30 MANAGEMENT DECISION 32,2
For the business community to become more
effective, companies need to be clear about the
purpose of their reports and provide what their
end-users need to know.
Corporate
Reporting
Mohamed Zairi and Steve Letza
Management Decision, Vol. 32 No. 2, 1994, pp. 30-40
© MCB University Press Limited, 0025-1747
The purpose of a company report should be to convey
information which is useful to those who have an active
interest in the organizations concerned, mainly the
stakeholders. Stakeholders can exert a great deal of
influence over the way organizations are managed, which
markets they should be operating in and what long term
strategies they should be pursuing. The legal framework
tends to cover the interest of the stakeholder very
explicitly; for example, company law stresses that limited
liability companies are there to do the bidding of
shareholders.
In the UK the following phenomena tend to characterize
the way businesses are run:
● A business organization is described as one which
should create value to the shareholder. The
concept of shareholder value is usually interpreted
as the payment of dividends and the appreciation
of share values.
● Management executives are judged by their ability
to optimize shareholder value on a consistent
basis.
● Companies have never really been empowered and
given sufficient flexibility to perform in a
commanding way in world markets. Taking long-
term risks is not really a practice which has been
encouraged and the desire for immediate results
tend often to overshadow opportunities in the
horizon. As Binney[1] explains:
Most British companies are held in a legal and moral strait-
jacket. Whatever their real wishes, they have to pretend their
purpose is to make money for shareholders. They are held
back from thinking through and articulating the purposes
that are right for them. A key to economic success is that a
company should be clear about its purpose. Each company
should be free to choose the one that suits it, without having
to worship at the shrine of shareholder value.
Short Termism: How Harmful Is It?
The way some senior managers make decisions about
their companies’ behaviour has been described as caring
little for people and communities who have a close
association with the organizations concerned, such as
employees, customers and suppliers, and treating the
companies as assets which can be sold and bought
without any consultation. This was justified years ago,
by some, when the direct labour content was considered
to support technological processes that added value to
the end customer. In today’s business environment,
people productivity and creative contributions have the
biggest impact on customer satisfaction. Binney[1]
argues that it is strange that there has been no cultural
shift in the way organizations are viewed in spite of the
fact that people have become the principal component. He
concludes that, “In an age when companies are largely
people, helped by physical assets (rather than the other
way round) it is strange that we accept so readily that
companies are tradeable properties”.
What Is Wrong with Existing Systems of Reporting?
It was back in 1975 that the Accounting Standards
Steering Committee (ASSC)[2] commented on the
inadequacies of existing methods of reporting company
performance. The ASSC argued that: “The fundamental
objective of corporate reports is to communicate
economic measurements of and information about the
resources and performance of the reporting entity useful
to those having reasonable rights to such information”.
The concerns of the ASSC were echoed elsewhere. The
Research Committee of the Institute of Chartered
Accountants of Scotland (ICAS)[3] argued that the true
intention of financial reporting is to reflect what is
happening to an organization and express its
behaviour/performance, in financial terms, as practically
as possible. Existing reporting systems, it was argued, do
not fulfil this objective at all.The ICAS group concluded:
Financial reporting – what does it achieve? What is it
intended to achieve? Surely the intention is to show what is
actually happening to an entity, expressing the salient facts
as far as practicable in financial terms. Frequently current
external reporting does not fully achieve that intention.
We arrived at our first basic conclusion, namely that all
financial reports ought to reflect economic reality. As a

