www.contrast.at
Datum:
Prezentacija
Strateški kontroling
Misija kontrolinga u vreme
ekonomske krize
20. maj 2014
Denis Pet...
Page 2|
Contrast‘s origins date back to 1980, when the first “Controller Day” took place at the
public Vienna University o...
Page 3|
Today the organisation benefits greatly from its strong interrelations between
management consulting, education an...
Page 4|
Studies about Controlling and CFO Roles1
Strategic Management in the Public Sector6
Strategic Management3
Strategy...
Page 5|
Controlling according to IGC What does this mean
Controlling is a management activity that makes sure that compani...
Page 6|
Recent developments influence the role of the CFO
▲ Financial crisis and high insecurity of the economic environem...
Page 7|
▲ How is Controlling organized?
▲ What makes Controlling efficient?
▲ What are the dominant tasks?
▲ What are the ...
Page 8|
▲ What are the key challenges?
▲ What is the State of the Art of the CFO
function?
▲ What are the dominant CFO-Rol...
Page 9|
Controlling depends on a close interaction of manager and controller. The only thing
that counts is the next decis...
Page 10|
n=241-264
Controlling has challenges in many areas. MIP, opportunities/risk control and performance
increase are ...
Page 11|
Quelle: Ruthner, R./Feichter, A.: „Der CFO als Strategic Performance Manager“. In: CFOaktuell Sonderheft, 7. Jahr...
Page 12|
Studies about Controlling and CFO Roles1
Strategic Management in the Public Sector6
Strategic Management3
Strateg...
Page 13|
The role of the CFO can be described in three characteristics
integrated control
▲ The CFO ensures an
integrated ...
Page 14|
The "Strategic Performance Manager" is an ideal vision for the corporate CFO
Finance
Manager
Strategic
Performanc...
Page 15|
In Austrian companies the role of the "Strategic Performance Manager" is dominating
Roles of the Austrian CFOs
Fi...
Page 16|
Realising a Strategic Performance Management System involves many interwoven
activities
Elements of Strategic Per...
Page 17|
In-between Strategy and operative Controlling
Big pictures
Organization
Budgeting
Strategy-focused middle-term-pl...
Page 18|
CFOs of Austrian companies more and more become "Strategic Performance
Managers" – financial excellence is an imp...
Page 19|
Studies about Controlling and CFO Roles1
Strategic Management in the Public Sector6
Strategic Management3
Strateg...
Page 20|
Schools of strategic management
Theory
External:
Industry attractiveness
Market-based view
Advantageous positioni...
Page 21|
Generation of
strategic
option
Strategy
communication and
cultural change
Cycle of value-based management
Changes...
Page 22|
Four dimensions of strategic analysis and strategy conception
Strategic analysis
Financial performance / value cr...
Page 23|
The strategic analysis‘ objective is to derive a basis for decision-making in order to
develop a proper strategy....
Page 24|
During strategy development, special attention has to be paid to the internal and
external analysis.
Strategic an...
Page 25|
From the analysis to the generation of strategic options
Step by step
External analysis Internal analysis
Strateg...
Page 26|
Dimensions of strategy evaluation
Think twice
Strategy evaluation
qualitative quantitative
Internal
practicabilit...
Page 27|
Middle-term planning
Operationalization of Strategy
 Inclusion of external
benchmarks
 Documentation of plannin...
Page 28|
Realization of strategies
Measurement parameters
Measures
Controlling of measures
e.g. customer-satisfaction
e.g....
Page 29|
Operationalization of strategies
Big picture
Reasons for the failure of strategies
▲ No sufficient specification ...
Page 30|
Development of strategic options: Approaches
Options
Step 1: Development of ideas and starting points
Analytical ...
Page 31|
Central value-creation-opportunities
Tools
▲ Portfolio correction
 Withdrawal from regional markets
 Withdrawal...
Page 32|
From strategy to action
Operationalization of the strategyBusiness model-based strategy
“24-hour-
service hotline...
Page 33|
Studies about Controlling and CFO Roles1
Strategic Management in the Public Sector6
Strategic Management3
Strateg...
Page 34|
Industry-related reasons Internal „technical“ reasons
Why Shareholder-Value-concepts?
▲ Increasing pressure from ...
Page 35|
Balance sheet vs. value orientation
Long-term approach
„There is no profit unless you earn the cost of capital“ (...
Page 36|
The Shareholder Value Approach
The long-term approch
Capital budgeting,
company
evaluation
Capital
market
theory
...
