Linking Finance Functions With Sales And Marketing

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*Understanding the value of linking sales and marketing
concepts with finance functions
*Understanding the strengths and weaknesses of sales
and marketing people and how finance play a role to help them
*Considerations when considering financial strategies
to enhance business outcomes
*Strategically aligning the finance, sales and marketing
to achieve business erformance
*Maximising efficiencies and opportunities between sales and marketing and finance
*Integrating finance, sales and marketing as part of strategic planning and budgeting
*Establishing and building a strong business partnering
relationship with senior sales and marketing management

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  • Linking Finance Functions With Sales And Marketing

    1. 1. LINKING FINANCE FUNCTIONS WITH SALES AND MARKETING TO ACHIEVE IMPROVED PERFORMANCE Case Studies, Concepts and Debatable Ideas Kenny Ong CNI Holdings Berhad www.myCNI.com.my www.OOBEY.com
    2. 2. Intro: CNI <ul><li>19 years old </li></ul><ul><li>Core Business: MLM </li></ul><ul><li>Others: Contract Manufacturing, Export/Trading, eCommerce, F&B Retail </li></ul><ul><li>Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan </li></ul><ul><li>Staff force: ± 500 </li></ul><ul><li>Distributors: 200,000 </li></ul><ul><li>Products: Consumer Goods and Services </li></ul>www.myCNI.com.my www.OOBEY.com
    3. 3. <ul><li>How to fail without trying </li></ul>www.myCNI.com.my www.OOBEY.com
    4. 4. The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time www.myCNI.com.my www.OOBEY.com Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy
    5. 5. Denial and Defense <ul><li>“ It’s not really good value our competitor is offering, because it doesn’t include a lot of our features.” - ABC vs Air Asia </li></ul><ul><li>“ It’s good value but not in our preferred customer market.” - ABC vs Toyota </li></ul><ul><li>“ Sure they’re hurting us, but with their unfair advantage, what can we do?” – ABC vs MILO </li></ul><ul><li>“ The rules we are playing by have always worked before” – AMEX vs VISA </li></ul>www.myCNI.com.my www.OOBEY.com
    6. 6. The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time www.myCNI.com.my www.OOBEY.com Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy
    7. 7. Ad Hoc Tactics <ul><li>Selectively hold discounts to hold business that has started to go elsewhere </li></ul><ul><li>Introduce new promotions, terms, conditions, and offers to confuse and cloud the market </li></ul><ul><li>Beef up customer service by adding people to fix mess-ups and quicken delayed shipments </li></ul><ul><li>Delay capital investments and adjust accounting methods to portray quarterly financial results more favorably </li></ul><ul><li>Introduce “new and improved” products that are new in form, but not in substantive ways that are of consequence to purchasers </li></ul><ul><li>Introduce Balanced Scorecards and Performance Management Systems </li></ul>www.myCNI.com.my www.OOBEY.com
    8. 8. The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time www.myCNI.com.my www.OOBEY.com Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy
    9. 9. <ul><li>“ What is the moral of the story?” </li></ul>www.myCNI.com.my www.OOBEY.com
    10. 10. Understanding the perspectives of Sales & Marketing vs. Finance www.myCNI.com.my www.OOBEY.com
    11. 11. Typical Corporate Planning Scenario? <ul><li>Budget ‘top down’ – no questions asked </li></ul><ul><li>Only two budget goals – revenue, expenses </li></ul><ul><li>The only planning we needed to do was “do better than last year” </li></ul><ul><li>Planning was ‘bottom up’ - compilation of plans within set budget </li></ul><ul><li>No one knew what the other was planning </li></ul><ul><li>FAC’s role was only to compile budget for approval </li></ul><ul><li>KPIs were not used </li></ul><ul><li>Sales was resource priority, everything else not important </li></ul><ul><li>Assumed no major changes in market </li></ul><ul><li>R&D was ‘bottom up’ </li></ul>www.myCNI.com.my www.OOBEY.com
    12. 12. Problems from the start (1/2) <ul><li>No money </li></ul><ul><li>Split Objectives: Sales? Share Price? Image? </li></ul><ul><li>Independent entities </li></ul><ul><li>FAC controlling schedule </li></ul><ul><li>S&M always running over budget </li></ul><ul><li>Compounding activities </li></ul><ul><li>BOD expectations too high without proper explanation nor justification </li></ul><ul><li>Lack of Market research </li></ul><ul><li>Expenses not spent gets punished </li></ul>www.myCNI.com.my www.OOBEY.com
