Excellence in leadership
Issue 4 | 2011 | ÂŁ12
Excellence in leadership
Top finance and business insight in this issue Michael Brierley, CFO of Metro Bank, on the FDâ&#x20AC;&#x2122;s role in driving performance management Tom Kennedy, CFO of Hilton Worldwide, on creating a performance culture Alasdair Macnab, director of corporate services at the Royal Botanic Gardens Edinburgh, on the benefits of the Balanced Scorecard Joe Kaesar, CFO at Siemens, on the value of creating a culture of equity ownership Chris Sparkes, FD at BAE Systems, on the journey from finance manager to business leader
Strategic performance management
Strategic Performance Management ISSUE 4 2011
In the current economic climate, managing organisational performance is more important than ever. We take a look at various strategies for managing performance effectively
3 Excellence in leadership | Issue 4, 2011
Cover photography: Trunk Archive. This page: Illustration: Masao Yamazaki/Dutch Uncle
Strategic performance management here is a Japanese saying: when devising long-term growth strategy (p40). Meanwhile, Regine a strategy, it is important to see distant Slagmulder, professor of accounting and control at the things as if they were close and to take a Vlerick Leuven Gent Management School in Belgium, distanced view of close things. In this looks at the role of the board of directors and how risk issue, we continue on this theme and take can be integrated into performance reporting (p18). a closer look at the latest thinking on This issue also takes a look at how economic uncertainty strategic performance management. is encouraging companies to tighten up their cash controls. To give an overview of current Marina Wyatt, CFO of TomTom, a supplier of in-car approaches to strategic performance location and navigation products and services, and management, three leading finance professionals provide Antony Barnes, director of tax and treasury at information an insight into how CFOs are driving organisational services company Experian, explain how their approach performance globally (p8). Tom Kennedy, CFO of Hilton to cash management has changed since the credit crisis Worldwide, also gives his views on what public companies began (p52). can learn from private equity owners when it comes to The complexity of managing information and data creating a strong performance culture (p14). continues to grow. To find some solutions, a group of CFOs In terms of innovation, Dr discuss what it takes for finance Alasdair Macnab, director of professionals to become trusted corporate services at the Royal business partners (p56). The debate The new year is an ideal time Botanic Garden Edinburgh, looks at covers key issues, such as: what role to review strategic processes some of the key challenges facing should finance play in analysing and look at ways of making a public sector organisation and implementation more effective non-financial information? How can discusses how the invention of a business intelligence tools be utilised new management accounting model to give finance professionals more is making a marked difference in resource allocation time to support management? And is there a threat of and performance management (p26). becoming too reliant on software and repetitive reporting? As corporate structures become more complex, Many nations move into another year of uncertainty. one of the biggest challenges ahead is measuring But the new year is also an ideal time to review strategic inter-organisational performance. Lisa Jack, professor processes and look at ways of making implementation in accounting at Portsmouth Business School, highlights more effective. I very much hope that this issue of the importance of developing a shared language in this Excellence in Leadership will provide some useful tools to situation and how benchmarking can play a vital role in add to your kit. As City grandee Sir Brian Pitman once creating a clearer picture of supply-chain efficiency (p22). noted: “There is always a better strategy than the one you As Louise Ross, CIMA’s head of corporate performance have; you just haven’t thought of it yet.” management points out, strategy implementation can be more difficult than formulating the framework. In her article (p36), Louise outlines the value of good practice in Charles Tilley, strategic performance management and provides case chief executive, studies involving Johnson & Johnson and the Man Group. CIMA A key issue around performance can be getting buy-in from staff. To address this, electronics and engineering giant Siemens has built a strong culture of equity ownership among its employees. Its CFO, Joe Kaesar, explains how this supports the company’s sustainable,
Excellence in Leadership is the official publication of CIMAplus. For more information visit: www.cimaglobal.com/cimaplus
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CONTENTS Balancing is best The Balanced Scorecard is being revitalised 20 years after it was first developed p26
Global growth How performance management helped Hilton Hotels grow post-acquisition p14
Risk and uncertainty The missing link in strategic performance management p18
3 Foreword 6 Vital statistics
link in strategic performance management.
22 Supply chain risk Why measurement of inter-organisational performance is the next frontier for management accountancy.
8 Performance approaches The CFO of UK retail banking newcomer Metro Bank and the head of performance management at Maersk Oil & Gas discuss approaches to performance management. 14 A private equity view How private equity firm Blackstone Group put performance management at the heart of its strategy to grow its newly acquired Hilton Hotels. 18 Risk and performance Prof Regine Slagmulder explains why risk and uncertainty is the missing
26 Reviving the scorecard Twenty years after its inception, the Balanced Scorecard is being revitalised. 32 Boosting influence A recent roundtable discussion asked how the finance function can obtain increased influence in the business. 36 Measuring the measures What makes a good performance measure?
39 Get involved with CIMA 40 Share ownership Can businesses increase employee engagement and performance through share ownership schemes?
42 Industrial ecology How waste has become a valuable commodity for one organisation. 46 Assessing CFOs New research from Robert Half UK looks at what makes a good CFO. 48 MA to business leader Three CFOs from a variety of sectors discuss their journey from manager to business leader, and the skills and experiences they picked
up along the way. 52 Cash flow forecasting Marina Wyatt of TomTom and Antony Barnes of Experian discuss how their approaches to cash management have changed since the credit crisis began. 56 Releasing responsibility A recent CIMA roundtable, in partnership with SAP, looked at how senior finance professionals can adapt to the changing demands of businesses and their responsibilities for providing information and insight. 63 CIMA events 65 Next issue 66 CIMA directory
Editorial advisory board Malinga Arsakularatne chief financial officer, Hemas Holdings
Bogi Nils Bogason chief financial officer, Icelandair Group
George Riding chief financial officer, Middle East and north Africa, SAP
Jeff van der Eems chief financial officer, United Biscuits
David Blackwood group finance director, Yule Catto & Co
Kai Peters chief executive, Ashridge Business School
Arul Sivagananathan managing director, Hayleys BSI
Jennice Zhu finance director, Unilever China
6 Excellence in leadership | Issue 4, 2011 CIMA is the Chartered Institute of Management Accountants 26 Chapter Street, London SW1P 4NP 020 7663 5441 www.cimaglobal.com
VITAL STATISTICS Strategic performance management stats:
of current FTSE CEOs have a background in finance, which is a...
CIMA contact: Senior product specialist Ana Barco Email: ana.barco @cimaglobal.com
increase from 2008
Source: Robert Half International - FTSE 100 Tracker (2011)
% of respondents
Finance vacancies in F&A operational support roles: 35%
Australia Canada Germany World Finance accounting
Source: Robert Half Global Employment Monitor 2010-2011
Excellence in Leadership is published for CIMA by Seven, 3-7 Herbal Hill, London EC1R 5EJ. Tel: 020 7775 7775. Commissioning editor Dawn Cowie Group editor Jon Watkins Group art director Simon Campbell Junior designer Josh Farley Chief sub editor Steve McCubbin Senior sub editor Graeme Allen Picture editor Nicola Duffy Senior picture researcher Alex Kelly Editorial director Peter Dean Client director Jessica Gibson Creative director Michael Booth Production manager Mike Doukanaris Account director Jake Cassels Business development Tina Hanks Advertising manager Andrew Walker Email: andrew.walker@ seven.co.uk Tel: 020 7775 5717 Chief executive Sean King Chairman Tim Trotter
of firms are failing to align performance management with their strategy and culture
On average, global firms are targeting 5.4% growth in 2011, outstripping local economic forecasts in many markets
Source: The business of performance management, Hay Group
The products and service advertised in Excellence in Leadership are not necessarily endorsed by or connected in any way with CIMA. The editorial opinions expressed in the publication are those of the individual authors and not necessarily those of CIMA or Seven. While every effort has been made to ensure the accuracy of the information in this publication, neither Seven nor CIMA accepts responsibility for errors or omissions.
ÂŠ Seven ÂŠ CIMA Cover artwork Alberto Antoniazzi The contents of this publication are subject to worldwide copyright protection and reproduction in whole or in part, whether mechanical or electronic, is expressly forbidden without the prior written consent of CIMA/ Seven. All rights reserved. Origination by Rhapsody. Printed in the UK by Wyndeham Press Group.
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Unlocking performance CFOs use strategic performance tools in a myriad of ways to steer their businesses towards strategic goals. We ask the CFO of UK retail banking newcomer, Metro Bank, and the head of performance management for Danish energy company, Maersk Oil & Gas, to explain how better planning, use of technology and communication about performance can unlock hidden potential
Getty Images, iStockphoto
Can you give an example of how you’ve used performance management techniques in a particular operational area of your business to raise performance, and can you quantify the business benefits? Michael Brierley, Metro Bank: We launched in July 2010 with a single store and now have nine stores, with one more just opened and 10 more to follow next year. Each store has a monthly “scorecard” of metrics across customer service, compliance, financial and other important success factors. This is highly visible to all the store management and staff. The healthy but vigorous competition this has generated has proved beneficial in driving performance. Those at the bottom of the league want to climb up the table and those at the top want to stay there. Best practice is sought out and innovative ideas are generated. Albert Birck, Maersk Oil & Gas: At Maersk Line we carried out analysis of the value drivers of the business some years ago as part of a general strategy update. To share the learning and empower the global organisation, which has 24,500 employees in 125 countries, it was decided to roll out around 600 scorecards. Each scorecard would contain a handful of key performance indicators (KPIs) selected from a list of 110 consistent drivers and designed so that each manager would be accountable for and be able to influence the KPIs chosen.
