Performance Reporting to Boards: A Guide to Good Practice 1 Preface 4 2 Who should read this report 4 3 Introduction 5 4 The principles of financial and business reporting 6 5 The characteristics of good information 6 6 Transparency 9 7 Key performance indicators 11 8 Information systems 11 9 The CIMA SEM initiative 12 10 Applying the principles 12 11 Performance reporting – a checklist 13 12 Case study 1: extracting value from data – supporting 14 the board at DHL UK 13 Case study 2: Metapraxis – an early-warning support 17 system for directors at Tomkins plc References/further reading 19

Writer: Danka Starovic Production editor: Neil Cole Designer: Adrian Taylor Publisher: the Chartered Institute of Management Accountants Inquiries: [email protected] (tel: 020 8849 2275) Other executive guides are available at www.cimaglobal.com

3 Performance Reporting to Boards

1 Preface 2 Who should read this report

Many post-Enron discussions about many firms assume is simple but find This report will be particularly corporate governance have focused hard to get right. The case of Marconi, useful for: almost exclusively on the for example, raised questions about Board members – to reassess the responsibilities of directors and the how timely the board’s information was, reports they receive to ensure that structure of boards. This is hardly whether it was of good enough quality they are being given the right type of surprising – after all, a company’s to support high-level decision-making information by which to steer the survival ultimately depends on the and whether it was conveyed in the organisation towards its key objectives. effectiveness of its board’s right manner. In a business environment dominated decision-making processes. But boards CIMA is concerned with the board by fear of liability, knowing that your don’t exist in a vacuum. In order to reporting practice that’s necessary for decisions are based on the most make the right decisions, directors must good market performance and sound relevant facts can be reassuring. For base them on good-quality, timely corporate governance. The case studies individual directors it represents a way information on how their businesses at the end broaden this perspective by of limiting their exposure to any are performing. The quality of revealing two innovative approaches to allegations that they are failing to performance reporting to boards is improving performance reporting. discharge their duties to shareholders. therefore one of the key factors The first case study describes how The onus is on them to ensure that affecting companies’ competitiveness. logistics company DHL changed the they are getting the information they This report sets out principles for the focus and structure of its performance need, rather than passively consuming effective reporting of financial and reviews with a view to improving what they are fed. non-financial information to boards. decision-making at board level. The Finance directors and preparers of It’s meant to guide both directors and result was the appointment of a team financial and business performance those preparing board reports. We hope of business performance analysts information – to gain a source of ideas that finance professionals will find it dedicated to supporting the directors. on reporting. The information within useful in considering how they engage The second case study, from their control will be financial and executives and senior managers. management consultancy Metapraxis, non-financial, and both need to be It’s not meant to be prescriptive; focuses on the implementation of an presented clearly if they are to reflect the intention is that the summary tables early-warning support system for the performance of a company. of good practice and the case studies directors at Tomkins plc. The approach Finance professionals must understand will act as a springboard for new was designed to help the group’s finance how to deliver performance thinking and give you useful ideas for teams support their boards with relevant information in the context of decisions making improvements in your and forward-looking information. that need to be made by the board. organisation. Ultimately, board structures This is especially true for large and decision-making cultures will depend international organisations with many on a company’s unique circumstances. subsidiaries, where the layers of Large companies may also operate management and the number of different levels of boards throughout boards may obscure the relevant their businesses. The complexity of large figures and breed a lack of common international organisations with many understanding of what the key subsidiaries makes the issue of performance drivers are. management information and Managers – to gain an understanding decision-making more complex, and the of the information needs of the need for directors of such vast board and to see the performance organisations to have early-warning report as a strategic extension of systems is a must. day-to-day information-gathering. This guide isn’t about the latest The information and decision management techniques and reporting support that board members receive technologies either. Although many enables them to discharge their such tools exist (and some are proving duties in an appropriate fashion. It can useful), recent cases of corporate failure also be a good indication of the have underlined the importance of relationship that exists between the performance reporting – an area that board and the management.

4 Performance Reporting to Boards

3 Introduction

The board of directors in any purpose and for the means of achieving and reputational matters. Although the organisation is responsible for its it. The task, however, for which the detailed content of the OFR itself will not operational, strategic and financial board alone is responsible is the be audited, the process of preparing it performance, as well as its conduct. determination of corporate ends.” and its consistency with the financial Boards exercise their responsibilities by Provision A1.1 of the Combined figures will be. The OFR means that the clearly setting out the policy guidelines Code states that the board should have a disclosure of non-financial information within which they expect the formal schedule of matters specifically will no longer be an optional extra for management to operate. They will set reserved to it for decision-making and large public organisations and very large out the short- and long-term objectives that the annual report should include a private companies. of the organisation and a system for statement of how the board operates, The scope of information flowing ensuring that the management acts in including a high-level statement of which through the company to the board, accordance with these directions. types of decisions are to be taken by the and then from the board to the They will also put procedures in place board and which are to be delegated to investors, will have to be broadened. for measuring progress towards management. It is generally accepted Companies need to ensure that they corporate objectives. that the former should cover: have systems in place that can There is therefore a clear difference business strategy, including generate and collect such data, as well between the main responsibilities of operating, financing, dividend and as processes and people capable of directors and managers. In his recent risk management policy; analysing and presenting it to the book, Corporate Governance and the annual operating plan and budget; board, and then to the markets, in a Chairmanship: A Personal View, Sir acquisitions and disposals that are meaningful form. Adrian Cadbury distinguishes between material to the business; direction and management: “It is the job authority levels; of the board to set the ends – that is to the broad framework and cost of say, to define what the company is in directors’ remuneration (on the advice business for – and it is the job of the of the remuneration committee); executive to decide the means by which the appointment and removal of the those ends are best achieved. They must company secretary; do so, however, within rules of conduct approval of financial statements. (The and limits of risk that have been set by Corporate Governance Handbook, Gee the board. The board is ultimately Publishing, 1996). accountable for both the company’s Having sound information on which to act is key to this process. Any attempt to formulate business strategy or set tactical plans without it is bound to misfire – the board runs the risk of failing to discharge its responsibilities effectively. This will ultimately result in poor decision-making and, at worst, increased liability for directors. It is worth remembering that boards require both financial and non-financial information. The pressure for multi-dimensional reporting is likely to increase with the proposed legislative changes such as the mandatory operating and financial review (OFR). This requires directors to give a qualitative, as well as financial, evaluation of performance on a wider range of issues, including policies and performance on environmental, community, social, ethical