    13. 13. Problems from the start (2/2) <ul><li>Budgeting for known, consistent, and predictable business conditions </li></ul><ul><li>Never learn from past mistakes, usually in under-budgeting (e.g. staff and PCs) </li></ul><ul><li>Wrong Business Model – blame Budgeting & Planning. Having a good planning process cannot correct a bad business model </li></ul><ul><li>Focusing on the Process (KPIs), instead of “Business” </li></ul><ul><li>Planning & budgeting treated as separate processes by businesses/functions </li></ul>www.myCNI.com.my www.OOBEY.com
    14. 14. At the Table Sales and Marketing Finance and Accounts <ul><li>Field Intelligence </li></ul><ul><li>CRM </li></ul><ul><li>Growth (organic) </li></ul><ul><li>Lagging KPIs </li></ul><ul><li>Adaptability </li></ul><ul><li>Channels </li></ul><ul><li>1 st Level Branding </li></ul><ul><li>Stakeholder Interest: Customers </li></ul><ul><li>Gut Feel/Instincts </li></ul><ul><li>External Intelligence </li></ul><ul><li>Ratios </li></ul><ul><li>Leading KPIs </li></ul><ul><li>Control/ Constraints </li></ul><ul><li>Resource Mgmt </li></ul><ul><li>Stability & Systems </li></ul><ul><li>Pyramid roles </li></ul><ul><li>Containment </li></ul><ul><li>Shareholder Interest: Shareholder </li></ul>www.myCNI.com.my www.OOBEY.com
    15. 15. Linking the Roles Sales and Marketing Finance and Accounts <ul><li>Five Links: </li></ul><ul><li>Philosophy </li></ul><ul><li>Business Model </li></ul><ul><li>KPIs </li></ul><ul><li>Resource Allocation </li></ul><ul><li>Performance Management System </li></ul>www.myCNI.com.my www.OOBEY.com
    16. 16. Link #1: Philosophy The anchor for all decisions www.myCNI.com.my www.OOBEY.com
    17. 17. Philosophy: <ul><li>Goods Return Policy </li></ul><ul><li>“ I don’t care if they return a Goodyear tire. If they said they paid $200, pay them $200.” </li></ul>Nordstrom does not sell tires www.myCNI.com.my www.OOBEY.com
    18. 18. Philosophy <ul><li>“ In business after business, 60% to 80% of lost customers reported on a survey just prior to defecting that they were satisfied or very satisfied .” </li></ul>HBR March/April 1996 www.myCNI.com.my www.OOBEY.com
    19. 19. Philosophy <ul><li>“ CNI is more than business. </li></ul><ul><li>We strongly believe that every individual has the opportunity to attain a better living through CNI.” </li></ul>www.myCNI.com.my www.OOBEY.com
    20. 20. Philosophy Ultimate Objective of Marketing: “ Get more people, to buy more things, more frequently, at higher prices.” Sergio Zyman “ Retention and Loyalty useless if No Conversion is happening.” www.myCNI.com.my www.OOBEY.com
    21. 21. Philosophy <ul><li>Loyalty is Useless… </li></ul><ul><li>Virtual Consumption vs. Real Consumption </li></ul>www.myCNI.com.my www.OOBEY.com
    22. 22. Philosophy <ul><li>Loyalty is misleading… </li></ul><ul><li>Heavy Consumption ≠ Loyalty </li></ul><ul><li>Loyalty ≠ Heavy Consumption </li></ul>www.myCNI.com.my www.OOBEY.com
    23. 23. Philosophy <ul><li>Loyalty = Relationship (something like Dating) </li></ul><ul><li>Loyalty ≠ Points </li></ul><ul><li>Loyalty ≠ Redemption </li></ul><ul><li>Loyalty = Get more people, to buy more, more frequently, at higher prices </li></ul>www.myCNI.com.my www.OOBEY.com
    24. 24. Link #2: Business Model www.myCNI.com.my www.OOBEY.com
    25. 25. What is the Business Model? USP Market Discipline Profit Model www.myCNI.com.my www.OOBEY.com
    26. 26. Intro: Market Discipline <ul><li>Mamak stall </li></ul>www.myCNI.com.my www.OOBEY.com
    27. 27. Intro: Market Discipline <ul><li>&quot;Exactly what I need&quot; </li></ul><ul><li>Customized products </li></ul><ul><li>Personalized communications </li></ul><ul><li>&quot;They're very responsive&quot; </li></ul><ul><li>Preferential service and flexibility </li></ul><ul><li>Recommends what I need </li></ul><ul><li>&quot;I'm very loyal to them&quot; </li></ul><ul><li>Helps us to be a success </li></ul>&quot;They are the most innovative&quot; &quot;Constantly renewing and creative&quot; &quot;Always on the leading edge&quot; &quot;A great deal!&quot; Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership &quot;A no-hassles firm&quot; Convenience and speed Reliable product and service Product Leadership Operational Excellence Customer Intimacy www.myCNI.com.my www.OOBEY.com
