ABSTRACT
How do effective directors ensure efficient financial performance management?
Based on a framework of global corporate governance best practice, which can be used in all organisations anywhere in the world, this chapter of Questions To Ask (QTA) in the boardroom gives a high-level but succinct introduction to financial performance management and the role the board plays in it.
Performance management is about identifying the right short-term key performance indicators to be monitored and measured over time, to evaluate performance and trends, to ensure the organisation is driven towards relevant long-term goals in order to accomplish its mission and maximise value creation.
The chapter considers what the board should be aware of with regards to financial performance management. This includes clarity of the economic value of the organisation, free cash flows, cost of capital, and competitor performance. It also looks at revenue growth, growth drivers, and customer engagement and satisfaction. To have sufficient insight into the profitability process, directors should also look at the margins, return on invested capital, and operational and financial risks.
The chapter’s headings lead into outlining the key Questions To Ask in the boardroom, giving the reader further insight into how to initiate discussions about the practical details requiring the attention of the board.