Page 37|
Initial situation I
▲ Insufficient specification of strategic objectives and strategies
▲ Missing quantification ...
Page 38|
Initial situation II
Linking financial and strategic values
The degree of financial penetration of strategic deci...
Page 39|
Challenges I
▲ Specification and quantification of strategic objectives and strategies
▲ Supplementation of perfo...
Page 40|
Challenges II
Overcoming the dichotomy of the planning and management pyramid
strategic management control
operat...
Page 41|
Goal: Integrated strategic and financial planning and controlling pyramid
Company
strategy
Contentual
vision
Busi...
Page 42|
Financial Leadership
▲ Fields of action for goal
attainment
▲ Controlling of measures
▲ Financial and strategy-ba...
Page 43|
What distinguishes Financial Leadership as a management-approach?
▲ CEO-centric
▲ Role models and vision as preva...
Page 44|
Quality characteristics of a strategy-based financial corporate management
▲ Ensure compatibility of strategic go...
Page 45|
Studies about Controlling and CFO Roles1
Strategic Management in the Public Sector6
Strategic Management3
Strateg...
Page 46|
Genuine tasks of strategic controlling
▲ Strategy evaluation
─ qualitative
─ quantitative
▲ Strategy implementati...
Page 47|
Success-critical fields of action
▲ Strategy quantification: Financial evaluation of strategies and success poten...
Page 48|
Studies about Controlling and CFO Roles1
Strategic Management in the Public Sector6
Strategic Management3
Strateg...
Page 49|
Strategic Performance Management ensures that strategies in the public administration
are implemented as planned ...
Page 50|
Strategies are planned top-down and are based on the outcome that is to be achieved.
Strategic Focus on Outcome
O...
Page 51|
Outcome-based objectives need to be defined, which are measured against indicators
and achieved through the imple...
Page 52|
The second implementation phase of the Austrian Federal Budget Reform includes the
introduction of the outcome-or...
Page 53|
Different target groups benefit from outcome-orientation.
Source: BKA (2013), adapted by Contrast
Target Groups o...
Page 54|
The outcome-orientation principle is strongly linked to other contents of the Budget
Reform.
Source: BKA (2013), ...
Page 55|
The environment and the organisation have to be analysed first, strategic objectives,
measures and indicators der...
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2.ICV Kongres controllera, Denis Petrović, partner, Controller Institute Austria

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Denis Petrović iz Controller Instituta je govorio o misiji controlinga, procesima controllinga, strateškom controllingu i različitim controlling alatima koji se koriste dana i za koje se tek očekuje da dobiju na značaju.

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2.ICV Kongres controllera, Denis Petrović, partner, Controller Institute Austria

  1. 1. www.contrast.at Datum: Prezentacija Strateški kontroling Misija kontrolinga u vreme ekonomske krize 20. maj 2014 Denis Petrović, Mag. oec. ,MBA 2.ICV Kongres controllera Srbije, Beograd
  2. 2. Page 2| Contrast‘s origins date back to 1980, when the first “Controller Day” took place at the public Vienna University of Economics and Business (WU). History 1 21980 1982 1991 Research ▲ The 1st “Controller Day“ is organised at Vienna University of Economics and Business (WU) ▲ Main objective: “…to contribute to the development of management control and strategic management in both science and practice” Education ▲ Controller Institut founded as a non-profit-society ▲ Objective: “…to offer excellence education and research in the areas of: ▲ Management Control ▲ Finance ▲ Management“ Management-Consulting ▲ Establishment of consulting business with primary focus on strategy and management control ▲ Objective: “…to offer top- tier management- consulting in addition to high-quality education activities.“ 3
  3. 3. Page 3| Today the organisation benefits greatly from its strong interrelations between management consulting, education and research. Today Research ▲ Several research studies are conducted in cooperation with Contrast ▲ New research findings from WU are integrated in course offerings of the Controller Institut Education ▲ New educational products, such as business simulation games for managers, are developed in cooperation with Contrast ▲ Programmes offered together with WU, such as the MBA in Controlling Management-Consulting ▲ CEO of Contrast is Head of the Institute for Strategic Management at WU ▲ Contrast Consultants share their practical experience in seminars and courses of the Controller Institut
  4. 4. Page 4| Studies about Controlling and CFO Roles1 Strategic Management in the Public Sector6 Strategic Management3 Strategy in the Time of Economic Crises4 The Role of Controlling5 Role and Tools in the Future – Strategic Performance Management 2 Agenda
