The increasing complexity of performance reporting

Over my career I have seen an incredible increase in complexity of issues that leadership needs to measure, monitor and manage. It is time to upgrade our reporting frameworks.

Identify 7 Differences between 1977 and 2017

OK. So that's not such a tough challenge... but what is not visible is the complex inter-relationships between each of the items on the 2017 diagram. (This is an n-dimensional situation drawn in a 2-dimensional diagram.)

So what?

The recommendation is obvious: businesses need a reporting framework that creates a single view across all these issues "on a single page" (i.e. one view of the truth)

We are solving for this in the "sustainability scorecard"

More detail on 1977

In the "good old days" all we worried about is "Is the business making money?" Since business was getting more complex than when accounting rules were first developed, we innovated and developed "standard costing" which provided a bit more detail of the allocation of overheads, which were a growing cost element.

By the mid 1980's we saw that some products attracted more costs then others... typically ones that required more engineering, more complex sales cycles, etc. To deal with that we innovated ABC (Activity Based Accounting), ABM, etc. ...But still focused on reporting profit.

The next innovation occurred in the late 80's when the Balanced Scorecard was developed. The word "Balance" was intended to tackle the financial issue of sacrificing the long-term in order to make the (short-term) quarter-end numbers. The Balanced Scorecard introduced non-financial measures, lead / lag concepts and many more elements that improved our reporting capabilities.

More detail about 2017

Chances are you know several parts of this puzzle. The good news is that great thinking has been developed in each of these areas.... Just go to your local book store... there are thousands of business books on these topics.

The problem is that we are developing these ideas in silos / isolated from each other. But the reality is that they are all interconnected. Changes in any one area will, sooner or later, impact the others.

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My last comment was that the relationships on the 2017 image are more complicated than just the one-to-one lines. I was sent the following image from one of my readers...it may describe the relationship better:

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