Money might be the marker businesses typically use for keeping score, but an interesting new study out today from Deloitte Touche Tohmatsu suggests that many companies’ board members and top executives feel they aren’t getting the information they need to truly understand the health of their organizations.
The Deloitte study, In the dark II: What many board executives STILL don’t know about the health of their businesses, concedes the importance of financial metrics and financial results. But the report suggests that business leaders feel it’s also extemely important to evaluate such non-financial indicators as customer satisfaction and employee commitment. Many, however, believe their companies do a much poorer job measuring those non-financial indicators than they do financial metrics, Deloitte found.
The professional services firm found that 57% of the companies it surveyed are under increasing pressure to measure non-financial indicators. But, while companies indicated they’re aware of the pitfalls of focusing solely on financial measures, Deloitte found that executives’ ability to track performance through non-financial measurements appears inadequate, and that companies either don’t have or aren’t sharing non-financial performance data with their boards.
While 87% of the companies surveyed rated their ability to track financial performance as either good or excellent, only 29% described their ability to track non-financial performance in such terms.
Standing in the way of greater use of non-financial performance metrics, according to the Deloitte report, are such factors as undeveloped tools, “organizational skepticism” as to the value of such tools, unclear accountability for non-financial performance, time constraints and the concern that such metrics might provide competitors with too much information.
The Deloitte survey, done in cooperation with the Economist Intelligence Unit, follows a similar study conducted in 2004. The latest study found that the recognition of the importance of non-financial measures detected in 2004 has increased in the time since, and that some companies are demonstrating real business successes as a result of tracking and managing non-financial performance metrics, while many more are including non-financial data in annual reports or shareholder briefings.
Still, Deloitte concluded, their survey’s statistical results “raise some red flags” that business leaders aren’t getting the information they require to guide their companies effectively, and that at many businesses there’s still work to be done.