corollary, if financial reports do not reflect economic reality,
they are deficient.
There is general agreement on the shortcomings of
existing corporate reporting systems[1,2,4]. Essentially it
is thought that financial reports are deficient in the
following areas:
● There is high suspicion of the quality of
information provided, and whether the type of
information included in reports is of much benefit
to the end-users.
● The information included in the reports tends to
be of a historical nature, based on compiled data
which reflect business behaviour and performance
in a retrospective manner. As such, the
information is lacking in terms of timeliness,
flexibility and an ability to respond effectively to
the end-user, with little or no input/feedback.
● There is too much emphasis on single earnings
numbers and very little attention given to
organizations’ “state of health” in terms of cash
flow and liquidity.
● The structure, design and content of most
company reports is more concerned with
complying with legal conditions than reflecting
business and economic performance.
● Vital information on future plans/intentions and
commitments for improved performance levels
tends to be absent.
It is felt by many people that one way of changing
management attitudes and behaviours is to ensure that
the reporting mechanisms become more of a guiding tool,
a driver rather than an inhibitor. Most management
practices tend to be restricted by the expectations of those
people who closely scrutinize the corporate report. The
format of financial reports is very restrictive and does not
encourage innovation or risk taking, which are two
important characteristics of excellent management styles.
As argued by the ASSC[2] in 1975:
It is important to keep in mind the pervasive influence of
reporting practices on management attitudes. Managements
naturally respond to those indicators by which they
consider their performance is judged, and strive to achieve
and present results accordingly. Special attention is bound to
be given to those areas where the spotlight falls. Our view is
that management attitudes and objectives can be profoundly
affected by changes in reporting practices.
Tailoring Corporate Reporting for the Needs of the End-
User: What Needs to Be Done?
Starting with the end-user, and asking questions about
the kind of information which is useful and necessary for
actions, is the basic step which has been omitted in the
past. Another fundamental mistake made has been not
having identified and defined who the end-users are and
CORPORATE REPORTING 31
whether they all have the same basic needs or require
different types of information.
The first question to ask, therefore, is who is the
stakeholder? As identified by many writers[2-4],
corporate reports need to communicate information to at
least four distinctive user groups[2]:
(1) the equity investor group;
(2) the loan creditor group;
(3) the employee group;
(4) the business contact group.
The second question to ask is what type of information
should be included in the reports? Since business “jargon”
seems to include words like productivity, capital
investment, research and development, innovation,
quality achievements, competitiveness, efficiency,
effectiveness, clearly information on these issues should
be brought to the attention of the various users of
company reports, rather than used internally.
Other questions to ask include: What format? Why
certain types of information? How often (when)?
As discussed previously, one of the failures of corporate
reporting at the moment is the historical nature of the
information compiled. For the reports to be useful they
must be relevant, understandable, reliable, complete,
objective, timely and comparable[2].
The final question to ask is perhaps why the need for
change since corporate reports have served a useful
purpose for many years? The change is required for the
simple reason that if one accepts, in quality terms, that
the customers decide on the type of service and have to be
encouraged to specify their requirements, then it is logical
and only fair to expect the end-user of corporate reports
to have better input and be involved more closely in
determining what kind of information should be
included, how often it should be communicated and what
format the report should take.
Having end-user involvement should ensure that the level
of control over the destiny and future of organizations is
much more participative, which should in turn help
protect organizations from irrational and damaging
decisions.
Timely information, in a fuller format, should enable
stakeholders to determine their association with the
organization concerned on a long-term basis, and
encourage the prospective stakeholder to take a keen
interest.
From a less tangible point of view, good corporate
reporting should enhance the image of an organization,
which shares information on its present performance
standards and its future plans.
32 MANAGEMENT DECISION 32,2
Research and Development and Corporate
Reporting
One of the key variables which is a major determinant of
long-term business performance is the issue of Research
and Development (R&D). Corporate reporting in the UK
has so far failed to provide specific and detailed
information on organizations’ commitment to R&D;
detailed expenditure plans for R&D, and performance
measurement based on R&D activity.
A study[5] which tried to establish the “state of the art” of
management control techniques used for R&D
expenditure based on 26 companies in various sectors of
industry, concluded that there was:
● a lack of interest and commitment to R&D activity;
● an absence of review procedures on R&D activity;
● a tendency to conduct R&D as a discretionary
activity;
● the dilemma of wanting to be creative but also
needing to control and justify levels of expenditure
on R&D.
The study concluded by recommending that: “R&D
expenditure should be disclosed to the company’s annual
report and accounts whether or not this has been
capitalised. At the moment companies are legally obliged
to disclose a mixture of unimportant and sensitive data,
without having to publish how much they spend on one
of the most crucial areas of corporate activity. Such a
requirement would bring UK companies in line with US
companies.”
Another study conducted by the Open University/UMIST
Design Innovation Group[6] led to the conclusion that
commitment to R&D activity often leads to positive
financial returns. The study was based on a survey of 221
projects in UK manufacturing organizations. Some of the
key findings included the following:
● Around 90 per cent of projects examined led to a
profit with a payback period of 15 months after
product launch.
● Forty-eight per cent of the projects examined
managed to recover their total costs within a year
of market launch.
● Sales increases recorded were of the order of 41 per
cent.
● Twenty-five per cent of the projects examined
opened up new markets.
● Various benefits were reported such as reductions
in inventory costs and production costs and
improvements in the company’s external image
and reputation.
Many other studies have attempted to highlight the
importance of R&D in determining long-term
competitiveness, yet corporate reports fail to contain
relevant information on companies’ level of commitment
to R&D activity. Recently, however, an initiative was
launched by the British Government under the banners:
“Getting the message across – improving communication
on innovation between companies and investors”[7].
A handbook was published offering a framework of
communication between investors and innovative
organizations. The handbook highlights the importance
of innovation and gives examples of where commitment
to innovation could led to various benefits for the
shareholder. It offers guidance to organizations on how to
link innovation to their business strategy and how to
communicate this to the investor community. The
document also gives investors some ideas on how to
evaluate innovation-based strategies.
The handbook is a move in the right direction for
bridging the communication gap between business
organizations and stakeholders. It is an attempt to form a
“customer-supplier” chain and to start an effective
communication process between the players concerned.
The major vehicle for this process is the corporate report
and, if the issue of short-termism is to be overcome,
serious attempts will have to be made to“re-innovate”
radically the corporate reports.
Mission Statements
Corporate Reporting and Mission Statements –
The Missing Link
The use and publication of vision and mission statements
appears to be increasing[8]. Why is it that corporate
reports in the past did not share the mission/purpose of
the organizations concerned with the end-users? Is there a
conflict in objectives here? Has the mission of most
organizations been largely to maximize returns for the
shareholder? Was the purpose of organizations kept
vague because the short-term interests tended to
overshadow the long-term opportunities? Have
managements in the past not been interested in the real
purpose of their organizations since their motives were
maximum gains in minimum time while planning their
next move up the executive ladder?
Many more questions like these could be asked. Clearly,
for any organization there has to be a purpose, a set of
values and beliefs which have to cover the interests of a
wide variety of people both internally and externally.
Mission statements tend to reflect these sets of values,
beliefs of organizations about organizations, their
strategies and their objectives both in the short term and
long term.
If existing ways of external reporting are to be changed,
is not the mission statement a suitable vehicle for starting
the change process? Would it not be a useful way of
making organizations more open, more objective, more
rational, more externally focused and more driven by
customer needs and requirements?

