Management Reporting vs Board Reporting: What is the Difference?
Sometimes, in the world of modern business, “management reporting” and “board reporting” are terms used interchangeably. But did you know there are key differences between them?
While boards and management typically hold close ties to each other, their role, responsibilities and duties are actually quite different. That means that, when you’re reporting to each of them, you’ll be focusing on achieving two vastly different goals.
Below, we’ll first outline in detail the key distinction between a board and management, and then explain the differences in the way reporting works with each of them.
First, what’s the difference between management and a board?
A board of directors make the key decisions that drive an organisation into a specific direction, and management is responsible for carrying out those decisions in practice. While boards do take particular interest in a company’s daily activities, they typically do not (and should not) actually carry out managerial responsibilities.
We’ll explain this in further detail below.
Responsibilities and duties of the board
Boards are in charge of oversight and planning. Their role is to ensure that the organisation is always on track to achieving its strategic planning objectives, mission and overarching vision.
This includes through performing duties such as:
- Choosing a CEO
- Deciding major policies
- Making critical decisions
- Overseeing organisational performance
- Serving as the organisation’s external advocate
Boards will typically be staffed with directors, who are subject to directors’ duties and obligations under company legislation (which, in Australia, is the Corporations Act 2001).
While boards of directors should be aware of what’s happening in their organisation, they shouldn’t get directly involved in matters day-to-day.
Instead, they should work closely with managers to provide robust guidelines.
And in turn (discussed below), managers should be sharing reports with the board, so directors can make critical decisions about the future of the company.
If you’re looking for background information on how Australian companies work generally (including the different types of directors), please read our article on corporate structure.
Responsibilities and duties of management
Management is in charge of executing the board’s vision. While their precise way of working will depend on the size and a culture of an organisation, they’re generally responsible for ensuring the organisation operates in accordance with the values, mission and direction set by the board.
Management’s key duties include:
- Making and executing operational decisions and policies
- Keeping the board informed through well-executed reporting
- Making suggestions and recommendations to the board about the company’s future
- Handling all administrative work within their purview to keep the organisation moving
There are usually different levels of management depending on the size of the organisation.
Lower to middle management will be responsible for hiring, training and keeping new employees. These include roles such as team leaders, supervisors or area managers. They’ll also be responsible for delegating tasks and jobs to a company’s workforce, who are trusted to get the job done.
Upper management (often called the executive) is the connecting point between lower-level managers and the board of directors. Their role is to communicate the expectations of the board down to lower levels within the company. Positions in upper management may include rules roles as General Counsel, Chief Operating Officer (COO) Chief Financial Officer, (CFO) or Chief Technology Officer (CTO).
The bottom line: Because both management and the board have different roles, responsibilities and duties, it naturally flows that reporting differs for each of them.
Management Reporting vs Board Reporting: 3 Key Differences to Remember
While there are crossovers between the two, there are three important differences to remember when thinking about the distinction between management and board reporting.
- The nature of the reporting
Board reporting refers to the preparation of reports (usually by management and any relevant committee) to present to the board of directors. It involves the analysis of organisational data and communicating high level information usually through a ‘board report’.
Management reporting generally refers, however, to internal reports prepared for heads of particular departments, or even the executive. They may never necessarily be seen by the board. This includes reports made to a Human Resources Manager, Chief Financial Officer or to General Counsel. These individuals may then use the information from management reports to prepare a board report.
- The purpose of the reports
The purpose of board reporting is to communicate critical operational information to the board in a high-level format. It will contain information applicable to the entire organisation.
Their purpose is to give boards the key information they need to correctly set the company’s strategic goals, and ensure the organisation moves into the right direction.
The purpose of management reporting, however, is to communicate information to department heads or executive officers so they have an overview of what is occurring within their particular area of the company. A management report’s purpose is to help managers understand the status of their department, establish goals, ensure better communication and monitor performance regularly.
Management reports will be generated from every department within a company: sales, operation, finance, customer service, marketing, human resources and so on.
- The audience
In board reporting, you are usually reporting to an extremely busy set of people who may not have day-to-day understanding of the business. While some board members will know more than others, a handful may be directors of various companies and won’t have detailed knowledge about how the organisation runs.
It is therefore important to keep the board as succinct as possible, but at the same time paint the whole picture – both the good and bad side of the business.
In management reporting, you will generally always be reporting to individuals who have a strong understanding about how their department operates. They will want to be in a position to make decisions about how their particular department is run, and also understand the major problems facing their team so they can action them immediately.
How to prepare effective board and management reports
While the purpose, audience and nature of the reporting is different, drafting high-quality reports will often require the same thing. This will include:
- Writing for your audience
Whether you are in a committee writing for the board or middle management writing for the executive, the key principle is to always write for their audience.
If you know the particular individual who is going to read the report, then tailor the report to their background, personality and needs. If you know they are a stickler for detail, for example, then it would be worth having appendices that outline detailed data in a presentable format.
- Show the good and the bad
Both board reports and management reports need to deal with the good, bad and the ugly. Boards need to know the true state of their company, and managers need to know the real status of their department. Tell them what they need (and not want) to hear.
This information will be critical for boards and managers so they can make the best possible decisions for the future.
- Highlight the key points first
Unlike a good joke, don’t leave the punchline to the end. The most important points in the report should be captured immediately and clearly. This will include through an executive summary, headings, graphs and so on to ensure that the message you’re presenting is clearly articulated.
- Conclude with a plan
The best board and management reports won’t just highlight the good and bad – they’ll conclude with an action plan to help the reader make the right decisions.
Come up with a proposed solution based on what you’ve found, so that your managers can make the best decision for your department or company’s future.
We’re here to help
If you need help with your board or management reporting, the team at 2account are the experts who can help.
Financial reporting is what we do best. We’ve helped finance committees, directors and managers prepare excellent reports that companies and department heads can use to make critical decisions that affect their organisation’s future.
Our virtual CFO services will make sure that your board is always across financial status of your company each and every time – so if you need to improve your company’s board reporting, please do get in touch with us.