The scorecards provided a monthly snapshot of performance at the strategic level that allowed for relevant discussions about continuous performance improvements that the traditional, and lagging, accounting-based reporting did not. When supported by intuitive weekly performance dashboards at the tactical level and exploratory business intelligence (BI) at the operational level, it significantly increased performance awareness and understanding of current issues, and allowed people to “speak with data”. What lessons have you learned about how to adapt and apply generic performance management tools to the particular strategic goals of your business? Could you give an example? Michael Brierley, Metro Bank: The UK’s existing high street banks do not routinely manage their profitability on a store by store basis, unlike retail operations such as clothing chains and restaurants. Metro Bank produces daily store by store metrics and monthly performance data, as well as measuring individual store profitability. This data allows us to adjust our approach at individual stores quickly and identify where they are diverging from our expectations. Albert Birck, Maersk Oil & Gas: It’s easy coming up with 20 to 30 different performance management methodologies, but added shareholder value and » the
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‘We watch a whole range of indicators that reflect and predict the confidence in the UK economy’ Balanced Scorecard (BSC) still seem to be some of the most popular foundations after 20 years. However, it is important not to treat performance management as if it were a finance exercise with a narrow organisational scope. Talk to human resources, talk to sales, production or operations. You can be sure of two things: first, they are also applying performance tools for employees and core processes for the company; and second, they are doing it in a different way to you. Realising that “one size does not fit all” and actively tackling the hot spots between business performance, process performance and individual performance allows the organisation to use different tools for different purposes and creates positive synergies. What steps have you taken within the finance function to avoid a complexity of disparate systems, an excessive number of spreadsheets and a multitude of different process and controls? Michael Brierley, Metro Bank: We have benefited from starting with a “clean sheet” from a technology perspective. This has enabled us to implement a complementary suite of “best of breed” systems to deliver our general ledger, asset liability management and regulatory reporting to the Financial Services Authority and the Bank of England. All these systems are automatically linked to our core banking engine and the data warehouse and are updated on a semi real-time basis. So far, we have managed to avoid “spreadsheet hell”. Albert Birck, Maersk Oil & Gas: It is a challenge to keep up with an ever-increasing amount of data and hundreds of global systems, especially when trying to convert this data into information, and the information into knowledge. Using spreadsheets is tempting for the individual business analyst for many good reasons. It’s available, easy to use (kind of), portable (print, email) and compatible. However, it can be easy to make mistakes; data integrity often suffers; frequent updates are cumbersome; it is too manual; and it can be hard to construct coherent models across the organisation. This will not change until a better alternative is available so you should revisit your business intelligence (BI) strategy to check whether it is being addressed. Dashboarding is one alternative where analysts are
given an online platform to analyse and share information that can help to visualise the issues more powerfully than using a spreadsheet. This can even work without a complete enterprise data warehouse. It’s better to let people find ways to meet their information needs before setting up the technical back-end to support this, not the other way around, or you will lose a valuable learning experience and risk delays later on. Which economic indicators are most important to your business and how can this data help to gain strategic advantage, even in a turbulent world? Michael Brierley, Metro Bank: As a mass market retail and commercial bank our success is linked to the success of our retail and small and medium-sized corporate customers, which in turn is linked to the health of the general economy. So rather than a single metric or indicator, we watch a whole range of indicators that reflect and predict the general health and confidence in the UK economy. Albert Birck, Maersk Oil & Gas: Sometimes non-economic KPIs can help unlock the value creation in a new way, but “soft” KPIs are often downplayed in turbulent times. In 2000, Professor Donald Marchand from IMD Business School created a framework for “strategic information alignment”, describing how information can be used to create business value by reducing costs, managing risks, adding value to customers and markets, and creating a new reality, such as new products and services. Finance people love the first two, and they are important, but the real strategic advantages are found by exploiting the last two aspects, and these need to be covered by using non-economic indicators in your performance methodology. Let me give you two examples. In Maersk Line we have recently introduced “Daily Maersk” between the Far East and Europe. That means a fixed transportation time and absolute reliability, and can only be realised by monitoring and managing on-time deliveries. That is a “new reality” for customers and adds value to their supply chains by allowing them to reduce their storage and inventory costs by up to 50 per cent. Furthermore, with third-party verified data on CO2 emissions we have become leaders in the shipping industry for low CO2 transportation. This information and these KPIs are also made available to customers who, in many cases, also have CO2 reductions as part of their strategy. We have helped many customers save thousands of tonnes of CO2 (equivalent to hundreds of thousands of dollars) by shipping their cargo with us. That transparency is a strategic advantage for us and for our customers. What are the challenges involved in measuring and improving employee engagement? Which
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techniques have proved to be most effective and can you quantify the results? Michael Brierley, Metro Bank: Our unique selling point is convenience and customer service. While we have good products and robust systems, it is the culture of the bank that will enable us to deliver customer service and differentiate us from our competitors. Organisations generally get “the culture they deserve”. I have worked for some banks with a toxic culture and this was reflected in how they treated their customers. Metro Bank aims to create “fans, not customers”, so we make sure all our activities, visible or invisible to the customer, are consistent with this. We have a number of forums that enable staff to identify and channel areas we need to work on, and a quarterly staff survey. All our people are passionate about delivering against our brand values and those who aren’t tend not to last long. Frontline, customer-facing staff are not rewarded on sales, but on customer service and compliance. Extensive and relentless mystery shopping ensures we spot any issues where we are falling short of our high standards and then fix them.
Furthermore, research indicates that other factors may be more important. Autonomy, purpose and mastery are examples pointed to by Dan Pink in his book, Drive, which was published last year. These can easily be incorporated into the design of your performance approach through the empowerment of your people, a focus on high-level goals and structured facilitation to help people learn how to become the best they can through benchmarking, double-loop learning (where goals can be modified or rejected) and business analytics.
Albert Birck, Maersk Oil & Gas: The challenge of how to get people engaged in driving performance is really about managing the hot spot between business performance and individual performance. From a human resource management perspective a typical solution is greater accountability and rewarding good performance. But will this always drive the right kind of behaviour? There is a risk that people think in silos, which can lead to sub-optimal results.
Albert Birck, Maersk Oil & Gas: “Speak with data”, “face the facts” and ensure “total transparency”. That is easier said than done and the change in mindset that may be required should not be underestimated. However, the benefits are significant. Transparency allows people to trust the information they get. This encourages them to use the information for better decision-making, which in turn increases the potential for performance management to become »
How can greater transparency and better reporting of performance change perceptions, both internally and externally? How does this help to improve decision-making at board level and throughout the company? Michael Brierley, Metro Bank: What gets measured gets done, fixed or improved. We have a number of BSCs across the business that feed up to an overall BSC, which is discussed monthly at board level and for which the executive team is held collectively accountable. This is a valuable tool that continues to evolve as the bank grows and becomes more complex.
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a shared methodology for creating value. Using the principles of vertical-lateral-contextual analysis in all reporting will help to improve transparency. You need to be able to access information from the top to the bottom of the organisation (the vertical perspective), and compare entities across the business (lateral benchmarking). Finally, do not omit the external or contextual perspective. Compare your performance with that of your competitors and against industry growth rates. All three perspectives should always be available. To what extent have you invested in enterprise performance management technology in recent years? How has the better use of technology helped to reduce costs, allocate resources more effectively and improve efficiency during the recent economic downturn? Michael Brierley, Metro Bank: We are currently small, but growing rapidly, and have an ambitious ten-year plan. We have a simple business model based on what is, in many ways, old-fashioned banking. We will need to invest in performance management technology in the future as we grow, but for now we try to keep it simple and relentlessly, some would say obsessively, focus on the customer experience. If we get that right the rest will follow.
Michael Brierley Brierley is a fellow of the Institute of Chartered Accountants, having qualified in 1984 while working for Ernst & Young. Before joining Metro Bank in 2009, Michael was director, business risk at Barclaycard, where he was responsible for the development of risk management policy and strategies. Previously, he undertook various senior finance and risk roles in Capital One Bank (Europe) between 1999 and 2006, including being CFO (2000-2002) and chief risk officer (2002-2006). Michael has also acted as CFO for the Royal Trust Bank, a UK retail and commercial bank, and Gentra Ltd, a vehicle created to buy and manage residential and commercial property related debt.
Albert Birck, Maersk Oil & Gas: Before looking into how to use technology, you have to ensure you have the right technology. Iâ&#x20AC;&#x2122;m not talking about a technical assessment, but a performance assessment. What does it take for analysts or end-users to get access to the information they need, and then to share and discuss that information with colleagues? This is what you need to study. You may find that improving analytical skills and processes can be far more rewarding than investing in technology. Four years ago, we surveyed the market for performance solutions and the result was, for many reasons, disappointing. Overall, solutions lacked flexibility, or they were not user-friendly. People would have these solutions imposed on them and adoption would suffer. That was not an option. Only recently have more mature solutions emerged. Tableau Software is one example. When a 20-year-old part-time assistant studying French can use it on his own without any previous BI experience then you know you are on the right track. This means that scarce IT resources can be used elsewhere and it also means that your people will be more engaged and empowered to drive performance themselves, rather than having a set of targets and procedures imposed from above. n
Albert Birck Birck was recently appointed general manager for finance performance management at Maersk Oil & Gas, part of transport and energy group AP Moller-Maersk. Before this he held a similar role at shipping business Maersk Line. During his career he has worked in several industries and different functional areas in order to manage performance management from top to bottom and end to end, including strategy development and M&A, optimisation projects and operational process efficiency.
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It’s a marathon, not a sprint
iStockphoto, Jos Verhoogen
When private equity firm Blackstone Group acquired hotel chain Hilton in 2007 it spotted a wealth of untapped potential to grow the business internationally. Tom Kennedy, CFO of Hilton Worldwide, tells Dawn Cowie how rigorous performance management has helped the company to live up to its owner’s long-term ambitions for the business ilton wasn’t firing on all cylinders in 2007 when it caught the attention of private equity firm Blackstone Group. Despite having a strong global brand, the company was hamstrung by its fragmented operational structure and failing to make the most of international growth opportunities. What it needed was greater financial discipline, operational efficiency and a more integrated strategy across its brands – bread and butter performance management issues for Blackstone. This was also familiar territory for Tom Kennedy, who was brought in as CFO in 2008 to provide Hilton’s management with the consistent, accurate, concise and timely financial information needed to run the business more efficiently. Kennedy had previous experience working in a private equity environment as CFO of Vanguard Car Rental, between 2003 and 2008, after the company was bought from bankruptcy by Cerberus Capital Management. The challenges were different at Hilton, but the approach was similar, particularly the key metrics to measure and monitor performance. At most private equity-owned businesses cash
and earnings before interest, taxes, depreciation and amortisation (Ebitda) are the two key metrics, says Kennedy. Ebitda is important as it tends to be the basis used by private equity sponsors for calculating the purchase and sale price of a company. So when a sponsor acquires a company it tends to put Ebitda targets in place as part of its initial 50- to 100-day plan, alongside cost-reduction and revenue generation initiatives. That said, cash really is king for private equity sponsors. “Cash management is important for any business, but companies that are troubled, or have an untapped opportunity, must monitor and measure how much cash goes into and out of the business religiously. It lets you understand the rhythm of the business and helps you to manage the capital structure of your balance sheet carefully, because private equity-owned businesses often have a lot of debt,” says Kennedy. The first thing that Kennedy did at Hilton was to look at the company’s cash position and cash forecast. What he quickly realised was that the company had a reasonably good understanding of where it was getting its cash from, partly because the company’s franchise model added some » certainty, but it didn’t have a good »
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understanding of how cash was being deployed in the business. Its annual cash flow forecast was quickly replaced with a 13-week rolling cash-flow forecast to enhance understanding of how the company used cash. “The fact that the company wasn’t forecasting cash on a monthly or weekly basis was concerning because it was a levered situation and 75 per cent of the debt was at a variable rate during a time of rising interest rates, so the cash interest expense was growing,” says Kennedy. “Putting a 13-week rolling cash forecast in place and measuring the actual cash position against the weekly forecast really creates discipline. You can start to ask why the actual and forecast figures don’t match up, which gives a better understanding of the drivers of the business and the risks. This also helps the finance function to understand how other parts of the organisation are run,” says Kennedy.