    28. 28. Strategy: Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com
    29. 29. Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes Relationship Image www.myCNI.com.my www.OOBEY.com
    30. 30. Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes Price Quality Time Selection √ √ Smart Shopper Relationship Image Operational Excellence : Quality and selection in key categories with unbeatable prices www.myCNI.com.my www.OOBEY.com
    31. 31. Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes √ Brand Time Function √ √ Best Product Relationship Image Product Leadership: Unique products and services that push the standards www.myCNI.com.my www.OOBEY.com
    32. 32. Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes √ √ √ √ Service Trusted Brand Relationship Image Customer Intimacy: Personal service tailored to produce results for customer and build long-term relationships Relations www.myCNI.com.my www.OOBEY.com
    33. 33. Strategy: Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com
    34. 34. The McPlaybook* <ul><li>Make it easy to eat </li></ul><ul><li>50% drive-thru </li></ul><ul><li>Meals held in one hand </li></ul><ul><li>Make it easy to prepare </li></ul><ul><li>High Turnover </li></ul><ul><li>Tasks simple to learn & repeat </li></ul><ul><li>Make it quick </li></ul><ul><li>“ Fast Food” </li></ul><ul><li>Tests new products for Cooking Times </li></ul><ul><li>Make what customers want </li></ul><ul><li>Prowls market for new products </li></ul><ul><li>Monitored field tests </li></ul>*Adapted from: Businessweek , Februrary 5 th 2007 www.myCNI.com.my www.OOBEY.com
    35. 35. <ul><li>Product Leadership </li></ul><ul><li>New, state of the art products or services </li></ul><ul><li>Risk takers </li></ul><ul><li>Meet volatile customer needs </li></ul><ul><li>Fast concept-to- counter </li></ul><ul><li>Never satisfied - obsolete own and competitors' products </li></ul><ul><li>Learning organization </li></ul>Strategy: Disciplines, Priorities, and KPIs <ul><li>Operational Excellence </li></ul><ul><li>Competitive price </li></ul><ul><li>Error free, reliable </li></ul><ul><li>Fast (on demand) </li></ul><ul><li>Simple </li></ul><ul><li>Responsive </li></ul><ul><li>Consistent information for all </li></ul><ul><li>Transactional </li></ul><ul><li>'Once and Done' </li></ul><ul><li>Customer Intimacy </li></ul><ul><li>Management by Fact </li></ul><ul><li>Easy to do business with </li></ul><ul><li>Have it your way (customization) </li></ul><ul><li>Market segments of one </li></ul><ul><li>Proactive, flexible </li></ul><ul><li>Relationship and consultative selling </li></ul><ul><li>Cross selling </li></ul>www.myCNI.com.my www.OOBEY.com
    36. 36. <ul><li>Operational Excellence </li></ul><ul><ul><ul><li>Move know-how from top performing units to others </li></ul></ul></ul><ul><ul><ul><li>Benchmark against best in class </li></ul></ul></ul><ul><ul><ul><li>Ensure operations training for all employees </li></ul></ul></ul><ul><ul><ul><li>Use disciplines like TQM for continuous learning to reduce costs and improve quality </li></ul></ul></ul>Strategy: Value Disciplines www.myCNI.com.my www.OOBEY.com
    37. 37. Strategy: Value Disciplines <ul><li>Customer Intimacy </li></ul><ul><ul><ul><li>Capture knowledge about customers </li></ul></ul></ul><ul><ul><ul><li>Understand customer needs </li></ul></ul></ul><ul><ul><ul><li>Empower front line employees </li></ul></ul></ul><ul><ul><ul><li>Ensure that everyone knows the customer </li></ul></ul></ul><ul><ul><ul><li>Make company knowledge available to customers </li></ul></ul></ul>www.myCNI.com.my www.OOBEY.com
    38. 38. <ul><li>Product Leadership </li></ul><ul><ul><ul><li>Reduce time to market </li></ul></ul></ul><ul><ul><ul><li>Commercialize new products fast </li></ul></ul></ul><ul><ul><ul><li>Ensure that ideas flow </li></ul></ul></ul><ul><ul><ul><li>Reuse what other parts of the company have already learned </li></ul></ul></ul><ul><ul><ul><li>Ensure there are multiple sources of funding </li></ul></ul></ul>Strategy: Value Disciplines www.myCNI.com.my www.OOBEY.com
    39. 39. Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com
    40. 40. Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com
    41. 41. Link #3: KPIs Dangers of BSC, KPIs and other evils sold by Consultants www.myCNI.com.my www.OOBEY.com
