Michael D. Moberly December 19, 2011
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 three key findings that demonstrate the importance boards and senior managers should now be attaching to tracking/monitoring non-financial aspects of company performance, i.e., intangible assets.
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 effectively track/monitor non-financial vital signs of their business are:
a. lack of sophisticated, broadly accepted measures, and
b. doubts that they truly matter.
Interestingly, the Deloitte – Economist Intelligence Unit survey also revealed that an overwhelming majority of respondents (ranging from 90+% to 78%) described the following as ‘critical and important drivers to (their company’s) success’, i.e.,
- customer satisfaction
- service quality
- efficiency and effectiveness of business processes
- brand strength
- innovation, and
- quality of relationships with external stakeholders
(Please note that each driver above is routinely categorized as an intangible asset!)
In my view, the findings and obstacles cited above by the respondent’s to the survey can be substantially mitigated by elevating boards’ and senior executives’ awareness, alertness, and overall (operational) familiarity with intangible assets, particularly the one’s I often refer to as ‘company specific intangibles’, i.e., distinctive intangibles a company has produced internally or acquired that provide (measurable) competitive advantages, increased market share, or adds to a company’s overall value.
Once this occurs, I’m confident it will become much clearer to boards, senior executives and business unit management teams alike:
- what type of performance indicators need to be in place to consistently track/monitor their company’s non-financial vital signs, i.e., it’s health
- any changes in company governance that may be necessary, i.e., stewardship, oversight, management of the intangibles to better utilize – leverage those performance indicators!
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