Smart Decision-Making: The CIMA Strategic Scorecard

The CIMA Strategic Scorecard™ illustrates enterprise governance in the overall governance context in which strategic decisions are taken.

The scorecard is a tool that has been developed by CIMA to help the board of any organisation to engage effectively in the strategic process. It is based on the premise that executive management is responsible for conducting the detailed strategic planning while the board needs to provide effective oversight.


The scorecard gives the board a simple but effective tool that helps it to focus attention on the most important strategic issues and to provide a constructive challenge to management by asking the right, searching questions. In context, therefore, the scorecard conveys the point that decisions are not taken in isolation. There must be accountability and/or approval for major strategic decisions. On the other hand, however, boards should not get too immersed in the detail of the organisation, and management needs to be free to take decisions that are necessary to the daily running of the business


Relating the decision-making process to the definition of management accounting, it can be said that management accountants have a significant contribution to make at each stage of this decision making process. However, the (finance and accounting) F&A function have challenges to overcome before it will be engaged to provide finance/business partnering; it must be transformed to better support decision-making


  • Formulation of policy and setting of corporate objectives.  
  • Formulation of strategic plans derived from corporate objectives 
  • Formulation of shorter-term operational plans 
  • Design of systems, recording of events and transactions and management information systems 
  • Generation, communication and interpretation of financial and operating information for management and other stakeholders
  • Provision of specific information and analysis on which decisions are based
  • Acquisition and use of finance
  • Monitoring of outcomes against plans and other benchmarks and the initiation of responsive action for performance improvement
  • Derivation of performance measures and benchmarks, financial and nonfinancial, quantitative and qualitative, for monitoring and control
  • Improvement of business systems and processes through risk management and internal audit review


Surveys from leading management consulting organisations suggest that the majority of top performing companies have already transformed their F&A functions. They may even be empowered by their F&A functions to achieve superior performance. However the causality is unproven. Superior returns could also be due to the holding of competitive positions in attractive sectors, choice of strategy, exceptional leadership or just good fortune. Nevertheless, the correlation is clear. There is sufficient evidence to suggest that organisations that do not transform their F&A functions to better support decision-making risk putting their company at a competitive disadvantage


Research by Accenture has shown a high correlation of over 70% between businesses with high performance and their F&A functions’ mastery of a suite of five finance capabilities


The five finance capabilities are:  


  • Pervasiveness of a value-centred culture 
  • Depth of enterprise performance management 
  • Dfficiency of finance operations 
  • Sophistication of capital stewardship 
  • Extent of enterprise risk management. 


More recent research by Accenture identified five key challenges that are common to finance executives around the world.


Challenges include:

  • Balancing the role of accountant with that of intimate finance/business partner
  • Increasing total return to shareholders
  • Achieving operational excellence
  • Managing all types of risk
  • Developing finance skills and retaining talent


The challenges for finance

Finance and accounting personnel not trained as management accountants in business would be challenged to move from their core competence and comfort zone in head office or back office roles to work alongside the business’ front line in the front office. CIMA’s Visiting Professor in 2007, Professor Mike Shields of Michigan State University, notes that head office F&A roles in America tend to be held by staff with legal backgrounds because of the emphasis on compliance in financial reporting. On the other hand, people with industry backgrounds, for example, engineers and forestry experts in the pulp and paper industry, often fill the finance/business partner roles


Having a fiduciary/stewardship role and holding a control function can distance head office accountants from the front line. For governance reasons, the finance director needs to apply checks and balances to retain objectivity. But good finance directors (FD) have always balanced their professional objectivity with an ability to partner with the managing director.


For example, Andrew Higginson FCMA of Tesco currently holds the job title of finance and strategy director. In some cases, finance/business partners are spared from this potential objectivity tension by being assigned to the front line. More than one in ten CIMA members in business already hold management or director-level roles outside the F&A function. These F&A alumni are still management accountants. They bring their professional standards and disciplines to non-financial roles


Moving from being a scorekeeper in the back office to a player alongside the front line can stretch F&A’s credibility in businesses that still see F&A as a control-and-report-generating function. The information produced by F&A has to be reliable and in a useful format if finance/business partners are to work alongside the business as advocates, rather than apologists for finance. And these finance/business partners must have sufficient understanding of the business to be able to apply their financial expertise


The CIMA Forum has considered these challenges and determined that if the F&A function is to be engaged to help improve decision-making, it must first attend to the following:


  • The efficiency of F&A operations in producing timely, accurate and useful financial and management information to support decision-making
  • F&A’s ability to provide finance/business partners to work closely with the business to combine their financial expertise with the business’s expertise to inform decision-making and help the business to achieve impact


These are usually addressed sequentially, as the improving efficiency of finance operations provides the capacity to offer finance/business partnering


Key messages


  • Decision-making is the key to superior performance.
  • Decision-making is an ongoing and continuous process.
  • Management accountants have a significant role to play in this process.


The challenges for the F&A function are:


  • To provide useful management information more efficiently
  • To work closely with the business to improve decision-making


The cost of the finance and accounts function

According to research from the Hackett Group, F&A functions had achieved considerable productivity gains by 2000, through the implementation of ERP/financial accounting systems and shared-service centres. But gains in efficiency seem to have bottomed out in more recent years


The F&A costs for the top quartile of the global companies surveyed (termed ‘world-class’ by Hackett) have levelled out at an average of 0.72% of turnover. The need to meet Sarbanes-Oxley requirements seems to have contributed to a loss in efficiency gains over recent years, especially in ‘peer’ companies in the middle quartiles of those surveyed


The Hackett Group also relates F&A costs to turnover. There may be variances in definition and the findings may differ by sector, but CIMA Forum members accept this analysis as being directionally correct and consistent with their own experience


World-class companies only require about half the number of accounting personnel for a given level of turnover. This is consistent with an observation of the CIMA Forum that the future for many accountants may not be in the F&A function


The IBM Business Consulting 2005 CFO survey also shows that finance transformation has stalled. It has stalled both in terms of efficiency and in terms of effectiveness. According to IBM’s research, it was largely the implementation of ERP systems and SSCs that enabled F&A functions to reduce the cost of transaction processing


IBM considers the proportion of F&A time spent on decision support as a proxy for effectiveness. In 2005, 27% of the F&A function’s time was still spent on stewardship activities, with only 26% on decision support. IBM estimates that the proportion of F&A time spent on decision support needs to increase to 40% at the expense of transaction processing, if F&A is to be effective as a finance/business partner. 


Even in 2005, transaction processing was still absorbing 47% of F&A’s time on average. But leading companies may already be at the 40% level. (Statistics: reprint courtesy of International Business Machines Corporation, copyright 2005 ©, International Business Machines Corporation.)


The Economist Intelligence Unit, 2006

A survey conducted by the Economist Intelligence Unit for KPMG identified how the F&A functions in top-performing companies differ from average-performing companies. They found that the top-performing CFOs are more inclined to see decision support as a major focus of their role, and less inclined to see cost control as their priority. These CFOs are also more likely to have a clear vision for the F&A function, which they have shared with the business. Traditionally, accountants have been focused on financial reporting, budgeting and cost control. Relative to their peers in average-performing businesses, top-performing companies’ F&A functions already put more emphasis on risk management, investor relations, operating and strategic decision support and providing non-financial data


About the Author

Charles Tilley is chief executive of the Chartered Institute of Management Accountants. He is a regular commentator on a range of corporate governance issues, international standards, narrative reporting and strategic management issues concerning the profession and the Institute.


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