28 February 2017

The importance of challenging and testing performance reports

Recent events in the world of politics remind us of the importance of challenging performance reports.

Performance reports enable boards and senior management teams to make informed decisions based on robust data and intelligence. The reports allow organisations to see if they are on track to achieve their strategic objectives and if changes to departments or services are delivering the projected results.

But what if the data and intelligence contained within performance reports is wrong, or if the reports do not reflect the environment in which the organisation must operate?

Incorrect performance data can lead to an organisation being unprepared for what happens, or unable to respond effectively to the circumstances in which it must now operate. Either outcome could result in an organisation having to rethink its strategy or revisit recent resource and budget allocations.

It is therefore important for board members and senior management to challenge and test the information they receive within performance reports. The following are some basic questions they can ask:

  • What assurances do they have on the performance reports they receive?
  • How does the information contained within the reports compare or contrast with their perception of the business?
  • How does the information contained within performance reports compare or contrast with what they are being told by staff and stakeholders?
  • How many different sources are used to inform the assessments of performance?

Two recent examples from the world of politics demonstrate the impact of not challenging or testing information received.

On 24 June, the majority of people in Scotland woke up and were stunned to hear that the UK had voted to leave the European Union. Similarly, on 9 November, the majority of people across the world woke up and were shocked at the news that the next President of the United States was to be Donald Trump.

The majority of us had read the papers, watched the news, read about the various debates and saw the outcome of the polls. So why did we not see these two events coming?

The day before the vote on Brexit, I exchanged messages with a friend, predicting what we thought would be the final result. Whilst my friend believed it would be ‘remain’ 56% and ‘leave’ 44%, my prediction was ‘remain’ 48% and ‘leave’ 52%.

The day after the US presidential election, I walked into my local bookmakers to pick up the winnings from my bet that Donald Trump would be the ‘unexpected’ winner.

Does this make me a genius? No (no matter how much I may want you to think I am). What it does mean is that I spent much of 2016 challenging the information I was reading, and seeking alternative sources to test and challenge the assumptions I was making about both events.

This thinking began whilst speaking to Canadian tourists about Brexit. Whilst I was saying that I thought the remain margin might be closer than people estimated, they were talking about leave as an almost certain result.

Intrigued to find out more about what they claimed to know, I proceeded to read various media and press coverage from outside of the UK. These papers commented on what their reporters saw, which was different to the polls and mainstream UK editorials. Their reporters saw Brexit as a real possibility, and they had found a groundswell of people who were not happy with the status quo and wanted change.

I had found a similar situation with the US presidential election. Whilst the majority of media outlets were reporting a view of ‘surely it will never happen’, this did not match up with the number of supporters attending Trump rallies and the mood amongst the average person being interviewed. For example, Time magazine and Channel 4 news reported that the last time they had seen crowds of the size attending the Trump rallies was when Barack Obama was running for office in 2008.

We need to take a similar approach when scrutinising organisational performance. How do we know what we are forecasting is correct? Are there additional signs or measures that provide an alternative view of performance than the reports provide? If we are not confident in the information that is being provided to us, we can’t be sure that the decisions we take are the most appropriate.

We must challenge assumptions, even our own, and we should regularly test sources of data to seek confirmation on the performance reporting we receive.

Whilst we have all taken many messages from the Brexit and Trump results, one message is clear; if you only believe what you want to believe, you might find yourself very surprised by reality!