An effective reporting strategy supports corporate strategy by supplying the measures and metrics that align organizational behavior with organizational objectives. The choice of corporate strategy, such as product innovation, customer intimacy or operational excellence will influence what information is emphasized in a company’s reporting strategy.
There are different strategy frameworks but at a basic level they can be divided into cost leadership or differentiation. Types of differentiation include product innovation and customer intimacy. The choice of strategy will dictate the types of measures and metrics that are important to the organization, both at the senior leadership level and throughout the organization. A comprehensive management reporting strategy will include measures and metrics that focus on effectiveness of delivery as well as the efficiency of the processes, but each company will craft it's performance scorecard in a way that provides critical information about strategy execution to its managers.
More broadly, the choices of strategy execution will also inform the choice of management reporting measures chosen. Is a company pursuing its strategy by focusing on individual countries or Strategic Business Units (SBUs) that are managed globally? This overlaps with the choice of organizational structure, but effective management reporting aligns measures and metrics with the key responsibility centers within the organization.
If a company is pursuing its strategy through country-focused execution, then the management reporting system will align critical measures with the country management structure. On the other hand, if a company pursues strategy execution through global SBUs, then the management reporting structure will align with the SBU responsibility centers to ensure that the information received through the management reporting structure provides critical information to the SBU leaders.
The choice of strategy and the organizational alignment created to execute that strategy go hand-in hand. In a future post I'll discuss in further detail how the choice of organizational structure informs the requirements of a company's management reporting systems.
