Perf Reporting
Perf Reporting
Perf Reporting
1 Preface
3 Introduction
6 Transparency
11
8 Information systems
11
12
12
13
14
17
References/further reading
19
1 Preface
2 Who should
read this report
3 Introduction
4 The principles of
5 The characteristics of good information
financial and
business reporting
The board should:
Set aims, policy constraints and
guidelines, objectives and broad
strategy, and then confirm these to
the executive management team.
Agree defined performance indicators.
Ensure that it is receiving all the key
information to enable it to probe
and question; focus on critical success
areas and key performance
indicators; and identify appropriate
management actions where there are
positive or negative variances from
projected performance.
Periodically review the information it
receives to ensure that it is getting
what it needs and that all board
members fully understand it. The
board should guard against being
inundated with an unnecessary
amount of data that provides little or
no information and which may
prevent it from taking action.
Ensure that the performance reporting
process links objectives, principles and
practices to its needs.
The climate of fear and uncertainty that the Enron scandal created
may mean that some managers are tempted to increase the amount
of information they provide to the board for fear of omitting
something relevant. But boards should not be burdened with an
excessive amount of operational detail. Micro-management wont
ultimately lead to improved business performance. If anything, it will
weaken the organisations strategic focus. Something is wrong in a
company where directors spend much of their time sifting through
huge management reports. The question to ask is how much
knowledge has been lost in the information?
The information provided should always be tailored to the
boards needs and relevant to the current strategy and business
model. Its up to the management to distil this day-to-day
information and focus the directors minds on potential problems
and discrepancies. Of course, there needs to be a great deal of
trust between the board and the management so that the directors
arent in doubt that theyre being told what they need to be told.
Finance professionals need to do more than simply put the right
numbers on the boardroom table. If they are to add value, they
must also act as strategic advisers, explaining whats behind the
information and pointing out possible solutions to any problems.
In the words of Sir Adrian Cadbury, they must give their own best
judgment on the companys financial position. In order to do this,
accountants in business need to have a real understanding of the
business model and the value-adding processes that underpin it.
Where they do have this knowledge and understanding,
accountants in business are also in a position to challenge other
parts of the organisation to determine what kind of information is
required for better decision-making. (See the section on the CIMA
strategic enterprise initiative on page 12 for a view on how the
finance function and an SEM approach can help an organisation to
improve its decision-making.) But it is worth remembering that,
although accountants need to add value and enhance their role as
strategic advisers, they mustnt lose sight of their basic financial
control responsibilities.
In some companies, internal reporting can be completely divorced
from the decisions that need to be taken and the strategy its meant
to be supporting. It has simply evolved over time and contains
worthless information. Not only can this result in information
overload; it also may mean that directors are not making decisions
based on facts. Reliance on intuition and gut feeling has always been
a crucial element of decision-making, but its best to have all the
facts available and an agreement about the key performance drivers.
How the information is summarised and salient points extracted
depends on the skills of the management and the ability of the
board to define what it needs. Responsibility for good-quality and
timely reporting is therefore a joint one. Directors must play a part
in determining the right measures of performance and ensuring that
they are effectively monitored. They can also add value by being
proactive for example, by asking for clarification, additional
information and so on.
At the heart of the whole process is a culture of trust and
openness. Directors especially non-executive directors who will lack
the detailed knowledge of the business must be able to trust that
executive directors and managers will tell them all they need to
know. If this is not the case, the system is built on shaky foundations
and only good fortune will prevent it from failing.
6 Transparency
10
7 Key performance
indicators
8 Information
systems
9 The CIMA
SEM initiative
Good practice
Poor practice
action identified.
In perspective
quantitative ones.
Reliable
Comparable
sufficient explanation.
explanation offered.
of report. No use of
performance indicators.
12
11 Performance
reporting
a checklist
Good practice
Poor practice
Executive summary
with no cross-referencing.
unrefined information.
No action plan.
only history.
Capital programme
on under/overspend.
Balance sheet
Responsible for
providing info
What
Customer
Smart research
Customers satisfied or
Customers, annually
are our
satisfaction
(annually)
Number
Business unit
Accounts shipping
of active
revenue report
versus previous
customers
doing?
accounts
year: +4%
SPD of
Business unit
Volumes in
active
revenue report
shipments versus
accounts
BSI
Area analyst
Area analyst
>50%
Area analyst
Financial
9am
analysis
9.30am
Customers
Commercial
How are our customers feeling and what are they doing?
overview
Develop
hypothesis
Gather data
Analyse data
Interpret data
Communicate
insights
Take action
Deliver value
Ad hoc reports
Statutory accounts
Management accounts
Statutory information
consolidation databases
Total group
Management information
consolidation databases
Total group
Statutory information
consolidation databases
Divisions
Copies of
consolidation database
Divisions
Corporate
centre users
Ad hoc
reports
On-line
capability
Performance visualisation
Visualisation
database
Total group
Copies of
visualisation database
Divisions
Divisional
users
Operational statutory
information
Spreadsheets, general
ledger, ERP etc
Companies
18
Operational management
information
Spreadsheets, general
ledger, ERP etc
Companies
Operational
company users
References/further reading
Companies
Divisions
Total group
Divisional
users
Visualisation database
Statutory
information
consolidation
Operational statutory
information
Spreadsheets, general
ledger, ERP etc
Companies
Management
information
consolidation
Operational management
information
Spreadsheets, general
ledger, ERP etc
Companies
Divisional
users
Divisional
users
19
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