  5. 5. Page 5| Controlling according to IGC What does this mean Controlling is a management activity that makes sure that companies reach their objectives. As partners of management Controllers make a significant contribution to the sustainable success of the organization. Controllers … ▲ design and accompany the management process of defining goals, planning and reviewing so that every decision maker can act in accordance with agreed objectives ▲ ensure that decision makers act with foresight and thus make it possible to take advantage of opportunities and manage risks. ▲ integrate an organization's plans into a cohesive whole ▲ ensure the quality of data and provide decision- relevant information. ▲ are an organizations economic conscience and thus committed to ensuring its success Details: http://www.igc-controlling.org/EN/_leitbild/leitbild.php ▲ Controller believe that clear and accepted objectives are at the core of management. By ensuring the definition of these objectives the controller substantially contributes to successful management. ▲ Controllers take care of planning and reporting. ▲ The Controller has to use all his resources to support management in achieving their objectives. The resources include financial know-how, fast and flexible information as well as constant reviews and checking. The sophisticated controller calls this sparring or consulting. ▲ To be efficient, the Controller needs to have his systems under control. This takes up a lot of her time. ▲ By strictly administering management processes, the Controller forces the company into a regular review cycle, thus making sure that problems and opportunities are being identified early on. Definition of Controlling
  6. 6. Page 6| Recent developments influence the role of the CFO ▲ Financial crisis and high insecurity of the economic environement ▲ The challenges become more and more diverse and interdisciplinary ▲ Next to data integration, compliance and financing, including the CFO in strategy development becomes more and more important ▲ Time of crisis strenghten the position of the CFO ▲ The role of the CFO devlops towards the real strategist behind the board’s plans ▲ The CFO becomes challenger and sparring partner for management, also for strategic issues Motivation for the Study
  7. 7. Page 7| ▲ How is Controlling organized? ▲ What makes Controlling efficient? ▲ What are the dominant tasks? ▲ What are the key benchmarks? ▲ Which instruments does the Controller use? The study has targeted the Controllers of the top 500 companies in Austria and the Czech Republic Framework and Key Questions Key Questions Framework ▲ Online - Questionaire ─ Top 500+ in Austria ─ Top 500+ in Czech Republic ─ Total ca. 1.500 companies ▲ Response rate 11,8% ▲ Range ─ Sales 100 m - 40 bn ─ Employees 60 - 30.000
  8. 8. Page 8| ▲ What are the key challenges? ▲ What is the State of the Art of the CFO function? ▲ What are the dominant CFO-Roles? ▲ How does the CFO contribute to strategy? ▲ Which instruments does the CFO use, when working on strategy? The study has targeted the CFOs of the top 500 companies in Austria Framework and Key Questions Key Questions Framework ▲ 2-step procedure ─ quantitative research ─ personal interviews ▲ Online-Questionaire of the Top-500+ ▲ Response rate 21,8% ▲ Industries ─ Industry 54% ─ Retail 35% ─ Services11% ▲ Range ─ Sales 100 m – 40 bn ─ Employees 60 - 30.000
  9. 9. Page 9| Controlling depends on a close interaction of manager and controller. The only thing that counts is the next decision = the future! Controlling is Interaction ▲ Manager • Has enough to do to keep the car on the road • Needs fast and precise information • No distractions, no nonsense • Pushes forward and wants to win ▲ Controller • Is part of the team • Is only successful, when the team wins • Needs to really understand the driver • Looks forward and wants to win ▲ Controlling • Is seamless interaction to bring the car (company) forward • has no time to look back • Is the combination of different talents
  10. 10. Page 10| n=241-264 Controlling has challenges in many areas. MIP, opportunities/risk control and performance increase are among them. present vs future priorities Mediane ▲ look-out ▲ present ▲ future ▲ Controlling has the following priorities ▲ operational planning / budgeting ▲ forecast ▲ analysis and reporting (internal) ▲ strategic controlling ▲ MIP ▲ cost accounting ▲ data management ▲ analysis and reporting (external) ▲ project and investment control ▲ opportunity and risk control ▲ internal consulting ▲ functional controlling (sales, HR) ▲ control of measures ▲ development of processes and systems ▲ special projects