5 Performance Reporting to Boards

4 The principles of 5 The characteristics of good information financial and business reporting

The board should: Performance reporting is a means as many alternatives as are necessary for Set aims, policy constraints and to an end, never an end in itself. The impartial decisions to be taken. guidelines, objectives and broad purpose of information is to promote If the board is to exercise its strategic, strategy, and then confirm these to action. The board report is therefore long-term planning function fully, it the executive management team. the document that pulls together all needs to focus on more than the current Agree defined performance indicators. the relevant information with balance performance indicators. They may say Ensure that it is receiving all the key and objectivity. something about historical performance information to enable it to probe A good report should contain all the – ie, how it measures up to past and question; focus on critical success information necessary to facilitate objectives – but they can be a poor areas and key performance decision-making at board level. It predictor of the future. The board should indicators; and identify appropriate should lead directors to ask the right therefore have some forward-looking management actions where there are questions and initiate a chain of actions information at its disposal, including positive or negative variances from that will enhance the ability of the trends, projections and forecasts, but projected performance. enterprise to achieve its short- and these should be based on more than a Periodically review the information it long-term aims and create sustainable simple extrapolation of past data. receives to ensure that it is getting shareholder value. Finance departments It’s often hard for those who prepare what it needs and that all board are particularly important in this context, the information to know what level of members fully understand it. The since the information they provide detail they should go into when board should guard against being reflects the overall health of a company. compiling board reports. Non-executive inundated with an unnecessary Finance directors have a critical role to directors may not know the ins and amount of data that provides little or play in ensuring that the information outs of the operational side of the no information and which may received by the board is unbiased, business. Executive directors, on the prevent it from taking action. even-handed and multi-dimensional. other hand, need to balance the task Ensure that the performance reporting Having robust systems for collecting, of running the company with that of process links objectives, principles and storing and analysing financial and setting its strategic direction – what practices to its needs. non-financial information is important, have been called their conformance but the value of integrity and (past- and present-orientated) and transparency should not be overlooked. performance (future-orientated) roles. There is always a risk that information The right balance must be struck could be distorted on its way up to the between too much and too little detail. board. In some companies, finance As thought leaders and providers of directors may face pressure from the decision information, finance chief executive to restrict the amount of professionals should be making this negative information that’s provided to balance their goal. other directors and investors. Working at Integrated. Organisations are obliged the heart of shareholder-value-managed to produce information for a range of companies and the decision-making internal and external purposes. CIMA process, a CFO is in a position to give thinks that the systems and processes the board a more prudent view of the used to provide this information should, state of the business. as far as possible, be integrated. In other Good-quality information should be: words, the data collected internally Relevant. Information presented to should be managed in a way that the board should be sharply focused satisfies both internal and external and reflect the defined objectives and reporting needs. We believe that the the overall strategy of an organisation. information needs of directors are It must not obscure the overall picture broadly similar to those of investors, with irrelevant detail. except in the level of detail required. The board should be able to drill down Some of the information that boards and access further supplementary reports require – eg, benchmarking competitor where necessary. The information should data – cannot be generated internally be sufficient to allow the exploration of but will have to be collected from

6 Quality, not quantity

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 won’t ultimately lead to improved business performance. If anything, it will weaken the organisation’s strategic focus. Something is wrong in a company where directors spend much of their time sifting through external sources. The same principle of huge management reports. The question to ask is how much conciseness should apply. The overall knowledge has been lost in the information? objective should be to have information The information provided should always be tailored to the that maps the business entirely. board’s needs and relevant to the current strategy and business In perspective. Information should be model. It’s up to the management to distil this day-to-day presented in relevant time context. information and focus the directors’ minds on potential problems Estimates of the projected time situation and discrepancies. Of course, there needs to be a great deal of should always be plotted over time. trust between the board and the management so that the directors This acts as an internal benchmark for aren’t in doubt that they’re being told what they need to be told. the performance of each aspect of the Finance professionals need to do more than simply put the right information. Where, for example, numbers on the boardroom table. If they are to add value, they historical, current and projected must also act as strategic advisers, explaining what’s behind the information and pointing out possible solutions to any problems. scenarios are presented, operational In the words of Sir Adrian Cadbury, they must give their own “best problems are brought to light wherever judgment on the company’s financial position”. In order to do this, the variances are significant. This applies accountants in business need to have a real understanding of the as much to the monitoring of contracts business model and the value-adding processes that underpin it. and projects as it does to the profit and Where they do have this knowledge and understanding, loss account and balance sheet. accountants in business are also in a position to challenge other Timely. It’s better that the board parts of the organisation to determine what kind of information is receives information that’s imperfect required for better decision-making. (See the section on the CIMA (but within acceptable tolerances of strategic enterprise initiative on page 12 for a view on how the precision) in good time than completely finance function and an SEM approach can help an organisation to accurate information too late. improve its decision-making.) But it is worth remembering that, Marconi is often cited as an example although accountants need to add value and enhance their role as of a company that failed partly because strategic advisers, they mustn’t lose sight of their basic financial its board didn’t receive timely control responsibilities. information. In other words, it wasn’t In some companies, internal reporting can be completely divorced simply a case of incompetence or flawed from the decisions that need to be taken and the strategy it’s meant risk assessment, as is often stated. The to be supporting. It has simply evolved over time and contains simple truth is that the company’s worthless information. Not only can this result in information directors may not have had the chance overload; it also may mean that directors are not making decisions to act, because they didn’t find out what based on facts. Reliance on intuition and gut feeling has always been was going on until it was too late. a crucial element of decision-making, but it’s best to have all the facts available and an agreement about the key performance drivers. Information should, as far as possible, How the information is summarised and salient points extracted be available in parallel with the activities depends on the skills of the management and the ability of the to which it relates. The report should be board to define what it needs. Responsibility for good-quality and available promptly enough to plan from timely reporting is therefore a joint one. Directors must play a part it and/or take action to consolidate gains in determining the right measures of performance and ensuring that and recover shortfalls. they are effectively monitored. They can also add value by being Monthly board reports should contain proactive – for example, by asking for clarification, additional performance information relating to key information and so on. operational issues as defined by the At the heart of the whole process is a culture of trust and board: the critical success factors (CSFs) openness. Directors – especially non-executive directors who will lack and key performance indicators (KPIs). the detailed knowledge of the business – must be able to trust that Quarterly board reports should contain executive directors and managers will tell them all they need to a broader coverage of organisational know. If this is not the case, the system is built on shaky foundations activities and should also address and only good fortune will prevent it from failing. qualitative areas of the business. It’s important that only the key pieces of information are presented monthly to enable a succinct and useful report to be

