Improving Decision Making in Organizations
Subtitled Unlocking Business Intelligence, this report by CGMA (a joint venture between the AICPA and the CIMA) has an interesting business-oriented perspective on the issue of the information that drives business decisions.
While the report has an emphasis on the role of management accountants, it explains and gives examples of how business intelligence can be used across the enterprise and in the boardroom to drive better decisions, efficiency, and performance.
Along the way, they have some important things to say and for us to consider:
- BI, if properly designed, implemented and managed, will inform better decision making in business. Everyone in management needs to be alert to this opportunity and the threat that early adopters may achieve a competitive advantage.
- The finance function is being transformed in terms of the efficiency of its operations, the quality of the information it generates and its level of influence in management. Leading organisations have already grasped the opportunities presented by developments in information and communications technology to improve the efficiency of accounting operations. They recognise that there is a limit to how much cost can be taken out of the finance function. Their focus has shifted instead to how they can get more value from finance.
- Current developments in business intelligence (BI) present an opportunity for finance functions to provide better management information and to realise their potential to better support the business.
- The term ‘business intelligence’ is often used to describe the technical architecture or ‘stack’ of systems that extract, assemble, store and access data to provide reports and analysis. It can also be used to describe the reporting and analysis applications layer or performance management tools at the top of this ‘stack’….. But BI is not just about hardware or software. Success depends on senior management recognizing that an organisation’s data is an important strategic asset that can yield valuable management information. Their leadership is essential when implementing changes and developing the culture necessary to unlock the potential in a BI solution so the better information generated is actually used to improve decision making.
- Most organisations are either not alert to the potential in BI or are still wary of investing in information systems. Meanwhile, major companies in certain sectors already use BI to achieve competitive advantage. Software vendors have developed solutions to address systems integration or data quality which were often areas of difficulty.
- Moreover, developments in cloud computing and in in-memory processing mean this technology is becoming more cost-effective for a wider range of sectors and for smaller companies too.
- BI may threaten some traditional accounting roles in the monthly reporting cycle, but it presents new opportunities to stimulate stalled finance transformation projects. It could release management accountants’ capacity to help improve decision making from strategy formulation to risk and performance management.
- Business leaders and management accountants must be alert to the potential of developments in the role of the finance function (finance transformation) and BI. The combination of these developments provides an opportunity to improve accounting operations and acquire a greater competence in informed decision making. These could enable an organization to ensure its sustainability by becoming more adaptable through being better informed and able to respond more rapidly than its competitors to market developments.
- As globalisation gives competitors access to similar resources and competition causes their business processes to converge on similar standards, decision making becomes the remaining key to superior performance. Any company that fails to transform its finance and accounts function to support decision making could be putting its competitive position at risk.
- A survey commissioned by Business Objects from the Economist Intelligence Unit (EIU) found that nine out of ten corporate executives admit to making important decisions on the basis of inadequate information. Less than one in ten executives in the survey receive information when they need it.
There’s a LOT of great information for those who want to explore the topic further. Pay attention to the business case decision (starting on page 24) and the performance management section (starting on page 39).
My questions to you:
- Is your organization taking advantage of this capability?
- Are you using it not only to monitor performance and improve decisions, but to monitor risks?
- What, if anything, in the article interests you?