2. A KeyOn research report
Management Reporting Excellence
A Vision of the Future
3.
4. Management Reporting Excellence
A Vision of the Future
Fabien Lennertz, KeyOn Consultant
Loek Lemmens, KeyOn Partner
Martin Daudey, KeyOn Partner
February 2010
A KeyOn research report
5. 2
Contents
1 Management Summary 3
2 Introduction 4
2.1 Objectives and report question 4
2.2 Scope of the research 5
2.3 Research input 5
2.4 Structure of the paper 5
3 Management Reporting 6
3.1 What is management reporting? 6
3.2 Management reporting vs. financial reporting 6
3.3 KPIs in management reporting 6
4 Process 8
4.1 Reflect the company’s strategy 8
4.2 One version of the truth 8
4.3 The reporting process 9
4.4 Scenario modeling 9
4.5 Clear communication of the strategic direction 9
5 System 10
5.1 Functionality 10
5.2 Single data storage 10
5.4 User-friendly systems 11
5.5 System integration 11
6 Organization 12
6.1 Accountability 12
6.2 A balanced set of measures 12
6.3 Shift to empowerment 13
6.4 Organizational MDM 13
6.5 Multidimensional management reporting 13
7 Culture 14
7.1 Corporate cultures 14
7.2 Bureaucratic culture 14
7.3 Innovative culture 15
7.4 Supportive culture 15
8 Management Reporting Excellence 16
8.1 Process 16
8.2 System 16
8.3 Organization 16
8.4 Culture 16
8.5 Management reporting excellence 16
References 18
Definitions 19
6. 3
High Quality
of Source Data
Successful
Strategy
Implementation
Right
(Time)
Information
Sharing,
Trust and
Openness
Business-IT
alignment
Management
Reporting
Excellence
1 Management Summary
Many organizations struggle with the delivery
of accurate and up-to-date management
reports. Managerial decisions drive
information requirements. Management
reports are produced to enable efficient
and effective decision-making. Without an
effective reporting process management
is flying blind. Incomplete or irrelevant
information reports could lead to wrong
decisions. This paper describes our visionary
thoughts on management reporting and
performance measuring. It is based on the key
findings of a survey amongst the Planning
and Budgeting Systems Network. The
following question is addressed in this paper:
“How can large-sized, profit-based organizations increase
their overall performance by optimizing management
reporting within the next 10 years?”
Best practice organizations match the
information that is reported to the specific
needs of the recipient at a specific time.
Businesses prosper or fail based on their
ability to identify, define, check and act on
key performance indicators (KPIs) used in
management reports. When defining key
performance indicators, take into account
that a KPI must be measurable, accurate,
meaningful, understandable and relevant
to the business. Furthermore, effective
management reporting requires a balance
between quality, quantity, efficiency and
speed. The findings in this survey are
grouped by process, system, organization and
culture.
Process: Efficient and effective management
reporting starts with the use of a structured
approach that translates the company’s
strategy to objectives, key value drivers
and key performance indicators. Reliable
and relevant KPIs rely on the creation and
maintenance of a master list with metadata
collected from various applications. Clean and
up-to-date data is the perfect starting point to
create different scenarios which can be used to
comprehend the future. Finally, management
reports are presented in such a way that they
are fully understood by the recipients.
System: Information systems that contribute
to management reporting contain sufficient
functionality and are user-friendly. Reporting
on data is based on a dynamic knowledge
management solution enabling employees to
easily organize, find and share information.
Management reporting tools are seamlessly
integrated with any source system, making it
possible to create reports within less than a
second.
Organization: A balanced set of financial
and non-financial measures provides a
holistic view of the company’s performance.
KPIs are reported and analyzed from a
multidimensional perspective. Accountability
must be set for every performance indicator.
People with the best information and
perspective make the best decisions.
Culture: A company’s culture supports a
way of working that values organized and
systematic work. Standards, templates,
explicit rules and regulations can help to
standardize KPIs in management reports.
Innovation subgroups create and share
ideas which contribute to the quality of
management reporting. A culture of sharing,
trust and openness enforces a performance
culture.
Best practices emphasize five cornerstones
that are necessary to obtain management
reporting excellence: successful strategy
implementation, Business-IT alignment, high
quality of source data, sharing trust and
openness and right (time) information.
Figure 1: Management reporting excellence
7. 44
A company’s success largely depends on
reliable and accurate management reporting.
Performance indicators and steering variables
which are intertwined in management
reporting produce an x-ray to determine a
company’s health. Whenever a company is
under-performing, necessary actions must
be taken to get the company back on track.
Reliable and accurate management reports
contribute to a more effective and efficient
decision-making process. We will examine
how companies can organize management
reporting in the future without being held
back by any restrictions.