7 Performance Reporting to Boards The characteristics of good information

produced. But recent research sponsored and it covers both financial and Clear. Reports should always be written by KPMG has highlighted the danger non-financial aspects of performance. clearly and simply. Everyday language of reporting KPIs by exception only. For financial performance, comparing should be used wherever possible and Many non-executive directors in its what happens (actual) with what should jargon or acronyms should be avoided. survey blamed this for their limited have happened (budget/plan/rolling Used judiciously, graphs and charts can understanding of business processes, forecast), or in some cases what be an effective communication medium value creation and customer satisfaction did happen previously (last month/year), for key indicators. They also enable – crucial strategic areas for any company. will be valuable. Presenting a forecast trends to be identified more easily. Reliable. Information should be of good year-end position will focus minds on Apart from the information they enough quality for the board to be the effectiveness of an organisation, receive at the start of their tenure, confident in it. This will depend on its rather than just its economy and directors would normally expect to see: source, integrity and comprehensiveness. efficiency. Comparison with budget monthly consolidated profit and loss The pack supplied by the management should be one of the key management accounts, balance sheets and cash before the board meeting will be the tools, but the emphasis should be on flow reported against budget; key source of information for board the future, which can be influenced, a further breakdown of results by members – especially non-executive rather than the past, which cannot. strategic business unit, where they directors. But there are other channels are of a size material to the overall available, including business publications, performance of the company; formal and informal contacts with staff a quarterly update of forecast results below board level and so on. Last, but for the trading year; not least, the extra information and specific papers on new investment analysis delivered orally by the CEO or projects above an agreed size; other executives with different areas of updates, as appropriate, on major responsibility will probably be the most expenditure, such as acquisitions or useful in terms of decision-making. large building projects; Comparable. The board report is the a six-monthly review of progress performance report for the organisation on the implementation of the strategic plan. The value of informal information should not be underestimated, as Good Governance, a CIMA-commissioned research report states: “Genuine board Playing the system member access to an organisation’s staff, premises, clients and operations can sometimes reveal far more than the board papers. It is also qualitative as well Even when a company has a well-structured internal reporting as quantitative – copying for the board system, the targets and objectives it relates to must be realistic, all of the documents and figures that achievable and aligned with the culture of the organisation. If this managers use in their work does not is not the case and the system is not ‘owned’ by staff, there remains necessarily mean that the board is well a temptation to try to get around its constraints. informed. Its members may be The recent case of a FTSE 100 company with a reputation for swamped, or the board-level implications excellent internal reporting illustrates the danger. As it issued may be unclear, thereby preventing the another production warning, analysts speculated that the reason for development of a well-formed overview the company’s sudden panic was that subordinates had failed to reveal the extent of its troubles to senior managers. The FT of the key trends and issues affecting speculated that the cause of the problem may have been that the the organisation.” performance targets were so stretched that staff felt under pressure Again, it’s worth repeating that there’s not to reveal the real results to their superiors. a danger that the amount of informal information provided can become excessive, leading the board to focus too much on operational matters.

8 What makes financial information useful

According to the Institute of Chartered Accountants in England 6 Transparency and Wales in its draft guidance for UK directors (July 2002), useful financial information has the following characteristics: Material. It comprises only items of information whose size or nature mean that their misstatement or omission might reasonably be expected to influence the economic decisions of investors. Relevant. Internal reporting has implications It has the ability to influence economic decisions of investors. that go beyond board level. If directors It is provided in time to influence economic decisions of investors. are committed to telling investors about It has predictive value or, by helping to confirm or correct past the key value drivers of business evaluations or assessments, it has confirmatory value. performance – which will enable them Reliable. to value the company more accurately It can be depended upon by investors as a faithful representation – it follows that the information used to of what it purports to represent – or what it could reasonably be manage the company should not be expected to represent. radically different from that which is It is neutral, because it is free from deliberate or systematic reported externally. bias intended to influence a decision or judgment to achieve a The problem is that many firms spend predetermined result. more time trying to get the right figure It is free from material error. It is complete within the bounds of what is material. to satisfy market expectations. The It is prudent in that a degree of caution is applied in making struggle to meet quarterly targets can judgments under conditions of uncertainty. cause them to lose focus on long-term Comparable. value generation in favour of making It can be compared with similar information for other periods short-term decisions that give them the and other entities so that similarities and differences can be right numbers to report. These ultimately discerned and evaluated. destroy shareholder value. The failures of It reflects consistency of preparation and presentation, providing Enron and WorldCom are only the that this is not an impediment to improvements in practice. extreme examples of this practice. It is supported by the disclosure of the accounting policies used in CIMA has been calling for greater its preparation. transparency in reporting as the only way Understandable. to restore the trust in capital markets It involves the characterisation, aggregation and classification of that was lost after the recent accounting transactions and other events in accordance with their substance scandals. Investors are still hypersensitive and their presentation in ways that enable the significance of to the possibility of inflated earnings, information to be understood by users. so transparency has become a matter of It presumes that users have a reasonable knowledge of business survival rather than choice. The and economic activities and accounting, and have a willingness to investment community does not want study information with reasonable diligence. to see a sanitised version of the information used to run the business. In essence, greater transparency According to management consultancy Metapraxis, board members means improved disclosure. By this we should consider the following questions about the information they don’t mean that companies should are receiving: start reporting more; it’s simply that Accuracy. Can I trust the data? what they report should be the Relevance. Does it cover the critical issues? information the market needs. If enough Timeliness. Is it sufficiently up to date? companies start reporting this way, the Clarity. Is it presented in such a way that I can digest it quickly? fear of being held hostage to fortune Risk assessment. Is the information purely historic or does it will diminish. But it’s not only companies assess future risks? that have a responsibility to ensure that Depth. Do I receive only summaries or can I access the highest-quality information is individual subsidiaries? provided to capital markets. The Provision. Can I access the data via a secure internet connection? Fédération des Experts Comptables Européens (FEE) has sketched out a network of participants who must contribute to this goal: Preparation of true and fair financial information by an effective company accounting function.

