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Not only are UK companies under pressure from global competitors, but they are also under the domestic spot-light.  Corporate Governance requires the board of a company to use its assets in the best way in order to maximise shareholder value. A simple objective, but one which relies on effective decision making based on less than optimal data and information against a backdrop of intense competition.

So, how effective are boards today in using data and information to drive and support their strategies?  Can they balance maximum shareholder returns and squeezed margins with survival?

In an Ideal World

Ideally, directors should access management information systems, executive ‘dashboards’ or scorecards to summarise key management statistics on a regular basis. Data should be presented as meaningful summaries enabling direct decision making based on known business drivers.

But at the operational level, many decision makers rely on extracts from lengthy reports, batch-generated from their core enterprise resource planning (ERP) systems.

Then there’s the unstructured data that comes from face-to-face departmental and board meetings and a dependence on ‘instinct’. Between all these sources, decision makers can adjust the performance of the business but the level of confidence in using data from these differing systems and methods is understandably low.

Some companies use key indicators and traffic lighting to drive performance. Graphical displays are used to motivate employees towards better operational performance in critical areas of the business.  

But, are these companies any more ‘effective’ that the others? Do these measures really affect the great master plan? Is the whole company driven towards the company’s overall goal? Outside the boardroom does anyone really know what that goal is?

Employees within an organisation rarely have an idea of the corporate goal and how their own objectives directly affect corporate performance. There can be situations where personal or even entire team achievements make no progress towards a corporate goal.

Consequently the board faces a dual issue:  an incomplete picture and a dysfunctional set of measures which are not aligned to the same goals.

How can it be resolved?

Financial and operational directors on a board should take a step back and determine the right objectives to ensure that the entire strategy is executed. Again this sounds very simple – but there is a ubiquitous gap between strategy and execution throughout organisations. This is effectively a strategy gap – one that the current economic conditions will simply not allow to go unpunished.

A useful start is to free up more time by reviewing strategy and stop wasting analysing measures of historic data and/or measures that don’t affect the strategy. Effective organisations target and monitor far fewer measures than the norm, and so can measure them accurately and often, and see easily the effects of change.

Finance, operations, marketing and all other directors must agree on the company’s strategy and state it clearly with measurements. From here, all the constituent parts of the strategy can be broken down between the organisation’s departments.

By agreeing on these objectives collaboratively it’s possible to see the effect of one department’s objectives and actions on another’s. So, production’s plans can be assessed against their impact on purchasing and despatch.

From top level goals, objectives can be set and resources deployed and clear actions can be warranted. A closed-loop of measurements against objectives can deliver a meaningful management information system.  

The crucial difference here is that all desired actions are cascaded out of the company’s overarching objective. It is these actions which must be intensely scrutinised on a real time basis. Ideally, the measurement system and the objectives are all supported by a single technology platform so that objectives can be cascaded downwards electronically, and measurements automatically summarised upward.

Most management information systems are ineffective as they take a retrospective view of many measures and financial results, effectively ignoring the critical actions (or lack of them) that resulted in creating the results.  British businesses’ activities must now be brought in line and be driven out of clear objectives or the decisions made by those businesses will be terminally wrong.