Board members only measuring financial health

03/04/07 16:55

Many chief executives are still in the dark about the overall health of their companies, new research has suggested.

According to a new survey by business advisors Deloitte, many board members and senior managers are not informed enough about issues such as employee engagement, innovation or customer satisfaction.

Commenting on the study, William G. Parrett, chief executive officer at Deloitte, said: “The attitudes of [chief executives] towards understanding the value of non-financial indicators and measuring performance against them are more positive now compared to the last survey, but it seems executives and boards are not yet prepared to take the next step and act.

“The majority of companies said they are under increasing pressure to measure these indicators, but the quality of non-financial performance information they receive is inadequate to meet their needs.”

Only 29% of chief executive officers described their monitoring non-financial areas of performance as good or excellent, compared to 87% who thought they tracked financial health adequately.

This comes despite nearly 80% admitting that financial indicators alone did not give an accurate reflection of the performance of the company.

“In time, a growing number of companies will improve the quality of their non-financial performance measurements and adapt them more broadly in the enterprise,” continued Parrett.

“This will help them identify their edge over their competitors, improve performance, and ultimately contribute to an improved bottom line.

“It is a matter of understanding that a more balanced mix of financial and non-financial objectives can improve performance and even financial results.”