    42. 42. <ul><li>“… in the past 18 months, we have heard that profit is more important than revenue, quality is more important that profit, people are more important than profit, customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our performance is inconsistent&quot; </li></ul>CEO, Anonymous www.myCNI.com.my www.OOBEY.com
    43. 43. Before we start… <ul><li>In the old days of HR… </li></ul><ul><li>Average training hours per staff </li></ul><ul><li>% of staff attending training </li></ul><ul><li># of training programs </li></ul><ul><li>% of training programs conducted </li></ul><ul><li>Training needs analysis conducted </li></ul><ul><li>Competency models developed </li></ul><ul><li>Training budget as % of payroll </li></ul>What’s wrong with this picture? www.myCNI.com.my www.OOBEY.com
    44. 44. Before we start… <ul><li>Moral of the story… </li></ul><ul><li>Innovation: </li></ul><ul><ul><li>Business models </li></ul></ul><ul><ul><li>Products </li></ul></ul><ul><ul><li>Services </li></ul></ul><ul><li>Market Leadership </li></ul><ul><li>Competitive differentiation </li></ul>Get the picture? www.myCNI.com.my www.OOBEY.com
    45. 45. <ul><li>“ What is the moral of the story?” </li></ul>www.myCNI.com.my www.OOBEY.com
    46. 46. What is Strategic Planning? Strategic Planning Variables: Research Growth Risks Stakeholders Constraints SWOT Misc. Output: Plans Priorities KPIs www.myCNI.com.my www.OOBEY.com
    47. 47. Before we start… <ul><li>Which comes first? </li></ul><ul><li>Strategies -> KPI? </li></ul><ul><li>KPI -> Strategies? </li></ul>www.myCNI.com.my www.OOBEY.com
    48. 48. Focus: Corporate Alignment Financial “ To satisfy our stakeholders, what Financial objectives must we accomplish?” www.myCNI.com.my www.OOBEY.com Internal Process “ To satisfy our customers, in which internal business processes must we excel?&quot; Customer “ Who are our target customers? What is our value proposition?” Learning & Growth “ What capabilities and tools do our employees require to help them execute our strategy?
    49. 49. Linking BSC to Strategy Revenue Growth Base Retention Share Gain Positioning Adjacent Market New Business Operational Excellence Product Leadership Customer Intimacy Competencies Information Systems Motivation, empowerment, alignment Financial Learning & Growth Internal Process Customers Investment Strategy Productivity Market Value www.myCNI.com.my www.OOBEY.com
    50. 50. Focus: Corporate Alignment Financial Learning & Growth Internal Process Customers / Distributors www.myCNI.com.my www.OOBEY.com Revenue Growth Productivity Market Value Department Operations Supplier & Alliances External Involvement Target Markets Products/ Services Channel Strategies Human Resources Technology Information & Intelligence Systems & Processes
    51. 51. Example: Selection of KPIs for BSC <ul><li>Customer satisfaction </li></ul><ul><li>Customer loyalty </li></ul><ul><li>Market share </li></ul><ul><li>Customer complaints </li></ul><ul><li>Complaints resolved on first contact </li></ul><ul><li>Return rates </li></ul><ul><li>Response time per customer request </li></ul><ul><li>Price relative to competition </li></ul><ul><li>Total cost to customer </li></ul><ul><li>Average duration of customer relationship </li></ul><ul><li>Customers lost </li></ul><ul><li>Customer retention </li></ul><ul><li>Customer acquisition rates </li></ul><ul><li>Percentage of revenue form new customers </li></ul><ul><li>Number of customers </li></ul><ul><li>Annual sales per turnover </li></ul><ul><li>Win rate (sales closed/sales contact) </li></ul><ul><li>Customer visits to the company </li></ul><ul><li>Hours spent with customers </li></ul><ul><li>Marketing cost as a percentage of sales </li></ul><ul><li>Number of ads placed </li></ul><ul><li>Number of proposals made </li></ul><ul><li>Brand recognition </li></ul><ul><li>Response rate </li></ul><ul><li>Number of trade shows attended </li></ul><ul><li>Sales volume </li></ul><ul><li>Share of target customer spending </li></ul><ul><li>Sales per channel </li></ul><ul><li>Average customer size </li></ul><ul><li>Customers per employee </li></ul><ul><li>Customer service expense per customer </li></ul><ul><li>Customer profitability </li></ul><ul><li>Frequency (number of sales transactions) </li></ul>www.myCNI.com.my www.OOBEY.com
