The typical controller only reports on the financial situation of a company. Unfortunately, financial information that is the result of many other activities that the accounting department does not normally have anything to do with. For example, profits are impacted if the customer is not satisfied (impacted by quality, pricing, and on-time delivery), if internal business processes do not function properly (impacted by such issues as machine utilization and the level of automation), and if employees are not well trained in their jobs (impacted by training and any factors leading to high employee turnover). A controller is not accustomed to reporting on any of these issues, but they all impact company profitability, the controller’s primary reporting responsibility.
Robert S. Kaplan and David P. Norton have addressed this issue in their landmark book, The Balanced Scorecard (Harvard Business School Press, 1996). In it, they argue a strong case in favor of an entirely new method of reporting that itemizes the key factors impacting company profitability. An example of such a report is shown in Exhibit 13.6, where measurements are clustered into blocks, each one concerned with a different aspect of key success factors: financial, customer, internal business processes, and employee learning and growth. Kaplan and Norton feel that these four areas must be closely managed as a whole in order to attain truly exceptional levels of profitability.