  11. 11. Page 11| Quelle: Ruthner, R./Feichter, A.: „Der CFO als Strategic Performance Manager“. In: CFOaktuell Sonderheft, 7. Jahrgang, März 2013. The key challenges lie in risk management, financing and strategic controlling Challenges from the pespective of the CFO accounting 3% financial accounting 5% procurement 6% internal audit planning/budgeting 22% ICS 24% Forecasting 24% strategic control 38% treasury/financing 44% risk management 49% projects and investments 9% functional controlling 11% Reporting 13% HR 13% IT/BI 19% taxes 22% 7% consolidation 8% 8%Investor Relations Top-3-Challenges of the CFO risk management is well established, but lacks a relation to other systems optimizing the financial mix is an essential part of treasury strategy gains in importance, but needs more sophisticated instruments
  12. 12. Page 12| Studies about Controlling and CFO Roles1 Strategic Management in the Public Sector6 Strategic Management3 Strategy in the Time of Economic Crises4 The Role of Controlling5 Role and Tools in the Future – Strategic Performance Management 2 Agenda
  13. 13. Page 13| The role of the CFO can be described in three characteristics integrated control ▲ The CFO ensures an integrated control system … ─ financial and non- financial levers of control (KPIs) ─ on all relevant corporate levels ─ broad employment (decision support, reporting and incentives) ▲ managing volatility of results financial excellence ▲ The CFO ensures efficient structures, processes and systems … ─ state-of-the art finance organization and processes ─ information and integration standards ─ automatization of data analysis ▲ Devising and implementing a master plan for finance and controlling Dimensions of the CFO role service & sparring ▲ The CFO acts as a service and sparring partner to management (= business partner) ─ support to profit centers and business units ─ personal relation to decision makers ─ adapting organization structure (close to the customer) ▲ establishing relevant communication platforms and tools
  14. 14. Page 14| The "Strategic Performance Manager" is an ideal vision for the corporate CFO Finance Manager Strategic Performance Manager Performance Manager Business Partner Exzellence in structures, processes & systems in finance Quelle: Ruthner, R./Feichter, A.: „Der CFO als Strategic Performance Manager“. In: CFOaktuell Sonderheft, 7. Jahrgang, März 2013. Seperating CFO Roles integrated control system for strategy and operations financial excellence Role Focus requirements accepted service- & sparringpartner for management financial excellence controlling the implementation of strategy through an integrated control system financial excellence integrated control, service & sparring financial excellence integrated control service & sparring financial excellence integrated control service & sparring financial excellence integrated control service & sparring financial excellence integrated control service & sparring
  15. 15. Page 15| In Austrian companies the role of the "Strategic Performance Manager" is dominating Roles of the Austrian CFOs Finance Manager (1%) Performance Manager (13%) Business Partner (33%) High rates in the areas of financial excellence, integrated control systems, service & sparring „Stuck-in-the-middle“ (11%) Quelle: Ruthner, R./Feichter, A.: „Der CFO als Strategic Performance Manager“. In: CFOaktuell Sonderheft, 7. Jahrgang, März 2013. Strategic Performance Manager (41%) financial excellence ▲integrated control service & sparring financial excellence integrated control service & sparring financial excellence integrated control service & sparring financial excellence integrated control service & sparring financial excellence integrated control service & sparring
  16. 16. Page 16| Realising a Strategic Performance Management System involves many interwoven activities Elements of Strategic Performance Management activities • Clear and accepted strategy linked to • a strategic financial goal. • Incentive systems linked to strategy, • integrated management processes • fit of organizational structure and strategy developing objectives from a strategic and financial goal system devising and priorising project-/ and program portfolios to implement strategies mid-term planning linked to strategy as the basis for operational budgets setting up a clear and precise reporting to support implementing strategies logical, strategic value drivers for a flexible planning and simulation model controlling volatilities (risks)
  17. 17. Page 17| In-between Strategy and operative Controlling Big pictures Organization Budgeting Strategy-focused middle-term-planning Project-/Program portfolio-management Integrated strategic and financial goal- system Vision Strategy and strategic/financial objective
  18. 18. Page 18| CFOs of Austrian companies more and more become "Strategic Performance Managers" – financial excellence is an important basis for this development ▲ The CFO is challenger & sparring partner of management and is an important player in corporate strategy ▲ The role of the CFO as a Strategic Performance Managers (41%) dominates in Austrian companies ▲ Financial excellence is an important condition for development in the dimensions integrated control and service & sparring ▲ In Strategic Performance Management more work is needed to ensure a forceful implementation of strategies ▲ The contributions of the CFO to corporate success are considerable and will increase in the future CFO-Study 2012 „The CFO as Strategic Performance Manager“