9 Performance Reporting to Boards Transparency

Informed review by directors, audit Jürgen Dormann, ABB’s chief culture in which managers embellish their committees or supervisory boards. executive, admitted that many managers results can undermine the whole model. Internal audit. had been exaggerating the performance A culture of openness may be a Proper approval procedures for of their divisions to hide problems. prerequisite for effective internal financial information by the body This is partly why the company is now reporting, but it can’t exist without a responsible within the company. struggling to retain investors’ confidence sufficient level of control. In a recent External audit and external review while trying to cut its debt burden. CIMA executive briefing on business subject to quality-assurance systems One of the attributes of ABB’s model transparency (www.cimaglobal.com/ that inspire public confidence. of management was the idea that downloads/enron.pdf), David Phillips, Effective enforcement bodies. dependence on information systems head of PwC’s ValueReporting™ initiative Stock exchanges with supportive should be replaced by developing good in Europe, predicted that we would soon listing requirements. personal communications with those be in a world where a single database Sponsors, advisers and investment who have access to vital intelligence. would be used both to run the business bankers committed to high-quality The imperative was to “lighten the and to communicate with stakeholders. financial reporting, particularly in burden of control systems by developing The only real external reporting issue respect of complex transactions. personal values and interpersonal would be where to draw the line of Investors, analysts, rating agencies and relationships that encourage transparency across the information, the financial press, all of whom should self-monitoring” (Harvard Business since some of it would inevitably be have clear ethical obligations to raise Review, May/June 1995). It is now clear commercially sensitive. issues of dubious financial reporting. that such endeavours have largely failed. As CIMA sees it, transparency – as an In their book Building Public Trust, Percy Barnevik, one of ABB’s previous overarching concept guiding the Samuel DiPiazza and Robert Eccles draw chief executives, implemented an reporting process in a company – should up a similar corporate reporting supply accounting and communication system become the cornerstone of good chain. They assert: “If management is that was meant to generate company corporate governance. As long ago as not transparent with its own board, how reports from a single database. The 1990, we argued that there should be can it practice external transparency? rationalisation of information systems better disclosure of information (while If management is not willing to be held for internal and external reporting is preserving commercially sensitive data, accountable by the board, how can it undoubtedly helpful, because it prevents if necessary). A CIMA publication entitled have the legitimacy to hold accountable managers from debating the accuracy Corporate Reporting: The Management others in the company?”* and relevance of data. But an underlying Interface called for companies to make In the KPMG survey, non-executive boardroom information publicly available. directors (Neds) were asked whether It said: “One function of financial they had sufficient knowledge in a reporting is for management to explain number of specified areas. Where the its progress towards meeting its answer was negative, one of the main strategic objectives. It follows that there reasons quoted was the lack of must be benefit in publicly reporting the appropriate reporting by management. sort of information that management Similarly, in a survey of Neds conducted uses internally.” by Mori for the Higgs review, two of A more recent CIMA research report, the top three items cited as barriers to External Reporting and Management greater effectiveness were “executive Decisions, examined the influence of directors holding back information” external reporting on management and “a lack of knowledge/understanding accounting in companies. It concluded of the company”. that the requirements of external The case of ABB illustrates this point. reporting didn’t have a major impact Until recently, the Swiss engineering on internal decision-making in the firms group was one of Europe’s most admired it examined. It said that the traditional companies, gaining plaudits from distinction between management and eminent publications such as Harvard financial accounting didn’t provide a Business Review, which praised its useful framework for understanding model of “individualised corporation”. the impact of external reporting on

10 Performance Reporting to Boards

7 Key performance 8 Information indicators systems

internal reporting. Instead, it was better Performance information should be Management should set up systems to think of it as a single generic process focused, with key elements highlighted. to process data into information on comprising several layers of Where appropriate, all problems, the performance of specific areas of information-gathering, reporting and explanations and solutions suggested the organisation. A good information use. As far as most managers in the by those who prepare the reports system should: research were concerned, there was should be laid out in front of the board. be defined by the company’s operating only one mainstream accounting process The directors can then assess, advise profile, not the other way round. in a company. and initiate appropriate courses of action distinguish between the critical In the companies surveyed there was a for the management to take. success factors and those that are clear overlap between internal and The board and management should merely desirable; external reporting – for example, agree the high-level KPIs to be covered in have an architecture that’s flexible monthly management accounts were the report. These should: enough to survive technological and often in the same format and structure draw together and integrate business changes over time; as the external ones. The researchers management information; be scalable, offering key information found that the common thread was in reflect the critical success factors of down to detailed analysis; fact the framework of accountability and the organisation and provide a be thoroughly integrated with the the assessment of financial performance. high-level aggregate overview; board’s reporting process. This research clearly shows that be part of a normal business routine; The integration of information for day-to-day management decision-making be comprehensive; internal and external reporting means is based on much more than financial provide a reliable and easy-to-use base that the quality of data generated, information alone. Although many through which to provide information collected and analysed internally firms tend to report only their financial that the board finds meaningful; becomes critical for the successful information, in reality it comprises only be appropriate to a challenging running of a company. This may sound one part of the total information management environment and be obvious, but in many firms this system that’s available to managers – reviewed regularly. information simply isn’t available or there and that investors are interested in. Management should be able to drill is a lack of understanding about what In fact, the finance function already down from high-level indicators to the relevant numbers are. This hampers serves as a repository for a lot of examine the underlying cause of a decision-making, because too much time non-financial information in many problem and identify appropriate action. is spent on reconciling figures or getting companies. But there needs to be a Subordinate details should always be information out of different systems. systematic approach to what is collected summarised. (See the CIMA technical For example, many companies wouldn’t and how it is reported upwards. briefing entitled Latest Trends in know which of their customers are This convergence of internal and Corporate Performance Measurement delivering the bulk of their profits or external reporting clearly has implications – visit www.cimaglobal.com/downloads/ why, or which parts of the business are for both management and financial tech_brief_perf_man_160702.pdf creating the most shareholder value. accountants, since it erodes some of the to download a copy.) In a survey last year by the Economist difference between the two. It doesn’t Intelligence Unit, technological mean that their roles will become constraints that made it hard to get an redundant, but it does mean that they integrated picture of the financial will need to understand better how each accounts were among the top eight affects the other and how they can be most serious barriers to the brought into line to achieve better implementation of proper corporate decision-making and a simplified system governance policies in companies. More of external reporting. For management than a fifth of respondents, including accountants in particular, their senior executives and leading corporate commercial awareness and ability to and regulatory figures worldwide, cited evaluate business performance is the it as the highest or second-highest basis of ensuring such convergence. barrier. Getting the right information and getting it on time affects both the

* © 2002 S DiPiazza and R Eccles. This material is used business operations and strategic by permission of John Wiley & Sons Inc decision-making of many companies.