2.1 Objectives and report question
With a green field approach we will investigate
how large-sized profit organizations
can manage their performance through
management reporting within the next ten
years. We will not specifically focus on the
path they have to travel to come to a perfectly
managed environment. A survey and breakout
sessions are the main sources to explore the
ideal situation. A generally accepted taxonomy
2 Introduction
is used to classify the findings in this report.
This taxonomy consists of four building blocks
which influence a company’s performance:
process, system, organization and culture.
Management reporting systems can be
positioned in the Corporate Performance
Management (CPM) framework. A CPM
system, like a management reporting system,
enables a closed-loop process (Plan-Do-
Check-Act) that starts with understanding
the current situation, defining the future
situation, setting the targets, and finally
allocating the resources to achieve those
targets. In Figure 2 the planning and control
cycle is summarized. The closed-loop process
is an essential approach to redesign and
improve the process, system, organization
and culture of management reporting in your
company. The research question of this paper
is as follows:
“How can large-sized, profit-based organizations increase
their overall performance by optimizing management
reporting within the next 10 years?”
ActionStrategyOperations
Strategic planning
Strategic
plan
Scenario
analysis
“Plan”
“Check”
Strategic setting
Review
Reporting
& Analysis
“Do”
Realization
“Act”
Corrective
actions
Figure 2: The planning & control cycle
8. Figure 3: Members participating in the Planning
and Budgeting Systems Network
5
2.2 Scope of the research
Our research focuses on members of the
Planning Budgeting Systems Network.
Most members are large-sized, profit-based
organizations with a minimum annual sales
revenue of 200 million Euro, and which are
active in the industrial, food, high-tech,
telecom and healthcare sectors. The Planning
and Budgeting Systems Network Members can
be found in Figure 3.
2.3 Research input
This paper is the outcome of the third
Planning and Budgeting Systems Network:
KPI to plan for performance, facilitated by
KeyOn Planning. During breakout sessions the
Network Members were asked to define the
most important conditions that are needed
to bring management reporting to a higher
level of quality. The purpose was to gather
a draft of how companies should have their
management reporting organized in ten
years from now without thinking of all the
restrictions that could undermine an ideal
situation. A survey - conducted prior to the
KeyOn Network Event - has also been used as
input for this report. The conditions have been
grouped into four main areas. Keep in mind
that we made a choice to allocate conditions
to these areas. Some of the conditions can be
placed in more than one area.
2.4 Structure of the paper
We will start with a general introduction
of management reporting in Chapter 3. In
Chapters 4-7 the results will be presented in
four main areas: process, system, organization
and culture. For every area the ideal situation
regarding management reporting will be
outlined. Finally, Chapter 8 summarizes the
most important conditions presented in the
previous chapters. This paper concludes with
five cornerstones that are required – according
to KeyOn – to achieve management reporting
excellence.
Recreate PMS(From Best brands)
Recreated LOGO
9. 66
Academic papers reveal a high variance of
the perception of management reporting and
key performance indicators. Therefore we
will use this chapter to define our view on
management reporting and key performance
management indicators.
3.1 What is management reporting?
Quality management information delivered
on time is the cornerstone of any business.
According to Axson (2003) effective
management reporting is about delivering the
right information to the right people at the
right time. Reports can present a great deal
of data and yet have no relevant information
about how to run the business. Drucker (1995)
points out that “the challenges increasingly
will be not technical; rather, they will be
to convert data into usable information
that is actually being used.” The quality
of management reporting is dependent on
the translation of your company’s strategy
into mid and short-term action plans. The
seamless integration of strategic planning,
budgeting and forecasting, and management
reporting is indispensable in terms of
acquiring actionable management information
that reflects the business direction.
Axson 2003: “Effective management reporting is about
delivering the right information to the right people at the
right time.”
3.2 Management reporting vs. financial
reporting
Compared to financial reporting, management
reporting is a relatively new term. Financial
reporting, such as bookkeeping and account-
ing, has been used for a long time. It is no
surprise that managers have adopted finan-
cial reporting methods to get information for
managerial control. Such methods, however,
were not designed for that purpose. Financial
reports include accounting information for
people who are outside the organization or
who are not involved in its day-to-day run-
ning. They are based on historical data, which
emphasizes a backward-looking perspec-
tive. Furthermore, governmental regulations
describe specific mandates and requirements
for financial reporting. Management reports,
on the other hand, provide information that
aims to help managers make decisions for
future action. These reports have a forward
looking perspective. Management reports can
contain information about financial transac-
tions but also information that is increasingly
useful in handling operational management
problems. Think of a loss of market share or a
failure to innovate influencing the company’s
performance. Both indicators can appear in
management reports but you won’t see them
in financial reports.
