By John J. Doubt
Our basic philosophies, concepts and procedures in management are not keeping pace with our rapidly expanding technologies. A specific example, following far in the wake of scientific progress, is in the field of management reports—whether machine run, hand written, or typed. Technological development in the field of data processing has provided us with the ability to produce a fantastic number of reports, and in our haste to keep up with the times and requirements of our fast moving age, we neglect the very basic concepts of management and build ourselves a paperwork Tower of Babel. Complexity and quantity often times destroy the functional value found in report simplicity.
If we compare the design of a reports structure to the design of a large factory building, we find that both are complex and require creativity and know-how. Plans for both must meet requirements and we must know what these requirements are. They must be inspected before occupancy and at various stages of development. A factory is designed to help accomplish the many activities of all its occupants, not just top management, not just the Controller, and not just Personnel. Too frequently in the design of a reports system, the occupants, or those at the front lines of production where the need for factual and timely information is greatest are given the last consideration and the lowest priority. The few reports that are designed for first line supervision usually hinder rather than help.
Unlike a factory building plan which starts from a solid base and a well defined area, the reports structure, unfortunately, is many times built from the top down and extended horizontally in any direction without consideration of relative value, purpose, overlap, duplication, perspective, or the laws of gravity.
What determines the strength and weakness of a report? First, a report falls down or is a failure when its size and cost exceeds its need or strength. A report may be considered strong if it is useful to many people and the information contained is uncontaminated with individual bias. Incidentally, one of the greatest values of the machine run report over the hand prepared report is its unbiased preparation.
A report is no stronger than its source of information. For this source to be reliable, we must be concerned with points of focus. The work of any department or function has one or more points of focus. The speedometer on your automobile is a control point which may be described as a point of focus. It indicates the speed of the car at any moment. It indicates total or trip mileage. It can easily be seen by the operator. If you have no oas gage, it can accurately predict when gasoline is needed or when your tires need replacement. It tells you when your car needs greasing or other periodic maintenance. It gives you the mileage reading for making out expense accounts. It can measure the distance between two points that you may be traveling. The speedometer is really a marvelous instrument, considering its universal adaptability, its concept, and excellent application. It is a point of focus for the controller of the car. In the lancr ua oe of the data processing man it is an information display terminal designed for the operator of the car. Reports information should be derived automatically from these vital operating points through which information must pass in the actual operation of the enterprise.
The strength of a report may also be determined by its application. Multiple applications increase a report’s value and indicate that the proper sources have been found and tapped. Every department performing a useful purpose needs (and usually has) good control points, but it is not always easy to determine where the control points should be located or how they should be administered and tied into the total reports system. When these points have been properly designed and located, they can serve a manifold function of control within the department as well as serve as input sources into the overall data collection system. Normally, they will act as a control interface between departments or functions, and indicate progress toward departmental and company objectives.
The mechanics of control for these points may consist of one or many things jointly: a manual log, a deck of punched cards, a time stamp, a cash register, a file of basic documents, a computer terminal, etc. If properly interpreted and designed, this control point can usually be exploited to produce valuable by-products—$5.00 worth of extra effort here may produce a by-product. When these points of focus are integrated into an overall process of reports flow, it is found that there are also natural secondary focal points, usually at the next level of management. If these are also properly revealed, the base of the reporting pyramid is narrowed, and, level by level, the pyramid gravitates toward the basic objectives of top management.
The usual approach to reports control is rather frantic. You’ve heard it many times: “Let’s eliminate 10% or 20% of our reports,” or, “Let’s have a Reports Control Center” (and keep reports from being born). Then what happens? Reports are driven underground and we have unofficial or “special request” reports which are always ten times more difficult to prepare, hence, we have saved nothing except inefficiency.
Reports of the “special request” variety are like the grapevine. They have a tendency to fill a void in communications, and, just how necessary it is for that particular void to be filled doesn’t seem to be important. If there appears to be a hole in the information channel, we are asked to fill it with reports. Perhaps the hole is just someone with nothing to do but keep himself apprised of everything that is going on (whether he serves any other useful purpose or not). Some of the other voids that require information, however, may be very real, and in denying this information the Reports Control group may do much more harm than good.
