Measuring A Businesses’ Real Health! Are Company Boards and Executives Still In The Dark?

November 20th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, intangible assets. No Comments.

Michael D. Moberly    November 20, 2008

In 2004, Deloitte teamed with the Economist Intelligence Unit to conduct a survey titled; ‘In the dark: What boards and executives don’t know about the health of their businesses’.  The survey produced the following three key findings related to the importance of boards and senior managers to track non-financial aspects of  company performance:

1. Factors driving boards and senior managers to monitor key non-financial performance indicators are:

    a. increasing global competition

    b. growing customer influences

    c. greater awareness of risks to company reputation, and

    d. accelerating product innovation

2.  Despite the growing need to monitor non-financial vital signs of their businesses, most boards and senior managers are struggling to do so.

3.  The biggest obstacles to enabling boards and senior management to track non-financial vital signs of their business are:

    a. lack of sophisticated measures, and

    b. doubts that they truly matter.

Interestingly, the Deloitte survey also revealed an overwhelming majority of respondents (ranging from 90+% to 78%) described ‘critical and important drivers to (their company’s) success’ as (a.) customer satisfaction, (b.) service quality, (c.) efficiency and effectivness of business processes, (d.) brand strength, (e.) innovation, and (f.) quality of relationships with external stakeholders.  Please note that each of the aforementioned are routinely classified as intangible assets!

In my view, the findings and obstacles cited above by the survey’s respondents, can be substantially mitigated by elevating boards’ and senior executives’ awareness, alertness, and overall familiarity with intangible assets, particularly ‘company specific’ intangibles (their) company possesses, produces, and/or has acquired.  Once this occurs, I’m confident it will become much clearer to senior executives and boards’ alike (a.) what type of performance indicators need to be in place (to track-monitor non-financial vital signs) and (b.) any changes in company governance, i.e., stewardship, oversight, management, that may be necessary to act on (e.g., better utilize, leverage) those performance indicators!

 

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