Strategic reporting is also known as "management reporting," "enterprise performance management," or "business strategy reporting."
It's a complex process of collecting, organizing, and analyzing high-level metrics about an organization's performance.
A good example of strategy reporting is a financial analysis done on a company's balance sheet or cash flow statement.
These two reports provide insight into how much money your company has in its bank account right now, as well as how much money it's bringing in over time through sales and collections on invoices.
When you put together these two pieces of information, you can tell if there are any problems with cash flow — and then take action accordingly.
Because strategy reports often involve sensitive data, they are usually developed by senior-level management.
Aside from commercial organisations, strategy reporting is also used by other types of organizations, such as government bodies, non-profits, educational institutions, and more.
What is strategic reporting?
Strategic reporting is a high-level overview of an organization's performance and progress.
It allows organizations to evaluate their current state against an idealized future state and then create a plan on how to get there. As such, strategic reporting should be at the heart of any organization's planning process.
This article is an in-depth guide to strategic reporting systems, starting with their definition and purpose. Then, we'll explain what to include in a strategic report, along with best practices and who should be responsible for creating them.
The purpose of a strategy report
Unless they have an exemption, for the United Kingdom, all UK-incorporated companies are legally required to prepare a strategic report within their annual report, along with a directors' report.
This requirement was established under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. These came into force on October 1, 2014, and applied to financial years ending on or after September 30, 2013.
Small companies are exempted from this requirement, which we'll discuss in more detail later on.
In general, strategic reporting is designed to accomplish the following:
- Demonstrate public accountability by a public body
- Evaluate key performance indicators (KPIs) that impact an organization's ability to achieve its goals
- Provide shareholders with a meaningful overview of a company's business model, risks, strategy, performance, position, and future prospects
- Meet the requirements of the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.
As you can see, strategic reporting is a broad and multi-faceted process.
Ultimately, it's crucial for organizations to understand the purpose of strategic reporting so that they can create reports that are accurate, actionable, and compliant with any applicable regulations.
Why strategic reporting is important
Strategic planning and reporting isn't just a collection of data points and numbers — it's a powerful decision-making tool.
In particular, the following advantages come with strategic reporting:
- Helps management make better decisions based on the latest, most accurate data
- Enforces transparency and accountability across all levels and departments of the company
- Facilitates open communication between management and employees
- Supports the development and implementation of winning business strategies
- Identifies potential areas of improvement and risk
- Improve operational efficiency
- And many more
By analyzing these data and trends, management can make confident decisions about virtually every facet of the business, from product development and marketing to sales and operations.
For example, a report on customer satisfaction can help management decide whether to make changes to the product or service offering.
A report on employee engagement can help management identify issues that need to be addressed in order to improve retention rates.
In other words, strategic reporting is an essential tool for any organization that wants to be proactive and data-driven about its growth and success.
What to include in a strategic report
While the specific contents of a strategic report will vary from company to company, there are some key elements that should be included in every report.
In general, it should cover a fair review of the company’s business, realistic challenges facing the company, and an explanation of how these might affect its future development and performance.
In addition, the report should set out the company’s strategy for dealing with these risks and uncertainties, as well as its performance during the reporting period.
Other important elements of a strategic report include:
1. Mission statement and organization’s vision
These two elements of a strategic report are the most important because they establish the context for all other information.
The mission statement is essentially a summary of what your organization does or plans to do, and it should be clear enough that anyone can understand it. The vision, on the other hand, is more aspirational in nature; it represents your goals, hopes, and dreams — things you want to achieve in the long term.
2. Reporting methodology and tools used
This section of the report should explain how the data was collected and what tools or methods were used. For example, some of the most common data sources for strategic reports include surveys, financial reports, customer feedback, data gathered from social media, and web analytics.
3. Key performance indicators (KPIs)
KPIs are measurable values that indicate whether a company is achieving its objectives. They can be financial or non-financial in nature, and they can be used to track progress over time.
Some common examples of KPIs include:
- Revenue growth
- Profitability
- Customer satisfaction
- Employee engagement
- Website traffic
- Social media engagement
- And more
4. Data visualizations
This is one of the most important elements of a strategic report because it allows readers to quickly and easily see patterns, trends, and relationships between different data sets. Data visualizations can take many different forms, from simple charts and graphs to more complex infographics.
5. Data analysis and explanation
In this section, you will need to provide a detailed analysis of the data you have collected. This is where you will present the insights you have gleaned from your data and explain how they can be used to improve the performance of the business.
6. Prioritized issues / problems requiring attention
Once you have identified the most important issues facing the company, you will need to prioritize them in terms of their urgency and potential impact. This will help management to focus on the most pressing issues first.
7. Risks and uncertainties faced by the organization
A critical part of any strategy report is an honest assessment of the risks and uncertainties faced by the organization. This includes both internal and external factors that could potentially impact the company’s ability to achieve its objectives.
8. Recommendations / proposed fixes
After you have identified the most important issues and risks facing the company, the strategy report should also include recommendations for how to address them. These can be either short-term or long-term in nature, but they should always be realistic and achievable.
9. Concluding summary
The concluding summary is a brief overview of the entire report, highlighting the most important points. An effective summary should be able to stand on its own without the need for readers to refer back to the main body of the text.
Strategic reporting best practices
The best strategy reports will paint a meaningful and complete picture of the company’s strategy, development, and performance.
In order to do this effectively, there are a few key best practices that should be followed. Here are some of them:
Define goals and objectives clearly
The more specific and measurable the goals and objectives are, the easier it will be to track progress and determine whether or not they have been met.
Identify and measure the right KPIs
Not all KPIs are created equal. Make sure you are measuring the right ones by focusing on those that are most relevant to your business, and that will give you the most insights.
For example, if your goal is to increase revenue, then measuring website traffic might not be the most appropriate KPI for that section.
Represent data in appropriate formats
The format in which data is presented should be based on the needs of the target audience.
For example, a more formal and detailed presentation might be appropriate if the report is being shared with senior management. However, if the report is being shared with employees, a more informal and digestible format, such as infographics, might be more effective.
Add narrative to data
Data by itself is often not enough to provide insights and understanding. Adding narrative, aka storytelling, is essential in order to help readers understand what the data means and how it can be used to improve the business.
Ensure clarity
As much as possible, avoid jargon and technical terms that might not be understood by the target audience. The report should be easy to read and understand without the need for further explanation.
Use digital reporting tools
There are a number of different online software platforms and tools available that can help to make the report-writing process easier and more efficient.
Utilizing these can help to save time and resources while also ensuring that the final product is of high quality.
Who is responsible for strategic reporting
For the UK, according to the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, the directors of a company are responsible for preparing a strategic report for each financial year of the company.
As we mentioned earlier, small companies are exempted from this requirement.
A company is not considered "small" if it meets two out of the three following criteria:
- It has an average number of employees that's greater than 50
- Its turnover is greater than £6.5 million
- Its gross assets are greater than £3.26 million (not just the balance sheet total)
Despite the exemption, small companies can still benefit from preparing a strategic report. All the advantages, such as improved clarity of thought, data-based decision making, increased transparency, and better communication with stakeholders, still apply.
Wrapping it up
A strategy report offers a meaningful, detailed look into a company's present, ideal future and what it takes to bridge that gap.
Regardless of size, all types of companies and organizations can benefit from preparing strategic reports.
Despite its numerous advantages, preparing an effective strategy report is a tedious, time-consuming, and often daunting task.
This is where the strategic reporting platform from Reporting Ninja can help. We offer a wide range of reporting services, from complete strategy reports to specific sections such as KPIs, data visualizations, and more.
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