Mission Statements and Their Usefulness
There is no universal definition of a mission statement.
There are, however, various terminologies often referred
to which are assumed to fulfil the same purpose, notably:
mission statement, corporate statement, aims and values,
purpose, principles, objectives, goals, responsibilities and
obligations[9]. While all these expressions are assumed to
fulfil similar roles, there is a great deal of confusion about
their meaning.
Collins and Porras[10] in a recent paper on organizational
vision, have reported the following comments from a
chief executive:
I’ve come to believe that we need a vision to guide us, but
can’t seem to get my hands on what “vision” is. I’ve heard
lots of terms like “mission”, “purpose”, “values”, “strategic
intent”, but no-one has given me a satisfactory way of
looking at vision that will help me to sort out this morass of
words and set a coherent vision for my company. It’s really
frustrating!
These words from a CEO highlight the general level of
ignorance on what a vision, mission and purpose really
mean.
The main concerns about mission statements seem to be
in the message they contain, how they are written, the
degree of involvement in their development, how they are
communicated and how they are implemented. It is
recognized that senior managers often do not receive
enough guidance on how to write a quality statement,
communicating their organizations’ objectives[11].
Others[8,12,13] commented on the degree of naivety in
developing mission statements and certainly on the lack
of belief and commitment from senior managers in
translating the messages in a mission statement into
tangible goals and results.
Smith[12], for example, writes: “As we enter the 1990s,
vision is everywhere. Far from being self-conscious about
its use, as they were several years ago, many
organizations have jumped on a bandwagon, with visions
on every available display panel and neon visions
rotating on every wheel hub! As prospective customers,
we are often pummelled by corporate advertising built
around the vision theme”.
How Are Mission Statements Being Implemented?
While there is growth in the number of mission
statements being developed, not all of them have,
however, been effectively communicated and deployed.
As Coulson-Thomas[8] explains: “Many attempts to
formulate and implement visions and missions have been
naive, and in some cases destructive. A wide gulf has
emerged between rhetoric and reality, and between
aspirations and achievements. Instead of inspiration and
motivation there is disillusionment and distrust”.
CORPORATE REPORTING 33
Based on an analysis of three different surveys, the
following explanations were frequently given as the
main reasons why the deployment of mission statements
failed:
● In many cases, managers knew what they had to
do but did not know how to do it.
● Managers were being stretched and not
necessarily prepared to handle fundamental
challenges in terms of introducing radical
changes.
● In many instances vision and mission tended to be
pure statements on paper. There was no life, no
enthusiasm, no belief and commitment to make
things happen.
● A fundamental reason given, which is also at the
heart of this research project, is the short-term
response of board members to economic pressures.
This tended to enter into conflict with what the
mission tended to drive at (i.e. building long-term
commitments for serving the end-customer in a
more competitive way).
● Other reasons given were quality related. For
example, it was suggested that the quality
message was not properly communicated, lack of
understanding of the power of TQM, lack of
commitment (in some organizations, commitment
to TQM is no more than rhetoric).
● The recession has aggravated the level of cynicism
and meant that managers had to revert to the old
habits of fire-fighting, being reactive and certainly
more concerned about survivability rather than
prosperity. This has led to an increase in the extent
of financial ratios utilization.
These factors perhaps display some useful points. They
suggest that there has to be total compatibility between
the quality message/commitment and the sharing,
communication and deployment of mission statements.
In addition they highlight that mission statements are
about the introduction of fundamental change to
organizational beliefs, values, principles, philosophy and
as such are vulnerable to market pressures and economic
situations. As was highlighted, senior managers may
appear to believe strongly and can be committed to the
message in the mission statement, for as long as things
are rosy and performance of the organizations concerned
is strong. When things become tough and the business
climate is difficult it is very easy to revert back to the old
habits of short termism and a concern for financial
results rather than strengthening business operations for
future competitiveness.
Critical Aspects of Mission Statements
While the mission statement may be perceived as a useful
tool in raising the level of employee commitment,