11 Performance Reporting to Boards

9 The CIMA 10 Applying the principles SEMinitiative

The CIMA strategic enterprise Figure 1, below, highlights examples performance rather than exceptional management initiative (SEM) is about of good and bad practice based on the events. In order for the board to give treating decision-making as a characteristics set out in part 5, appropriate weight to the most distinguishing competence. Although focusing on the financial section of the important issues of policy and strategic a separate executive report on CIMA performance report. direction, key exceptions and variances SEM and improving decision-making It should be remembered that must be highlighted. The action plans in your organisation is now available management will provide a lot of other prepared by management must be from the institute’s website information to the board on an ad hoc clearly stated. (www.cimaglobal.com/sem), it’s not basis in addition to the main board Figure 2, opposite, highlights good possible to discuss better performance pack. The board pack, in that sense, is and bad practice for key elements of reporting without mentioning the about the organisation’s ongoing the report. initiative in this guide. CIMA SEM aims to enable management accountants to add value Figure 1 The financial section of the performance report constantly as part of the management team by integrating advanced Principle Good practice Poor practice accounting techniques and their enabling technologies into the business. At the Relevant Focused financial report of three to six Detailed analysis of income and CIMA SEM round-table, a selection of pages in length. A good report will expenditure and variances for all companies discussed their approaches to summarise the issues and highlight the directorates in 32-page report. getting the right information and overall position, making use of graphs Limited narrative. No corrective analysis to the right people at the right and charts to replace lengthy tabular action identified. time. In formulating and delivering information where appropriate. strategic objectives and improving data analysis, the leading companies Integrated Activity data linked to financial No activity data presented in the had, in effect, decentralised their performance. Variances calculated and financial report. No balance management accounting function. explained. The report should integrate between qualitative factors and This modified role should involve selling non-financial and financial reporting. quantitative ones. ideas and options to both strategic and operational decision-makers. In perspective Abbreviated P&L account shows period Massively detailed P&L account. The report considers the progress of and cumulative positions with Insufficient detail to support issues SEM in organisations and why there is highlighted variances against budget. identified in the narrative report. often a difference between the rhetoric Major variances adequately explained. of software vendors and the reality. For Trend analysis included. Full-year many companies the ERP or SEM projections updated. technology has not necessarily led to improved decision making and Timely Report available within five working Information presented 28 days increased transparency. days of period end. after period end. The SEM debate is much wider than just leveraging the benefits of ERP Reliable Every key issue identified with No key issues identified, or no systems. CIMA is focused on enhancing sufficient explanation. explanation offered. the role of the finance function and management accounting to add value by Comparable Consistent style across reports. Inconsistent format and style taking the value creation perspective and Performance indicators used to illustrate of report. No use of properly integrating advanced trends in liquidity, asset utilisation, etc. performance indicators. management accounting techniques Comparison with budget/previous year. such as shareholder value management, activity-based management and Clear Appropriate use of graphs, colour-coding Copious financial tables at the balanced scorecard and clear chapter headings. beginning of the report. No title or contents pages. Information presented in complex spreadsheets.

12 Performance Reporting to Boards

11 Performance reporting – a checklist

A monthly performance report Figure 2 Key elements of the performance report should be between 10 and 20 pages in length. Element Good practice Poor practice Board members must have enough time to digest it before the meeting. Executive summary All key issues identified in an No simple overview. Information Performance reports should: introductory executive summary is there, but in a confusing order – be readily understandable for all with a synopsis of performance with no cross-referencing. members of the board; provided by key indicators. Typically excessive use of data or – convey key strategic and operational Supporting documentation and unrefined information. information clearly and concisely; appendices clearly referenced. – give an accurate picture of events; – present a view of the future, with Action plan Corrective action specified No action plan. projections and scenarios for next with contingencies and month, year or longer, as appropriate; sensitivity analysis showing – prompt a discussion of the options; best- and worst-case scenarios. – focus on critical success factors. Style should be consistent. This applies Profit and loss P&L account showing period Summarised cumulative income to the overall structure of the report and cumulative positions with and expenditure account. and page layout, as well as to the highlighted variances against Insufficient detail to support issues comparators used for KPIs. budget. Major variances identified in the narrative report. The report should be easy to highlighted and adequately assimilate, containing graphs, explained. Trend analysis charts, colour-coding, clear headings shown graphically. Full-year and selective highlighting; projections updated. supplementing written reports with presentations; and using external Projected outturn Projected outturns recalculated No projected outturn plan. benchmarks and commentary. on the basis of actual Supplementary information should be performance and action plans. annexed only if considered vital to the board’s understanding of the report. Cash flow Profiled cash flow summarising No cash flow information, or Overall, the report should allow the actual and projected receipts, only history. board to discharge its responsibilities payments and balances on a to investors, suppliers, customers, regular basis to year end. employees and other stakeholders. Information should be presented as Capital programme Analysis of progress of major No data provided, or only that often as is useful. Some facts are likely capital schemes showing on under/overspend. to be acceptable quarterly, half-yearly percentage completion, current or even annually, but it’s up to the and projected expenditure, board and management to decide on completion cost and timescale. the frequency. The report should present the salient Balance sheet Indication of working capital No working capital information. strategic and operational information position presented in tabular clearly and concisely. It’s not the form or using performance board’s responsibility to review raw indicators – eg, debtor and data. This should be filtered and creditor days. distilled by management into information to aid the board in its decision-making. The role of the FD and the finance department as a whole is crucial in ensuring integrity, transparency and impartiality.

