IQ Improvement Starts Here
Opportunities and Options for Gaining Better Insight and Control of Enterprise Performance

By Lee Dittmar and Jane Griffin
Illustration By Josh Cochran

You wouldn’t purchase a car without a speedometer. Nor would you board an airplane if you knew the instruments weren’t working. Yet many companies are operating without this kind of basic, timely feedback on their speed, direction and other critical indicators. Many also don’t have insight into their operating and financial performance until long after they close the books, and, even then, they often have doubts about the accuracy and usefulness of this historic information. Most don’t have information about key performance metrics, including governance, risk and compliance parameters, until after retrospective audits or other reviews. The bottom line: the accuracy, timeliness, reliability and transparency of information are not where they need to be.

In 2005, CFO Research Services in collaboration with Deloitte Consulting LLP embarked on a survey program that illuminated the pervasiveness of poor information quality (IQ) in today’s enterprises. The initial survey summary, titled IQ Matters, reported that a majority of respondents did not have ready access to high-quality, reliable, useful information on operating and financial performance at their companies.1 Queried on ten categories of IQ — combinations of the utility, timeliness and accuracy of financial and operating information — a majority of the senior financial respondents reported room for improvement in every category.

The summary of a recent follow-on to that survey, titled Look Closer, Look Further, reported that, two years later, the needle has still not moved much in a positive direction.2 While companies do well at mandated information management activities, such as reporting financial results, they still struggle to produce the timely, accurate and insightful information needed for strategic planning, supporting board oversight and governance, making investment decisions, and identifying, monitoring, managing or mitigating risks. For instance, a near majority, 47 percent of the 443 senior finance and IT executives surveyed in 2007, reported that their companies struggle to produce and develop the desired quality of information needed to make good business decisions.

We believe one of the main reasons for this ongoing struggle is the perception of the issue as being large and intractable. Simply figuring out where to start is difficult for companies with mazes of disparate systems and variable processes. And certainly, most finance and IT executives, as well as the implementation teams that support them, are not looking for additional things to do as they work to align technology with the business’s needs. Nevertheless, the issue of poor information quality is not going to go away because the consequences are far too significant and widespread. Take the recent experience of a large insurance company, for example. This company found that organic growth and acquisitions had resulted in a complex maze of finance and accounting systems and processes that adversely affected information access and quality. Across the company, there were:

• 14 general ledgers
• 20 charts of accounts
• 12 reporting systems
• 17 data repositories

In addition, company managers had created more than 300,000 spreadsheets in an attempt to reconcile and make sense of the data — a clear indication that the manual efforts needed to produce information were impeding productivity.

A large aerospace and defense company also found that it was not spending nearly as much on procuring product for its manufacturing process as its competitors. However, the company’s low spend was not due to thriftiness; rather, the company couldn’t account for how much it was spending with whom because it had different definitions of vendor codes within multiple systems.

A large life sciences company found that poor IQ was hindering control and performance. Different groups within operations would generate their own individual backorder reports. These separate reports would often have conflicting information, which created confusion and delayed alignment around manufacturing priorities.

With such far-reaching effects, it isn’t surprising that IQ can have a significant and growing impact on shareholder value. Eighty-one percent of the 2005 IQ Matters survey respondents said that better information can improve profitability; 82 percent said it can reduce costs.

Yet, despite the widespread belief that improving IQ can generate tremendous value, based on the most recent survey, some companies are still reluctant to address IQ problems. Others have begun to tackle a handful of issues here and there, but only a few are approaching IQ comprehensively as a strategic imperative.

Obstacles and Objections
One of the reasons that IQ is such a significant problem today for so many companies is that historically it wasn’t a priority. After all, we’ve invested heavily in information technology, so we must be getting the information we need, right? Yet only 41 percent of the senior finance and information technology executives included in the recent Look Closer, Look Further survey indicated that their companies consistently produce the desired quality of information needed to support management decisions.

There is also the issue of lack of ownership. Who is responsible for IQ? Many surveyed point to the CIO — after all the “I” stands for “information.” Certainly, the CIO has important responsibilities for people, processes and, of course, the technology related to information assets. But this is not the same as being responsible for the quality of the information. CIOs are usually responsible for the infrastructure that houses, stores, distributes and supports the maintenance of data security, but the CIOs don’t control the inputs and outputs, and they don’t control all of the strategies, decisions, actions, processes and people that ultimately affect IQ. Indeed, CIOs often don’t even control the governance and decision-making concerning technology architecture, applications and IT processes. So who does have responsibility for IQ? In many companies, the hard truth, in our experience, is that this has not been clearly defined.

“One of the reasons that IQ is such a significant problem today for so many companies is that historically it wasn’t a priority. After all, we’ve invested heavily in information technology, so we must be getting the information we need, right?”