    52. 52. Example: 1 st Level BSC & KPIs Financial Learning & Growth Internal Process Customers / Distributors Profit after Tax. Revenue. Cash-to-cash cycle. Operating cash flow Customer Complaints. Customer Acquisition Rate. Product Availability. Product Quality & Service. Renewal Annual Subscription. Distributor Rank Achievement. No. of Active Distributor. No. DC/Regional Sales. Distributor with commission Customer Database Availability. Accuracy of Forecast Planning. Continuous Improvement. Response Time to Customer Needs. Perfect Order Fulfillment. Inventory Turnover. Number of Effective Sponsoring Program. On Time Delivery. No. of Effective Training. Number of Effective A&P % of staff evaluated on Core Competency Framework. % of staff with Career Development Plans. No. of training hours completed per staff. % of staff with access to strategic information. Q12 Index. % staff evaluated on Culture alignment www.myCNI.com.my www.OOBEY.com
    53. 53. Sample: Other 1 st Level KPIs across industries… www.myCNI.com.my www.OOBEY.com <ul><li>Single view of customers across supply chain </li></ul><ul><li>Zero-error order capture </li></ul><ul><li>Streamline opportunity to cash processes </li></ul><ul><li>Leverage investment in ERP and backoffice systems </li></ul><ul><li>Increase customer loyalty and preference </li></ul><ul><li>Maximize customer revenue </li></ul><ul><li>Improve service quality and efficiency </li></ul><ul><li>Capture and close sales opportunities </li></ul><ul><li>Personalized customer experience </li></ul><ul><li>Maximize share of wallet </li></ul><ul><li>Player/customer loyalty </li></ul><ul><li>Multichannel customer service </li></ul>Manufacturing Travel & Leisure Hospitality <ul><li>Anticipate and prevent churn despite compensation </li></ul><ul><li>Increase number of products per customer </li></ul><ul><li>Turn call center information opportunity to up-sell and cross-sell </li></ul><ul><li>Increase customer satisfaction and loyalty </li></ul><ul><li>Understand customer behavior related to customer conversion, acquisition, and retention </li></ul><ul><li>Single view of customer </li></ul><ul><li>Multichannel customer experience </li></ul><ul><li>Personalized customer experience </li></ul><ul><li>Maximize ARPU </li></ul><ul><li>Minimize Churn </li></ul><ul><li>Mutichannel customer service </li></ul>Telecommunications Retail Financial Services
    54. 54. Lagging and Leading KPIs Historical, Outcome, Results, 1 st Level, Usually Financial or tangible, Quarterly and Annually Current, Indicators, Drivers, 2 nd Level onwards, usually non-financial or intangible, Weekly, Monthly and Quarterly www.myCNI.com.my www.OOBEY.com Leading Lagging
    55. 55. Developing ‘Driver’ KPIs www.myCNI.com.my www.OOBEY.com Customer Retention % Lagging, 1 st Level Customer Satisfaction Index Leading, 2 nd Level On time delivery Time to market for new products TNA % Defect levels, warranty claims Leading, 3 rd Level onwards
    56. 56. What is the Objective? <ul><li>‘ Do-or-Die’ KPIs for CNI </li></ul><ul><li>Revenue </li></ul><ul><li>ARPU </li></ul><ul><li>Sponsoring </li></ul><ul><li>Retention </li></ul><ul><li>Commission Plan (BDP) </li></ul><ul><li>Product </li></ul><ul><li>Corporate Image </li></ul>www.myCNI.com.my www.OOBEY.com
    57. 57. Strategy: Disciplines, Priorities, and KPIs Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com
    58. 58. Sample KPIs for Each Discipline <ul><li>Operational Excellence </li></ul><ul><li>Price </li></ul><ul><li>Selection </li></ul><ul><li>Convenience </li></ul><ul><li>Zero Defects </li></ul><ul><li>Growth </li></ul><ul><li>Customer Intimacy </li></ul><ul><li>Customer Knowledge </li></ul><ul><li>Solutions Offered </li></ul><ul><li>Penetration </li></ul><ul><li>Customer Data </li></ul><ul><li>Customer-success focus </li></ul><ul><li>Product Leadership </li></ul><ul><li>Marketing </li></ul><ul><li>Functionality </li></ul><ul><li># of Successes </li></ul><ul><li># of Failures </li></ul><ul><li>Learn from key users </li></ul><ul><li>Interdisciplinary teams </li></ul><ul><li>Pipeline </li></ul>www.myCNI.com.my www.OOBEY.com
    59. 59. MBO – Sources of KRAs and KPIs, Targets <ul><li>Department Scorecard [E3], </li></ul><ul><li>Employee’s Job Description, </li></ul><ul><li>Department SOP, </li></ul><ul><li>Department Quality Objectives, </li></ul><ul><li>Corrective Action Requests (CAR), </li></ul><ul><li>Preventive Action Requests (PAR), or </li></ul><ul><li>Special Projects relevant to the employee. </li></ul>www.myCNI.com.my www.OOBEY.com