Converting data into information Looking beyond cash and Ebitda, Kennedy found that there was no shortage of other data being collected at Hilton. Unfortunately, this was sometimes more of a hindrance than a help in management decision-making because of nuances in the numbers and a lack of clear analysis. Part of the problem was that the company had been built through multiple acquisitions, so different groups had different ways of defining the same metric or they would extract the data at different times of the day. “Hilton’s chief executive, Chris Nasetta, was getting inundated with weekly reports from operations, brand and finance, but none of the numbers matched because each division used different metrics and had different ways of reporting. I could ask a question and within an hour I would get an email with tonnes of data in spreadsheets, but there was no concise analysis that transformed that data into information that could be used by management,” says Kennedy. “People would produce data in their silo, send it off to the finance function and never see it again. They never really understood how their data fitted into the overall picture of the business, nor how changes in their data could affect other parts of the enterprise,” he says. “Forecasts sent to the finance or marketing teams might show that room occupancy was predicted to fall, but the
operations team wouldn’t find that out until the day when fewer customers showed up than expected. By then, it would be too late to do anything to mitigate costs.” The solution was to create one central group – called financial planning and analysis – that would be responsible for pulling together all the data needed to manage the business and putting it in an executive summary at the end of each month or quarter, with commentary provided by the finance team to guide management on the key issues and trends. Given that Blackstone will ultimately seek an exit, possibly via an initial public offering, it has been important for the company to adopt performance metrics recognised as the industry standards, such as revenue per available room (RevPAR), which help in making comparisons with its peers. The company was used to ad hoc reviews of the performance of its peers, but this has become a more systematic part of the quarterly business review and budget for board meetings. “Within three business days of the end of each month management is now sent an information flash with consistent, accurate and concise analysis of business performance,” says Kennedy. Then, within 12 business days of the end of the month, they receive the complete monthly financial results, compared with more than 20 days previously. The company has also introduced a quarterly business review, where the top 30 senior managers in the company get together as a team to do a “deep drill-down into the performance of their business areas”, including metrics for revenue, market share and cost, as well as forecasts. Although the need for change was not clear to everyone at the start, the company’s efforts to involve people in designing the new processes have paid off. “Change can be harder at a well-run company where there is an opportunity to extract more value than it is at a company where the business model is clearly broken, because you’ve got to get people to understand why there is a need for change,” says Kennedy. “It helps to get representatives from each discipline that will be affected to be part of a transformation team that comes up with the changes so that it is a collaborative approach. The role of finance is to enable
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people in brand, operations, sales and marketing to do a better job − not to lecture, dictate or tell,” he says. “It is easy to get buy-in when people start to see that the information is coming out more quickly and accurately, and they find that there are no more disputes about what the number is, they’re arguing about what the number means.”
The long haul Too narrow a focus on financial targets, however, creates the risk of unintended consequences. For example, at the peak of the downturn for the hotel industry − the last quarter of 2008 and start of 2009 − Kennedy had to be careful to ensure that the company’s drive to improve operational efficiency and reduce costs had a minimal impact on customers’ experience. His aim was to prioritise cost-cutting in areas that guests wouldn’t touch, feel, hear or see. This was followed up with intense monitoring of service quality via customer surveys, which are used to compile Hilton’s service and loyalty tracking metric or SALT score. One reflection of the importance of the SALT score is that it is reported monthly by brand right after Hilton’s RevPAR index so that the company can track its market share performance against the guest experience. Similarly, shifting Hilton’s future growth prospects from being US-centric to being international has required a fine balance between increased resources, precise objectives and targeted incentives to drive the right behaviour. For example, Kennedy adjusted the incentives offered to the sales team responsible for signing new hotel deals in developing markets so that the financial rewards flowed to those whose deals came to fruition. In 2007, about 15 per cent of Hilton’s hotels under contract were international; this year it’s 55 per cent. The proportion of international hotels under construction was also about 15 per cent in 2007; now it’s about 75 per cent. Another lesson that Kennedy has learned from working at private equity-owned companies is that business transformation is a marathon, not a sprint. “The excitement and challenge of transforming a global business has to be balanced with the need to keep people engaged for the long term,” says Kennedy. His advice is to keep initiatives small, and to celebrate the milestones along the way. “You’re going to get
frustrated when you run into challenges, which is why it’s important to have small milestones and, when you reach them, take a deep breath and celebrate with the team. Give people a depressurisation moment before you start to climb to the next level of the mountain,” he says. n Creative compensation One of the performance tools that private equitybacked companies tend to use differently from their public sector peers is compensation. As Ebitda is such an important metric for private equity sponsors it tends to be widely used in compensation packages to ensure that a company’s staff and owners are focused on the same objectives. Private equity sponsors also tend to offer equity in the business as an incentive to drive performance, and they also tend to target equity participation directly at particular individuals or business units. “In my view, sponsors are more willing to take creative risks with compensation if they think it will induce the right performance and behaviour. That means there tends to be more flexibility in the way that equity participation is targeted and less concern about the cost of distributing equity than at a publicly traded company,” says Kennedy. One example of this was at Vanguard Car Rental, where Kennedy was CFO before joining Hilton. Kennedy recalls using a pool of cash to reward his team for completing a Form S-1 financial filing with the Securities and Exchange Commission in 60 days. Getting authorisation to set this up took a five-minute phone call to one person at the company’s private equity owner, Cerberus Capital Management. “Private equity-owned companies are usually troubled businesses or those trying to exploit some opportunity, which often requires concentrated effort to meet targets in a short period of time. I’ve never encountered resistance from a private equity sponsor to a well-thoughtout and targeted incentive to drive behaviour or reward performance,” says Kennedy.
Risk and uncertainty: the missing link in strategic performance management
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trategic performance management refers to the integrated, strategyfocused management approach that companies use to deliver sustained organisational performance. The purpose is to create a highperformance culture across the organisation through a systematic process of strategic and financial planning, setting appropriate targets and cascading them throughout the organisation, deciding on the right performance indicators, monitoring and reporting progress and, lastly, evaluating achievements and distributing appropriate rewards. Performance management is thus a combination of retrospective performance evaluation and future-oriented planning and performance improvement. In most organisations, performance management is run as a calendar-driven process, where the senior management team agrees on the companyâ&#x20AC;&#x2122;s mediumto long-term priorities during the annual strategic planning meeting. The first year of the strategic plan is then further detailed in a short-term financial plan or budget, which becomes a fixed performance contract for the following year. Managers and employees in different parts of the business are held accountable for the achievement of the financial and operating targets laid out in their performance contract. Although this approach is widespread in practice, it has several potential weaknesses in todayâ&#x20AC;&#x2122;s uncertain and volatile business environment. First, many companiesâ&#x20AC;&#x2122; performance management systems lack the necessary flexibility to deal with a highly uncertain business environment. Because of the typically fixed nature of performance contracts, such
as budgets and variations in business circumstances and their impact on performance is often disregarded. Business leaders have long justified this approach, based on the argument that it helps to reinforce a strong commitment to achieving the agreed-upon objectives. However, in an uncertain business environment characterised by major shifts in market demand, such a static approach may lead to performance problems as targets become impossible to achieve, resulting in perceived unfairness, or because the budget imposes constraints in dealing with new business opportunities or threats. Instead, turbulent times require more proactive performance management that enables senior executives to address changing market dynamics in a timely and effective manner. Second, an important challenge in strategic performance management nowadays is to give explicit consideration to the risk-reward trade-off. A lot of managerial attention is traditionally focused on performance measurement and monitoring (i.e. the reward side of the equation), but all performance is essentially linked to risk as risk is intrinsic to doing business. Unfortunately, companies have ignored the risk side for too long. The recent financial and economic crisis has shown that a failure to integrate performance and risk management can leave businesses struggling in the face of uncertainty. For example, at some banks the group risk management function was alerted to potential subprime losses long before senior management appreciated the severity of the problem. In some cases, it was not until a presentation was made to the chairman that included both performance and risk aspects that the size of the problems became known to the board. As companies have become more global and complex, they have found it increasingly difficult to exercise adequate control over Âť
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both performance and risk across the organisation. That brings us to the question: how should companies go about integrating risk and uncertainty into their strategic performance management processes? Our CIMA-funded field study observations have shown that leading companies focus on the following three aspects: • upgrading their performance planning processes to deal with uncertainty and risk; • incorporating risk indicators into their performance monitoring systems; • and taking an enterprise-wide perspective on performance and risk.
Incorporating uncertainty and risk in performance planning The fundamental economic changes that businesses are faced with today are driving the adoption of more flexible performance management processes that are capable of dealing with uncertainty. For example, virtually everyone is talking about rolling forecasts nowadays. These continuously look one period or more ahead, enabling business leaders to manage performance and review strategic options on an ongoing basis. They are also used as a signalling tool for risk when the forecasts start to show a significant deviation from prior estimations included in the strategic and financial planning. Scenario planning and budgeting is another important trend in strategic performance management. Since no one can predict the future with 100 per cent certainty, especially not in today’s turbulent times, a systemic method for thinking through alternative scenarios becomes critical. The central idea of scenario planning is to consider a variety of possible futures that include important uncertainties, rather than focus on the accurate prediction of a single outcome. The result is a set of strategic scenarios that broaden the span of managers’ thinking about different decision alternatives and help minimise unpleasant surprises. In scenario budgeting, executives have to come up with draft performance objectives, think over potential threats
to the realisation of those objectives and then fine-tune their plans accordingly. That way, senior management is in a better position to “stress test” the strategic and financial plans that are being proposed to them for approval.
Towards risk-adjusted indicators for performance monitoring Many organisations believe that their budget-based performance management system is the primary way to monitor progress on strategy implementation. However, a significant portion of the strategic decisions that companies make cannot be tracked solely through financial measures and targets. Instead, an effective performance management system should provide a comprehensive yet focused set of financial and non-financial metrics against which managers can gauge progress of major strategic initiatives. For example, a company whose strategy is geared towards product innovation should use a variety of performance indicators, such as the number of new ideas in the pipeline at different stages in the development cycle and the quality of its R&D talent, in addition to the more traditional financial metrics, such as revenues. Performance management is most effective when it is based on a balanced set of financial, customer and operational metrics, with visible results, consequences and, importantly, embedded within a dynamic process that enables early detection of potential problems. One way to enhance a company’s approach to performance management is by integrating key risk indicators (KRIs) that show the riskiness of certain pursued activity into the measurement and monitoring system. Contrary to key performance indicators (KPIs), which are typically used as “lagging” indicators to monitor the company’s progress in strategy execution, KRIs are intended to provide early-warning signals (i.e. leading indicators) to help mitigate identified risks. Sometimes, the distinction between the two is subtle. For example, customer complaints might be treated as an indicator of poor performance or as a risk to business reputation.
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The first step in defining KRIs is setting the strategic goals and performance objectives of the company. These should then be analysed individually to identify uncertain events that can jeopardise their realisation. Once the potential risks have been identified, the challenge is to come up with appropriate indicators that can act as a warning signal that a given uncertain event might soon realise itself. For example, let’s assume that one of the company’s performance objectives is increasing sales to a key customer by ten per cent. One of the potential risks relates to the uncertainty that the key customer will not close the deal. KRIs that can be identified for this event include the customer’s financial health and his level of satisfaction with previous and ongoing deals. Including KRIs into the performance measurement system, together with thresholds and trigger points, allows senior management to increase the likelihood that the company achieves its desired performance levels.
