Slides for the Proformative webinar "Using Real-Time Financial Benchmarks to Drive Dynamic Decision-Making and Action" by Niels Pflaeging, BetaCodex Network

1. Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals
Using Real-Time Financial Benchmarks
to Drive Dynamic Decision-Making and Action

2. Sponsor

3. L earning Objectives
After attending this event you will be able to:
• Identify the benefits of self-setting, continuous, “relative” performance
systems and on-demand decision-making for your company
• Learn how to develop the right benchmarks and associated peer
groups for your company to maximize the value of your investment in
real-time benchmarking
• Understand how to use real-time benchmarks to produce continuous
dialog and reflection, and deliver the information company leaders
need to develop and maintain competitive advantage

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6. Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals
Using Real-Time Financial Benchmarks
to Drive Dynamic Decision-Making and Action
Niels Pflaeging, Author, Influencer, Advisor on Leadership Transformation
Jon Kondo, Sr. Software Executive and Advisor

7. The historic course of market dynamics
Local markets,
high customization
high
dynamics

8. The historic course of market dynamics
Sluggish/dull,
low dynamics
high
dynamics
Spacious markets,
little competition
Local markets,
high customization

9. The historic course of market dynamics
Sluggish/dull,
low dynamics
high
dynamics
high
dynamics
Spacious markets,
little competition
“Outperformers” exercise
market pressure over
conventional companies
Local markets,
high customization

10. The “Taylor Bathtub” -
and what it means for companies today
Dynamic part of value
creation
Solution: Man
Formal part of
value creation
Solution:
Machine
Sluggish/dull,
low dynamics
high
dynamics
high
dynamics
Age of
Crafts Manu-facturing
Industrial Age/
Age of
Tayloristic Industry
Age of
Global
Markets
1850/1900
Spacious markets,
little competition
“Outperformers” exercise
market pressure over
conventional companies
Local markets,
high customization
1970/80 today

11. We must stop riding the dead horse:
Let´s work on the model, not in the model!

12. How to let go of traditional
Performance Management practices
• Fixed, individual targets
• Management by Objectives
• Budgets and Plans
• Performance Appraisal
• Hierarchical Pressure
• Pay by Position or Performance
• Incentives and Bonuses
• …

13. How to let go of traditional
Performance Management practices
• Transparency & Improvement
• Comparisons between peers
• Comparisons with previous periods
• Dialog and Dissent
• Social and group pressure
• Pay by market value
• Results Sharing
• …
• Fixed, individual targets
• Management by Objectives
• Budgets and Plans
• Performance Appraisal
• Hierarchical Pressure
• Pay by Position or Performance
• Incentives and Bonuses
• …
High dynamics
Low dynamics

14. Polling Question

15. Some pioneers of the new model
Industry
Retail
Services
Government/
NGOs
It is possible.

16. From fixed to relative targets & measures
Fixed, negotiated targets
Target: absolute ROCE in % (here: 15%)
Most
important
competitor
(28%)
Market
(25%)
Plan
Plan
(15%)
Comparison:
Plan-Actual
Actual
(21%)
[expected
market Ø: 13%]
Actual
• Interpretation within the plan-actual-comparison:
“Plan was outperformed by 6 percentage points”
> positive interpretation
• Better ROCE of the market average
and the performance of the most important
competitor remain unnoticed!
Relative, self-adjusting targets
Target: relative ROCE in % (to market)
Most
important
competitor
(28%)
Target Actual
Comparison:
Market-Actual
Market
(25%)
Target: ROCE
in % better
than market avrg.
Actual
(21%)
[independent
from expected
market Ø]
• Interpretation within actual-actual comparison:
“Performance was 4 percentage points
below competition!” > negative interpretation
• Absolute assumptions at the moment of planning
don't matter.
• Targets always remain updated and relevant!

17. Practice: Relative measures & reporting
Accounts/KPIs vs prev. periods
last
mnth
Same
mnth
last
year
Same
mnth
prev..
year
Ø
last
12
mnths
Ø
12
prev.
mnths
Indicators
or
Groups of accounts
Rankings (“league tables”)
Company KPI
Competitor A 31%
Competitor E 24%
Competitor C 20%
Us 18%
Competitor B 13%
Competitor D 12%
Competitor G 10%
Competitor F 8%
Regions KPI
Region G 7%
Region E 7%
Region B 6%
Region F 4%
Region A 3%
Region D 3%
Region C 1%
Region H 0%
Snapshot (static) w/benchmarks
KPI 2
Us
Our
unit B
Our
unit A
Compe-titor
B
Compe-titor
A
KPI 1
Trend with references
(A) Maximum
Curve with variance
KPI
(B) Gliding average
Time (Actuals)
Trend with benchmark
Us
Competitor A
Time (Actuals)
KPI
Trend with tolerance
Tolerance levels
Time (Actuals)
KPI
Us
out of bounds

18. Polling Question

19. From org design principles for the
industrial age to contemporary ones
Law Beta Alpha
§ 1 Freedom to act Connectedness not Dependency
§ 2 Responsibility Cells not Departments
§ 3 Governance Leadership not Management
§ 4 Performance climate Result culture not Duty fulfillment
§ 5 Success Fit not Maximization
§ 6 Transparency Intelligence flow not Power accumulation
§ 7 Orientation Relative Targets not Top-down prescription
§ 8 Recognition Sharing not Incentives
§ 9 Mental presence Preparedness not Planning
§10 Decision-making Consequence not Bureaucracy
§11 Resource usage Purpose-driven not Status-oriented
§12 Coordination Market dynamics not Commands

20. Practices of the past (selection)
Org charts
20
”Meritocracy“
Budgeting Planning
Forecasting
Control of work hours
Job Descriptions
Travel policies
Competencies Management
Holiday applications
Performance Appraisal/360°
Incentives
Individual targets
Salary ranges
Training budgets
Personnel Development
Target negotiation
”Personnel Expenses“
Suggestion boxes
Assessment Centers
Knowledge Management
Pay for Performance
Paid extra hours
Bonuses
Sales quotas
Dress codes
Job titles
HR
Allocations
Cost Management
Plan-Actual variances
Forecasting
MbO
Strategic planning
Jours fixes
SWOT analysis
Earnings guidance

21. Q & A

22. Polling Question

23. @NielsPflaeging
nielspflaeging.com
organizeforcomplexity.com
betacodex.org
Contact, book, and more
www.organizeforcomplexity.com slideshare.net/npflaeging

24. Thank You

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