In the knowledge-based economy, optimised use of data is central to helping organizations make better decisions. However, a new study of performance reporting conducted by KPMG and ACCA has found that almost 40% of finance professionals around the world believe decisions are still primarily based on “gut feel.”
“The benefits of using concrete data sources, particularly external ones, are manifold; however gaining buy-in from the top of the business is essential to unlocking their true value,” says Jamie Lyon, head of corporate sector at ACCA.
“If management do not trust the data on which performance insight is based, or would rather use their own instinct, it becomes even harder for the rest of the business to see it as an essential part of the decision making process.”
Gatekeepers of data
More than half of respondents (56 percent) said that the finance team in their organization is perceived principally as gatekeepers of data, or providers of basic financial analysis at best.
John O’Mahony, Head of KPMG’s Enterprise Performance Management team, said: “The finance function is finding its reputation as a data repository hard to shake.
“The team needs to step out from behind their spreadsheets, actively guide the board and work with them to drive the strategy for the business. We already seeing this happen in the consumer goods sector, where finance teams work hand in glove with leadership and the wider business to drive better performance.
“However, this reputation overhaul cannot be achieved while finance teams remain tied up in transactional activities, such as time consuming data extraction or traditional month end analysis. This sort of activity is often not valued by the business and can be done by reporting technology, freeing up the finance professional to join colleagues at a client meeting and help to set the agenda, not just inform it.’
Common set of KPIs
On a more positive note for performance reporting, over 71% of respondents believe their organisation applies a common set of KPIs consistently across the business. According to Lyon, this is a great step towards being able to understand performance across the organisation consistently but caution must be taken:
“Organisations may have consistent KPIs but there is a danger they could paint a misleading picture if they aren’t focused correctly. Organisations using measures that are too inwardly focused risk losing sight of competitors whereas those with too outward a focus risk losing relevance to corporate strategy. The key word here is balance.”
For Lyon, the report shows there is still work to do for the majority of organisations when it comes to performance reporting:
“Despite the opportunity that exists in the face of ever increasing volumes of data, this study tells us that current performance reporting processes are still flawed. Ultimately, by continuing to use the wrong data in poor alignment to KPIs, organisations risk making sub-optimal decisions that will hinder their pursuit of strategic goals and leave them unable to respond to emerging threats and opportunities.”
O’Mahony adds: “The statistics reveal a real desire for finance functions to persist with monthly and annual routines, rather than offer the business a real time feed with proactive, external comparators.
“At the very least this risks damaging the finance function’s credibility, but it could also be hampering the ability of the business to raise its performance to that of the market leader. External comparators can help an organization identify where it needs to catch up and target investment to achieve this.”