ensuring that everyone is “on board” and that there is
34 MANAGEMENT DECISION 32,2
unanimity of purpose, in practice it is likely to be difficult
to achieve. Past research has paid scant attention to this
point. Underpinning the literature is the assumption that
raising employee morale is a straightforward process
[8,12]. Successful implementation of mission statements
depends on many factors including: leadership style, the
creation of a “metanoic” organization, establishing a set
of core values and the involvement of senior managers.
These factors are considered in detail below.
Leadership Style
Effective implementation of mission statements depends
on senior managers’ ability and willingness to involve
employees more closely in the decision-making process,
particularly on issues which affect their futures and that
of their organizations. Employee involvement will
motivate people to perform better and increase their
contributions to adding value to the end-customers.
In addition, good management is about recognition and
rewards, identifying individual contributions and
rewarding individual efforts. In this way, the mission of
organizations can be said to have been successfully
implemented. A mission statement will remain only an
expression of hope, a dream, a propaganda message, an
advert, unless it strikes a chord with all employees and
unless people respond to it and implement the objectives
in it with firm belief, enthusiasm and commitment.
Creating the Metanoic Organization
Smith[12] describes a “metanoic” organization as one
which has undergone a fundamental shift of perspective.
This transformation can be described as being from a
state of rigidity and restriction to full empowerment,
involvement, participation and ownership. It is thought
that to achieve this transformation there has to be much
more than a well communicated vision/mission. There
has to be alignment of all the efforts supported by a well-
designed structure and a reliance on individuals’
innovativeness and creativity. In a sense, the vision of an
organization has to be reflected by real outcomes.
Having a Set of Core Values
In order to create the metanoic organization, there has to
be some guiding principles, some standards and values to
which employees can subscribe and make an integral
part of their working performance. This is what is meant
by “core values”. In many cases, however, this is the
missing vital element. Many organizations have created
cultures which are based on mistrust, vagueness about
objectives, lack of communication and lack of
involvement, yet the senior managers expect that by mere
introduction of a mission statement, things are going to
happen and change will be under way. This is not,
however, the case as expressed by the following
statement[13]: “In our work with dozens of owner-
managed businesses, we have observed that the
entrepreneur’s values are sometimes vaguely articulated,
seldom published, and often ambiguously communicated.
The result is that employees are left to an intuitive
reading of organizational values”.
Having a set of core values in place has helped many
organizations face tough times and make big decisions.
Core values were also found to lead to a wide variety of
benefits, for example, dealing with crisis management,
dealing with strategic change and growth management
[13]. A survey of 20 TQ-based companies revealed that
there are seven general core values and beliefs of total
quality in those companies, based on:
(1) customer focus;
(2) employee focus;
(3) teamwork;
(4) safety;
(5) candour;
(6) total involvement;
(7) process focus.
Mission – A Boardroom Issue
Various parts of the literature[9,11] have criticized the
often unclear and defensive role of boardroom directors,
and the level of hesitancy in committing themselves to
long-term strategic decisions. A similar criticism can be
levelled in relation to the development of the mission
within their organizations and the deployment of all the
goals and objectives. Based on empirical work and a
review of existing literature, Zahra[14] suggested that
directors at boardroom level need to be involved in a
strategic process which encompasses six sequential
phases: mission development, internal analysis, external
analysis, analysis of strategic gap, development of
strategic options, selection of strategy and strategy
implementation.
In relation to the articulation of a company’s mission,
Zahra[14] proposed that its scope should include the
following:
● identification of markets to be covered, products to
be offered and technology to be emphasized;
● determination of corporate self-image and
business philosophy;
● development of specific goals to pursue;
● development of a corporate public image.
He suggested that in relation to the above the role of board
members should be to:
● ensure compatibility of markets and products;
● ensure compatibility of product portfolio (in the
case of multi-business companies);
● ensure that the mission has been effectively
communicated to employees and the general
public.

