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How Measurement Can Put Teeth Behind Stakeholder Capitalism

Thursday, February 11, 2021

By Marisa Walster, Senior Director

On January 26, global business leaders announced a commitment to the core Stakeholder Capitalism Metrics released by the World Economic Forum (WEF) and its International Business Council (IBC). This is just one example of a growing movement to put more teeth behind the idea of stakeholder capitalism — the notion that companies should add value not just to owners and shareholders, but also to customers, employees, and communities.

While the new WEF commitments do not hold leaders accountable to specific levels of stakeholder impact, simply reporting on these metrics is a powerful action. Performance management starts with metrics, or as the saying goes, “what gets measured, gets managed.” At the Financial Health Network, we believe this rings true for financial health.

FinHealth MAP: Performance Management for Financial Health Impact

In the Financial Health Network’s recently released FinHealth MAP, a core pillar of a mature financial health strategy is Performance. We define performance as a financial services organization holding itself accountable to financial health metrics: diagnosing financial health, designing solutions, and delivering on financial health impact. Like any company initiative, such as expanding to a new customer segment or reducing loan charge-offs, it is important to understand the current state of the problem, set a goal, and track progress toward that goal.

Taking the First Step: Measurement

In addition to defining the core pillars of a financial health strategy, FinHealth MAP outlines the phases of organizational maturity on the road to impact. The first step is to collect data. To solve any problem, you must first understand it. By collecting data on the financial health of their constituencies, organizations gain insight into the needs of their stakeholders, determine which products and programs are making a difference, and can create a roadmap for impact.

The FinHealth MAP white paper includes case studies of how multiple organizations are turning financial health metrics into action and impact. From a Financial Health Leader using the FinHealth Score® to benchmark its customers’ and employees’ financial health needs to a large credit union developing its own key performance indicators, these case studies demonstrate that financial health metrics are the building blocks to impact.

The new commitment to Stakeholder Capitalism Metrics by the WEF is the first step on a journey to improving the lives of all stakeholders – not just shareholders.

We hope you will join us on our journey of improving financial health for all. If you are interested in learning how to use financial health metrics or how you can work with us to advance financial health for all, we would love to hear from you. Contact Marisa Walster at mwalster@finhealthnetwork.org or read the report.

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