3.3 KPIs in management reporting
Key performance indicators (KPIs) are
quantitative measures that are used to
monitor business objectives. Many things are
measurable. That does not make them key to
the organization’s success. In selecting key
performance indicators, it is critical to limit
them to those factors that are essential to
the organization reaching its goals. Limiting
their number also helps to keep everyone’s
attention focused on achieving the same
goals. When defining key performance
indicators, you should at least take into
account the following conditions:
• A KPI must be measurable: KPIs must be
analyzed over time to identify trends. This
allows you to make decisions to improve
your company’s performance. KPIs should
be re-evaluated regularly to determine if
your performance is moving forward.
• A KPI must be accurate: KPI reports that
rely on inaccurate data are not only invalid
but also dangerous as they may lead to
wrong decisions.
3 Management Reporting
10. 7
• A KPI must be meaningful: Raw numbers
must be placed in context to comprehend
their meaning.
Figure 4: KPI Champion
Source: www.epmreview.com
• A KPI must be relevant to the business:
KPIs must be tied to your organization’s
strategic direction and they must represent
the business areas.
• A KPI may be required by legislation and/
or regulations: In some cases reporting on
a certain set of KPIs may be prescribed by
legislation or regulations.
• The KPI set must be balanced: To make
management reports effective, KPIs must
have a balanced range, representing quality,
quantity, efficiency and speed in equal
measure. This means that there should be a
balance between the number of KPIs being
measured, how they are measured, and in
which frequency they are measured. KPIs
should also reflect both financial and non-
financial performance areas.
11. 8
In this chapter we will focus on the processes
that are necessary to increase the company’s
performance through management reporting.
A timely and smooth flow of information
is necessary to reach excellence in the
management reporting process.
4.1 Reflect the company’s strategy
Efficient and effective management
reporting starts with the use of a structured
approach that links the company’s strategy
to key performance indicators. In practice,
companies insufficiently link strategic
objectives to key performance indicators. In
order to measure and report on figures that
truly matter it is important that your metrics
reflect the company’s strategic direction. As
can been seen in Figure 5, cascading or rolling
out the strategic direction to your operations
requires the completion of a few intermediary
steps.
Objectives
Strategy
Key value drivers
Key performance indicators
Feedback
Development
Figure 5: From strategy to action
The first step is to define the company’s
strategic direction. On the basis of this a clear
and concise understanding of the overall
strategy must be developed. This insight
is gained by discussing the organization’s
vision and mission, as well as the company’s
internal and external environment.
Subsequently, the strategy is described as
a limited number of statements which are
called strategic objectives. These objectives
are derived from the strategy. Between two
and five strategic objectives should be enough
to focus the organization’s efforts over a
3-5 year period (Kouwen Van, Lemmens
Tullemans, 2007). The table below shows an
example of a set of strategic objectives:
Strategic objectives
To establish year-over-year improvements
in yield and cost efficiency
To take a leading position in all the markets
that we serve
Once the strategic objectives have been
determined, key value drivers (KVD) can
be defined. KVDs are the critical factors or
activities required to ensure the success of a
business. There are a reasonable number of
key value drivers for each strategic objective –
between two and five is a useful rule of thumb.
For each strategic objective and key value
driver appropriate measures must be
identified. It is critical that KPIs measure
those vital few activities and processes which
monitor the performance of the organization.
Deriving performance metrics from your
company’s strategy can be a time-consuming
and cumbersome activity. The definition of
KPIs and the way they are measured do not
change often. The objectives for a specific
key performance indicator may change as the
organizational goals change.
4.2 One version of the truth
One of the top-rated conditions participants
mentioned to increase the company’s
performance with the help of management
reporting is producing one single version of
the truth. As we can see in the next chapter
- from a system point of view - data is to be
stored in integrated databases. However, the
data stored in this repository can be right
or wrong. The quality of data relies on the
creation and maintenance of a master list
which is created by the metadata, collected
from various applications. The objective
of this list is to easily track the correct
4 Process
12. 9
information to all the linked applications.
This is called master data management. It
prevents, for example, that data is stored
more than once.
One of the starting points for achieving one
version of truth is to establish accountability
among business owners. They are the
responsible actors that guard the applications
so that clean data is entered, which remains
clean and does not degrade. Furthermore,
processes should be available that enforce the
definition of attributes and calculations. Non-
integrated systems are the main reason why
not every business unit applies the same data
definitions. Figures in management reports
will lose their credibility. The value of these
kinds of dictionaries strongly depends on the
frequency at which they are updated.
In a perfect world all processes are automated
and all business applications are connected to
integrated databases that format, cleanse, and
redistribute data back to all the applications
in real-time.
4.3 The reporting process
The Network Members emphasize the need
for a clear reporting process. At the moment
few companies have strict guidelines about
what their reporting process should look like.
Management reports should be produced in a
consistent way and should be understandable
for all involved actors. Clear management
reporting is the result of a clear management
reporting process. Clear processes give insight
into transparent information flows, which
allow for more extensive reporting.
The first step of defining your reporting
process consists of determining relevant KPIs.