Mission in Perspective – The Wider Context
In order to understand how a mission works and begin to
appreciate the type of impact it can have on
organizations, there is a need to look at it in a much wider
context. Some of the most interesting work in this area is
that of Collins and Porras[10], who developed a
framework that explains the role of mission and how it
relates to other vital aspects of corporate success. They
argue that most organizations, in desperate need for a
vision, create something called a mission statement. But
is this enough, is it compelling, has it enough impact as a
guiding force?
The basis of the framework is a number of model
companies which are known to be most visionary and
sustained their reputation over the years. The model
suggested describes organizational vision as a subset of
two important components: guiding philosophy and
tangible image (Figure 1).
Guiding philosophy. This is where the vision starts and
consists of fundamental principles, standards and
assumptions. Generally speaking, influence comes from
the early leaders. Within the guiding philosophy are two
operating forces:
(1) Core values and beliefs: about how the business
should operate, its impact on communities and
society at large; they include such as business
ethics, social responsibility and care for
environment/community, etc.
(2) Purpose: the eternal guide for the business
organizational role, which has no time limit, and
must be articulated properly.
Tangible image. This aspect is much more concrete, vivid
and real. Unlike the guiding philosophy which tends to be
Figure 1. Organizational Vision
Guiding philosophy
Purpose
Environment
Core
beliefs and values
Source: [10]
CORPORATE REPORTING 35
vague in people’s minds (in the background), tangible
image is very much at the foreground and relates to
specific goals and targets. As explained by Collins and
Porras[10]: “Guiding philosophy is deep and serene;
tangible image is bold, exciting, and emotionally
charged”.
The two major components of tangible image are:
(1) Mission: A clear and compelling goal that serves to
unify an organization’s efforts. It has a time limit.
(2) Vivid description: This is a futuristic aspect,
which mainly paints a description of post-
implementation of the mission and describes the
ground in the horizon. It transforms the mission
into pictures.
This framework is very useful in that it clarifies the
differences between words such as Vision (the whole
dynamic aspects of organizational performance) and
mission (clear goals, objectives and commitments for a
specific period of time). More importantly for
sustainability and crystal clear goals, organizations have
to have some roots (basic principles, values, standards
and also a sense of purpose of the exact role of the
organization).
Having a guiding philosophy and knowing what
the desired tangible image is going to be is not enough
however. The conversion of the guiding philosophy into a
tangible image depends very much on environmental
forces. While the guiding philosophy is in the background
and free of environmental conditions, the tangible image
is affected by timing, trends in the marketplace,
technological advancements, customer sophistication,
environmental issues and other external factors
(Figure 2).
Tangible image
Mission
Vivid
description
36 MANAGEMENT DECISION 32,2

