Considering the utility of Altman's <i>Z‐</i>score as a strategic assessment and performance management tool

Abstract

Purpose The purpose of this article is to provide commentary on the utility of Altman's Z ‐score as a strategic assessment and performance management tool. This possibility is suggested in the recently published book Measuring Organizational Performance – Metrics for Entrepreneurship and Strategic Management Research (Northampton, MA: Edward Elgar, 2006) by Robert B. Carton and Charles W. Hofer. Design/methodology/approach This paper is a corporate manager's analysis of the utility of Altman's Z ‐score as a strategic assessment and performance management tool based on published research, with suggestions for further research. Findings The analysis supports Carton and Hofer's findings with respect to the utility of the Z ‐score as a strategic assessment and performance management tool. Practical implications While the Z‐score is both popular and widely used in the fields of credit risk analysis, distressed investing, M&amp;A target analysis, and turnaround management it has received relatively little attention as a strategic assessment and performance management tool. The findings of Carton and Hofer's study, in conjunction with the impressive results achieved by GTI Corporation, suggest that applying the Z ‐score in strategy and performance management may also be warranted, especially after more research is undertaken. Originality/value This article offers a manager's perspective on new research that indicates the potential of a popular financial distress metric to provide insight in the areas of entrepreneurship and strategic management.