The next step is to identify your audience. On
the basis of the contents of your management
report the audience should be determined.
The audience can vary from internal
stakeholders such as senior management and
the project sponsor to external stakeholders
like shareholders, clients, suppliers and
governmental institutions. Data sources
should then be identified and reviewed to
select the leading systems that deliver the
data as input for management reports. Once
you have gathered the right data, you can
start reporting on it.
4.4 Scenario modeling
Scenario modeling is a method for analyzing
the main uncertainties in future business
conditions in order to prepare for decision-
making. The Network Members emphasized
that they would like to make (more) use of
scenario modeling. They find it important
to build scenarios of real-life situations in
the future. In terms of the tactical planning
horizon in particular, it is essential to quickly
make “what-if” analyses and so support
decision-making (Aertsen, Theeuwen Van
Geel, 2008). This process requires involvement
of different parties throughout the entire
company to produce and share the variables
necessary to construct scenarios. Systems
should support the calculation of different
scenarios. Unfortunately, the current systems
are often batch oriented, which means
that the answers to “what-if” questions
are available only after the completion of
batch jobs. Companies need models that
immediately come up with the answers
within one single mouse click.
4.5 Clear communication of the strategic
direction
The progress of strategy implementation must
be communicated throughout the company.
Whenever reports are not credible, the process
of defining key performance indicators and the
frequency with which management reports
are produced should be repeated. Replace the
irrelevant KPIs with the KPIs that matter and
distribute the reports again.
A total of 74% of the Network Members
create management reports at least every
month. The success of management reporting
processes depends on reports that are ready
on time.
13. 10
5 System
In the ‘System’ chapter we will focus on
information systems and technology that
enable management reporting. The design and
implementation of a management reporting
system requires some deep thought about
what is really important in order to assist
management in decision-making. Reports
should be created with user-friendly systems
that contain a broad range of functionality.
Furthermore, technology can automate
processes and integrate systems to retrieve
information from various source systems.
5.1 Functionality
Network Members indicated there is a lack
of functionality regarding the systems that
contribute to management reporting. These
systems do not meet the overall business
needs.
The systems being used to create
management reports lack the functionality to
capture and report on non-financial data. In
Section 6.2 we will consider this topic in more
depth. In a vision of the future, companies
will have management reporting systems
at their disposal that contain right-time
dashboard functionality.
Figure 6: Example of a dashboard
Whereas management reports produced in
various spreadsheets are hard to compare,
due to the freedom employees have to modify
or extend the results and metrics, dashboard
functionality enables employees to see at
a glance the current status of the business’
performance. Dashboards encourage a
consistent way of showing results, triggering
a fast and reliable decision-making process.
Management reporting systems should also
contain the possibility to configure alerts.
A manager wants to know if he is outside or
inside the target, and if there is an even, an
upward or a downward trend.
5.2 Single data storage
Companies are often fractured due to
the independent actions of separate
organizational units. These organizational
units have systems with data stores that have
been implemented specifically for the benefit
of their own unit. A mishmash of systems can
also be caused by mergers and acquisitions,
and changing business processes. All the
necessary information used in management
reports is gathered from all these different
source systems.
Furthermore, spreadsheets are used to
make calculations and present the data in
a way that is consistent with the needs of
the individual user. To make use of relevant,
unambiguous and correct data, all the
information should be connected to a single
data store.
In a vision of the future, companies prefer to
have their data stored in integrated databases
to ensure data accessibility for the entire
organization. At the moment 58% of the
companies manually gather their data used
in management reports. In those cases where
companies gather their data automatically,
about half of them use interfaces from several
data sources. In an ideal situation all the data
is collected automatically and only one source
system is used instead of several systems
that collect overlapping data leading to
redundancies and anomalies. A central point
for data retrieval will increase the quality of
management reports and will subsequently
lead to an efficient and effective decision-
making process.
14. 11
5.4 User-friendly systems
A management reporting tool may have all
the required functionality, but that is no
guarantee that the tool is user-friendly. End-
users of the networking companies attach
a lot of value to future systems that fulfill
their requirements in terms of usability.
User-friendliness is about the look and feel
of an object. A relatively high level of user-
friendliness will encourage managers to use
a system – leading to a higher acceptance
rate. If a system does not function as is
expected by its users, those users may
become reluctant to use the system, or even
worse abandon it and use other ways or tools
to accomplish their activities. Companies
want to stimulate the usage of preferred tools
to support a standard way of working. This
also applies to management reporting tools
and tools that produce the input for these
reporting tools. Tools which are user-friendly
will lead to more reliable data and standard
formats since everyone is using them.
A management reporting tool must be
efficient to such an extent that once users
have become familiar with its design, they
are able to perform their tasks fairly quickly.
Default templates and reports increase the
user-friendliness by enabling end-users to
rapidly produce management reports for
recurring events.