Figure 2. Creation of Tangible Image Table II illustrates the scores of the 80 companies
examined. Table III includes overall scores based on the
13 variables and the scores obtained by the companies
concerned under the different groups of variables.
Guiding Free of current environmental
philosophy conditions – comes from within people

Random 100 companies

A further 100 reports were extracted randomly. Twenty-
Moderating role six were duplicates of the top 100. Therefore, 74 randomly
Environment (translation of purpose into selected company reports were used. No attempt was
mission)
made to replace the discarded reports, particularly since
the number of those suitable reports for analysis was
close enough to the number representing the top 100.
Mission affected by
Tangible image timing, trends, technology,
and other external factors Table IV illustrates the 74 companies, together with the
various scores on the groups of variables examined. The
results were grouped to reflect overall scores, scores
under the TQ criteria and scores for the finance/
competitive criteria. In addition, the mean scores for each
The Evaluation Framework company under all specific variables were calculated.
This framework consists of 13 variables adapted from the Overall, out of a potential cumulative score of 65 points,
US Malcolm Baldridge National Quality Award criteria, only a small number of companies managed to obtain
but much more specific and covering various aspects of relatively high scores.
corporate performance and behaviour. The 13 variables
are briefly described in Table I.
Cross-Comparison Analysis
To facilitate the process of analysis the 13 variables were In relation to each of the 13 variables scrutinized; the
grouped as follows: major differences were as follows. The top 100 companies
were found to be slightly stronger than the random
● Mission 1 variable sample in stressing the importance of mission statement
● Financial/competitive 4 variables (24 per cent strong, 19 per cent medium as opposed to 9
● TQ parameters 8 variables per cent strong, 14 per cent medium in the random
sample).
A scale of 1-5 was used to rate each of the 13 variables in
each report read. The rating scale used was as follows: For information on economic situation, the top 100
1 2 3 4 5 companies turned out to be much stronger than the
randomly selected ones. Forty-one per cent scored strong
Little/no Moderate Great and 43 per cent medium, as opposed to 26 per cent strong
emphasis emphasis emphasis and 35 per cent medium in the random sample.
In general, the judgement was based on:
● frequency of citation of the specific topic/area;
In training, there seems to be a more open and bigger
commitment for training in the top 100 (11 per cent
● space devoted; strong, 13 per cent medium as opposed to 5 per cent
● wording emphasis; strong and 4 per cent medium for the random sample).
● overall impression from reading the report.
Customer satisfaction is a stronger area for the top 100
Each report was read twice: first reading was a skim read with 11 per cent strong, 11 per cent medium, as opposed
and the second was a much more detailed examination of to 5 per cent strong and 7 per cent medium in the case of
the contents of the report. random companies.

Overall, there is very little difference between the ways

Discussion of findings used by both the top 100 and random samples to
Top 100 Companies disseminate information. All organizations studied tend
Letters were sent to the top 100 UK-based European to be much better at exhibiting information on the
companies requesting copies of their company reports for following variables than on anything else:
the year 1991. Eighty reports were received and analysis ● finance,
was conducted on these. The turnover and industry (SIC) ● corporate,
codes of the non-respondents were examined and
● competitive,
compared with the respondents to ensure that there was
no bias. ● economic.
 CORPORATE REPORTING 37

Table I. 13 Variables

(1) Mission
Whether an explicit statement of the mission or the vision of the firm is made. Grading was based on space given to mission
statement (i.e. importance and emphasis placed within the report), and level of clarity (for instance, whether expressed in
bullet format or formal sentences).

(2) Financial
Level of emphasis placed on financial criteria in explaining the firm’s position and its short- and long-term goals. Graded
on basis of space devoted to explanation using financial variables (ROCE, Sales, EPS, Dividends, etc.).

(3) Corporate
Concern for corporate or related matters expressed in the report. Graded on space given to policy descriptions in terms of
acquisitions, divestments, market penetration and growth-related matters.

(4) Competitive
Discussion of competitive/SBU level strategies. Graded on product-market level descriptions. Examples of typical
descriptions include marketing, positioning statements, market level trends, product modifications, innovations, etc.

(5) Economic
Review of corporate explanations in terms of current, past and forecast status of the general macro-economic environment.
Graded on: mentions of factors such as recession, business cycles, interest rates, inflation, etc.

(6) Quality vision

Whether there is an explicit statement which captures the organization’s quality quest. Forms part of vision statement.
Graded on length/clarity, and support or degree of importance placed on quality. Determined by wording, placement,
position within overall mission statement.

(7) Quality strategy

Whether quality was defined as being an integral or key part of business strategy, i.e. anything suggesting the
incorporation of quality in the development of business strategies. Graded on suggestions which indicate plans of
articulation and implementation of quality as an integral component of business strategies: e.g. “quality is a critical aspect
of achieving our long-term goals of market growth”, etc.

(8) Teamwork/participation
Level of employee involvement, reliance on human potential and contributions from individuals/teams in meeting various
goals and challenges. Graded on statements providing any evidence of inter-functional as well as intra-functional teamwork
or participation. For instance, creation of any initiatives or networks with the specific aim of meeting quality objectives.

(9) Training and reward schemes

Whether training programmes geared to generating quality are adopted and the extent and level to which these schemes
appear to be utilized, captured by statements indicating number of employees trained, the amount of resources directed
towards such training initiatives. Also whether the training efforts are complemented by installation of appropriate
motivational procedures to encourage a quality orientation in the workforce (i.e. recognition and rewards).

(10) QA systems
Evidence which suggests that QA systems are set up and working within the organization. Whether QA systems pervade
the whole organization or are confined to some narrowly defined area of the organization.

