Traps in presenting and communicating performance information ► ► ►
Unfortunately, graphical presentation is easily manipulated to give readers the desired impression, rather than the correct one. There are several traps, including (see Figure 5.12):
► cutting off part of the vertical axis to make variations in the performance seem more dramatic (see Figure 5.12(c) v. (d))
► adjusting the vertical or horizontal scale so that small variations seem large (see Figure 5.J2(a) V. (b); (c) V. -(d); (e) V. (f))
► judicious choice of the starting date for an index (e.g. Figure 5.12(c) and (d) give no indication of performance before that particular day)
► judicious choice of the information to be presented (e.g. change instead of absolute amounts—see Figure 5.12(e) v. (f)).
An analysis of the way graphics are used in financial statements found that 34% of graphs were materially distorted, 90% of which were distorted in the company's favour.
II concluded that companies used graphs to manage the presentation of the company, and that the graphs tended to undermine the true and fair view of accounts.25 Newspapers provide daily examples of these types of traps, in the graphs in the business section. Before accepting the apparent ‘look’ of the data, observe carefully the axes, the period covered and the actual variables being graphed, and then draw your own conclusions.
In the area of sustainability reporting, there is much ‘greenwash’.26 Much of the positive information presented, as well as the case studies and pretty pictures, represent a biased picture of actual performance, which is possibly due to the lack of clear and agreed formats and the lack of assurance of the information. It is often not clear what information has not been reported—information which is more important than what has been reported. Having a clear framework of what information is expected helps to identify gaps in the reporting.
Recommendations for successful application of a balanced performance measurement approach
Although the balanced scorecard has emerged as a major business tool for performance assessment, its complexity makes it difficult to have accepted and to work! The following recommendations are designed to improve the chances of successful implementation:
1 Have a clear strategy.
2 Develop a set of key drivers which will deliver the strategy.
3 Develop a strategy map which links the key drivers of strategic success and ensure it covers all areas of the balanced scorecard.
4 Develop measures and targets for each area of the sustainable balanced scorecard, covering all areas, not just those that suit.
5 Use a less is more' philosophy. Minimise the number of measures chosen.
6 Use grassroots information about what to measure, and obtain total acceptance of the measures chosen.
7 Communicate the measures, communicate what they mean, communicate updates and communicate results.
8 Use adequate resources to make sure the balanced scorecard is implemented and has an opportunity to succeed.
9 Link incentives to the measures chosen so that individual behaviour is encouraged to align with business needs.
10 Evolve the scorecard over time as the strategic situation changes and better measures arise.
11 Be patient—implementation, acceptance and results take time.
Strategy @ work 5.5 summarises the current state of play that directors see with measuring performance in practice.