Breaking through organisational silos in performance management The overall purpose of strategic performance management is to make sure that the company’s strategic objectives are realised, and that value is preserved and enhanced. As such, the process should begin with assessing the appropriateness of the company’s strategy and devising a plan to deal with the uncertainty and risks inherent in that strategy. In this regard it is important for senior executives to counter the silo approach in performance management that often results from organisational complexity and functional specialisation. For example, the budgeting system typically mirrors the organisational structure of the firm and focuses on the performance of functions, departments and divisions in isolation from one another. Organisational silos result in insufficient information sharing, an uncoordinated approach to performance problems and the lack of a comprehensive view on the totality of risks that the company is facing.
These problems can be mitigated by adopting an enterprise-wide perspective on performance management. This perspective requires that sufficient attention be paid to the interaction effects, i.e. how uncertainty in one strategic initiative might introduce counterproductive risks related to the achievement of strategic objectives in another part of the business. By looking at the total picture, business leaders are in a better position to evaluate the performance of strategic alternatives and ensure that they collectively support the desired strategic direction.
Key takeaways Traditional performance management systems and processes have been criticised for not helping businesses navigate effectively through today’s difficult economic circumstances. As companies go through turbulent times, they can no longer afford to use the static approach typically embedded in most planning and monitoring systems. It creates an illusion of control in a world that is characterised by high levels of uncertainty and risk. In this article, we advocate a dynamic approach that includes the management of uncertainty and risk as an integral part of strategic performance management. While performance management seeks to create value by exploiting strategic opportunities, companies should also strive to mitigate the hazardous consequences of uncertainty – just as risk and reward are considered to be two sides of the same coin. Risk-enhanced performance management must evolve from an ad-hoc event under pressure of the economic downturn, to a continuous process that is embedded within the company’s dayto-day management and governance processes. Unfortunately, many companies’ efforts in the area of performance and risk management seem to focus too much on documentation and procedures to meet regulatory requirements (“ticking the boxes”) and not enough on how to integrate performance and risk management for more effective, strategic decision-making. n
Prof Dr Regine Slagmulder Dr Regine Slagmulder is professor of accounting and control and head of the competence centre accounting and finance at the Vlerick Leuven Gent Management School (Belgium). She is also the director of Vlerick’s research platform on performance and risk management and a guest professor at the University of Ghent. Her research and teaching activities focus on the relationship between performance and risk management, corporate strategy and enterprise governance.
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Inter-organisational performance measurement: the next frontier in accounting research Lisa Jack, professor in accounting, Portsmouth Business School
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erformance measurement poses something of a definition problem to researchers, because it’s not quite clear who owns the subject. It has not been “professionalised”, as one writer says, in the same way as accounting, law or finance. A researcher in performance measurement will find relevant work in operations, human resources, marketing, management, operational research, information systems and other places, as well as in accounting. However, there are few interdisciplinary projects in performance measurement. Like the notion of management accountants being transformed into business partners in multi-disciplinary teams, management accounting research should be transforming into a team approach, with partners from different relevant disciplines. The “next big thing” in terms of research is in understanding performance measurement systems (PMS) for supply chains. In organisations or in research, this can only be a cross-departmental, multi-disciplined exercise. There is an immediate hurdle, however. In 2007, a study from The Netherlands observed that “supply chains lack accurate indicators of performance for comparison, benchmarking and decision-making,” but that “authors in different disciplines generally have different views on what a supply chain PMS should look like.” (Aramyan et al, 2007). Operational management researchers in 2006 identified a “dearth of research into performance measurement systems and metrics” (Shepherd and Gunter), while Professor Andrew Neely (2005) states that “how to measure performance across supply chains and networks rather than within organisations” is one of the urgent questions today (and there has not been much progress yet). Identifying appropriate supply-chain measures that facilitate relationships between supply-chain partners, and that have the potential to improve effectiveness in communication between them, is a challenge. The food supply chain, where I carry out much of my own research, provides a case in point. There are numerous food supply chains and a multitude of inter-organisational relationships within those chains. The chains themselves can be fragmentary and are characterised by a number of “one-to-many” relationships. Issues relating to poor communications, disparate IT systems, multiple
reporting systems and uncertainty about which metrics to employ can also be found here, as in other industries. A number of writers observe that “current supply-chain performance measurement systems are inadequate because they rely heavily on the use of cost as a primary (if not sole) measure, they are not inclusive, they are often inconsistent with the strategic goals of the organisation and do not consider the effects of uncertainty”. Accounting systems’ design can be incompatible with supply chain realities: “supply chains are about continuous processes, not discrete transactions, and about flow of costs – particularly logistics costs – not cost centres; they are horizontal rather than vertical and cut across internal and external boundaries. How successful are organisations at developing meaningful performance metrics for supply-chain management that are recognised in the boardroom and that are aligned with the company strategic plan?” (Craig, 2006). Can measures be forward-looking and incorporate intangibles and fair values as well as, or instead of, traditional rates of return? A number of case studies find a disproportionate focus on cost over non-cost measures, such as quality, time, flexibility and innovativeness, but relatively few measures concerned with the process of return, customer satisfaction or other supply-chain processes, such as planning, sourcing, making and delivering. Shepherd and Gunter (2006) found that 82 per cent of metrics identified in their study were quantitative rather than qualitative. They conclude that “one of the main problems with supply-chain metrics is that they are, in actuality, about internal logistics performance measures and do not capture how the supply chain as a whole has performed”.
Broader issues Getting the right measures, whether financial or non-financial, is not the only issue managers and researchers have to contend with when trying to establish inter-organisational performance measurement systems. The same authors identify benchmarking of supply chains, competitor issues, cross-boundary international studies and the cost-benefit analysis of implementing and maintaining systems as issues, as well as change management as key issues. In a wide-ranging state-of-the-art review in supply-chain performance measurement, Folan and Browne in 2005 found that “by focusing almost »
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LISA JACK Jack is professor in accounting at Portsmouth Business School. Her recent publications include: “From Gate to Plate” with CIMA Benchmarking for food and farming: creating sustainable change. Gower (2009) “Inter-organisational performance measurement practices between supply chain partners: issues for the agri-food industry.” Abdel-Kader, M. (2011), Review of Management Accounting Research, Palgrave.
completely upon the logistics control system, supplychain performance measurement cannot answer a number of wider ranging, more holistic questions; for example, how effectively the firms in the supply chain are interacting?” They also found that while academics might have developed frameworks for performance measurement, they have not been involved in the design of systems. In practice, “most of the PMS developed in companies are a collection of best practices that have been grafted onto various PM frameworks and are found to work anywhere between very well indeed – to very badly”. The important issues though, as Morgan wrote in 2004, are “whether or not the PMS supports an organisation in its current activities in a consistent and reliable manner; whether or not it will retain validity with the passage of time; whether or not it provides management with a balance of information that is relevant to the organisation’s activities and strategies; and finally, whether or not management use the information it provides in a proactive as well as a reactive way.” Most accounting researchers in this field have undertaken case studies, mainly based on the relationships between two particular supply chain partners rather than whole chains. These studies have tended to uncover and emphasise the relational nature of such partnerships, rather than their technical or functional nature. Some of the relationships covered are collaborative, others coercive. The success of the control and measurement systems put in place are found, perhaps as we would have guessed, to be more about how well individuals get on and how good the information sharing systems are in practice. Supply chains are prime sites for conflict and excise of power, and trust is paramount. There can be a fine line between sharing value and allegations of misappropriation of value.
Elements of socialisation Any PMS contains an element of socialisation, whether it is of employees, suppliers or customers. They are meant to influence behaviour and any undermining or enhancement of trust in joint performance measurement system arises because as Free (2007) says, “implicit in these arguments is the notion that accounting can provide forum and common language for learning and co-ordination”. Furthermore, “since a supply chain is by its definition a collection of multiple actors, each with their own specific objectives (and values and norms), a lot of effort has to be put in the development of a shared language, shared objectives, shared KPIs etc.” (Ondersteijn et al, 2006).
In food supply chains, there is extensive deployment of technologies that can facilitate data capture and processing, including electronic point of sale, efficient customer response, radio frequency identification and bar coding. There are a small number of open-book accounting schemes, and forecasts and inventory are communicated. Recent work by Professor Andrew Fearne and the Centre for Value Chain Research at the University of Kent indicates that there is still significant work to be done to improve forecasting in food retailing. This certainly ties in with findings from the CIMA “From Gate to Plate” project that I led, where forecasts and requirements of retailers were identified in focus groups as a difficulty in managing relationships in an environment that is generally said to be untrusting. Value-chain analysis has been effectively applied by some to identify improvements in information flows, but published versions of these analyses rarely indicate cost or financial information, and financial measures are less obvious in this particular industry. However, for researchers and organisations across industries it can be said that “our knowledge regarding process orientation and advanced planning across company borders is still in its infancy.” (Stadtler, 2005). One approach to developing inter-organisational performance measures in supply chains might be to develop generic performance measures that gauge the effectiveness of the supply-chain relationship for all parties that promote collaboration and value sharing. This would be a multi-disciplinary project, and one that would bring in practicing accountants, as well as academic researchers. Another approach is to build benchmarking into the PMS design and management. One surprise for many people is just how developed benchmarking is in agriculture at farm level in terms of production. Similarly, in retail and catering, customer and quality benchmarks are developed. However, there is less evidence available that process benchmarking is used to any significant extent. Linking performance measurement in supply chains to accounting approaches, such as collaborative target cost management, requires utilisation of benchmarking in setting fair measures. In a “From Gate to Plate” workshop in May 2011, we explored the links between TCM and benchmarking, and further research is planned. Inter-organisational accounting research is beginning to mature, and as supply chains and networks themselves become more understood and more mature forms, the potential for value sharing and collaborative supply-chain relationships will also develop. n
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Reviving the balanced scorecard It’s been 20 years since the balanced scorecard was first developed as a strategic performance management tool. Dr Alasdair Macnab, director of corporate services at the Royal Botanic Garden Edinburgh, explains why it is still relevant to public and private sector organisations today
tringent cost-cutting is an all too familiar reality in the current financial climate, but cost savings can prove to be false economies if organisations fail to understand the drivers of cost, risk and value. Public sector organisations need this knowledge as they gear themselves up to take bold steps to maintain optimum efficiency − otherwise they risk damaging the competencies they need in order to recover from recession and achieve long-term success. At the Royal Botanic Garden Edinburgh (RBGE) we have invented a new management accounting model, known as Strategic Objective Costing (SOC), which has allowed us to develop novel managerial structures that are significantly improving resource allocation and performance management. This model is based on the Balanced Scorecard (BSC) – developed by Prof Robert Kaplan and Dr David Norton – which sets out a framework of strategic non-financial performance measures, as
well as financial metrics, aimed at giving managers a more balanced view of organisational performance. The SOC model at RBGE did, however, require significant adaptation of the BSC approach. This is largely because RBGE faces different challenges to that of a private sector organisation because of the multiple requirements of its stakeholders. While reviewing income and costs against budget may suffice as a short-term management tool at a private company, it is not appropriate in the public sector. As a result, there is a need to adapt best practice from all sectors and to engage finance and other personnel to provide more relevant cost, risk and performance management.