  19. 19. Page 19| Studies about Controlling and CFO Roles1 Strategic Management in the Public Sector6 Strategic Management3 Strategy in the Time of Economic Crises4 The Role of Controlling5 Role and Tools in the Future – Strategic Performance Management 2 Agenda
  20. 20. Page 20| Schools of strategic management Theory External: Industry attractiveness Market-based view Advantageous positioning in the competitive environment Michael Porter Stakeholder-based view Internal & external: Stakeholder relationship Unique stakeholder relationships Jeffrey H. Dyer/ Harbir Singh Resource-based view Internal: Availability of resources Better availability of scarce resources and core competencies Gary Hamel/C. K. Prahalad Jay Barney Competitive advantage Focus Most eminent authors 80 90 2000
  21. 21. Page 21| Generation of strategic option Strategy communication and cultural change Cycle of value-based management Changes Analysis Strategy check On-going value management Strategy specification Adaptation of structures, systems and processes Assessment and selection of options
  22. 22. Page 22| Four dimensions of strategic analysis and strategy conception Strategic analysis Financial performance / value creation Processes / activities and company organization Customer / market Resources and potentials
  23. 23. Page 23| The strategic analysis‘ objective is to derive a basis for decision-making in order to develop a proper strategy. Strategic analysis Definition of the own business (1) What is our mission? (2) Who is our customer? (3) What does the customer want? (4) What are our results? (5) What is our plan? Environment / industry ▲ Environment analysis ▲ Stakeholder analysis ▲ When needed: Industry analysis ▲ When needed: Market analysis (quantitative) Organization ▲ Organization analysis ▲ Potential analysis Strengths & weaknesses, core competencies Opportunities & threats, Key success factors Sharpening: „Where is our organization at?“ ▲ Contractual fundamentals ▲ Mission statement (mission, vision, values) Determining factors Basics for strategy development
  24. 24. Page 24| During strategy development, special attention has to be paid to the internal and external analysis. Strategic analysis Organization analysis Potential analysis ▲ Analysis of core competencies ▲ Cost-structure analysis ▲ Analysis of strategic business fields ▲ Derivation of potentials for improvement which can later on be integrated in the target plan. Environment- / industry analysis Stakeholder analysis ▲ General trends in society, technology, economy, etc. ▲ Analysis of the industry‘s dynamics ▲ Methodology: STEP-analysis, Porter‘s 5 Forces ▲ Organizations / persons, that (may) influence the company ▲ Internal and external ▲ Methodology: Structured interviews with central stakeholders I N T E R N A L E X T E R N A L Market analysis ▲ Quantitative market analysis with selected analysis tools Opportunities, threats Strengths, weaknesses
  25. 25. Page 25| From the analysis to the generation of strategic options Step by step External analysis Internal analysis Strategic options ▲ Future of the industry ▲ Opportunities / threats ▲ Key success factors ▲ Resources ▲ Strengths / weaknesses ▲ Strategic resources ▲ Concentration on strengths that are at the same time key success factors ▲ Minimizing “deadly” weaknesses ▲ Using opportunities consequently ▲ Counterbalance risks
  26. 26. Page 26| Dimensions of strategy evaluation Think twice Strategy evaluation qualitative quantitative Internal practicability ▲ Capabilities ▲ Resources ▲ Acceptance Coherence ▲ Internal „fit“ ▲ External „fit“ Risk PIMS SVA Real options Middle term planning
  27. 27. Page 27| Middle-term planning Operationalization of Strategy  Inclusion of external benchmarks  Documentation of planning premises  Avoidance of a „Hockey- Stick“-planning  Performance budget, P&L-account, investment plan, CF-statement, planned balance sheet  Time horizon: 3-5 years  Scenario-planning  Highly aggregated planning  Concentration on key-figures  Translation of strategies into a middle-term measure-program Middle-term planning Strategic optionsTranslation of development scenarios into strategic objectives and rough measures Trend objectives for middle-term planning, open time horizon
  28. 28. Page 28| Realization of strategies Measurement parameters Measures Controlling of measures e.g. customer-satisfaction e.g. conceptualising and implementing complaint management e.g. concept for a complaint- management exists Strategic objectives e.g. develop clear communication structures towards customers Measures the extent of goal attainment Identifies whether the single measure has been reached Contribute to a better goal attainment In order to reach strategic objectives, relevant measures have to be defined. Through measurement parameters goal attainment can be determined.
