Measuring Long Term Superior Performance: Or How to Compare Apples with Oranges

Abstract

The measurement of company performance poses several challenges. Three critical ones are: balancing short-term and long-term performance, the need to use multiple measures to capture the broad meaning of performance, and finding the right peer comparators. We argue that truly sustainable long term superior performance should be observed over an extended period, and in comparison with industry peers from around the world. We describe how a technique, frontier analysis, can be applied to the issue of measuring performance. We apply frontier analysis to several companies in the oil industry to demonstrate how their performance can be ranked even when using eight divergent measures. We also apply the technique to identify which of 215 of the largest UK publicly-listed companies in 38 industries can qualify as long term superior performers. We find and name 28 qualifying companies in 19 industries.