(11) Information collection systems

Existence and emphasis placed on information and data collection systems and their usage to drive quality goals (namely,
extent of, and systematic approach to, monitoring).

(12) Measurement
The extent to which measurement of efficiency and effectiveness with regard to achievement of quality goals is carried out.
Factors such as use of internal auditing procedures and establishment of benchmark criteria as well as external audits to
define best practice benchmarks were used to make the grading judgement.

(13) Customer satisfaction

The degree to which the quality goals are derived and defined in terms of customer satisfaction. Graded on explicit
statements of customer orientation and level to which surveys of customer satisfaction are conducted to assess level of
satisfaction, etc.
38 MANAGEMENT DECISION 32,2

Table II. Groups of Variables and Potential Scores Overall it was found that the information communicated
is poor, lacking in many aspects, and certainly not
relevant to how organizations perform and of little benefit
Potential to the end-user.
Variables score
A great deal of inconsistency was found in displaying
Mission 5 information – strengths were only identified in specific
TQ parameters 40
Finance/competitive
areas, and not throughout the reports read.
parameters 20
The reports exhibit two major weaknesses:
Total 65
(1) The dilemma of needing to mention a long-term
stance and a clear purpose of the organizations
concerned, and having to deliver consistent results
Table III. Scores of the 80 Companies which are acceptable to the stakeholder in terms of
dividends, share appreciation, etc.
Companies Scores (2) An internally focused approach where most of the
information is linked to what the organization does
Overall, only a small proportion of companies
obtained relatively high scores (out of 65
points) including for instance: Table IV. Additional Companies’ Scores
TrustHouse Forte 44
W H Smith plc 39 Companies Scores
NFC plc 36
Cadbury Schweppes 35
Overall high scores (out of 65 points) included:
RTZ Corp plc 35
Thorn EMI plc 35 Barratt Development plc 45
Westland Group plc 37
Mission statement
Albert Fisher plc 35
Only two companies managed to obtain the
Kingfisher plc 34
maximum score of 5. Fourteen companies
Staveley Ind plc 33
scored highly, including:
Boddington 31
J. Sainsbury plc 5
Mission statement
Marks & Spencer 5
Among the highest scorers (out of 5 points) are
British Airways plc 4
the following:
BT plc 4
GEC plc 4 Freemans plc 4
Hawker Siddeley plc 4 Ocean Group plc 4
Rentokil Group plc 4
TQ parameters
Out of the potential score of 40 none of the 80 TQ parameters
companies expressed their TQ commitments Out of a potential score of 40 points, a very
visibly and strongly enough to reach 75 per small number of companies managed to
cent. The following companies were found to register relatively high scores. Examples
be more positive about quality than the rest: include:
TrustHouse Forte 29 Barratt Development plc 30
Bowater plc 26 Simon Eng plc 24
NFC plc 24 Westland Group plc 23
W H Smith plc 24
Finance/competitive parameters
Finance/competitive parameters Out of a potential score of 20 points, the
Out of a potential score of 20, very few following companies obtained a relatively high
companies registered high scores. Examples of score:
relatively high scores include the following
companies: 31 Group plc 15
Plaxton 15
Reed International 16 Laura Ashley plc 15
Harrisons & Crosfield 15 TI Group plc 15
John Mowlem & Co plc 15 Williams Holdings 15
Ladbroke plc 15 C. E. Health plc 16
LEP Group plc 15 TGD Group 16