  29. 29. Page 29| Operationalization of strategies Big picture Reasons for the failure of strategies ▲ No sufficient specification of the vision or the strategy ▲ No link between strategy and resource allocation ▲ No link between strategy and targets of departments, teams and employees. Starting situation ▲ Defined strategies at corporate-, BU-, and department-level. ▲ Availability of results regarding the qualitative and quantitative strategy evaluation (incl. premises) ▲ Availability of rough strategic measures To Do’s during strategy specification ▲ Derivation of strategic sub goals ▲ Make the implementation of strategic (sub-) goals measurable ▲ Agreement on plan-targets for departments, teams and employees ▲ Development of a detailed measure- program for goal attainment ▲ Allocation of strategic budgets and employee resources for implementation of measures ▲ Coordination of sub goals, plan-targets and measures between business units
  30. 30. Page 30| Development of strategic options: Approaches Options Step 1: Development of ideas and starting points Analytical approach Creative approach Step 2: Consolidation to consistent strategic options Objective: With the help of instruments, theoretical development possibilities are developed in an analytical process Sample instruments: ▲ Business model (Strategy Map) ▲ Product/market-matrix ▲ Industry value chain modell Objective: Through creative exercises thinking barriers are breached. Sample instruments: ▲ Convention Hunting ▲ Wear a different hat ▲ What-if Process
  31. 31. Page 31| Central value-creation-opportunities Tools ▲ Portfolio correction  Withdrawal from regional markets  Withdrawal from business areas or customer segments ▲ Withdrawal from certain value chain stages ▲ Reengineering/cost management in central processes ▲ Growth in the core business ▲ Approach new customers ▲ Growth in market share through acquisition of competitors ▲ Opening up new regional markets ▲ Increasing the degree of integration ▲ Development of new business areas with existing core competencies ▲ Internal vs. external growth Growth (examples) Derivation of central value creating possibilities for the company Re-dimensioning and re-engineering (examples) Analysis results Supporting instruments Contrast business model databank Contrast Strategy Creating Set Environment, industry Company Business area
  32. 32. Page 32| From strategy to action Operationalization of the strategyBusiness model-based strategy “24-hour- service hotline” Action program Vision/ Strategy Perspective Key success factors Measurement parameters Planned values How can they be measured? Which value is intended? How can it be achieved? What are the key success factors? Financial performance/ accretion Customer / market Processes and structure / organization Resources and potentials Top 3 position in the premium segment Outstanding growth Customer satisfaction Growth in market share Customer Satisfaction Index (CSI) 3 % CSI 80 %
  33. 33. Page 33| Studies about Controlling and CFO Roles1 Strategic Management in the Public Sector6 Strategic Management3 Strategy in the Time of Economic Crises4 The Role of Controlling5 Role and Tools in the Future – Strategic Performance Management 2 Agenda
  34. 34. Page 34| Industry-related reasons Internal „technical“ reasons Why Shareholder-Value-concepts? ▲ Increasing pressure from the capital market ▲ Competitiveness necessary not only in the product market but also in the capital market ▲ Globalisation and internationalisation of capital markets ▲ Traditional profit ratios barely correlate with the development of the market value ▲ Imperfection of the middle-term planning ─ Limited planning horizon ─ Lack of consideration of risk aspects ─ No consideration of the time value of payment flows ─ Distortion at investing in intangible assets ─ Wrong incentives for management (problem of underinvestment) What it has changed?
  35. 35. Page 35| Balance sheet vs. value orientation Long-term approach „There is no profit unless you earn the cost of capital“ (Peter Drucker, 1954) Traditional accounting Value-based-approach 0 Return Loss Value creation Profit Costs of capital Value destruction Hurdle-rate Risk-weighted required rate of return
  36. 36. Page 36| The Shareholder Value Approach The long-term approch Capital budgeting, company evaluation Capital market theory Strategy planning SVA Fundamentals of the Shareholder Value Approach
  37. 37. Page 37| Initial situation I ▲ Insufficient specification of strategic objectives and strategies ▲ Missing quantification of strategic objectives and strategies ▲ Performance Measurement is only concentrated on operative financial indicators ▲ Market-based and financial planning- and management systems are not sufficiently integrated ▲ Measures in order to optimize market performance and financial performance are not sufficiently coordinated ▲ Profound understanding of value- and cost-drivers is often missing in the management team Linking financial and strategic values „Strategy world“ and „financial world“ often co-exist and are most of the time not linked systematically
  38. 38. Page 38| Initial situation II Linking financial and strategic values The degree of financial penetration of strategic decisions is too low. Influence on substancial financial performance Level of action Strategic positioning / business model Business area strategy Operation Degree of financial penetration Extent and level of detail of quantification Actual
  39. 39. Page 39| Challenges I ▲ Specification and quantification of strategic objectives and strategies ▲ Supplementation of performance-measurement through strategic pre-control measures ▲ Integration of market- and financial-based planning and controlling systems ▲ Missionizing the company for financial performance targets Linking financial and strategic values Contentual business planning and business controlling as well as financial planning and financial controlling have to be systematically linked between all levels of action.