What seems to be needed before reports control and design is a better understanding by management (not methods or systems) of the basic management concepts, philosophies, and principles around which the bulk of reports should be structured.
The first requirement of a good reports system is that the objectives of top management are well defined and in writing. Further, that these objectives are interpreted downward level by level and that at each level its own objectives are well defined in writing and in perspective with those above and with the necessary concurrence. When this has been done, the matrix has been established for the proper flow of reports. One side of the pyramid may be the Sales perspective, another Manufacturing, another Engineering, and the other Finance. Each side should show the symmetry of proper planning with consideration given to Objectives, Money, Personnel, and progress in these three areas.
How should data be reported upward? When a person ascends in an airplane, the objects below him become smaller and smaller; however, his vision becomes greater and greater in scope. The trees become forests, the houses become villages, the highways become thin but connected strips of communications, the rivers become great networks showing intricate designs revealed only from great heights. What has this to do with reporting? Reports are a form of vision or communication, and, as these reports rise toward top management they must give a complete picture of what is below yet with a considerable reduction of detail.
A reporting matrix, pyramidal in form, must be designed for each company, Perspective and communications must not be lost, crowds of detail must not obscure the vision. All important factors must be reported upward. The amount of detail for each elevation of management must be summarized without losing the basic picture.
The Reports Architect
Many companies send a boy to do a man’s job when it comes to reports structure design. We are not talking about the design or format of a particular report, rather, we’re talking about the need for a reports architect, someone who knows the overall needs of the company, understands methods and procedures, and is a generalist with the broad perspective necessary to tackle such an assignment in any large industry today. We can’t, however, create a sound structure from a jungle of shacks. There must be a planned base from which to build. This is management’s responsibility.
The Perpetual Base for Reports
Before we discuss the steps necessary to plan and design a new reports structure, let’s look at a traditional concept which is now hurting many industries and which must be changed by top management. Necessity and competition is forcing industry to adopt this new concept; however, we are doing so on an unplanned and unconscious basis. Much conscious planning needs to be done.
Most of our reports are based on the calendar year, and each year since time immemorial we have acted as though business came to an end on December 31 and then started all over again on January 1. Obviously, this is an incorrect concept. I am not recommending that we change to a 13 month year, although that might be a good basic idea, but we should have balanced quarters and months with an equal number of working days in each quarter of the year, with consistent cut-off dates for all reporting. This will provide a level base from which we can build an intelligent reports system. The other concept which must be carried through wherever possible in our reports is the use of a perpetual base. There is a wide difference in report usefulness when using a 12 month perpetual base as opposed to the standard 12 month calendar base, or the four quarter perpetual base and four quarter calendar base. The diagram below illustrates the concept of the perpetual report.
For most major statistical and financial reports, the reporting time base should always include a 12 month or four quarter cycle, regardless of the time of the year. For example, a department’s financial report will always project ahead for the next 12 months as well as indicate the past 12 months’ experience. As a new month or quarter is added to the projection, the month or quarter just past becomes a part of the 12 months’ experience report with the year-ago figure dropping off the report and becoming part of a comparative history file. Data processing equipment makes simple the comparing of historical records of previous years with like periods of the current report. In April a perpetual report would show :
- May through April (Past 12 months)
- May through April (Next 12 months)
In April we need to know the next 12 months’ forecast as much as we need to know it in January or July. We need to know the past 12 months’ cumulative history in April, not just the past three months. In September we need to know the next 12 months’ projection, not just the next three. Most companies permit the calendar year to destroy the consistency, completeness, and effectiveness of their reports and planning.
All reports have one thing in common —TIME. Without this ingredient stated or implied, they have little value. Usually, time is indicated by a start or cut-off date, or both, but a consistent time span between the two is many times lacking. Reports today must be based upon the reality of the moment. We need a factual reappraisal of events monthly, or, at least quarterly in balanced increments of time to give us the level base that is required. By doing this we also establish records of similar standard cycles which may be compared to previous years. The calendar or fiscal year-end figures will have little, if any, more significance than April or September “year-end” figures. Business does not come to an end in December of each year.
