It’s good practice for CEOs to report to their board of directors on a regular basis. In some companies these reports can be annual, in others, they are quarterly – in others still, they might be written as often as once a month. But whatever the frequency, it’s important that the CEO report is informative and meaningful. So what exactly should they cover? And how should data be presented so that it’s understood by all stakeholders?
Business Intelligence Vs Decision Intelligence
Some company leaders have been known to ‘listen to their gut’ when it comes to business decisions. But the most successful enterprises out there build their strategy on an extensive analysis of their company metrics. Not only do they use business intelligence to drive decision-making, but they regularly report on progress against targets using BI data.
In fact, a new term: ‘decision intelligence’ has recently been coined, and this refers to the democratisation of BI which has until recently been seen as the domain of data scientists, rather than company leaders and average employees. Thanks to AI, ML and augmented analytics, decision intelligence is likely to soon become the springboard for successful companies across industries. Gartner describes it as “a practical approach to improving organizational decision making,” which “models each decision as a set of processes, using intelligence and analytics to inform, learn from, and refine decisions.”
Key metrics to focus on
Effective decision intelligence is built around key metrics which should be included in every CEO report. Some of these metrics will be unique to your company size and industry, but we’ve included some common ones below that every CEO should consider.
- Net profit margin
The net profit margin CEO performance metric is used to measure a company’s profitability relative to its revenue. It is seen, in many cases, as the most important metric to include in a CEO report. The net profit margin helps investors and stakeholders to assess whether the CEO and senior management team are generating enough profit from company sales and that they are keeping operating costs in check – ensuring that they’re not spiralling out of control.
- Revenues and revenue growth
Tracking your revenue closely is crucial to making decisions around which business areas are worth investing in and where you might be able to cut some dead weight. Your board will ultimately want to see growth and to ensure that you’re capitalizing on the expansion opportunities that are evident in your data.
- Working capital
Effective business growth cannot occur without the means to fund it. Working capital is a valuable metric which shows the difference between your current assets and your current liabilities. It’s also useful for measuring your operational efficiency and your short-term financial health.
- Operating cash flow
Operating cash flow is the amount of cash generated by a company’s normal business operations. Many CEOs and stakeholders use this metric to assess the performance of a company’s core business activities. If your operating cash flow is decreasing, this may make your stakeholders think that you need to change your core business operations.
- Return on equity
One of the key things on the mind of every CEO is keeping shareholders satisfied. The return on equity metric is a good gauge of a company’s profitability – it’s essentially net income divided by shareholder equity. Generally, investors consider anything less than 10% as a poor rate of return.
- Cost per acquisition
This marketing metric measures the total cost of a customer completing a specific action. Most often, it refers to the cost of getting a prospective client to move down the entire sales funnel. The spending required to get them to achieve that goal may relate to advertising spending, hours spent by the marketing team on planning and delivering campaigns, the spend on design work for marketing content and more. The lower the spending, the more your stakeholders will be reassured that your marketing is efficient and effective.
- Staff retention rate
Employees are the lifeblood of every business, and although the worldwide economy is currently in turmoil, companies are still finding it difficult to recruit and retain top talent. Employee retention is defined as an organization’s ability to prevent employee turnover, and a CEO’s report should feature not just the data around this, but also the steps being taken to ensure that it remains low – be it professional development schemes, training opportunities or anything else.
The importance of having the right tools for measurement
While the above list is by no means exhaustive, it should give you a good indication of the key metrics needed to control business growth. Above all, it’s worth investing the time in the right tools for measuring these. According to data from Forrester, a quarter of all businesses use ten or more BI platforms, 61% use four or more, and 86% use two or more. To avoid the creation of data silos, with different tools being used by different parts of the business, it’s worth investing in a single, streamlined dashboard which will deliver you all the data that you need for a CEO report. With this single, at-a-glance view, you’ll be well-equipped to keep a close eye on progress and catch any inconsistencies or issues even before it gets to the reporting stage.