14 November 2003
Unless companies improve the quality and timeliness of business information delivered to the boardroom, corporate failures will continue to happen, according to the latest report from CIMA. Performance Reporting to Boards is being sent to the UK's top 250 finance directors and chairs of audit committees. It sets out the principles of good reporting of both financial and non-financial information to boards of directors, the systems companies need to have in place to do it and the culture that supports it. It illustrates good practice and the case studies provide useful ideas to make improvements in organisations and are a springboard for new thinking.
Charles Tilley, CIMA Chief Executive, said:
"Many of the post-Enron discussions about corporate governance have focused almost exclusively on the roles and responsibilities of directors and the structure of boards and board committees. This is hardly surprising. But boards do not exist in a vacuum – in order to make the right decisions, directors must base them on good quality and timely information about the company’s performance."
He added:
"Ultimately good performance reporting to boards is about competitiveness. If you want directors to make good strategic decisions, they need to be given good business information at the right time. Culture and performance management systems must also be aligned to this, as directors need to trust the information given to them."
Charles Tilley added: "Good performance reporting is about the quality of the information provided to directors. We need to move away from the mentality that leads to the board report needing to be delivered by a fork lift truck. This is particularly pertinent post-Enron where there may be a temptation to increase the amount of information provided to the board. Quality is the key, not quantity."
The report highlights that many companies do not know where value is created or destroyed in their business.
Charles Tilley said:
"In many companies it is currently the case that this information simply isn’t available or there is a lack of understanding about what the relevant numbers are. This hampers decision-making as much time is spent reconciling figures or getting information out of different systems."
CIMA is concerned with the best practice of board reporting necessary for good market performance and corporate governance. The report outlines characteristics of good information and key performance indicators, and provides tables detailing good and poor practice. There is also a performance reporting checklist.
The case studies at the end of the report broaden the perspective by revealing two differing innovative approaches to performance reporting.
The first case describes how the logistics company DHL changed the focus and structure of its performance reviews with a view to improving decision making at board level. The result was the appointment of a dedicated team of business performance analysts charged with supporting board directors.
The second case, from the management consultancy Metapraxis, focuses on an implementation of an early warning service for company directors. The service is designed to help finance teams support their boards in providing relevant and forward-looking reporting.
This report will be particularly useful for board members to re-assess the reports they currently receive to ensure that they are provided with the right type of information which will steer the organisation towards its objectives. Finance directors and those who prepare of financial and business performance information will also benefit from a source of ideas on performance reporting. And the report will also help management to understand the information and decision making needs of the board of directors and to see the performance report as a strategic extension of day-to-day gathering of management information
Download the full report.
If you would like more information please contact Lottie Muir
Phone: +44 (0)20 8849 2407
Email: lottie.muir@cimaglobal.com
