Adequacy of Information

We asked research participants about the adequacy of the information they receive
in nine categories: financial data about their company, financial data about their
business unit, operating data about their company, operating data about their
business unit, how well the company is performing to objectives, how well their
business unit is performing to objectives, how well they themselves are performing
to their objectives, leading indicators to anticipate issues or opportunities and
information about competitors' performance.
The participants said they are getting enough of the traditional, high-level accounting
and operating information about their company. For example, nearly three-fourths
report they are getting enough financial information about their company and fewer
than one in five said they get too little (see Figure 1). Therefore, it’s time to move on
to the newer challenges of the information age.
These challenges include the other types of information we asked about. When it
comes to providing more specific operational information, participants see less
adequacy. More than half said they are getting sufficient information about their
business units’ operating performance as well as how well they are performing to
their objectives, but about one-third are not. Moreover, based on other benchmark
research we have done in this area and our ongoing work with companies, we think
the assessments of adequacy are too lenient because they are based on what people
are used to receiving. We find that considerably more information exists that would
help people gain a broader and deeper view of their performance and the
performance of their business units.
Moreover, it is important for companies to
cast a wider net to get a broader set of
data. The traditional reliance on accounting
information as the basis for management
reports produces information mostly about
the past. Thus it is not surprising that only
20 percent of participants said they get
enough information about leading indicators
that will help them anticipate business
issues or opportunities; 60 percent reported
they do not get enough, and 20 percent are
not getting any (see Figure 2). Creating
leading indicators usually requires a
combination of operating and accounting
information.
Figure 2
Adequacy of Information about
Leading Indicators
Too much
0%
About right
20%
Too little
60%
Nothing at all
20%
Source: Ventana Research
Almost all companies’ management reports present results in the context of yearover-
year performance or actual-to-budget comparisons. But obviously, business is
not just an us-vs.-us proposition – it’s us vs. them. If sales are up 5 percent and we
were expecting a 10 percent increase, is that bad? Not if our major competitors are
experiencing flat sales. Yet only 15 percent of our participants said they have
adequate information about their competitors’ performance, while more than onethird
(36 percent) said they receive no information at all.
Until relatively recently, it was hard for companies to systematically collect
information about their own business and far more difficult to acquire information
about markets and competitors. Moreover, since the budgeting, forecasting and
review process in most companies sets an us-vs.-us context, it is no surprise that
people do not reflexively compare their performance in a context that really matters.
Today, however, it is far more practical to collect this type of information centrally
and disseminate it to managers to provide them with the proper context of their
business performance.