  40. 40. Page 40| Challenges II Overcoming the dichotomy of the planning and management pyramid strategic management control operative management control Department strategy Business area strategy Quantification of strategy (DCF) Mission Vision Company strategy Middle-term planning Yearly budget Rolling forecasts
  41. 41. Page 41| Goal: Integrated strategic and financial planning and controlling pyramid Company strategy Contentual vision Business area strategy Allocation of resources Department strategy Usage of available resources (measures) Accretion-potential (NPV, option value) Financial performance vision Planned value added by BUs Value generation Planned value added by departments Operative performance Liquidity Investment Financing-structure
  42. 42. Page 42| Financial Leadership ▲ Fields of action for goal attainment ▲ Controlling of measures ▲ Financial and strategy-based success control Strategy ▲ Creation and defence of competitive advantages ▲ Objectives with regard to  Business portfolio (what?)  Area (where?)  Business model (how?)  Market position (product/ market performance) Corporate Finance ▲ Creation of economic value ▲ Objectives with regard to  Company value  Economic value added/ company profitability  Capital market performance (TSR)  Cost of capital  Capital productivity/ capital expenditure (CAPEX) Financial Leadership links strategy with corporate finance!
  43. 43. Page 43| What distinguishes Financial Leadership as a management-approach? ▲ CEO-centric ▲ Role models and vision as prevalent guidance ▲ „Pre-management“ via leadership style as well as corporate culture (mind- sets, values) ▲ Alignment of all managers to the contentual goals of corporate development Conventional management approaches ▲ Underlining the importance of the whole management team ▲ Emphasising the necessity of strategic objective-systems as well as integrated planning- and management-processes ▲ Completition through a set of strategy- based performance-indicators (financial and non-financial) ▲ Alignment of all managers to financial performance targets and creating awareness for value- and cost-drivers Financial Leadership
  44. 44. Page 44| Quality characteristics of a strategy-based financial corporate management ▲ Ensure compatibility of strategic goals with financial performance goals ▲ Essential management processes have to be „financially sharpened“ (especially strategy planning, investment decisions) ▲ Strategic awareness: Consideration of the impact of all substantial decisions on the company‘s strategic position as well as on strategy execution ▲ Breaking down strategic goals and strategies into detailed goals regarding resources / organizational capabilities, processes, market performance and financial performance ▲ Financial controlling of strategy execution ▲ Compatibility of management incentive systems with the company‘s objectives
  45. 45. Page 45| Studies about Controlling and CFO Roles1 Strategic Management in the Public Sector6 Strategic Management3 Strategy in the Time of Economic Crises4 The Role of Controlling5 Role and Tools in the Future – Strategic Performance Management 2 Agenda
  46. 46. Page 46| Genuine tasks of strategic controlling ▲ Strategy evaluation ─ qualitative ─ quantitative ▲ Strategy implementation: Linking of strategy and operations ─ Measurement plans and budgeting ─ Balanced Scorecard ─ Strategy-based incentive systems ▲ Monitoring of strategy execution: ─ Control of execution (basis: action plans) ─ Control of outcome (basis: BSC) ─ Control of premises (basis: assumptions during strategy planning) ─ Strategic foresight The roll of Controlling
  47. 47. Page 47| Success-critical fields of action ▲ Strategy quantification: Financial evaluation of strategies and success potentials (NPV, value of options) ▲ Strategic resource allocation (strategic investment- and de-investment-decisions: Especially design of business portfolios and value chains) ▲ Value-based profit measurement ▲ Company-wide strategic risk management ▲ Measurement controlling of strategy implementation ▲ Cost/utility-optimization of accounting-, planning-, and management-systems (reduction of complexity) ▲ Improving strategic and financial awareness of responsible management staff (management development, teambuilding) Linking financial and strategic values
  48. 48. Page 48| Studies about Controlling and CFO Roles1 Strategic Management in the Public Sector6 Strategic Management3 Strategy in the Time of Economic Crises4 The Role of Controlling5 Role and Tools in the Future – Strategic Performance Management 2 Agenda
  49. 49. Page 49| Strategic Performance Management ensures that strategies in the public administration are implemented as planned and efficiency and effectiveness objectives met. What is Strategic Performance Management? What is Outcome oriented management? Budget What 1-3-year-budget is required to achieve our goals? Medium-term planning – What measures do we need to take? Insufficient link between strategy and operational execution Strategy How do we meet our objectives? Strategic Performance Management, understood as systematic performance and outcome-oriented management control in the public administration, aims at ensuring that strategies are implemented as planned in order to meet efficiency and effectiveness objectives. Based on Proeller, I. & Siegel, J.P., 2009