The involvement of business users at an
early stage of a tool selection and/or tool
development process is very important. User
acceptance tests will make sure that business
users are satisfied with the tool. Also think of
proper training and user manuals to increase
learning ability so that new users can quickly
use the tool in practice.
5.5 System integration
Nowadays, large companies in particular are
having trouble integrating different system
solutions. Due to the complex organizational
structure, IT departments are catering for
the needs of various organizational units,
and there is a proliferation of enterprise
applications.
The Network Members produce management
reports within a timeframe varying from a few
seconds to a couple of weeks (see Figure 7).
About 40% of the networking companies
create final reports within a couple of days.
The time necessary to create management
reports depends on the availability and
quality of data. When systems lack
integration, this means that data is scattered
throughout the organization. To make sure
that reports are credible, information should
be available in the right place at the right
time in the right way. Integration gaps are
frequently bridged by Excel spreadsheets,
resulting in a lot of manual intervention in
order to collect and process the data.
No time
(real-time)
0%
0% 0%
14%
12%
5%
29%
40%
A few
seconds
A few
hours
1 day Couple
of days
1 week 2 weeks
or more
5%
10%
20%
15%
30%
25%
35%
40%
45%
Figure 7: Time to create management reports
Companies that aim for a best-in-class
solution completely satisfying their needs are
usually dependent on a best-of-breed solution.
The integration of best-of-breed solutions
can be a cumbersome and time-consuming
challenge.
In the future, management reports should
be created that involve no delay, which
means that management reporting tools
should be seamlessly integrated with every
source system that offers data as input for
KPI dashboards and reports. Fully integrated
systems support and manage real-time
data feeds. Future solutions should embrace
architectures which easily support integration
and interoperability.
15. 12
6 Organization
In this chapter we will outline some
organizational conditions that should be met
to lift management reporting to a higher
level. Almost every participating networking
company uses KPIs one way or another.
However, most of the companies are up
against inadequately developed organizational
conditions, resulting in ineffective KPIs and
management reports. Unclear accountabilities
and an unbalanced set of measures are just
two examples of why the presence of KPIs in
management reports is insufficient.
6.1 Accountability
Defining and creating KPIs does not guarantee
that they are used effectively. Accountability
must be set for all the indicators. KPIs used
in management reports indicate whether
targets are met. Failing targets will reduce
a company’s performance. It is important
that companies can track the reasons for
lagging behind. This is the main reason why
the networking companies would like to
define accountable parties for each KPI. The
responsible party is the KPIs “owner”, and it
must be able to either directly influence the
KPI value or have the authority and power
to control it by assigning tasks to employees
who can influence it. A condition for the
effective use of accountability is that the KPIs
are populated with timely, actionable data so
that the responsible party can intervene to
improve performance before it is too late.
Without ownership, reporting on KPIs has
no priority or urgency. Consequently this
will lead to poor records, and eventually
incomplete and out-of-date management
reports. This creates a negative spiral.
6.2 A balanced set of measures
As long as data is accurate, it shouldn’t be
too hard to measure and evaluate financial
KPIs. For example, the total cost per operation
per hour can be calculated quite easily. A
KPI measure like this is reliable and can be
calculated in a consistent and objective way.
By the 1980s the awareness was growing
that traditional performance measures were
insufficient to manage organizations that
compete in modern markets (Johnson and
Kaplan, 1987). According to Au, Lemmens and
Tullemans (Au, 2006) financial performance
measures fail to reflect changes in the
competitive environment of organizations
and it is no longer satisfactory to use
financial measures as the sole criteria for
assessing success. Leading non-financial
performance indicators can provide a more
reliable indication of the future outlook than
lagging financial performance indicators.
They give insight into the value drivers
that sustain stakeholder satisfaction and
loyalty. Furthermore, non-financials cover
risks by monitoring performance objects
from a business perspective. A balanced
set of financial and non-financial measures
provides a true and objective view of the
company’s performance.
The members of the Planning and Budgeting
Systems Network mentioned that, unlike
financial data, non-financial data were
difficult to measure. In the future they would
like to have a balanced set of both financial
and non-financial measures (covering
economic, environmental and social factors)
to give stakeholders an overall picture of the
organization’s performance.
Business-IT
alignment
Inventory
net
working
capital
Currentdeb
Net profits
on net sales
Customer
satisfaction
Product quality
Inventory
net
working
capital
Net profits
on net sales
Customer
satisfaction
Product quality
Figure 8: Balance financial and non-financial
performance indicators
16. 13
6.3 Shift to empowerment
Empowerment is expanding the degree
of freedom of choice and action. It means
that employees are given more authority
and control over available resources and
decision-making. Assign responsibilities for
operational decision-making and performance
improvement. Individuals and work teams
with the best information and perspective
should make the decisions. According to De
Waal (Waal De, 2005) a climate of choice and
freedom is to be established for individuals
to develop their natures and express their
diverse qualities, but stress that the liberty
of individuals should not be at the expense of
others.