Before we go on to discuss other basic requirements and concepts, the following is an explanation and example of a simple “Perpetual Report.”
An Absenteeism Summary is certainly not the most important statistical report in an organization, but for first line supervision it can be useful and worthwhile. In a situation where attendance recording has been automated, there is usually a summary listing prepared by department, by employee wherein each employee’s absence is recorded and totaled. Each year the report starts anew in January and accumulates the absenteeism figures month by month. Such a report would have little meaning early in the year unless the previous years’ records are easily located. In a situation which is becoming very commonplace today, employees and managers are frequently moved about. Individual records of absenteeism may not easily be found and so the first line supervisor who finds an employee whose year-to-date record looks poor, finds himself without all the necessary previous history to make a good decision and without the time to look up all the necessary data. The problem is not with the first line manager or supervisor, the basic foundation of the report is faulty. The beginning of each year shouldn’t signal a new report, or the forgiveness of all past sins. Instead, it should only be necessary in January to add one new month to the existing report and drop the year-ago month and continue on without any concern for the calendar year. In a perpetual concept of reporting, each new report adds the new month to the actual and to the projected and drops the old month.
In the Absenteeism Summary the accumulated absence total will always be a 12 month cumulative figure. You will always have the same base regardless of the time of the year. Those employees who are accumulating a critical amount of absence can be spotted in a few minutes. If 100 hours cumulative absence is critical in December, it is just as easily spotted in March or April when it is equally critical. If the report were to start anew in January, the need for supervisory attention might not be noticed without adding or subtracting figures from the previous year’s report. Each of the 12 calendar months is always included, hence, the base remains the same and excuses such as “these are winter months and absenteeism is therefore high” are no longer valid in upwards reporting. The cycles have been eliminated with the continuous 12month base and we are therefore concerned only with the reality of the moment. At one glance it is obvious that the absenteeism picture is getting better, remaining he same, or getting worse, as far as the employee, the department, or the company is concerned.
Projecting absenteeism for the next 12 months would be a standard percentage goal indicating anticipated peaks and valleys. These will assist in determining available hours in the months to come.
Another example of a perpetual report run in the same manner as the Absenteeism Summary, would be an Overtime Summary. The overtime hours accumulated in this same format gives management excellent perpetual control for utilization of the most productive hours as well as the ability to easily spot individuals who are learning to live beyond their income. The 12-month projection of overtime hours could also be useful in determining product cost, cash requirements, hiring activity, etc. The absenteeism projection by month together with the overtime projection could serve as a useful planning tool as well as a supervisory control report.
What about the $5.00 ingredient that may prove to be worth much more? In the Absenteeism Summary it might be the inclusion of all vacation hours— taken and remaining. Adding this factor may eliminate the need for other existing personnel controls and reports.
Reports Symmetry and Design
There is a basic management principle which should be observed by upper management in requesting reports from the first line supervisory levels. This is that principle: Reports should flow naturally from a control point within the operation itself, but conforming also to the general symmetry of the reporting plan for the company. It should always keep the level of management immediately above informed of what is going on and give him immediate control by exception reporting techniques. It should lend itself to comparative analyses in pointing up inconsistencies when reviewed in the light of the entire function. It should give the first line supervisor the information he needs to formulate plans for continuing work improvement efforts.
If the information wanted by top management is not easily obtainable from the basic supervisory control reports, then one of two things is wrong:
- The information requested is unnecessary to the successful operation of the company, or,
- The reports and procedures used at the supervisory level need to be improved.
Reports requests from top management may sometimes be required to insure that good procedures are being followed at lower levels. A poorly designed report from top management however, may require information to which basic documents do not lend themselves simply and naturally, causing chaos in the accounting department or in the department which maintains the basic data.
Many reports are requested to justify or sanctify the past. A concept that we can learn from these unnecessary re ports is that we must document and learn from the past, but we must live in the future.
The Basic Process of Reports’ Design
What are some of the things that the “Reports’ Architect” must do to bring into focus a matrix which will give symmetry, balance, and consistency into the overall reports structure?
