The result of these excesses is often late
board meetings with the papers being sent to the directors only day or two before the meeting. The board meetings themselves can then be sidetracked by the detail, with the strategic overview inadequately addressed.
Directors themselves are often guilty party, requesting changes to board report formats or additional analysis without first finding out what the exercise will involve, or giving staff guidelines as to how much detail is required.
What amount of senior management time is absorbed by the monthly reporting process? We estimate that for, say, company with 500 FTEs, the time invested prior to the board meeting is between 26 and 47 days of effort each month.
Is there better way? Participants in our studies, are finding ways to improve the board reporting process, from the better practices provided.
Refocus ?variance-to-budget’ reporting
How often do you find that the variance commentary is not useful? In areas where precise budgets have been set for month’s activity, such as sales, power, payroll, cost of sales etc, monthly variance analysis is valuable.
However, many items in the P/L were best guesses at the time of the budget -eg, PR campaigns, travel, consultancy fees – and were often simply budgeted over the year.
Reporting on the monthly variance for these accounts is of questionable use and thus some participants are now focusing variance analysis commentary more on the YTD variance.
Information requests
A request for information from the board often can take on life of its own. simple request soon adopts charge-of-the-light-brigade characteristics as the request is passed down the management tree.
More direct communication between the directors and the staff who write these reports can minimise this problem.
Direct reports to the business unit managers are now fronting up to committees, and staff are writing board papers with limited input from the senior managers.
This step takes bravery. But the rewards are motivated and more competent staff, and general managers spending more time making money for their organisation.
Using the executive information system (EIS)
These are the answers to the question, “How can we reduce the ridiculous size of the board papers?” Imagine an environment where board members would receive 20-page document with pointers to relevant pages in the EIS. Board members then could arrive before the meeting and examine those areas of particular interest.
During the board meeting some queries could be dealt with before the meeting had finished. One manufacturer has such system and comments that board meetings are now more strategic, the board papers are brief, the non-executive directors have access to the EIS, and management has better control over the business.
Purging board papers
Does it take 200-page board paper package to run business? Are the key decisions direct result of board papers or the collective experiences of the board members?
Increasingly today Microsoft PowerPoint is used to deliver presentations. major time saving can be made if board members request copy of the slides plus notes rather than full scripted version. The benefit is that management has less space to cloud problem! They have to set out clearly and concisely the issues.
More timely board meetings
Timely, accurate and concise information is better than literary masterpiece. By setting tighter board meetings (within 10 working days of month end) the whole process will become more efficient.
Focus on the key measures
Most businesses can be controlled successfully by monitoring key measures. One of the celebrated cases is the way that Lord King, chairman of British Airways, turned around the company by focusing on one key measure: “delayed departures”.
Wherever Lord King was, the EIS could provide him with the delayed departures and the contact details of the British Airways representatives at the relevant airport. Very soon all sorts of inventive ways were introduced to catch up time on late arrivals and much progress was made in 18 months.
Actions directors can take
? refocus of “variance to budget” reporting
? scoping all information requests
? using the executive information system
? continually purging the board papers
? more timely board meetings
? focus on the key measure.
David Parmenter is the managing director of Waymark Solutions Limited. Email: [email protected] website: www.waymark.co.nz