    60. 60. Link #4: Resource Allocation a.k.a. Budgeting and Planning www.myCNI.com.my www.OOBEY.com
    61. 61. Summary: Planning & Budgeting <ul><li>L ong-term Plans </li></ul><ul><li>O bjectives </li></ul><ul><li>S trategies </li></ul><ul><li>E nablers </li></ul><ul><li>R esources </li></ul>Also known as L.O.S.E.R. www.myCNI.com.my www.OOBEY.com
    62. 62. Budgeting: Some thoughts… <ul><li>Two major roles of Budgeting: </li></ul><ul><li>Provide real-life CONSTRAINTS to strategic planning </li></ul><ul><li>Provide RESOURCES to realize strategic plans </li></ul>www.myCNI.com.my www.OOBEY.com
    63. 63. <ul><li>Product Leadership </li></ul>Each Discipline Requires Different Priorities & Resources Operational Excellence Customer Intimacy Organization, jobs, skills Management systems Information and systems Culture, values, norms www.myCNI.com.my www.OOBEY.com
    64. 64. Each Discipline Requires Different Priorities & Resources <ul><li>Operational Excellence </li></ul><ul><li>Central authority, low level of empowerment </li></ul><ul><li>High skills at the core of the organization </li></ul><ul><li>Disciplined Teamwork </li></ul><ul><li>Process, product- driven </li></ul><ul><li>Conformance, 'one size fits all' mindset </li></ul><ul><li>Integrated, low cost transaction systems </li></ul><ul><li>The system is the process </li></ul><ul><li>Command and control </li></ul><ul><li>Quality management </li></ul>Organization, jobs, skills Management systems Information and systems Culture, values, norms www.myCNI.com.my www.OOBEY.com
    65. 65. <ul><li>Product Leadership </li></ul><ul><li>Ad hoc, organic and cellular </li></ul><ul><li>High skills abound in loose-knit structures </li></ul><ul><li>Concept, future-driven </li></ul><ul><li>Experimentation and 'out of the box' mindset </li></ul><ul><li>Person-to-person communications systems </li></ul><ul><li>Technologies enabling cooperation </li></ul><ul><li>Rewarding individuals' innovative capacity </li></ul><ul><li>Risk and exposure management </li></ul><ul><li>Product Life Cycle profitability </li></ul>Each Discipline Requires Different Priorities & Resources Organization, jobs, skills Management systems Information and systems Culture, values, norms www.myCNI.com.my www.OOBEY.com
    66. 66. Each Discipline Requires Different Priorities & Resources Organization, jobs, skills Management systems Information and systems Culture, values, norms <ul><li>Customer Intimacy </li></ul><ul><li>Empowerment close to point of customer contact </li></ul><ul><li>High skills in the field and front-line </li></ul><ul><li>Customer-driven </li></ul><ul><li>Variation and 'have it your way' mindset </li></ul><ul><li>Strong customer databases, linking internal and external information </li></ul><ul><li>Strong analytical tools </li></ul><ul><li>Customer equity measures like life time value </li></ul><ul><li>Satisfaction and share management </li></ul><ul><li>Focus on ‘Share of Wallet’ </li></ul>www.myCNI.com.my www.OOBEY.com
    67. 67. Managing Gaps between actual and planned budgets <ul><li>Budgeting vs. Priorities </li></ul><ul><li>Basic Budgeting policies </li></ul><ul><li>Activity Grid to determine budget priorities </li></ul><ul><li>Budgeting for Investments based on the ‘BCG Matrix’ principles </li></ul>www.myCNI.com.my www.OOBEY.com
    68. 68. Budgeting vs. Priorities <ul><li>Priority = Time + Money </li></ul>www.myCNI.com.my www.OOBEY.com
    69. 69. Business Situation vs. Organization Focus Upturn Flat Downturn Fight Complacency Sharpen Edge Keep Momentum Conquer ‘ Change’ mgmt Reduce Fat Continuity Everyone Happy Innovation Acquire Profits Build momentum Sales Cash Flow Talent Mgmt Innovation/R&D Early wins Slow Down HR Costs Top Talent focus Sales, Sales, Sales Increase attrition www.myCNI.com.my www.OOBEY.com
    70. 70. Basic Budgeting policies <ul><li>Flexibility to switch between line items </li></ul><ul><li>Reserve Funds </li></ul><ul><li>Loans/External Funding </li></ul>www.myCNI.com.my www.OOBEY.com
    71. 71. Activity Grid to determine budget priorities www.myCNI.com.my www.OOBEY.com Eliminate (-) What are features/ activities/services to eliminate? Reduce (↓) What are features/ activities/services to reduce? Create (+) What are features/ activities/services to introduce? Increase ( ↑) What are features/ activities/services to increase?