6.4 Organizational MDM
Selecting and implementing the right
technology is not enough to make master
data management successful. The greatest
challenges are of an organizational rather
than a technical nature. Large master data
management solutions typically involve
marketing, sales, finance, customer service,
IT and potentially other departments, each
with its own views and interests. Conflicting
interests and political issues can make it
difficult to introduce efficient and effective
master data management. A successful Master
Data Management (MDM) project requires
leadership and executive sponsorship coming
from the business with IT as an important
contributor and facilitator. MDM has to be
driven by business needs.
An MDM competence center should be
developed, consisting of a small number
of dedicated persons from business and IT.
The competence center makes sure there is
sufficient alignment between the business
and IT. According to Gartner (Gartner, 2009)
data stewards should be selected for the key
areas of the business. They are accountable
for the production, definition, security and
integrity of MDM assets.
6.5 Multidimensional management
reporting
Most large organizations operate a multiunit
organization, consisting of self-contained,
organized business units, divisions and/
or operating companies. Business units also
depend upon resources organized outside
their units to achieve their objectives. This
approach results in problems like how to
organize account management and project
management across business units.
In a vision of the future (Strikwerda,
2008), organizations overcome such
problems and similar dilemmas by defining
accountability for turnover and profit-
and-loss simultaneously for multiple
dimensions (product, region, account, market
segment, industry). Individual managers
are held accountable for the organization’s
performance in their specific dimension.
Companies require multidimensional
transparency in terms of profitability on the
basis of three pivots: Products, Customers
and Markets. The objective of this approach
is to enhance performance visibility in order
to grab more and better opportunities in the
marketplace.
A multidimensional organization calls
for a new form of management reporting.
In a multidimensional organization,
key performance indicators are set for
each dimension and multidimensional
management reporting is applied.
Multidimensional KPIs are the same for each
dimension. The only difference is that they
are measured and reported from different
perspectives, called dimensions. KPIs only
reflect those dimensions that are critical for
the success of the organization.
17. 14
The company’s culture is one of the factors
that influences a company’s performance.
It is essential both for successful organiza-
tional change and for maximizing the value
of human capital. Companies face significant
cultural barriers to successful management
reporting. This chapter will elucidate the
importance of culture for effective and
efficient management reporting.
7.1 Corporate cultures
No two companies have the same culture.
Wallach (1983) identified three types of
corporate culture: bureaucratic, innovative,
and supportive cultures. Companies can
have a mix of different types of culture. For
management it is an important challenge
to determine what the most effective mix
of cultures is to increase the company’s
performance. We will not evaluate which mix
is best, but we will use Wallach’s taxonomy to
categorize the visionary ideas of the Network
Members regarding effective management
reporting.
7.2 Bureaucratic culture
Bureaucratic or hierarchical organizations are defined by
their stability and control as well as their internal focus
and integration. They value organized and systematic
work. To accomplish this, standards, templates, explicit
rules and regulations are used.
In a vision of the future, networking
companies pay more attention to the
standardization of KPIs used in management
reporting. One way to standardize is to make
use of templates. During the Network Event:
KPI to Plan for Performance we introduced a
template which can be used when defining
KPIs in a content management system. If it
is applied properly, it will tell you what the
KPI is about, who the responsible party is,
for which details that party is responsible,
with which frequency each indicator needs
to be measured, what the variables are that
influence KPI value, etc.
Name of KPI
Description Description of the KPI
Current value The current value of the KPI
Target setting The target/plan that is set for
the KPI
Progressbar
04 weeks, 02 days, 14 hours
The progress that has been
made so far and the time left
to report on the KPI.
Current Value: Target setting
Responsible party The person/echelon that is
responsible for the KPI
Purpose What are the objectives of the
KPI - what is it measuring?
Why is it important?
Stakeholder The stakeholders that are
involved
Effort Low/Medium/High?
Unit/Department The Unit/Dpt. which is
affected
Method The method(s) used to
measure your KPI
Tools The potential tools used to
support the measurement and
reporting
Frequency The frequency of reporting
e.g. the 1st day of a month
Comments Additional information
Figure 9: KPI template example
The use of KPI templates offers a lot of
advantages. A KPI template encourages a
standard way of working. Furthermore, it
makes it easier to determine if and why the
value of your KPI is below target. Consequently,
KPI templates are integrated in a knowledge
management system so that every interested
party can view the status of the KPIs. This
also deals with one of the main concerns,
namely that KPIs are delivered too late and
therefore lose their value. The companies’
visionary thoughts also comprise frequent KPI
evaluation. KPI templates encourage a standard
way of working resulting in easy KPI evaluation
and easy KPI comparison internally – between
departments – and externally – with peer
groups from other companies.
