- Need to transform their roles and adopt new KPIs to better measure intangibles
- Finance pros struggling to access and analyse data around intangible assets
CHIEF financial officers (CFOs) need to rethink how they measure the health of their corporations in the digital age, according to findings from The Digital Finance Imperative global research from Chartered Global Management Accountant (CGMA), sponsored by Oracle Corp.
According to the study, while the majority of a corporation’s value derives from intangible assets such as customer sentiment and brand, few finance professionals surveyed say they can access the right data to measure and monitor these critical elements of their business – just 25% in the case of customer sentiment, Oracle said in a statement.
“Choosing the right KPIs (key performance indicators) is hard,” said Richard Wong, vice president of finance at LinkedIn.
“You need to make sure that the KPIs you choose are measurable, impact the business, and that the underlying data is right. The worst thing you can do is not have any KPIs.
“In the beginning, your KPIs may be very simple, and may need to change or evolve over time, but at least you will have KPIs to focus on, to track progress,” he said in the statement issued by Oracle.
The Digital Finance Imperative report argues that measuring the business value of such intangible assets through innovative KPIs is only going to grow in importance as digitally-enabled business models proliferate.
Intangible assets have increased in importance over the last several years and today account for 80% of the value of companies that make up the S&P 500 Index, according to a 2014 report in The Wall Street Journal.
The respondents to the global survey believe the top value drivers for their businesses are customer satisfaction (76%), quality of business processes (64%) and customer relationships (63%), Oracle said.
However, the survey found that finance professionals are struggling to access and analyse data around intangible assets.
For instance, only 25% of respondents are able to assemble and analyse data on customer sentiment and only 20% have access to data about the impact of their brand on their business. Only a third of all respondents say they can measure the quality of their business process.
“Finance is running the risk of sitting on the sidelines while more digitally-savvy lines of business deliver the insights that management needs to differentiate and grow,” Oracle Applications Development senior vice president Rondy Ng.
“By unlocking the value of data using a modern and complete cloud-based ERP (enterprise resource planning) and performance management system, finance can seize the unique opportunity to become the new digital guidance system for the enterprise.”
When asked about the extent to which finance has been realigned to support new value drivers, only 15% of respondents reported that finance in their organisation has been fully engaged with regards to ‘providing non-financial measures of progress towards strategic intent’ or ‘the identification of the intangibles to be measured and managed to ensure long term success.’
The study features insights from 744 executives in 34 countries. Respondents include executives from world-leading companies including LinkedIn, Walmart eCommerce, Shell, and Southwest Airlines.
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