13 Performance Reporting to Boards

12 Case study 1: extracting value from data – supporting the board at DHL UK

With a 34 per cent share of the global were being implemented. The trick was Business Performance, The Economist international express market, DHL is to encourage the executives to consider Books, 1998), was used, as were the one of the world’s most successful the questions they wanted to be able to 10 “tests of a good measure”. The result courier companies, write Andy Neely and answer in the light of what was on the was a set of measures that mapped on Yasar Jarrar. It employs 64,000 people success map. Fundamentally, they were to the questions that the executives had worldwide, serving more than one million being asked: what do you need to know identified (see figure 3, below, for the customers in 228 countries daily. to decide whether the business is moving treatment of a sample question). The volume and variety of transactions in the right direction or not? This could DHL UK was fortunate in that it already at DHL meant that its UK executive team be addressed simply by asking what had much of the required data-capture could easily get engrossed in detailed performance measures are needed, but infrastructure, so there was little need to reviews of the division’s operational the problem is that measures are only a develop new reporting capabilities. performance at their monthly meetings source of data. As an executive, you But it did invest a significant amount in and risk overlooking strategic issues. It don’t necessarily want to know the education and process facilitation, which recognised this issue and started asking minutiae of such operations; you want turned out to be fundamental. whether the focus of the reviews was answers to questions. The measures are The next step was to restructure the appropriate. In 1999 DHL UK designed merely a means of accessing data that QPR agenda so that the discussions at and built its performance measurement allows you to answer questions. the review would reflect the key system according to the Performance The next workshops encouraged the questions that the executive team had Prism framework (see “The Performance executives to consider the questions they decided they should be addressing. After Prism perspective”, Journal of Cost would like to be able to answer at the a year of operation, the QPR agenda Management, Vol 15, No 1, 2001). quarterly performance reviews (QPRs), evolved and was structured as shown in given the structure of the success map. the sample subset in figure 4, opposite. Building and implementing the Once the right questions were identified, Performance Prism it became relatively simple to work out Developing the business To start the design process, the executives what should be measured. The final analyst community participated in workshops where they workshops focused on what data was The second major investment that DHL explored their understanding of the firm’s needed, and hence which measures UK made to redesign its performance strategy by addressing the five questions were required, to answer the questions measurement system was to enhance embodied in the Performance Prism: they identified. These sessions also the skills of the business performance Stakeholder satisfaction. Who are the involved DHL’s performance analysts. The analysts. The firm had deliberately key stakeholders and what do they measures design template (see Measuring adopted a structure where each member want and need? Strategies. Which strategies must we put in place to satisfy the wants and Figure 3 Subset of questions and measures – regular DHL customers needs of these key stakeholders? Processes. Which key processes do we Question Measure Data source Target Responsible for need in order to effect these strategies? providing info Capabilities. Which capabilities do we need in order to effect these processes? What Customer ‘Smart’ research Customers satisfied or Customers, annually Stakeholder contribution. What kind are our satisfaction (annually) very satisfied: >88% of contribution do we require from our customers stakeholders if we are to maintain and doing? Number Business unit Accounts shipping Area analyst develop these capabilities? of active revenue report versus previous Each of these resulted in a “success accounts year: +4% map” for the specific stakeholder. Having identified the links between these SPD of Business unit Volumes in Area analyst stakeholders, the maps were integrated active revenue report shipments versus into one success map for the business. accounts previous year: +4% The next step was to identify what to measure to monitor how these strategies BSI Loyalty data >50% Area analyst

14 Performance Reporting to Boards

analysis. When DHL’s analysts are Figure 4 Sample subset of quarterly performance review agenda constructing a case they should use all of the available data to answer a specific

Day one, Setting the scene – top-line NR results and forecasts Financial question. Only then will they enable the 9am GCC NR and cost – will we deliver NR target for the year? analysis board to have the right level of debate. The course covered techniques for

9.30am Customers Commercial extracting value from data within the How are our customers feeling and what are they doing? overview framework of the performance planning What are our competitors doing? value chain (see figure 5, next page). This Are we positioned well in the market? offered a method of transforming data – Is our revenue quality strategy working? often disorganised in its original form – Is our revenue volume strategy working? into high-quality information. It also Is the customer relationship management strategy working? provided a way to bring together a Do we have the processes to support our strategies for CRM? combination of skills for analysing and Do we have the money to sustain market leadership? interpreting complex information from Do we have the human resources to drive differentiation? a variety of sources and the ability to Do we have the right product offering? present technical information to Do we have the information to manage these processes? non-specialists in an insightful way. The performance planning value chain 10am Questions on commercial overview framework covers various steps for extracting value from data, including: Develop a hypothesis – which of the senior team – in effect, the UK main one was the quarterly business questions need answering? This is a board – had one or more performance analyst workshop, which was a place to: crucial step before data collection, analyst reporting to him or her. The role Share best practice in terms of requiring the analyst to identify the of these analysts was to brief the board business analyst skills. This included a issues that the analysis will try to member before the QPR on the issues presentation by one of the analysts on unravel. It is about finding the that they felt needed to be raised and to the tools and thinking processes used performance gaps that need prepare accompanying documentation. in his team to conduct an analysis. investigation and about the preliminary Clearly, if the structure of the QPRs Share information on DHL issues as a areas of focus in terms of the potential was to be modified in line with the whole. Not only did this provide a problems and possible solutions. Tools Performance Prism framework, there was forum for analysts to share ideas; used in this process include success also a need to develop a way of enabling it also gave them a chance to share maps, process maps and gap analysis. analysts to move from working with data their respective analyses before the Gather data – what data do we need to handling information and turning it board meeting and often allowed to collect? Do we collect it already? into value-adding knowledge. To facilitate cross-functional issues to be identified. How can we gather it more effectively? this process, the board, in co-operation Develop further skills by inviting Although most companies collect tons with Cranfield School of Management’s external speakers to present of data, few of them trust it, but the Centre for Business Performance, good-practice cases from other firms tools used in this process ensure that decided to set up a cross-functional and/or disciplines. Speakers in 2001 they follow a structured approach. analyst community. Its structure would included a detective, a journalist and These include sampling plans and data be beneficial in two key aspects. First, business analysts from other industries. collection plans. all the analysts would have the same One training programme, which was Data analysis – what is the data telling skills, which would eradicate any attended by everyone in DHL’s analyst us? At this point the analysts would inconsistencies in presentation. Second, community, emphasised the key analogy start transforming data to information the structure would allow the analysts to of the detective. When detectives are by using tools for quantitative and meet and discuss their analysis within the investigating a crime they don’t rely on a qualitative analysis. They include, overall context of the business, taking single piece of data. Instead they gather among others, the basic seven tools of them out of their functional silos. all of the available evidence and try to quality management. The community was developed and piece together the sequence of events. Interpretation – what insights can we managed through various initiatives. The So it should be with performance extract from the data? How will the