A stakeholder approach An important part of the RBGE’s unique approach was to develop a “fifth perspective” as part of the BSC. The traditional model suggests that an organisation should be viewed from four perspectives, each with its own metrics. These are the learning and growth perspective, which includes metrics for »
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employee training and corporate culture; the business process perspective; customer perspective; and financial perspective. In addition, we decided to add a stakeholder perspective at RBGE, which meant that we could connect to the Scottish government’s “National Outcomes” – 15 goals that it wants to achieve by 2017. As a result, staff are now more aware of the government’s agenda and are able to see where their personal contributions make a difference to RBGE and, in turn, to the government. By understanding and relating to the macro-environment, RBGE is also in a better position to make the case for funding support from the government.
The true costs Another strength of the adapted BSC is that it can help with resource allocation when staff work away from their usual cost centres. For example, we can track when scientists or horticulturalists make a significant contribution to educational activities or visitor services, but this requires a suitable strategic costing system that is linked to the scorecard. Staff contributions can then be measured and allocated where their activities have directly supported strategic objectives in the organisational scorecards. This means that the accurate information on input costs can be married up with particular output activities, as well as being used to measure the cost of achieving each strategic objective or key performance indicator (KPI). Moreover, these strategic objective costs can be reconciled by the cost centre in an organisation’s financial management accounts, which has made it possible to allocate resources against particular corporate goals, what we call “strategic objective budgeting”. None of RBGE’s systems for managing performance, finance or human resources were previously set up in this way. This new system of cost accounting allows the
‘The BSC sets out a framework of non-financial performance measures to give a balanced view of organisational performance’ board and executive management to meet their governance responsibilities more effectively, because they have better information about organisational performance. What’s more, the management team can make the most judicious use of scarce human resources by moving staff from one objective to another to ensure that the overall corporate goals are achieved.
Employee engagement An organisation’s strategy is executed by cascading objectives, KPIs and targets down through the organisation. If the objectives and measures are effectively aligned to strategy − and the managers have been involved in developing that process − staff will have a greater understanding of the organisation’s strategy and goals. This should, in turn, raise levels of motivation and encourage staff to contribute. The implementation process at RBGE involved considerable engagement with staff when designing divisional scorecards and deciding on objectives and measures during the first phase, which started in 2008. Following this, we had further discussions on relevant measures to support the divisional and corporate scorecards last year. Many benefits have emerged, including a significant increase in engagement of staff in the strategy formulation process. This has resulted in improved »
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Dr Alasdair Macnab FCMA Macnab is director of corporate services at the Royal Botanic Garden Edinburgh, where he is responsible for accountancy and finance, human resource and estates management, and the provision of information and communications technology services. He also has specific responsibilities for corporate governance, board management, corporate planning, performance and risk management. He previously served with the RAF for 24 years and holds a BCom, MA and PhD. He is a fellow of CIMA and now serves on the research and development panel and on the research advisory panel of the Institute.
staff understanding of the corporate objectives and increased management awareness of where staff priorities are being deployed. In turn, this allows management to allocate resources on a more rational basis to meet strategic objectives. It also provides regular performance management reports, giving data on achievements and barriers to progress. These can help in marrying the costs of objectives with the actual achievements. The lessons drawn from the implementation of these structures within a single entity should be equally pertinent to a conglomeration of organisations attempting to work together. The leadership of the project team is critical in leveraging maximum benefit from such a venture. Provided adequate and committed leadership is in place, the BSC can be adapted to provide an intra-organisational management framework to improve coordination and allocation of common goals in the public sector.
Collective goals While many private sector firms operate as joint ventures, the public sector can also have strategic alliances to secure efficient and economic delivery of services to various groups. The current trend towards the use of shared services is one such example. It is also quite usual for different public bodies to contribute to common governmental goals. For example, a government ministry may sponsor a number of research institutes to carry out work under their individual management controls and then combine their separate research outputs in order to achieve its overall strategic goals. There will also be comparable bodies, nationally
and internationally, carrying out work that is similar in purpose. It is not unusual, for example, for a number of international botanic gardens to have scientists conducting collaborative research on the same group of plants. That knowledge can then be shared once their findings are published in academic journals. However, the time that elapses between the initial fieldwork and journal publication can be considerable â&#x20AC;&#x201C; decades in the case of major flora studies, which give an account of all plants in a specific geographic area. To avoid potential duplications of effort it could be useful to have a coordinating mechanism to avoid inefficiencies in the use of scarce resources. The exchange of knowledge can also be enhanced if a suitable performance management system is used to provide easy and rapid communication. This is most effective if it is web-based. The adoption of the BSC at RBGE has undoubtedly been a success, both internally and externally. Favourable comments on our progress have come from a range of relevant organisations, ranging from Audit Scotland and the Scottish government, to the University of Edinburgh and the Chartered Institute of Management Accountants. We firmly believe that this newly developed SOC model is an exciting addition to the array of tools already available to management and boards in the public and private sectors. By highlighting present limitations and future opportunities, it allows management and staff to steer a safe course through the storm of fiscal and strategic planning into calmer and more prosperous waters. n
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Increased influence The latest in a series of CIMA roundtables, in partnership with Oracle, saw attendees discuss a variety of issues driving the finance function’s move to be a more influential business partner esearch conducted by CIMA has found that more than 75 per cent of finance and management professionals globally reported that when finance works in a management supporting or partnering role, the organisation better fulfils its objectives. So how should finance professionals communicate strategy to different stakeholders? CIMA CFO John Windle told the recent roundtable discussion of CFOs, held at CIMA’s offices in London, that, with this in mind, the influence of finance and its people is elevated significantly – to help communicate the strategy throughout the organisation and to deliver it. “This inevitably leads to some changes in the finance architecture and structure, and the skills required to provide effective support, while still driving efficiencies in all areas,” he said. “We see an increase in integration of
finance people with the business units they support and partner with, so the skills required to undertake such roles successfully, and work alongside the operational units are also changing, and there is a requirement for increased focus in certain competencies.”
Centralised versus de-centralised finance Jim Martyn, attending the roundtable on behalf of the event supporting partner, Oracle, provided a perspective from a centralised finance function: “In a decentralised case you’re dealing with a management team that you’re really communicating the finance strategy to day to day, and are working with them to plan the following six, 12 or 18 months in a way that encompasses everything from the tax strategy to knowing which customers you’re going to go after, and so on,” he said. “If I switch it to a very centralised role it becomes completely different, because in a centralised role you’re getting direction. So the management communication
becomes completely different. You’re now in execution mode. “It is a completely different situation and has quite a lot of ramifications in terms of interest of job, career prospects to the finance people in that situation and so on.”
The drive towards becoming a business partner Another participant argued that the main driver to change in the finance function was driven by being more efficient, rather than by becoming a business partner. However, another – from a television production company based in London – said there was opportunity to do both at the same time. “We are embedded in the business, but we’re going through a little bit of
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a reorganisation at the moment, and whereas each of the operating companies did their own strategy in the past, what we found was that TV production might have a different strategy to TV distribution, and to the cable channels,” he said. “What’s happening now is we’re starting to be grouped together so it’s a much more efficient conversation. We’ve also got greater size and strength, and we’re able to have strategies that are more aligned – so when we’re negotiating with other companies it can be in a full suite of products, rather than each trying to get the best possible deal. “So I think what we’re trying to do is marry the best of both, which is having the relevance of doing it at a local level, but having the guidance and the framework of a more centralised function.”
The CFO of a major pharmaceutical provider echoed the sentiment that marrying the benefits of a centralised and decentralised approach is the ideal. “We have quite an interesting model in that our ethos is decentralised. The way we live on a day-to-day basis encourages entrepreneurialism at the lowest level of the organisation,” he said. “We have restated that our aim is to maintain our decentralised focus. However, from a finance point of view, we are being challenged and benchmarked – and we’re going through a significant amount of change around cost. We’ve really accelerated our outsourcing, mainly on what I would describe as the ‘back office side’ of the business. “On a monthly basis, I think 85 per cent of our standard journal entries are now done completely by a team in the Philippines;
we’ve moved our level one accounts receivable cash collections over there. “So basically the finance organisation that’s left is what I would define as the real business partner in the organisation,” he added. “Their decision support is trying to make a significant impact within the business.”
Change across different sectors A further point of discussion was the barriers that exist in some sectors to the finance function to becoming a closer business partner. A participant from the banking sector said it had a number of barriers to overcome before finance could play a more influential role – both cultural and technical. »
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‘We are being challenged and benchmarked, and we’re going through significant change around cost’ “Well, I think if we could actually become finance business partners, that would be a start. Banks are funny businesses,” he said. “Large amounts of money get thrown at the front office because a trader will say ‘if you spend £300m on this item, I can execute a 15th of a second quicker, or I can bring you £2bn’. And we’re glad if you do that. “But the backbone – finance as a unit – can be left with some really creaky systems. “Then you end up with a barrier in the shape of a shadow finance team. So the battle for us is how we get through to business leaders or functional heads to have that dialogue.”
Offshoring while retaining influence Another issue to arise was how, in light of a rise in the number of organisations offshoring parts of their finance function, they can ensure the next generation of finance talent and leaders are being nurtured – when the bulk of tomorrow’s leaders have traditionally emerged from the lower echelons of the business. One participant in particular said this was a concern, stating: “It’s a great point because under our model now, our talent is going to come from India, and I don’t know how that will work because there are cultural issues, there are family ties and it’s a long way. You can’t just jump
on a Ryanair flight.” Another participant agreed and suggested the trend of firms outsourcing to places such as India may soon change. “What I think a lot of people are failing to see is that many firms have outsourced some element of their service or provision of finance to India, but there is huge inflationary pressure in India today and in five to ten years’ time a lot of firms might be coming back,” he said. “When you look at inflation at seven, eight or nine per cent, the saving which is very obvious to a lot of people today will not necessarily be there in five or ten years’ time. “What’s more, you know you’re going to get to the stage where a lot of the skill set is not going to have been developed in the UK because of the level of outsourcing,” he added. “Firms will recognise they can’t just click their fingers and find somebody who is going to understand the whole concept of finance within five minutes. It takes time, it takes investment and it takes years of experience to get to a certain level. That’s something that people need to keep an eye on.” In addition to this, some participants said extensive outsourcing also risked damaging the value of the retained function, as the skills being outsourced were also valuable for demonstrating the finance function as a genuine business partner.
“Is there a risk that as we aggressively move towards an outsource model and typically outsource the technical side of the finance function, that the retained finance organisation become less skilled in the technical side of the business?” asked one participant. “I personally think that that’s a strong threat,” he added. “We’ve got really good qualified accountants, with good analytical skills, and the value they can bring can add huge value to a business. “That’s what CIMA’s always been about. It’s been about value so that when you look at a business deal, you’re evaluating what the key drivers are, reviewing the process and analysing how it changes the dynamics, looking at whether you can structure the deal in a certain way. It’s really getting the management to think a little bit differently and outside the box. “The second you start to move away from the business and into that centralised port, it’s a very dangerous way to manage the business,” he added. “You’re trying to save money as a cost efficiency driver, but you only get cost efficiency for a couple of years. The real increase in business is through revenue generation and through deal generation, and that comes through good guidance. That’s about having good, commercially smart accountants around the business.” n This feature was developed from a CIMA senior round table in November 2011 as part of CIMA’s work on the future of finance. Supported by Oracle: www.oraclecfo.com.
