals.

Questions for Consideration:

• How do KPIs match the company’s unique business? Are KPIs forward-looking?
• Are you aligned on the top 3-4 KPIs for the business?
• Are KPIs aligned with employee goals and incentives?

Phase 4: Implement and Optimize KPIs

1. Integrate KPI Insights into Strategic Decision-Making: Embed KPI insights into board reporting and strategic planning processes to inform investment decisions and performance optimization. 
2. Establish Continuous Monitoring and Feedback Loop: Implement mechanisms to track KPI, metric performance, and impact. Develop feedback loops for continuous improvement at every level of the company.
3. Leverage Technology and Automation: Technology is evolving rapidly. The convergence of AI, Enterprise Resource Planning (ERP), and Enterprise Performance Management (EPM) systems heralds a new era of data integration and analysis to more easily align operational metrics with financial performance indicators. When utilized and implemented well, these technologies create a unified, adaptive environment where data flows seamlessly, and insights can be uncovered in near real-time. 

Questions for Consideration:

• Are leaders articulating the KPIs clearly and intentionally with stakeholders?
• Are KPIs being used to drive necessary improvements?

The Strategic Advantage of the KPI Value Creation Playbook

By following the KPI Value Creation Playbook, PE firms can harness the power of KPIs and advanced technologies to drive value creation. This comprehensive approach ensures wider visibility into organizational performance and causation, allowing management to employ an agile approach to strategic goal attainment for enhanced performance, sustainable growth, and superior returns. The Playbook positions PE firms to anticipate and react to market changes and drive value creation.

Firms that focus on the right metrics and utilize widely available tools can unlock the full potential of their portfolio companies, paving the way for long-term success. The Playbook is not just a tool for measurement; it is a strategic pathway to enable excellence in PE portfolio companies.

Unlocking Potential with The Ankura Advantage

Ankura’s Office of the CFO® can support the design and implementation of the KPI Value Creation Playbook. With years of experience supporting PE portfolio companies, expertise in value creation, and a hands-on approach, Ankura OCFO® can bring a unique and deeply informed perspective that harnesses the efficient future state and current challenges. We stand ready to extract, build, and connect The KPI Value Creation Playbook. 

Explore more on the topic: Metrics That Matter: Managing to Results for Private Capital Portfolio Companies, Corey Smith, Angela Cinefro, Elliot Fuhr, Ankur Sheth

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^{© Copyright 2025. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.}