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INFLUENCE: INTEGRATED THINKING AND THE ORGANISATION OF THE FUTURE

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Globally, South Africa is considered a pioneer in implementing integrated reporting. To achieve high-quality integrated reporting, organisations need to apply a high degree of so-called ‘integrated thinking’, writes Graham Terry

Given South Africa’s pioneering position, SAICA decided to canvass senior executives and non-executive directors to see if organisations were benefiting from the adoption of integrated reporting and, in particular, the implementation of integrated thinking.

Organisations chosen for the survey were those that had fared well in the EY Reporting Awards. The survey took the form of a questionnaire sent to CFOs and some non-executive directors.

The survey showed, overwhelmingly, that both executive and non-executive directors canvassed felt that organisations they were associated with had benefited from the implementation of integrated reporting and integrated thinking. Most respondents, however, indicated that they felt it was a process that takes time to reach maturity.

WHAT HAVE THE BENEFITS BEEN?

Respondents felt that decision-making in organisations both at management and board level had improved because more relevant and more accurate information was being presented. They said more robust non-financial information systems were being developed to improve the reliability of the information. Many admitted that the principles applied in integrated reporting had resulted in internal reporting becoming more focused and succinct.

Several respondents  indicated that organisations were recognising the importance of the six capitals, although they were not necessarily defined in the way the International Integrated Reporting Council (IIRC) defined them in the International <IR> Framework. There was a growing awareness that organisational capital amounted to far more than the traditional concepts of financial and manufactured capital. It was being recognised that human capital, intellectual capital, social and relationship capital, and natural capital were equally important in long-term value creation and that they needed to be developed and nurtured.

An interesting observation that came through strongly was that integrated thinking and reporting had helped to improve relationships with a range of stakeholders. Several respondents said that integrated reporting had assisted in improving these relationships as information was well organised, and the reports were easy to read and understand. They also provided a more useful and holistic picture of the organisation’s performance and prospects.

A high proportion of respondents pointed to the enhancements that have come about to risk management primarily because organisations were looking at risks from a much broader perspective, but also in a more integrated way.

When asked what drivers motivated the move to embrace integrated thinking, respondents frequently pointed to changing business conditions that forced organisations to rethink their business models to become more competitive. In many cases it seems that the move was inspired by a champion, either the CEO or the chairman.

The key inhibitors to implementation of integrated thinking were identified as poor information systems coupled with inflexible staff and board members. It is clear that organisations will not be successful if the culture of the whole organisation is not changed. Extremely important is the alignment of the performance measurement process with the organisation’s value creation strategy. It must reward short-, medium- and long-term performance, otherwise management and employee behaviour can be misdirected.

Given the complexity of running large organisations, it was surprising that more organisations do not employ tools incorporating systems thinking systems dynamics to assist in decision-making. When one considers all the variables that affect organisational performance and how they affect one another, organisations can no longer see the business as a linear process. More sophisticated models are needed to measure the impact of investments in capitals and the effects of changing environmental issues.

For more information on this survey go to https://www.saica.co.za/Portals/0/Technical/Sustainability/SAICAIntegratedThinkingLandscape.pdf

Author:

Graham Terry CA(SA) was the Project Leader for the Integrated Thinking Project

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