15 Performance Reporting to Boards Case study 1

Figure 5 The performance planning value chain

Develop Communicate Gather data Analyse data Interpret data Take action Deliver value hypothesis insights

message differ by changing the angle role in the QPRs than before. Instead Prioritising actions. Board members are from which we look at the data? It’s of preparing material for board now more explicit about which of the important to separate this step from members to present, they are expected potential actions they have identified analysis. Once the charts and graphs to deliver their own analysis and, in will work best. They achieve this in have been completed in the previous effect, be cross-examined by the board two ways. First, they evaluate the step, the question is: what does this on two issues: the quality of the impact of the proposed action on the mean for the business? It’s here that analysis and the implications for the customer through their “how does it thinking as a detective becomes business (and the actions required). affect the customer” programme. crucial. Tools include information Involving the analysts more fully has This requires them to consider the visualisation and benchmarking. been a crucial development, because it impact of each specific action they Communicate insights – how can we has allowed executives to act as a are proposing on DHL’s customers. best deliver the conclusion we have board, rather than as individuals Second, they prioritise actions based reached? Valuable insights could be representing their functions. In the on importance and required focus lost if the message is not delivered in days when the director responsible for using a two-by-two matrix. the right way, so it’s prudent that compliance delivered the presentation The role of the performance analysts. insights are put in a suitable delivery on “how well are we meeting Various lessons were learnt from the channel for the audience. Tools here regulations?”, he naturally tried to analyst community, which can be include presentation skills and present data that showed his function summarised as follows: attention management techniques. in a good light. The compliance – The need for cross-functional Take action – how do we act on that director is now simply another analysis. The focus should be on data? How do we prioritise our member of the board. Everyone plays the organisation as a whole, not actions? This is where all the work a role in ensuring that the business on functional silos. done so far can be transferred into meets the regulator’s requirements, so – The need for facilitation to achieve actions to deliver value. Tools here it’s essential that the board grasps the effective board meetings. include decision-making and situation and jointly decides what the – The need to focus on information prioritisation techniques, and project business needs to do next. not data. Boards must avoid micro Focus on action, not measurement. discussions and instead focus on management and feedback systems. DHL UK has devoted significant their duties as ”ship captains”. effort in shifting the focus of – The benefits of creating a centre of The lessons learnt performance reviews to closing excellence such as the business The improvements have not ended with the performance gap, rather than analyst community. The better the Performance Prism and the new QPR justifying the firm’s current position. equipped the analysts are, the structure. Instead, the measurement Far too often in organisations the more insights they can provide and system has kept developing and will debate on performance data centres the more value they can extract continue to do so. DHL has learnt the on justifying why the business is from the data. following key lessons from the process: where it is. Why the business is Professor Andy Neely ([email protected]) is The role of the board. This has where it is doesn’t matter. What director of the Centre for Business Performance at changed significantly now that the matters is what the business needs to Cranfield School of Management, where Dr Yasar Jarrar performance analysts play a far greater do to get to where it wants to be. ([email protected]) is a visiting research fellow

16 Performance Reporting to Boards

13 Case study 2: Metapraxis – an early-warning support system for directors at Tomkins plc

Tomkins plc, a world-class global aggregated transaction data towards an in time and effort of deriving year-on- engineering group, was founded in ongoing performance analysis. year comparisons were high. As a 1925 as the FH Tomkins Buckle result, the company’s ability to pinpoint Company, a maker of buckles and fas- Phase 1 – a need for change fundamental changes or shifts within teners, writes Dominic Powell. The com- sales, costs or cash, or indeed for any By 1999 Tomkins had a bottom-up pany remained focused on this specialist other key financial variable within the performance reporting system whereby market until 1983, by which time it was business units, was limited. each of its 50 to 60 business units and making an annual profit of £1.6 million These problems made matters harder divisions submitted their results in a on sales of £17 million. It was not until for the senior executives, who were keen fixed format – including a balance the mid-1980s, following a change of to focus on shareholder value creation by sheet summary, a cash flow summary, management, that it began to develop increasing the economic value of the capital expenditure summary and into the global engineering group it is constituent businesses. They led to the an income statement – every month. today, with an annual operating profit of formulation of a number of objectives: The reports were in addition to the £266 million on sales of £3.4 billion. Establish an information system and yearly financial plans. These comprised This tremendous growth was fuelled reporting mechanism that enabled the same analyses as well as a number largely by several acquisitions from integration between divisional and of others – eg, “cash added value” 1984 onwards, broadening both its business-unit management in the statements, which helped to ascertain product offering and its geographical running of their businesses. If, for whether the cash return in the business spread. Companies that were acquired example, divisional managers were to unit exceeded the cost of capital over included Ferraris Piston Service, Philips establish and focus on ways to enable the period covered by the plan. Industries Inc, Rank Hovis McDougall, their businesses to compete effectively, Information was submitted Gates Corporation and ACD Tridon. they needed a system that captured Many of the acquisitions that were made electronically to Tomkins Corporate and consolidated relevant information in the 1980s and early 1990s were based Centre’s centralised management from the business units far more on the technique of targeting poorly database. Monthly consolidated reports quickly, was scalable in its performing businesses in unglamorous were then generated and sent through performance and was fully integrated industries, selling off underperforming to the company’s executive within the board’s reporting process. assets and tightly managing the firms management. In addition, business-unit Enable management to spend more through to health. performance reports were returned to time diagnosing and understanding Subsequent restructuring focused on divisional management to be reviewed. the key business messages inherent the group’s engineering strengths, These statements provided a roadmap within the “wall of reported numbers” leading to the formation of three core for business-unit, divisional and than on the formulation and reading engineering businesses: Air Systems corporate managers to formulate and of executive reports. Components, Engineered & agree forecasts, as well as to calculate Create an objective, shared platform Construction Products and Industrial performance against targets. The main of understanding about the & Automotive. The culture of the benefit of the system within such a large performance of business units and company has developed in line with conglomerate was that the board received divisions among the respective senior this restructuring over the past couple a consolidated set of information about management and those at head office. of years. Divisional managers have the performance of the three key divisions This meant having a fixed set of been encouraged to widen their focus and the constituent business units. business analyses that would be used from the tight financial management The main drawbacks of the system to extract the messages from reported of the business units to an in-depth, were as follows: data. The means of analysis would ongoing assessment of how these The sheer volume of data from around therefore be consistent for all senior units ought to compete in their 50 to 60 operating companies managers in the medium to long term. respective marketplaces. obscured the key business messages Be able to build on this platform of This has been underpinned by the within that data. understanding of business development of management reporting The complexity of identifying performance to establish credible top- systems and processes. Specifically, the meaningful performance trends within down budget objectives for management reports and processes that P&L, balance sheet and cash across 50 management throughout the group. have been implemented have moved the to 60 business units was difficult at Detect significant year-end risks for emphasis away from the production of head office. The costs to management any given financial year (risks refer to