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Visibility, accountability and effectiveness: Louise Ross argues that strategic priorities should be apparent from the performance measures visible to external stakeholders and contrasts the practices of two organisations Strategic performance management (SPM) allows an organisation to monitor and report on its progress towards its strategic goals. There are two types of strategic performance measures – those demonstrating organisational progress and those used to evaluate individuals for performance that genuinely relate to strategy. Measures of the first type should be visible to those outside the organisation, because of the similarity between the internal and external reporting of strategy. The narrative reporting element in the organisation’s published accounts should consist of a high-level summary of the information regularly reported to the board on management’s progress against strategic goals. An examination of other organisations’ annual reports therefore gives a good indication of what elements of strategic performance they are monitoring and managing.
Good practice in SPM Strategic performance measures should incorporate the following key strategic concepts: • A long-term perspective. • The focus on competitive advantage and building organisational capacity. • The relationship between strategy and operational decisions. • A concentration on factors that managers can influence. They should also acknowledge other influences on strategy:
• The dependencies on significant external relationships. • The linked or integrated nature of strategic performance (that it spans the organisation). • The weight given to the values and expectations of organisation and stakeholders. Johnson & Scholes (two of the foremost writers on strategy) argue convincingly that strategy implementation – the ongoing process of putting the strategy into action and making it effectual – is more difficult than strategy development. However, it is almost inevitable for there to be a strategic gap between the intended strategy and the realised strategy
(i.e. actual performance). This is not just due to underperformance, but can also result from an intentional change in strategy driven by changing conditions. For profit-oriented organisations, research suggests an improvement in strategy implementation leads to an almost proportionate improvement in shareholder value. Strategic implementation issues can be considered under three headings, which constitute an organisation’s capability to succeed in its particular environment. It should also be noted that it is relative capability that is important – the ability of an organisation to perform better than its competitors.
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Photography: Getty Images
First, the management of resources, such as physical production capacity, talent, finance or intangible assets, such as the brand. This calls for strategic performance measures which ensure that resources (including the staff and management effort required to direct those resources) are applied to achieve strategic goals. Second, the suitability of the organisational structure and management culture. Strategic performance measures should assess the suitability of choices made with respect to organisational design and structure to deliver desired performance. They should also capture how decentralisation, accountability and autonomy interplay. Third, the management of change. Strategic performance measures should evaluate and report on how well organisations can obtain commitment from managers and staff to the strategy, and to amendments to the strategy. Some measures should also consider the relationships with stakeholders, such as suppliers and other organisations with which the organisation collaborates. Just as an organisation can choose from a wide range of operational performance measures, there are many different strategic performance measures, and organisations must chose their own. It is thus more useful to consider the qualities of an effective performance measure than it is to prescribe specific measures.
‘In essence, external reporting should be the top slice of management information that is used in board discussions’ Characteristics of an effective strategic performance system: • It limits the number of strategic measures that each team or person is responsible for. Each should not have more than seven or eight measures to monitor or for which to be held accountable. Likewise, the board should focus on a small number of key projects. • It incorporates interim milestones to help monitor progress and review whether a correction to the strategy needs to be made. • It sets measures that encourage the desired behaviour and thereby affect performance. It is underpinned by a reward system that supports strategy execution. Monitoring of performance is pervasive throughout the organisation and measures end-to-end performance, to prevent silo mentalities. • Results are presented timeously and in a usable format to help managers take decisions. An SPM system will also help to clarify strategy and communicate it throughout the organisation, which in turn helps to align effort to strategic goals. An SPM system will also share
information with external stakeholders on the progress against strategic goals. This article concludes with an examination of how well the SPM system fulfils the latter role in two organisations – Johnson & Johnson and the Man Group.
SPM at Johnson & Johnson Johnson & Johnson’s MD&A advises that its strategy is to achieve sustainable growth by targeting growth markets and achieving market leadership in these; and by developing new and differentiated products and services to sustain long-term growth. Specific KPIs include: • Proportion of sales accounted for by new products introduced within the past five years. • Proportion of sales revenue invested in research and development. • Worldwide sales in $ and percentage terms, change from previous year analysed by changes in volume, price and currency. • Five and ten year compound annual growth rates. • Sales analysed by business segment (consumer, pharmaceutical and medical devices). The MD&A, and J&J’s 2010 strategy, suggest the priorities are R&D, growth and cost containment. However, events during the past two years suggest that J&J should be addressing other strategic priorities. J&J have incurred significant avoidable costs owing to the settlement of legal actions related to deceptive marketing ($778m plus), bribery ($78m) and a significant patent infringement ($424m). It has also initiated about 30 different product recalls, resulting in some $900m in lost sales. Some recalls were prompted by the regulator, concerned that J&J had not responded to customer complaints about contaminated products. J&J product recalls are sufficiently frequent for the
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Wall Street Journal to publish a log. Concerns about these events have impacted J&J’s share price, which has underperformed those included in Standard & Poor’s Pharmaceutical Index, both in 2009 and 2010.
SPM at MAN GROUP Man Group is a British alternative investment management business that manages $26.8bn of private investment, mainly from institutional clients. It is also facing difficult trading decisions in the current climate. At the time of writing, all hedge funds are being adversely affected by nervous investors who are turning to cash. Man Group’s publication of its results at the end of September resulted in a 25 per cent drop in its share price5, although the Financial Times commented sympathetically on Man’s role as a leading indicator for the rest of the sector because of its policy of allowing investors to exit on a monthly, rather than the more normal quarterly, basis. A distinctive feature of Man Group is its transparency, as is evident from this comment: “The overall purpose of this Annual Report is to explain our strategy, discuss our recent performance and illustrate the sustainability of our business model.” Man’s annual report outlines its strategy and publishes KPIs which were set in agreement with the board and used by
it to evaluate progress against strategy. The KPIs included in Man’s annual report are intended to “illustrate and measure the relationship between the experience of the fund investors, our financial performance and creation of shareholder value”, and are reviewed to ensure they continue to be appropriate measures in the light of organisational or strategic changes. The financial and non financial KPIs included in Man’s annual accounts report compared performance against various industry benchmarks for private investors and institutional clients; the growth in funds under management and growth in revenues and trends in earnings per share and return on shareholders’ equity.
COMMENTARY ON CASES Not only is it more difficult to extract information on strategic priorities from the Johnson & Johnson Management Discussion and Analysis (MD&A), but those priorities seem not to be the ones which would be expected given the company’s experiences over the past two years, and its famed credo, which starts: “We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services.” One would have expected J&J’s strategic priorities to address the deficiencies in quality control to restore customer confidence, and to ensure that the values in its credo were lived throughout the organisation. Examples of such measures would be:
• Product quality (absolute and trend) – an index of defects identified by the customer. • Measure of responsiveness to problems identified by the quality control system. • Staff commitment and perception of managers’ commitment to values (measured by regular survey). In contrast, Man Group’s accounts show that it genuinely does use the top slice of Board reporting for the external reporting, and that its strategic performance measures are carefully chosen to support progress against strategic objectives. n
Louise Ross Louise Ross, BSc (Hons), CPFA, ACMA, is head of corporate performance management at CIMA. Her interests include performance management and changes in management accounting practices. She was formerly CIMA’s director of research. She blogs on CIMASphere and www.accountingweb.co.uk.
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A stake in the business Electronics and engineering giant Siemens has built a strong culture of equity ownership among its employees. We ask CFO Joe Kaesar to explain how this supports the company’s sustainable, long-term growth strategy Can you explain the origins of Siemens’ current employee share ownership scheme and its main objectives? Siemens established its first employee share programme in 1969 – but only in Germany and it wasn’t a huge success. In order to foster a global “equity culture”, we decided to redesign the employee and management participation. In 2008, we reviewed our equity-based compensation and decided to establish a share plan that would encourage employees worldwide to own a part of Siemens. And, as responsible leaders, we started with a mandatory share ownership plan for top management in order to set a good example to our employees. In 2008, the first wave of the Share Matching Plan was rolled out. We have driven the plan forward in four waves, and it has now been implemented in 54 countries. We will continue rolling it out and aim to make the plan available to all of our 360,000 employees around the world. Why was employee share ownership an important part of the company’s overall turnaround strategy and focus on sustainable long-term growth? With the Share Matching Plan, Siemens has resumed a tradition established by Werner
von Siemens. More than 160 years ago, he said: “In large businesses, which are impossible for a single person to oversee and control, a considerable part of the profits must go to one’s deputies.” His words are still valid today; while his “deputies” might have only been a few people at the time, today all Siemens employees are “deputies” in a way and carry on the heritage of the founder. Ownership drives motivation, as well as responsibility. As a result, employees who are also shareholders are more committed and inspired, and act like responsible entrepreneurs. Also, employee share ownership is an important tool for employment retention. Siemens’ most valuable asset is its excellent employees. We need to make sure that they stay with us, especially when companies worldwide are trying to attract the best talent. Can you explain some of the most important elements of the scheme’s design? Siemens’ equity culture should be comprehensive – driven from the top and reaching out to all employees, no matter what they do and where they fit in the organisation. Our top 500 managers are
committed to fulfilling the “mandatory share ownership guideline”. They have to be invested in Siemens, with between 50 per cent and 300 per cent of their base salary, which is about 100 to 600 per cent net of taxes. Furthermore, for the top 4,500 Siemens managers, part of the bonus is based on stock awards. Beyond this, we want to give every employee an attractive opportunity to be an owner of the company. Within our regular Share Matching Plan every employee will be able to invest up to five per cent of their base salary in Siemens shares. Based on an annual managing board decision, Siemens matches every three shares with one free share after a holding period of three years. So everybody within our company is able to have “skin in the game”. How has participation increased and what impact has this had on employee engagement and retention, company culture and business performance generally? The participation rate has been increasing since 2009: 117,000 employees across the world (35 per cent) have participated in the latest Share Matching Plan tranche. The individual volume of the personal investment into Siemens shares was practically unchanged. This is as a result of our employees’ commitment and demonstrates that they want to be long-term Siemens shareholders. The fact that the shareholder does not only benefit in successful times, but also participates in difficult times, encourages our employees to contribute to the success of the company. This is expected to have a positive long-term impact on Siemens’ performance. What is the company’s policy on share buy-backs to ensure that the value of employees’ investments doesn’t fall below a particular threshold? Share buy-back is one of the instruments of our financial toolbox. At our 2011 annual general meeting shareholders approved
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a resolution for share buy-backs of up to ten per cent of our capital stock. For the time being, we are not likely to buy back our shares, but we used this tool in 2007 and 2008 to adjust our financial ratios and it will always be an option for us in the future. How did the buy-back system work during the recent equity market collapse and how did you reassure employees during this period of volatility? Siemens did not buy back shares during this period. We keep cash and ample liquidity to remain financially and strategically flexible at any given point in time. Some of our competitiors got into real trouble by stretching themselves too thinly on short-term debt when commercial paper dried out, but we’ve always been in a comfortable position during the financial crisis. We are further convinced that a solid way of improving the share price over time is to create value by capital efficient growth in all our business sectors. Over the past ten fiscal years Siemens’ share price (including reinvested dividends) clearly outperformed Germany’s DAX index and the global MSCI equity index, delivering an average annual stock appreciation rate of 7.3 per cent. The goal of our employee share ownership schemes is the participation of our employees in the long-term success of
Siemens’ share price. The continuously increasing participation rate in our Share Matching Plan shows that our employees are supporting this goal. Since the financial crisis, and the collapse of Lehman Brothers, are employees more keen to separate their job from their investments? Even during the financial crisis the participation rate has been increasing. In our view this is proof of the confidence of our employees in the sustainable development of Siemens – and not without reason. Sustainability is a core element of our strategy and it is also a core element of our equity culture. We are proud that almost 95 per cent of all Siemens’ employees in 54 different countries are currently entitled to participate in our Share Matching Plan. To what extent has the scheme had an impact on the stability of Siemens’ share price and helped the business to focus on sustainable long-term growth? Today, about 117,000 Siemens employees are participating in the Share Matching Plan. In total, Siemens employees are holding around 2.5 per cent of our outstanding shares and we hope this will significantly increase in the future. Owing to employees’ long-term view
and their related trading patterns, these shareholders are a stabilising factor during periods of high volatility in the financial markets. n
Joe Kaesar Kaeser has been a member of the managing board of Siemens and chief financial officer since May 2006 and has special responsibilities for corporate finance and control, Siemens Financial Services, Siemens Real Estate and Equity Investments. This followed a varied career at the company dating from 1980. Before becoming CFO, Kaesar spent two years as chief strategy officer and prior to this he was part of the executive management team at the company’s Information and Mobile Communication Group.
