Survey: CEOs unaware of overall company health

The second edition of “In the Dark: What many boards and executives still don’t know about the health of their businesses,” a Deloitte Touche Tohmatsu survey, found that 78 percent of CEOs surveyed said that financial indicators alone don’t adequately capture their companies’ strengths and weaknesses. While the CEOs agreed that they need nonfinancial information, they admitted that their ability to monitor company performance against those indicators remains inadequate.

“The survey reveals a critical disconnect between rhetoric and reality in the boardrooms and management circles of some of the world’s leading companies,” said Deloitte CEO William G. Parrett in a news release. “The attitudes of CEOs towards understanding the value of nonfinancial indicators and measuring performance against them are more positive now compared to the last survey (2004), but it seems executives and boards are not yet prepared to take the next step and act.”

Parrett noted that in the survey – developed in conjunction with the Economist Intelligence Unit and released April 3 – the majority of responding CEOs, 57 percent, said they are under increasing pressure to measure nonfinancial indicators. They noted, however, that the quality of that information is inadequate for their needs.

Clear disconnect

Of the executives polled, 87 percent said their ability to track financial performance of their companies as excellent or good; just 29 percent of them say the same for their ability to track nonfinancial drivers such as customer influence, innovation and global competition.

“This report clearly shows a disconnect between demand and supply,” Parrett said. “Boards and management teams by their own admission see that the information they need is not the information they are receiving. … There is much more work to be done.”

The research suggests that overcoming the obstacles to monitoring nonfinancial performance will require significant changes in corporate governance. For the CEOs interviewed, impediments to the use of nonfinancial performance indicators include underdeveloped tools, organizational skepticism, unclear accountability, time constraints, and the concern that such metrics may reveal too much information to competitors.

“Consistently tracking soft issues, such as employee engagement, innovation, or customer satisfaction, is viewed as more art than science,” Parrett said.

“On the other hand, financial metrics are more familiar and quantifiable to many. Clearly this reticence needs to change, as business leaders can improve performance and even (out) financial results with a more balanced mix of financial and nonfinancial objectives.”[[In-content Ad]]