17 Performance Reporting to Boards Case study 2

the probability that end-of-year The first stage of work involved Trend analyses of business performance performance for a business unit overlaying business visualisation software could be used by executive managers might differ substantially from that on the consolidation base (see figure 6, to identify, focus on and track key which is forecast). below). The process for the capture and turning points, changes, aberrations Be able to diagnose key turning consolidation of information did not or anomalies. points in financial performance trends change substantially. What did change Comparative analyses gave managers and ratios for all divisions and units. were the tools that were available to the clear visual explanations of the executive and divisional management for underlying factors behind unexpected Phase 2 – visualising the key the diagnosis of business-unit performance in the business units. business messages performance. Specifically: They could also be used to identify Business performance could be Tomkins decided to implement a the best- and worst-performing viewed through organisation charts management reporting system that units in a division or area that rapidly identified which business (management can drill down into would address the above issues in two unit had achieved which outcome. areas of interest or concerns to consecutive stages. First, an information This enabled underperforming units continue a thread of analysis). visualisation capability was added to the to be identified instantly. These Business-driver analyses that were existing consolidation systems in 2002. “organisational performance” charts tailored to Tomkins’ specific corporate A later development of this system will could be used to show actual values or objectives and performance drivers see the rationalisation of the separate variances, for example against budget showed executive managers the databases into a single group-wide or previous year. In addition, cause-and-effect relationships between system underpinning both the statutory management teams could gain a more both financial and non-financial drivers and management reporting processes. detailed view of business-unit and business outcomes. It’s expected that this final stage will be performance by drilling down into the Significant year-end risks for any given completed in 2004. organisational chart. financial year could be detected automatically by means of statistically smoothed trend charts describing Figure 6 The management reporting structure in phase 2 business-unit performance and pinpointing implausible movements in any key financial or non-financial

On-line indicator; and end-of-period forecasts Ad hoc reports Corporate capability that could be calculated automatically centre users as a series of management-nominated scenarios for each unit and for key Statutory accounts Management accounts Performance visualisation Ad hoc financial variables. Executive managers reports Statutory information Management information Visualisation could then compare these objective consolidation databases consolidation databases database Total group Total group Total group assessments of performance against unit/divisional management forecasts to determine any significant variances. Statutory information Copies of Copies of consolidation databases consolidation database visualisation database Phase 3 – an integrated, group- Divisions Divisions Divisions wide consolidation system Divisional The third phase of the roll-out of users reporting systems will ensure the integration of disparate statutory and management information systems into a Operational statutory Operational management single consolidated system. Overlaid on information information Operational this consolidation system will remain the Spreadsheets, general Spreadsheets, general company users business visualisation software that drives ledger, ERP etc ledger, ERP etc Companies Companies key performance data through a series of analyses. Critically, though, the new

18 References/further reading

Corporate Governance, The New Strategic Imperative, Economist Intelligence Unit (sponsored by KPMG International), 2002.

“How about now? A survey of the real-time economy”, The Economist, 2 February 2002.

“How a toxic mixture of asbestos liabilities Figure 7 The management reporting structure in phase 3 and plummeting demand poisoned an industrial powerhouse”, Financial Times, 23 October 2002.

Divisional New Directions in Business – Performance users Reporting, Communications and Assurance, Visualisation database KPMG, 2002. Total group Total Prospective Financial Information: Guidance for UK Directors (consultation draft), Institute of Chartered Accountants in England and Statutory Management Wales, 2002. information information Divisional consolidation consolidation users C Bartlett and S Ghoshal, “Changing the Divisions role of top management: beyond systems to people”, Harvard Business Review, May/June 1995.

T Bentley, Defining Management’s Operational statutory Operational management information information Information Needs, CIMA Publishing, 1990 Divisional Spreadsheets, general Spreadsheets, general (revised 1997). users ledger, ERP etc ledger, ERP etc

Companies Companies Companies C Cornforth and C Edwards, Good Governance: Developing Effective Board-Management Relations in Public and Voluntary Organisations, CIMA Publishing, 1998. system will create a means for managers new system means that information will to understand what is happening in the be consolidated far more quickly and Corporate Reporting: The Management business. Tomkins’ use of intelligent shared more easily. The advanced Interface, CIMA Publishing, 1990. business systems will allow its analyses within the new system S DiPiazza and R Eccles, Building Public Trust: management to assimilate the key means that both financial and non- The Future of Corporate Reporting, John Wiley business messages in the data quickly, financial performance can be diagnosed, & Sons Inc, New York, 2002. freeing them up to manage the business. shared and understood by a wider S Dressler, “Management accounting Tomkins’ success over the past few management audience. master: closing the gap between managerial years has had much to do with the The homogeneity of the new reporting accounting and external reporting”, delegation of strategic, operational and system, and diagnostic tools within it, Journal of Cost Management, Jan/Feb 2002. financial responsibility to senior will contribute significantly to the company management. Analysis of successful delegation of responsibility to M Fahy, Strategic Enterprise Management competitive differentiation has senior company management. Systems – Tools for the 21st Century, translated into strategy, and strategy Specifically, they will provide a common, CIMA Publishing, 2001. has translated into a targeted investment up-to-date platform of business R Palmer, “The smart director”, Directors of funds and resources in marketing, understanding among management and and Boards, Spring 1993. operations and support. reduce both operational and financial The delegation of responsibility to risks in the meantime. J Ross, “Is real time a real need?”, Accountancy Age, 16 May 2002. senior company management has been, Dominic Powell ([email protected]) is and continues to be, aided by the director of Alliance Partnerships at Metapraxis Ltd R Scapens et al, External Reporting and development and roll-out of reporting Management Decisions, CIMA Publishing, 1996. systems and processes. Specifically, the R Derwent and M Jones, The Corporate centralised consolidation of data (“hub Governance Handbook, Gee Publishing, 1996. and spoke” reporting mechanism) has been replaced by a homogeneous, B Tricker, “What information do directors group-wide consolidation and business need?”, Corporate Governance, July 1997. analysis system. The homogeneity of the

19 Performance Reporting to Boards: A Guide to Good Practice

The Chartered Institute of Management Accountants (CIMA) represents financial managers and accountants working in industry, commerce, not-for-profit and public-sector organisations. Its key activities relate to business strategy, information strategy and financial strategy. CIMA is the voice of more than 77,000 students and 60,000 members in 154 countries. Its focus is to qualify students, to support both members and employers and to protect the public interest. The Chartered Institute of Management Accountants, 26 Chapter Street, London SW1P 4NP +44 (0)20 7663 5441 www.cimaglobal.com