Making good decisions
Information overload, excessive bureaucracy, lack of trust and incentives that aren’t aligned with goals are common complaints of modern day business. Not surprisingly, these issues have all been cited in recent research by the Chartered Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA) as key contributors to poor decision making in businesses around the world – Joining the dots: decision making for a new era.
But what does this actually mean? Well, according to a survey of over 300 global c-suite based in large organisations across 16 countries it has resulted in 72% of organisations seeing at least one strategic initiative fail in the last three years. Executives are struggling to make good decisions with more than three quarters (80%) saying flawed information has been used to make strategic decisions, and 42% admitting their organisation lost a competitive advantage because they were so slow to make decisions.
Scary stuff when you bear in mind the sheer pace and challenge of the environment we all operate in. If the best decisions can’t be taken in a timely manner it is almost impossible for organisations to survive the odds, harness risks and opportunities, and succeed over time.
One thing the report was clear on was the competitive advantage to be found through integrated thinking and leaders – including Simon Henry FCMA, CGMA, CFO at Royal Dutch Shell – who are billed as ‘integrated thinkers’ and took part in the research. By ‘joining the dots’ and breaking down silos, integrated thinkers head up organisations that can tap into information from across the business that is influential, relevant and underpins analysis on a basis of trust. Having the skilled people who are able to spear head this activity allows these organisations to have a grip on how to take timely decisions to co-create value across the business and thrive over time.
CIMA’s Global Management Accounting Principles were developed to unlock the value of the finance function through management accounting. Simply put, they provide a best practice framework for decision making which has just been endorsed by the British Standards Institute with the launch of PAS1919. As our research has shown, good decision making and a joined up approach is critical to organisational success. And management accountancy is, in essence, the integrated thinking that can facilitate this.
If organisations have an integrated vision and understanding of how they create both tangible and intangible value over time they are able to communicate and ‘join the dots’ on how they plan to succeed over time to the very stakeholders who are critical to that success – be they customers, investors, staff, the supply chain or society as a whole. As the IIRC says, this integrated thinking and approach is of fundamental importance if Integrated Reporting and an articulation of the value creation story is to be told effectively and in a way that engages and inspires.