Industrial ecology pays
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Waste has become a valuable commodity at global cement manufacturer Holcim Group – as a source of alternative energy. Mayuri Wijayasundara, head of relationship management, Holcim SL, and Sudarshan Senaratne, managing director, Development Concepts, explain Waste is not considered “dirt” at global cement supplier Holcim Group, where waste processing has generated energy savings and helped the company to significantly reduce the cost of energy. In the past few decades the company has developed a strategy of using alternative fuels and raw materials to produce environmental, economic and social benefits for the business as part of its principles of sustainability. Environmental initiatives focused on industrial waste co-processing in cement kilns, which helped to reduce emissions and the use of landfill, as well as conserving natural resources. Co-processing is the core operation associated with both cement manufacturing and waste destruction. It is where two processes happen simultaneously in the cement kiln, where cement production and waste destruction take place in temperatures as high as 1,450 degrees celcius. This led to the creation of Geocycle, a new business unit under a separate identity that operates as a player in the waste management industry. Geocycle not only generates completely new revenues by providing services to industrial waste generators, and therefore economic benefits for Holcim, it also helps the company to achieve its own environmental and social goals. Holcim operates worldwide and has a presence in more than 70 countries, but this article focuses on how Holcim Lanka, its Sri Lankan business, has benefited from adopting sustainability best practices developed at group level. Most of these key strategic changes started with the creation of Geocycle as a department of Holcim Lanka in 2004.
Economic sustainability The starting point for measuring the economic benefits of Holcim Lanka’s sustainability strategies was the use of indicators that were simple and easy to understand for economic performance measurement. This made it convenient for the management of the business – as well as ground-level sales and technical staff – to relate to the business objectives quickly when making decisions. The economic sustainability of Holcim Lanka, including its Geocycle operations, is measured as the absolute gross added value (GAV) to the cement business by using alternative fuels and raw materials, as opposed to using traditional fuel, coal and heavy furnace oil. The GAV to the business is measured through two means. The first is net value addition to the fees that Geocycle earns from industrial businesses for disposing of their waste, minus the cost incurred to prepare and pre-process the waste to provide a compatible alternative fuel to the cement kilns. The second is the value addition of using a cheaper alternative fuel that is used to power Holcim Lanka’s cement plant, instead of the more expensive traditional fuel source, typically coal. This creates a “replacement benefit” by allowing Holcim Lanka to make savings on traditional fuel costs. A net cash benefit will apply if Geocycle is able to manage the costs to supply professional services to the industry, as well as costs to convert the waste material into an alternative fuel that is less than the service fee from the industry. The business also has simple metrics for measuring these benefits. Finance managers, for example, use their analysis to derive the net cash benefit to the business and the substitution benefit in absolute terms. The thermal » »
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‘A simple calculation in front of a client can derive the economic benefit a waste stream brings’ substitution rate, which is the percentage of thermal energy generated from alternative fuels as opposed to traditional energy, is another such indicator. Meanwhile, a salesperson can quickly perform a simple calculation in front of a client to derive the economic benefit that a waste stream brings to the business compared with the heat generating capacity of waste and coal. It is then possible to understand the commercial viability of a waste processing proposal during a negotiation. The overall economic benefits to Holcim Lanka’s business have already been substantial. Geocycle has been able to increase the contribution of waste to Holcim’s total energy from 6 per cent to 30 per cent between 2003 and 2011. The substitution of waste for traditional energy also shielded the cement company from a sharp rise in the price of coal, which has recorded a compound annual growth rate of eight per cent since 2003. Becoming an industrial waste processer and a service provider has also generated savings from the operation of waste management services for Holcim, which has grown 56-fold between 2006 and 2011.
Environmental sustainability Geocycle has also made a significant contribution to the company’s environmental sustainability through the direct reduction in CO2, and indirectly by
converting waste into a less polluting final product through co-processing. For example, Geocycle has prevented about 50,000 metric tonnes of waste per month generated in Sri Lanka’s Katunayake Export Processing Zone from being dumped in landfill sites, which previously caused soil contamination, unsafe working conditions and the spread of disease. It has similarly helped to prevent the dumping or open burning of hazardous chemicals, rice husk, sawdust, polythene and plastics by destroying these through co-processing.
Social sustainability The company has also been able to generate a number of social benefits in Sri Lanka as a result of its sustainability initiatives, such as the creation of jobs, the development of the waste management industry and improvements in environmental regulation. It has, for example, created 85 internal jobs since Geocycle became a department of Holcim Lanka in 2004 and more than 1,000 jobs at its partner companies. It has also been a pioneer in setting up best practices and standards for professional waste management solutions in the industry. This involved the creation of safe working practices in waste management, a culture of risk assessment and control and more standardised regulation. The best example is the Material Collection Centre in the Katunayake Export Processing Zone, where more than 200 families started to work in a professionally managed waste collection site – instead of an open dumping yard for bulk waste – after Geocycle standards were introduced. Geocycle has also helped to enhance the legal and regulatory framework relating to environment and waste management in Sri Lanka, in partnership with the country’s Central Environmental Authority and the Provincial Environmental Authority of the North Western Province. The initiative has also helped small- and medium-sized
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businesses to grow as partners in the conversion of waste into sustainable end-products. Geocycle was able to set an industry benchmark for safety and environmental practices in the pre-processing and co-processing of waste by passing technology and know-how on to its partners.
A local approach One of the most important lessons learned at Holcim Lanka is that a global sustainability strategy can be successfully adopted in a local context by partnering with government institutions, industry partners and the local community. This can add value to all parties and help to drive economic growth in harmony with the environment. There are, however, several challenges that must be overcome. First, it is important to tailor the business and market strategy to suit the local context, with a clear segmentation and focus. This involves striking a balance between shortterm returns through opportunistic sales and the long-term growth of business through a more focused sales strategy. Sales people must therefore be aware of the unconscious and conscious needs of interested customers, who have a commitment to obtain an environmentally sound solution for their waste. It is also possible to generate equity value through professionally handling key projects. Effective communication is also critical. This is necessary to involve major stakeholders, such as government authorities and institutions, in consultation at key points on projects. Management must also focus on identifying key messages and delivering them effectively in order to build up awareness about potential solutions and gain acceptance one step at a time. Finally, it is essential to use simple and clear indicators that are customised to suit the particular business activity so that they can be used to measure economic performance, and as part of the
â&#x20AC;&#x2DC;The company has been able to generate a number of social benefits as a result of its sustainability initiativesâ&#x20AC;&#x2122; management decision-making process. The use of indicators, such as GAV and the thermal substitution rate, explained earlier, provide clarity for operational control and help management to assess financial performance by relating it to business strategy.