    72. 72. E3 – Department BSC Financial Perspective Budgeting On Time Delivery Innovation Quality OPEX CAPEX Targets Measures Goals
    73. 73. Way back in 2004… <ul><li>Thomas Cup, Indonesia </li></ul>www.myCNI.com.my www.OOBEY.com
    74. 74. Now in 2007… <ul><li>CNI ‘Beemax’ Factory Visit, China </li></ul><ul><li>Top Leaders </li></ul><ul><li>Product Development </li></ul><ul><li>Media </li></ul>www.myCNI.com.my www.OOBEY.com
    75. 75. Link #5: Performance Management Systems The ultimate link www.myCNI.com.my www.OOBEY.com
    76. 76. Complaints about Performance Appraisals As an Appraisee As an Appraisor Mgmt/HR www.myCNI.com.my www.OOBEY.com
    77. 77. Complaints about Performance Appraisals <ul><li>Bias </li></ul><ul><li>Different Standards </li></ul><ul><li>Surprise </li></ul><ul><li>Subjective </li></ul><ul><li>No linkage* </li></ul><ul><li>No differentiation </li></ul><ul><li>Secretive </li></ul><ul><li>No follow up </li></ul><ul><li>No control </li></ul>As an Appraisee www.myCNI.com.my www.OOBEY.com
    78. 78. Complaints about Performance Appraisals <ul><li>Cannot remember </li></ul><ul><li>Tedious </li></ul><ul><li>Subjective </li></ul><ul><li>Right targets </li></ul><ul><li>Scoring Competencies* </li></ul><ul><li>Defensive staff </li></ul><ul><li>No $$ to differentiate </li></ul><ul><li>Prejudices </li></ul><ul><li>Results or Activities </li></ul>As an Appraiser www.myCNI.com.my www.OOBEY.com
    79. 79. Complaints about Performance Appraisals <ul><li>Flexible or Control? </li></ul><ul><li>MBO or Character? </li></ul><ul><li>Best Practice or Fit Culture? </li></ul><ul><li>Backward or Forward? </li></ul><ul><li>Quarterly Results or Long-term? </li></ul><ul><li>No $$ to differentiate* </li></ul><ul><li>Perfect System, Bad performance </li></ul><ul><li>Recency and Halo effects </li></ul><ul><li>Untrained Appraisers </li></ul>Mgmt/HR www.myCNI.com.my www.OOBEY.com
    80. 80. Complaints about Performance Appraisals - Summary <ul><li>Process problem </li></ul><ul><li>Form problem </li></ul><ul><li>People problem </li></ul>www.myCNI.com.my www.OOBEY.com
    81. 81. What is Performance Appraisal used for? Reward? Discipline? Development? Motivation? Promotion? Monitor? www.myCNI.com.my www.OOBEY.com
    82. 82. Performance Management Performance Appraisal Performance Development Performance Measurement Common terms and definitions www.myCNI.com.my www.OOBEY.com
    83. 83. What is the OBJECTIVE? <ul><li>What is the ultimate objective of a Performance Management System? </li></ul><ul><li>‘ Performance’ – achievement, </li></ul><ul><li>‘ Management’ – controllable, improvement </li></ul><ul><li>‘ System’ – predictable outcome, autorun </li></ul><ul><li>Summary? </li></ul><ul><li>A Predictable process to Improve Controllable Achievements </li></ul>www.myCNI.com.my www.OOBEY.com
    84. 84. What is the OBJECTIVE? Succession Planning (Business Continuity) Talent Management Differentiation Performance Management System Budgeting + Planning KPIs BSC Business Model www.myCNI.com.my www.OOBEY.com
    85. 85. What is the OBJECTIVE? Succession Planning (Business Continuity) Talent Management Differentiation Performance Management System Budgeting + Planning KPIs BSC Business Model Business Plan Implementation Talent Management www.myCNI.com.my www.OOBEY.com
    86. 86. Which system should we use? Behavior-based Knowledge/Skill based Results-based Trait-based Managing Performance = Managing Expectations What’s YOUR expectation? Activity based www.myCNI.com.my www.OOBEY.com
    87. 87. Dangers of Best Practice and Benchmarking… “ Abraham Wald’s Work on Aircraft Survivability”, M. Mangel and F.J. Samaniego Where would you focus reinforcement? www.myCNI.com.my www.OOBEY.com
    88. 88. Dangers of Best Practice and Benchmarking… www.myCNI.com.my www.OOBEY.com Company Performance high low ‘ Best Practice’ theories low high zero Performance “ Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005 Trend line
    89. 89. Dangers of Best Practice and Benchmarking… www.myCNI.com.my www.OOBEY.com Company Performance high low ‘ Best Practice’ theories low high zero Performance “ Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005 Trend line
    90. 90. Dangers of Best Practice and Benchmarking… <ul><li>Selection Bias: </li></ul><ul><li>Success Traits = Failure Traits </li></ul><ul><li>Successful Cases + Failure Cases </li></ul><ul><li>Worst effects in ‘Old’ industries </li></ul><ul><li>Overvalue ‘best practice’ theories </li></ul><ul><li>Current accomplishments unfairly magnified by past achievements </li></ul><ul><li>Reverse Causal </li></ul>www.myCNI.com.my www.OOBEY.com