7 Culture
18. 15
7.3 Innovative culture
An innovative culture is exciting and dynamic.
It provides a creative place to work, filled with
opportunities and risks.
Companies with an innovative culture attain
new values by combining different kinds
of knowledge. A company’s culture must
stimulate the desire to encourage and develop
new ideas about management reporting.
In a vision of the future, people are aware
of the company’s strategy and innovation
subgroups are created to contribute and
share ideas. Organizations must hold
managers accountable for creating the
innovative culture. They are a role model
for the employees. Therefore, make people
accountable for achieving objectives that
create innovation and make sure that people
have the time to innovate.
7.4 Supportive culture
A supportive culture can be characterized as a trusting,
encouraging, relationship-oriented, and collaborative
culture. It provides an open, harmonious, and pleasant
place to work. People are friendly and helpful to each other.
Networking companies value trust and
openness. Both conditions are must-haves for
future companies that want to stand out in
management reporting.
The physical sharing of information
depends on the availability of appropriate
infrastructures, but the added value of
sharing is lost when there is no supportive
culture of trust and openness. People who
trust each other will share information and
will be more likely to listen to one another
in a team situation. Openness establishes
an open line of communication throughout
the entire organization and encourages the
sharing of information. Don’t blame people
for their mistakes but praise them for their
efforts. Reward appropriate risk-taking and
failure, and telling the truth. Management
reports benefit from trust and openness
in that they become more transparent and
reliable. People will be more honest when
presenting figures and will not disguise the
errors made by themselves or their team.
19. 16
In this final chapter we will summarize the
conditions by building block. The chapter ends
with the conditions that – according to best
practices – contribute most to management
reporting excellence.
8.1 Process
A decent process starts with the translation
of the company’s strategy into objectives,
key value drivers, and key performance
indicators. In practice many companies are
capable of defining their vision, strategy,
and strategic objectives, but few companies
are able to successfully communicate and
implement the strategy.
Credible KPIs rely on the creation and
maintenance of a master list with metadata
collected from various applications. A single,
integrated database formats, cleanses,
and redistributes data back to all the
applications in real-time. Clean, up-to-date
data is the perfect starting point for scenario
modeling. Different scenarios can be used to
comprehend the future. Finally, management
reports are presented in a way that is fully
understandable to its audience.
8.2 System
The quality of management reports depends
on the availability and quality of data. In a
vision of the future, companies prefer to have
their systems connected to each other with
one leading source system. In large-sized
companies especially, this may seem like a
mission impossible, since dozens of systems
are used containing both unique and overlap-
ping data. A “think big, start small” approach
should do the trick. Seamless systems inte-
gration reduces human intervention. From
now on only one source system needs to be
queried, making data more reliable and much
easier to access.
8 Management Reporting Excellence
8.3 Organization
From now on there should be a balanced
set of both financial and non-financial
measures. Financial measures give a clear
view of the company’s health expressed in
monetary values. Companies need to have
multidimensional Profit Loss transparency
in multiple dimensions, e.g. Products,
Customers and Markets. Better visibility in
business performance leads to more and
better opportunities in the marketplace.
The ability to endure also depends on other
factors that cannot be expressed directly in
money. Think of product quality, customer
satisfaction and company image. Those
factors can make the difference between
being one among the others and being a best-
in-class company.
The sole presence of performance measures
is not sufficient. An individual, group
or echelon must be held accountable for
multidimensional measures and the target
setting. In addition to that, employees who are
responsible for the data used in management
reports must be empowered to make sound
decisions. A competence center should
be present containing these responsible
employees.
8.4 Culture
A company’s culture supports a way of
working that values organized and systematic
work. Standards, templates, explicit rules and
regulations can help to standardize KPIs used
in management reports. Innovation subgroups
create and share ideas which contribute to the
quality of management reporting. A culture
of sharing, trust and openness manages the
performance culture.
20. 17
High Quality
of Source Data
Successful
Strategy
Implementation
Right
(Time)
Information
Sharing,
Trust and
Openness
Business-IT
alignment
Management
Reporting
Excellence
8.5 Management reporting excellence
At least five cornerstones (see Figure 10)
are required to distinguish the primus inter
pares in excellent management reporting.
Organizations with excellent management
reporting perform significantly better in these
five fields than organizations with average
to poor management reporting abilities.
The concepts of the cornerstones have been
clarified in the previous four chapters. The
five cornerstones that lead to management
reporting excellence are:
• Successful Strategy Implementation;
• Business-IT Alignment;
• High quality of Source Data;
• Sharing, Trust and Openness;
• Right (Time) Information.
Figure 10: Management reporting excellence
21. 18
• (Aberdeen Group, 2006)
Aberdeen Group (2006). Achieving collaboration excellence content management: Data integration and the
enterprise portal.
