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Implementing the Beyond Budgeting Principles in Össur
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Implementing the Beyond Budgeting Principles in Össur

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  • 1. THE JOURNEY SO FAR 2009 Large budget variances CFO initated a Rolling Forecast project CPA looked into options Stumpled upon Beynd BudgetingBEYOND BUDGETINGAT ÖSSUR 2010 Presented the vision to the executive management teamLESS Conference Created a cross functional implementation team andTallinn November 2012plan formalized aAxel Úlfarsson Not good understanding of the BB principles within the team and in some cases opposition to the change Did not manage to implement RF process before budget season kicked in Decided to do a budget for 2011 and pick up the RF project by start of 2011 1
  • 2. ABOUT ÖSSUR
  • 3. ABOUT ÖSSUR • A global orthopaedic company Headquarters Reykjavik, • Headquarters in Iceland Iceland • Founded in 1971 by Mr. Össur Kristinsson Össur EMEA • Develop, produce and sell non-invasive Eindhoven, Netherlands orthopaedics Össur • Listed on the OMX Copenhagen stock AmericasCalifornia, USA exchange • 15 Locations Össur Asia • 1850 employees Shanghai,China • 400 million USD annual turnover
  • 4. OUR BEYOND BUDGETING JOURNEY BEFORE BEYOND BUDGETING • Long and painful budget process • Every department with detailed budgets • Complex planning system • Started preparation in May • Heavy process during autumn • Ended in December with a report for BOD and Executive team • Value in the report not balanced with the effort in creating it • Focus on actual vs. budget
  • 5. OUR BEYOND BUDGETING JOURNEY HOW IT STARTED • CFO initiated Rolling Forecast project • Searched for improved ways to do financial forecasts • Did some research • Introduced to Beyond Budgeting • BBRT conferences • Presented the vision in 2010
  • 6. OUR BEYOND BUDGETING JOURNEY IMPLEMENTING • Simplified the budget process • Pull tactic • Shifted focus from budget to YoY improvements • Spread the BB “gospel” • The pull came in 2011 • First high level, 5 quarter rolling forecast in February 2012 • Cost control now with relative KPIs and trend lines • CEO decides to abandon the budget by 2013
  • 7. OUR BEYOND BUDGETING JOURNEY 2013….. • Evaluate and improve • Target setting processes • Cost control • Planning process • Align the organization on Beyond Budgeting
  • 8. WHAT HAS CHANGED 2009 2012
  • 9. WHAT HAS CHANGED Organic Sales Growth 7.0% 6.0% FOCUS ON THE FUTURE 5.0% 5.0% 5.0% 5.0% 4.0% 4.0% 4.0% 4.0% • More trend lines vs. static view 4.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% • Planning process on a higher level with 2.0% 1.0% focus on main KPIs 0.0% Q1 ´11 Q2 ´11 Q3 ´11 Q4 ´11 Q1 ´12 Q2 ´12 Q3 ´12 Q4 ´12 Q1 ´13 Q2 ´13 Q3 ´13 Q4 ´13 Goal Organic Sales Growth 12M Average • Shifting management´s focus from the past Adj. EBITDA % 22.0% and to the future 21.0% 21.0% 21.0% 21% 21.0% 20.0% 20.0% 20.0% 20.0% • Cost control with relative KPIs and trend 19.0% 19.3% 19.0% 19.0% 19% 18.0% 18.0% 18.0% lines 17.0% 16.0% 15.0% Q1 ´11 Q2 ´11 Q3 ´11 Q4 ´11 Q1 ´12 Q2 ´12 Q3 ´12 Q4 ´12 Q1 ´13 Q2 ´13 Q3 ´13 Q4 ´13 Goal Adj. EBITDA margin 12M Average
  • 10. CURRENT FORECAST PROCESS • Used to support decision making • Consolidated high level forecast • Down to main locations • Supporting tools variable based on each location´s needs • 5 Quarter view • Updated quarterly with exceptions if needed • Ownership of numbers with local management (MDs and department heads) • Ownership of process with financial controllers
  • 11. TIME WELL SPENT • Executive sponsorship • Communication • Face to face meetings • Workshops • Training • BBRT
  • 12. CHALLENGES • Rewards/Bonus structure • Target setting • Braking old habbits • Forecast reliability • Information on external peers
  • 13. Thank you