    91. 91. Dangers of Best Practice and Benchmarking… <ul><li>Also known as ‘Beware of Consultants’: </li></ul><ul><li>Selection Bias </li></ul><ul><li>Big vs. Small company </li></ul><ul><li>Selective success stories </li></ul><ul><li>Correlation vs. Causal </li></ul><ul><li>Survey problems </li></ul><ul><li>Practical vs. Glamour-to-have </li></ul><ul><li>Leaders who benchmark </li></ul>www.myCNI.com.my www.OOBEY.com
    92. 92. MBO Standards www.myCNI.com.my www.OOBEY.com Useless Poor Average Good Excellent E D C B A
    93. 93. MBO Standards www.myCNI.com.my www.OOBEY.com Useless Poor Average Good Excellent E D Good C B A
    94. 94. MBO Standards www.myCNI.com.my www.OOBEY.com Useless Poor Average Good Excellent Commit Suicide E Not Good D Good C Very Good B Excellent A
    95. 95. MBO Standards www.myCNI.com.my www.OOBEY.com Commit Suicide Not Good Good Very Good Excellent Unacceptable performance E Did not fully meet planned results D Achieved Planned Results C Higher than planned results B Consistently achieved 4 for 3 quarters A
    96. 96. Competency Target Setting <ul><li>Initiative </li></ul><ul><li>Teamwork </li></ul><ul><li>Problem Solving </li></ul><ul><li>Leadership </li></ul><ul><li>Integrity </li></ul>What’s the problem here? www.myCNI.com.my www.OOBEY.com
    97. 97. Competency Standards www.myCNI.com.my www.OOBEY.com Does not meet behavioral standards. Require counseling or disciplinary actions. 1 Meets behavioral standards some of the time. Needs improvement. 2 Meets behavioral standards consistently . Is a good role model for others. 3
    98. 98. The Planning & Budgeting Process www.myCNI.com.my www.OOBEY.com Nov-Jan <ul><li>Presentation of Group Budget and Planning summary & distribution </li></ul><ul><li>Communication of Highlights to the field and staff </li></ul>5. Communication and Cascading Oct-Nov <ul><li>BSC & Budget to CEOs, followed by BOD </li></ul><ul><li>Revised and Finalized Plans and Budgets </li></ul>4. Formal Results Planning Sep - Oct <ul><li>BSC & Budget preparation by HODs to HODivs </li></ul>3. Functional Strategy and Budgets Sep <ul><li>High-level strategy of Group Corp Plan. </li></ul><ul><li>Circulation of Main Budget simulation to all departments </li></ul>2. High-level Group Strategy and Targets July - Sep <ul><li>Current ½ yr budget & revision </li></ul><ul><li>Next yr options and budgets required </li></ul>1. Pre-Planning Analysis & Brainstorming Month Output Stages
    99. 99. Coaching & Counseling www.myCNI.com.my www.OOBEY.com Month 1 Performance Planning Month 12 Performance Appraisal Month 2-11 ?
    100. 100. Review processes <ul><li>Result Planning schedule inc. BSC, Budget </li></ul><ul><li>Quarterly Performance Appraisals </li></ul><ul><li>EMC – sales performance </li></ul><ul><li>QMS – non-sales performance </li></ul><ul><li>Divisional meetings </li></ul><ul><li>Annual Appraisals </li></ul><ul><li>Specialized KPI committees </li></ul><ul><li>CAR, PAR, SCAR KPI improvements </li></ul><ul><li>Internal Audit & MSD – process problems </li></ul><ul><li>HRM & TND – people problems </li></ul><ul><li>Supervisor Induction – PM training </li></ul><ul><li>Talent Management </li></ul>www.myCNI.com.my www.OOBEY.com
    101. 101. End Notes Problems, Teamwork, and everything else in between www.myCNI.com.my www.OOBEY.com
    102. 102. Problems still existing <ul><li>No serious budget to tackle key risks </li></ul><ul><li>Too much optimism or pessimism </li></ul><ul><li>Innovation vs. Results vs. Baseline </li></ul><ul><li>Investment ≠ Portfolio Management </li></ul><ul><li>Top down vs. Bottom up </li></ul><ul><li>Good to have vs. Need to have </li></ul><ul><li>Line Manager not thinking like Investors </li></ul><ul><li>Too focused on KPI and BSC </li></ul><ul><li>Budget allocation seen as ‘popularity’ vote </li></ul><ul><li>Public Listing -> pressure for short-term budgets and results vs. long-term innovation </li></ul>www.myCNI.com.my www.OOBEY.com
    103. 103. TEAM levers C.O.R.E. ÷ W.L. www.myCNI.com.my www.OOBEY.com
    104. 104. Don’t forget… <ul><li>“ The business of business is Business, not Sales, not Marketing, not Finance” </li></ul>www.myCNI.com.my www.OOBEY.com
    105. 105. Thank You. soft copy of slides: www.totallyunrelatedrandomanddebatable.blogspot.com

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