• (Aertsen, Theeuwen Van Geel, 2008)
Aertsen, F.; Theeuwen, M.; Geel, E. van. (2008). Stop met forecasten – Praktisch plannen en budgetteren (NL).
• (Au, Lemmens Tullemans, 2006)
Au, J.; Lemmens, L.; Tullemans, P. (2006). The (r)evolution in management control. EyeOn Research Report.
• (Axson, 2003)
Axson, D. A. J. (2003). Best practices in planning and management reporting: from data to decisions.
Hoboken, N.J.: Wiley.
• (Bowman, 1998)
Bowman, C. (1998). Strategy in practice.
• (Drucker, 1995)
Drucker, P. F. (1995). Managing in a time of great change. New York: Truman Talley Books/Dutton.
• (Gartner, 2009)
Gartner, (2009). The seven building blocks of MDM: A framework for success.
• (Johnson and Kaplan, 1987)
Johnson, H. T. and R. S. Kaplan. (1987). Relevance lost: The rise and fall of management accounting.
Boston: Harvard Business School Press.
• (Kouwen Van, Lemmens Tullemans, 2007)
Kouwen, E. van; Lemmens, L.; Tullemans, P. (2007). From strategy to action – Planning for value.
• (Lemmens Munsters, 2007)
Lemmens, L.; Munsters, R. (2007). Strategic scenario planning – Linking performance indicators to bottom-
line results. EyeOn Research Report.
• (Strikwerda, 2008)
Strikwerda, J. (2008). From multiunit management to multidimensional organizations.
• (Waal De, 2005)
Waal, A.A. de (2005). The characteristics of a high performance organization.
• (Wallach, 1983)
Wallach, E.J. (1983). “Individuals and organizations: The cultural match”.
Training Journal 37 (February). pp. 29–36.
References
22. 19
Definitions
• A Key Value Driver (KVD) is the translation
of a strategic objective into how it will be
achieved.
- Variables that must be achieved or
implemented successfully to meet strategic
objectives and to make sure that the
intended strategy of the business succeeds.
- These variables are the few key areas
where things must go right for the business
to flourish. If things should not go right
in these key areas, this would cause the
strategy to fail.
- Synonymous to KVD are the terms critical
success factors (CSF), and key performance
areas.
• Key Performance Indicators (KPI) are
quantitative measures for monitoring
objectives and KVDs.
- Many things are measurable. That does
not make them key to the organization’s
success. In selecting Key Performance
Indicators, it is critical to limit them to those
factors that are essential to the organization
reaching its goals.
- It is also important to keep the number
of Key Performance Indicators small just
to keep everyone’s attention focused on
achieving the same KPIs.
• Strategic objectives express the aspiration
that defines the purpose or expected level of
achievement of the organization.
• Master Data Management (MDM) (according
to Gartner) is the consistent and uniform set
of identifiers and extended attributes that
describe the core entities of the enterprise,
and are used across multiple business
processes. Core entities include parties (for
example, customers, prospects, people,
citizens, employees, vendors, suppliers
and trading partners); places (including
locations, offices, regional alignments
and geographies); and things (such as
accounts, assets, policies, products and
services). Groupings of master data include
organizational hierarchies, sales territories,
product roll-ups, pricing lists, customer
segmentations and preferred suppliers.
MDM is a technology-enabled discipline in
which business and IT organizations work
together to ensure the uniformity, accuracy,
stewardship, semantic consistency and
accountability of the enterprise’s official,
shared master data assets.
23. 20
For more information about planning and
control systems and how we can help you to
make the appropriate system work within your
organization, please contact KeyOn Planning.
Loek Lemmens, Partner
+ 31 (0)6 29 072 388
loek.lemmens@keyonplanning.nl
Martin Daudey, Partner
+ 31 (0)6 51 143 088
martin.daudey@keyonplanning.nl
Fabien Lennertz, Consultant
+ 31 (0)6 51 884 701
fabien.lennertz@keyonplanning.nl
Contact
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(PBS) knowledge network offers finance
and IT professionals a learning network on
contemporary trends and best practices in
planning, budgeting and control systems.
The network enables the members to share
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research and benchmark studies in which
members’ needs are closely reflected. KeyOn
Planning initiated the network in April 2008.
There is a possibility to meet each other in
person during Round Table sessions semi-
annually. PBS is targeted at large-sized
About KeyOn Planning
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companies. The participating companies
include: ASML, Campina, CFS, Colbond,
Daikin, Heineken, Heinz, Janssen de Jong,
KPN, Mars, Novartis, NXP, Océ (Canon),
Ohra, Perfetti, Philips Consumer Lifestyle,
Philips Medical Systems, Mediq, Rockwool,
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Ingredients, and Vodafone.
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http://www.keyonplanning.nl
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planning, budgeting and control systems.
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knowledge of planning and control processes.
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