When it comes to measuring the non-financial aspects of corporate performance, most board members and executives say that companies fall short, according to a Deloitte Touche Tohmatsu survey.
While 92 percent of board members and executives surveyed said that their board directors are responsible for monitoring both the financial and the non-financial measures of their companies' performance, only about a third said that their companies are proficient at monitoring the non-financial indicators, according to the poll of 249 companies conducted by the Economist Intelligence Unit. And nearly 75 percent said that their companies are under increasing pressure to monitor non-financial indicators of corporate performance.
According to the report, "In the Dark: What Boards and Executives Don't Know about the Health of Their Businesses," a minority or only a slight majority of companies said that their board directors are given excellent or good information in key areas, including: the company's impact on society and the environment (27 percent); employee commitment (35 percent); relations with suppliers and other external stakeholders (39 percent); product/service innovation (43 percent); customer satisfaction (50 percent); brand strength (51 percent); product/service quality (52 percent); and the quality of corporate governance and management processes (56 percent). In contrast, 86 percent believed that their companies are excellent or good at measuring and tracking the performance indicators necessary for financial reporting purposes.
Asked why board members and senior managers lacked information on many of the vital signs of their businesses, respondents identified two barriers more than any others: the absence of developed tools for analyzing non-financial measures, and skepticism that such measures directly impact the bottom line, Deloitte said.
However, such non-typical performance measures, like a physical exam, provide a necessary snapshot of the health of an organization, according to Robert Go, co-author of the study and a Deloitte senior principal.
"The financial numbers in the quarterly or annual report often tell you too late that something is amiss," he explained. "At a time when corporate boards are being asked to more closely watch the whole company, many directors and managers lack valuable information that would tell them whether their companies are on course."
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