First, he must have access to all documents which state the short and long range objectives of the company. Reports must reveal progress toward and support basic objectives. The objectives must be stated clearly by all levels of management and brought into agreement and approved. Without written detailed objectives, it is impossible to design an intelligent reports system.
Second, he must establish priorities of importance, starting with reports to top management. Few companies attempt to evaluate a report in relation to its cost, in relation to the basic objectives it supports, and in relation to the number of persons who find the report useful. Remember, reports can be very interesting but still be completely unnecessary.
Third, he must categorize the basic classifications of reports, starting with those for top management, indicating which objectives the reports support. It may be found that some objectives are never supported by machine-run systematic reports. Instead, top management merely receives the biased impressions (stripped of all bad news) of the staff men who work for them.
Fourth, he must determine what top management needs to know and wants to know. Analyze what is being sub. mitted and wanted in relation to what is needed (there may be no relation) .
Fifth, he must test these reports for balance. Do the reports when combined form a logical pattern that is compact, concise, and symmetrical without being too complicated and unwieldly?
Sixth, he should classify existing reports by frequency, (daily, weekly, monthly, quarterly, etc.). Determine what frequency is truly needed.
Seventh, he must determine directness. Through how many levels of management should a report pass before it reaches top management?
Eighth, he should determine the logical point from which each report should originate.
Ninth, he should compare the reporting structure he is forming with the organization structure to determine proper lines of authority and responsibility, as well as proper lines of ascent. The proper flow of data may suggest a better organization structure and vice versa.
Tenth, he must check out the reliability of data, bias, consistency, accuracy, and source. There is no accuracy without consistency.
Eleventh, he must obtain reports cost data, cost of processing the report, as well as the cost of acquiring the data and maintaining basic documents.
Twelfth, he must get concurrence for the report structure design, starting with top management and then, step by step, work down the management levels, getting concurrence as to what is truly important and necessary at each level. After leaving top management levels, this should become a management improvement effort participated in by all management.
This is not everything that must be done by the reports architect, but these are basic steps which may be classified as concepts, philosophies, and principles. Few companies have truly attempted to develop an overall philosophy or to put one into practice. Usually, any study of overall reports reveals that the “punishment fits the crime,” and “the squeaky wheel gets the grease.”
It is not easy to measure the value of reports and redesign of an overall new reports structure. It is a long, difficult road to travel, but it is necessary and can be well worth the time, money, and effort even though it may take several years to get a self-sustaining program into action.
Reports form the nucleus of all management communications, and successful communications is dependent upon an intelligently conceived reports structure. Most of our communications problems in business today can be traced to poor or non-existent reports. Reports must be systematic, where possible automated, and based upon solid logic. They must be a part of an organized plan to overcome the element of human error.
Management by Objective and the Exception Principle are two basic management concepts which must be supported by reports. As previously stated, management objectives reports form the core of all reporting. The most important by-product of a good reports system is the reporting of exceptions. If the exceptions are truthfully and properly revealed, it is a simple matter for management to “trim the craft” and keep the ship seaworthy. If the old adage “small leaks sink big ships” were completely true, there would be few corporations afloat today. We must know where the leaks are and where the favorable and unfavorable currents lie.
There are many basic concepts which must be applied to a reports system. Chief among these are: The Perpetual Base, The Pyramidal Summary, Balanced Increments of Time, and the establishment of Basic Control Points. All of these concepts are dependent upon and built around a core of written management objectives of “what should be occurring,” contrasted with “what is actually occurring” simplifying the management process of planning, organizing, and controlling.
John J. Doubt is Manager of Management Development for the engineering and manufacturing activities of the International Business Machines Corporation in San Jose, California. He is a well-known lecturer and is active in many management education activities. Presently, Mr. Doubt is co-chairman of the San Francisco Management Study Group and a National Governor of the Santa Clara Valley Chapter of the Society for Advancement of Management.
This article originally appeared in Volume 30 Edition 2 of the SAM Advanced Management Journal published in April of 1965. To subscribe to the SAM Advanced Management Journal visit www.samnational.org/journal