for itself as opposed to vital information on what
the market needs and what the customer wants.
This is clearly highlighted by the overall weakness
in referring to customers and customer
satisfaction.
The overall assessment of corporate reports leads to the
conclusion that they are weak in all the areas examined
and even for those companies that tended to excel in one
or two specific areas, the overall effort was disappointing.
Moving Forward: The Future of Corporate
Reporting
If corporate reporting is to change in the desired
direction, various issues will have to be addressed.
Notably, the following questions will need to be answered:
● Who are the customers/users of information
contained in the reports?
● Are their requirements/expectations well
understood?
● Is all the information generated of relevance?
● Where are the specific areas where there is a
dearth of information?
● Does the included information convey true
business performance?
● Is there a healthy blend of short-term and long-
term focus?
The desired changes will have to encompass an approach
based on:
● a customer focus,
● the establishment of a customer-supplier chain,
● a never ending improvement-based culture,
● people as a major asset,
● a process-based approach to competitiveness.
This study highlighted a variety of weaknesses in
corporate reporting. In particular, the lack of TQM
practice was very evident.
The challenge therefore is clear. The following points
need to be addressed if corporate reporting is to be of
more value to the various stakeholders and if the business
community is to become consistently more effective and
change the emphasis from a short-term focus to a longer-
term one:
● Stop believing that TQM is only a technique, of
relevance to the business units and with no
corporate value to it.
● Start to understand stakeholder requirements and
to begin to deliver to their expectations. This is
perhaps the most immediate action that holding
companies need to carry out. There is an urgent
need to improve the quality of communication and
CORPORATE REPORTING 39
also to improve drastically the quality of
information contained in the corporate report.
There is additionally an issue on the frequency of
communication and the timeliness of information
provided.
The ultimate result is to create a customer-supplier chain
(Figure 3), a principle which thus far has only been seen
to be applicable to business units and their relative
markets. The customer-supplier chain has to be
represented by a series of expectations and
responsibilities. The current situation reflects
expectations without highlighting the various
responsibilities.
There is an opportunity for the holding company to
communicate to the stakeholders concerned, the true
performance of the company by sharing with them
information on specific aspects of relevance. It is also an
ideal opportunity for communicating long-term plans
and measures/actions which were undertaken to protect
the companies concerned, to make them less vulnerable
and stronger competitors in the long term.
Support from the stakeholder can only be expected if the
level of awareness has been raised and issues clearly
pointed out. Stakeholders need to be educated to the
potential of TQM as a philosophy of doing business and
gradually will have to be encouraged to subscribe to
those principles. Ideally, stakeholders will have to expect
companies they invest in to be more and more
Figure 3. Ideal Business Model
Supporting business
Stakeholders
E
N
External reporting V
I
T R
Q Holding company O
M N
M
E
N
T
Internal reporting
Business unit
40 MANAGEMENT DECISION 32,2
accountable for their quality efforts as much as for their
performance on financial results.
In this way a climate of total quality management can be
created. This is the only way the culture of short termism
is going to be tackled head on. The ideal opportunity
and the trigger for this process to start is the corporate
report.
References
1. Binney, G., “Brief Case: Shareholder Dominance – Time
to Ask If the Emperor Has Any Clothes”, Long Range
Planning, Vol. 24 No. 6, 1991, pp. 107-9
2. Accounting Standards Steering Committee, The
Corporate Report, ASSC, England, 1975.
3. Institute of Chartered Accountants of Scotland, Making
Corporate Reports Valuable, Kogan Page, London, 1988.
4. Arnold, J., Boyle, P., Carey, A., Cooper, M. and Wild, K.,
The Future Shape of Financial Reports, Institute of
Chartered Accountants, England, Wales and Scotland,
1991.
5. Lothian, N., How Companies Manage R&D, The Institute
of Cost and Management Accountants, London, 1984.
6. Profits by Design – A Management Overview,
Department of Trade and Industry, London, 1991.
Mohamed Zairi is Unilever Lecturer in TQM at the University of Bradford Management Centre, and Steve Letza is a
Lecturer at the University of Bradford, Bradford, UK.
Application Questions
(1) Analyse the content of your corporate report using the guidelines suggested in this survey. How well do you score?
(2) Who are the prime “customers” for your organization’s annual report?
7. Getting the Message across – Improving Communication
on Innovation between Companies and Investors,
Department of Trade and Industry, London 1991.
8. Coulson-Thomas, C., “Strategic Vision or Strategic Con?:
Rhetoric or Reality?”, Long Range Planning, Vol. 25 No.1,
1992, pp. 81-9.
9. Klemm, M., Sanderson, S. and Luffman, G., “Mission
Statements: Selling Corporate Values to Employees”,
Long Range Planning, Vol. 24 No. 3, 1991, pp. 73-8.
10. Collins, J.C. and Porras, J.I., “Organizational Vision and
Visionary Organizations”, Cal ifornia Management
Review, Fall 1991, pp. 31-52.
11. Campbell, A., “A Mission to Succeed”, Director, February
1991, pp. 66-8.
12. Smith, B., “Vision: A Time to Take Stock”, Innovation
Associates of Canada, 1991.
13. Osborne, L., “Core Value Statements: The Corporate
Compass”, Business Horizons, September-October 1991,
pp. 28-34.
14. Zahra, S.A., “Increasing the Board’s Involvement in
Strategy”, Long Range Planning, Vol. 23 No. 6, 1990,
pp. 109-17.
Further Reading
Linkow, P., “Is Your Culture Ready for Total Quality?”, Quality
Progress, November 1989, pp. 69-71.