By Steve Morlidge, Business Forecasting thought leader, author of "Future Ready: How to Master Business Forecasting" and "The Little Book of Beyond Budgeting"
A few decades ago everything seemed so straightforward. When it came to planning and controlling businesses annual budgets were the only show in town. Managing performance simply consisted of comparing financial outcomes to these budgets on a periodic basis and using variance analysis to understand where and how deviations in performance had come about, to help the business ‘get back on track’. In this simple world of plan, actual and variance, simple presentational devices such as tables displaying columns of numbers sufficed.
But things have changed since then:
So the demands and the potential have increased but there is a large gap between what is possible and what we see on the ground. This is partly because the capability of the tools available has outstripped the time needed for analysis to master them with the result that Excel and the rest of the Office suite of products continue to be the tool of choice for routine reporting, even where significant investments have been made in BI software. It also because there is an abundance of advice on what to measure but there is relatively little guidance given on how to analyse the results and communicate them in an effective way.
Also, we need to recognise that performance reporting is part of a social process; it informs decisions which are made collectively by boards and business teams. And while there is now an abundance of BI software that helps individual managers personally explore and make sense of data online, these capabilities are ill-suited to the task of providing groups of decision makers with the information they need in the form in which they need it. To help them collectively agree what needs to be done they need clearly presented and concise analyses to ensure that they all receive the same story about performance message at the same time: because if the do not there is little chance of them quickly agreeing what needs to be done.
So software isn’t the solution to these problems, although it will certainly be part of it.
This is the premise upon which my presentation to one of the London FP&A Board's was delivered. This will form the basis of my forthcoming book ‘Present Sense’ along with his remedies. These remedies are divided into two; the first set comprises a series of simple and pragmatic approaches to help practitioners make sense of performance data and include:
These second set of remedies are six design principles practitioners better present and communicate insights to decision makers, particularly in the form of graphics. With the help of examples and illustrations, that effective communication needs to be:
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