  50. 50. Page 50| Strategies are planned top-down and are based on the outcome that is to be achieved. Strategic Focus on Outcome Outcome Output Processes Input What outcome do we want to achieve for our stakeholders? What processes need to be in place in order to produce the planned output? What output do we need to produce in order to achieve the planned outcome? What resources do we need in order to guarantee the functioning of the processes in place? (number and qualifications of staff, raw materials, infrastructure) Outcome Quality Process Quality Structural Quality Impact (influenced by the organisation and external factors) Realisation / Implementation (managed by the organisation itself) Contributes to Effectiveness (“doing the right things“) Contributes to Efficiency (“doing things right“)
  51. 51. Page 51| Outcome-based objectives need to be defined, which are measured against indicators and achieved through the implementation of measures. Strategic Focus on Outcome – Objectives, Indicators and Measures Outcome Output Processes Input What outcome do we want to achieve for our stakeholders? What processes need to be in place in order to produce the planned output? What output do we need to produce in order to achieve the planned outcome? What resources do we need in order to guarantee the functioning of the processes in place? (number and qualifications of staff, raw materials, infrastructure) What do we want to achieve? How are we going to know if we have achieved our objectives? What do we need to do in order to achieve our objectives? Objectives Measures Indicators capped
  52. 52. Page 52| The second implementation phase of the Austrian Federal Budget Reform includes the introduction of the outcome-orientation principle. Source: BKA (2013), adapted by Contrast Outcome-orientation Principle Dept. / Service Provider Input Output Outcome Political orders Outcome objectives Processes • Personnel • Budget • Materials • Partners Greater safety in Austrian traffic Objective: Lower number of accidents with personal injury in Austria • Greater volume of traffic • Weather conditions Other influences Logic of Outcome-Orientation in Austria
  53. 53. Page 53| Different target groups benefit from outcome-orientation. Source: BKA (2013), adapted by Contrast Target Groups of Outcome-orientation Outcome-orientation as an Instrument for Four Target Groups National Council Federal Government and Ministers Public Administration The Public ▲ Are better informed for budget negotiations ▲ Can demand performance based on objectves from ministries and the administration ▲ Has greater transparency over government‘s activities & performance ▲ Benefits from greater efficiency ▲ Increased equal treatment of women and men ▲ Benefit from increased transparency over their activities and performance ▲ Can better justifiy their budget proposal and other policies or decisions ▲ Can work more efficiently ▲ Enjoys greater transparency ▲ Can use performance information and outcome objectives for discussions with stakeholders
  54. 54. Page 54| The outcome-orientation principle is strongly linked to other contents of the Budget Reform. Source: BKA (2013), adapted by Contrast Interdependencies of Outcome-orientation with Other Instruments From 2009 Budget structure (Global Budgets) Estimation and calculation system Restuls-oriented management control of the public administration Outcome-orientation (incl. equal treatment of women and men) 4-year-expenditure limits, strategy report Institutional basis From 2013 Core Contents of the Austrian Federal Budget Reform
  55. 55. Page 55| The environment and the organisation have to be analysed first, strategic objectives, measures and indicators derived and implementation monitored. Strategy Analysis, Planning, Implementation and Monitoring Strengths and Weaknesses Opportunities and Threats Environment Organisation ▲ PESTLE Analysis ▲ Stakeholder Analysis ▲ Organisational Analysis ▲ Potential Analysis ▲ Develop strategic objectives (“What do we want to achieve by 20XX?“) ▲ Derive measures (“What do we need to do to accomplish our objectives?”) ▲ Define indicators (“How do we know if we have accomplished our objectives?”) Strategy Analysis Strategy Planning Strategy Monitoring ▲ Track individual milestones in order to ensure implementation of measures ▲ Tack individual indicators in order to guarantee accomplishment of objectives ▲ Use performance management system / process Strategy Implementation ▲ Realise planned measures ▲ Establish Integrated Process and Quality Management System 1 2 3 4

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