Strategic challenges Creating a completely new business, such as the Geocycle waste management unit, within a traditional cement business also creates challenges. The company must strive to align the management of two quite different businesses in order to improve the operational and economic performance of a single process, while Geocycle must also develop its own corporate image and communication strategy. This contrasting strategic and operational aspects of the two businesses also need to be recognised. Holcim Lanka operates in the heavily capital intensive, steady cement industry, while Geocycle is part of a dynamic but volatile waste management industry, and must be responsive to rapidly changing market needs. This creates big opportunities for Geocycle in adapting to the waste management needs of industry, but the direct benefits across all aspects of the triple bottom line are vast. n
From finance manager to business leader
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The role of the management accountant is fast evolving, and today’s CFO also needs to be an influential business leader. We ask three leading FDs – Tim Clancy of Lifestyle Services Group, Karen Booth of Carillion plc and Chris Sparkes of BAE Systems to explain the qualities and experience needed to be an effective business leader
Karen Booth, finance director, Carillion plc The journey from finance manager at the middle level up to the FD’s job is, to my mind, much more about becoming a more rounded business person. At FD level, it’s not about being an accountant anymore, it’s about understanding the business people are working in and making connections with the operational and commercial parts of it so that you understand their concerns. As FD, you have to try to understand the things the operational people are facing every day so that when you’re asking for them to submit something to you or for their input, you’re doing it in a way that they understand what is required. You need to be able to speak their language. Take this example: in the employment agency business the consultants who are putting people out to work think about it in terms of man-days or man-hours. So when talking to them about their profit and loss account, you ask them about how many people they’ve got out that week and you can translate that into a set of numbers. You ask them the questions that they understand and they are living and breathing every day, then you can use that information and translate it into the finances and numbers. Alongside that, part of the challenge is being able to demonstrate support when it’s required, and to challenge. So I think as a FD you have a dual role. You are a business leader and part of the senior management team, but you are also somebody who’s got to deliver a set of numbers, and you can’t do it on your own. So everyone has to understand what the goals are and since I’ve become FD I’ve realised a lot of the job is about communication and about bringing the numbers to life for the people that are working with you. Of course, you have to adapt as you progress up the corporate ladder. I’m quite a direct individual and I sometimes have to moderate my style to suit the
audience. That’s something that I have worked at, and I’ve been helped over the years by several mentors. I’ve probably picked people who are very different in style to myself for that very reason, just to understand what a different approach looks and feels like. Working with them helped me to consider the approach I adopted in certain situations to ensure I got the right result. But ultimately you can’t fundamentally change yourself and I think one of the things I’ve had to wrestle with is finding a management style that I am comfortable with and that is natural to me. Alongside that, I’m a big believer in choosing your team as a combination of personalities working together. If you’ve got a very strong technician in the team you probably need a fairly good communicator and somebody who’s a bit broader in scope to complement them. To anyone who wants to make that step up, I would say take an interest in and understand the business that you’re working in; connect with the people and demonstrate leadership because leadership qualities and interpersonal skills are absolutely key in an FD. Second, be true to yourself, and then I’d also say have a sense of humour. Lastly, don’t always think you have to be on a direct upward career path. I’ve taken various side steps, which have broadened my experience and then led to different opportunities. Don’t always think that your next move has to be a promotion. Taking a sideways move sometimes gets you there faster. As you broaden your experience you widen your network, widen your horizon. Working in a large organisation opens your eyes to the opportunity, and don’t always think you have to be in a live finance role to enhance your experience and your career. Sometimes it’s about spending some time on a project doing systems implementation, just so you’ve got that in your basket of tools to bring to a bigger role. »
Karen Booth Booth is currently finance director – group services and planned maintenance – at Carillion. She recently ran a large change programme for the group and, from early 2012, will be taking up the post of senior vice president and CFO for Carillion Canada
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Chris Sparkes, finance director, BAE Systems After a spell in practice and then internal audit I went into industry. I originally joined BAE Systems in 1990, working in the manufacturing side, then progressed to financial reporting manager for the predominantly commercial business unit that reported into BAE. In 2000, Airbus split from BAE and I took the Airbus route. I was the head of accounting and tax at that time and then became the CFO for Airbus in the UK. In 2008, I decided to leave Airbus and became finance director for the munitions business within BAE based in Wales. In April this year it was one of three businesses that made up a group called Global Combat Systems, of which I am now the FD. Looking back at my progression, I think you’ve got to learn not to try to do everything. You’ve got to let go and trust that you’re going to have to review it after somebody else has done it. You can put a few pointers on the way you want it done, but you have to sit back and let them do it. Since you have less time, you can’t do everything. But that is a really good opportunity for the people under you, because my philosophy has always been that not everything has got to come through me. A big part of the leadership of the FD’s role is giving your team the opportunity to present themselves and show how capable they are. It’s good for the team in that it gives them lots of exposure; in the past that’s helped their careers because the senior guys often say how impressed they were with the team. I was lucky that I had similar opportunities on my way up. One guy I worked with was incredibly supportive and he’d say, “Will you come and present these figures at the meeting with the senior people?” I also found myself in a position where between myself and the FD was a financial controller and I had a spell when the financial controller wasn’t there, so it gave me a lot of exposure and made it easier to step into the role as I progressed. I mentor a number of guys on our graduate scheme. When I talk to them about career progression, I tell them that with finance people, technical skills are a given. Everybody’s a qualified accountant. Everybody is technically able. But what sets you apart is what else do you bring to the organisation. Are you proactive? Do you make sure that you contribute, even if you’re not asked to and even if it’s not specifically on finance? Those people who put forward a view and try to take part in management beyond finance will prosper. During my career, and it’s something I’ve taken into the FD’s role, lots of people have said to me to get good
people around you. Keep them motivated. Keep them interested and stretch them and then you’ll do well. Have a core team around you and, to be honest, that reflects on you. When I think about what gets you beyond the middle management level, to my mind it’s enthusiasm, proactivity, being a strong part of the team, being the one that goes the extra mile, being helpful. Those are the things that people value in their team. They don’t want somebody who just sits in the back office and keeps the score. They want a problem-solver. You gradually learn that if you want to make it to the FD’s office, that more and more senior people in organisations have the attitude of, “OK, I know the problem, what are you guys in this part of the business doing to overcome it? What’s your action plan to get back on track or compensate?” As someone who wants to make it as an FD and a leader, you’ve got to be able to say to the board members, “Well, we’ve got some difficulties over here, but this is what we’re looking at to compensate.” That’s all about working with the leaders of the actual business that you’re in to try and put things over in the right way.
Chris Sparkes Sparkes joined private practice straight from school, studying accountancy. He moved into industry in 1987 as an internal auditor with Westbury Homes. In 1990 he joined BAE Systems and (then British Aerospace) as a management accountant working in Aerostructures in Filton. In 1993 he qualified (CIMA) and moved into the engineering division of Airbus as senior management accountant. After working in project roles and further management accounting roles he became financial reporting manager in 1999. In 2000 he played a lead role in the formation of Airbus. In 2004 Sparkes became CFO of Airbus UK reporting to the Airbus CFO in Toulouse. In April 2011 he was appointed as finance director for Global Combat Systems within BAE Systems.
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Tim Clancy, commercial finance director, L&W Investments I think one of the things that’s important in the early days of one’s career is to get broad experience and a thorough understanding of both financial and management accounting. So, for example, in my time at my first employer, Courtaulds Textiles, I was the accountant for a small retail business unit, which gave me my own P&L and balance sheet to manage. This allowed me to see the full picture of how we put our accounts together and that’s been very useful as I progressed in my career – I felt I had that thorough knowledge of accounting early on. After that, a lot of my subsequent roles were more about commercial accounting, where it’s not so much about thoroughly understanding debits and credits and double entry, but more about understanding how to deal with people and how to influence them. And those types of roles, with their exposure to commercial and salespeople, allowed me to learn a lot. I gained a new perspective on a range of issues and also learnt about different management styles. Later on in my career, I spent ten years at MyTravel, including two general management roles and managing overseas businesses and the company’s high street retail operation. And as I have subsequently moved back into finance that experience helped me understand the commercial drivers. That in turn makes it easier to influence board colleagues, having experienced their roles. At the same time I think it’s important for people to have a mentor; certainly I’ve had one or two in my career. There were a couple of people early on, FDs I worked for who shaped how I go about things now. And I think that’s really important that I try and give the younger guys as much advice as I possibly can, as it’s an important part of the FD’s job. When approaching a task I explain why we’re doing things to try and give them as much context as possible and guide them. At that stage they should be like sponges trying to soak up as much information as possible.
And to those who express an interest in reaching the FD’s role, I’d be asking them how broad their experience is; is it in financial accounting or commercial accounting? I think at that stage to make the jump to FD so you’ve got to have that broad experience and I’d also be interested in people who are able to focus on detail, focus and know their numbers inside out. Sometimes people think being an FD is about pulling together fancy strategy plans and not really understanding the details of the business. That’s not true, because when you’re presenting a business plan or a budget, people often want to delve into the detail and you need to be very sure you understand it all, and are able to apply it in a more strategic manner. And then, when you’re aiming to reach a senior role, the other thing is understanding what your leadership style is. It’s helpful at some point to get a bit of theory on that and to get some personal development training because I think what sometimes differentiates people at this level is how they can work with people on the rest of the board. I’ve interviewed a lot of people who are technically very good, but don’t have that leadership capability – there’s just something missing sometimes that prevents them taking the next step. n
Tim Clancy Clancy is currently FD of Lifestyle Services Group. Prior to that he spent ten years in the travel industry in a range of senior management roles before moving on to Shop Direct Group as commercial finance director.
This feature is part of the CFO Priorities programme, which includes articles, papers and interviews. Supported by Robert Half. www.cimaglobal.com/priorities.
Pulling the purse strings Economic uncertainty is encouraging companies to tighten up their cash controls. Marina Wyatt, CFO of navigation equipment maker TomTom, and Antony Barnes, director of tax and treasury at information services company Experian, explain how their approach to cash management has changed since the credit crisis began
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What challenges have the financial crisis and ongoing economic uncertainty created for cash management? Marina Wyatt, TomTom: The main challenges that the credit crisis has presented are the need to manage our working capital more tightly and to closely monitor the financial performance of our customers, because of the higher risk of companies going bankrupt. To run the business more tightly we’ve reduced the inventory in the supply chain − with our manufacturing partners and in our warehouses − so we’re not left with high ongoing inventory commitments in a downturn. This year, we’ve taken about €50m out of an inventory that was €130m at its peak. In fact, the whole supply chain has tightened up. Our distributors and retail partners are also holding less inventory and are ordering later so they want us to be able to respond with the delivery of shipments much faster. We also have to be more sensitive to signs of increasing demand and changes in the products that customers want, and know how to manage that. This means that we all have to do our jobs better − we need stronger market intelligence, better sales forecasts and our procurement team to be completely in sync with the sales force, because we have less buffer stock.
Antony Barnes, Experian: The company has always been well funded from diverse sources so the credit crisis has not created any undue challenges. In general, we use any surplus cash to pay down drawings on our revolving credit facilities. When we have deposited cash we have continued to be vigilant in monitoring the quality of our counter-party institutions. What changes have you made to improve liquidity in recent years and what have been the results? Marina Wyatt, TomTom: Our priority is to optimise how we use cash, which means we have to make sure
there isn’t any cash sitting in bank accounts around the world that we can’t use or pool for interest purposes. What we have done is to minimise the amount of cash held in non-core locations and reduce the number of bank accounts we have in order to concentrate the cash. We have also automated daily cash pooling around the world, which frees up more cash for our operations. As a company with operations in more than 40 countries we would like to have one bank, but in reality it is hard to find one with a global network. The financial crisis has exacerbated that problem because banks have tended to retreat into their core markets. That means we can’t pool cash completely worldwide, but we have done it regionally in Europe, the Americas and Asia Pacific. Antony Barnes, Experian: We have applied our policies consistently and hold substantial undrawn facilities committed by a syndicate of high-quality international banks. We have experienced no difficulties in drawing under those facilities and have increased the number of countries in which customer payments are received in accounts and swept those into global cash pools, which has speeded up the availability of incoming cash. How have you altered your banking relationships and funding strategy over the past few years, and what benefits has this had for management? Marina Wyatt, TomTom: We fund our operational needs using bank debt to the extent that they are not financed by equity. What has changed is that our relationships with our core group of banks have become closer. We have maintained open dialogue with them, made sure they have a good understanding of what is going on and managed their expectations. They have been keen to understand the business and we’ve been able to secure the finance that we’ve needed. Antony Barnes, Experian: The company continues to seek banking relationships with a diverse range of
Marina Wyatt Wyatt joined TomTom as CFO in February 2005, ahead of the company’s initial public offering, after three years as CFO at Colt Telecom. Before this, she was CFO of mobile computers company Psion between 1996 and 2002 following two years as group controller at the company. Wyatt also spent nine years with Arthur Andersen in the UK and the US.
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high-quality international institutions to ensure that we have access to an appropriate range of banking and funding services. Experian signed a euro medium-term note issuance programme in 2009, issuing €500m in 2020 notes under that programme last year and €400m in 2018 notes this year. We regularly evaluate other possible funding sources and possible banking partners. To what extent is your treasury function centralised and what are the benefits of centralising cash-flow management? Marina Wyatt, TomTom: Our treasury function is centralised for Europe, the Middle East and Africa and we are in the process of centralising these operations for Asia Pacific and the Americas. Eventually, we want treasury and cash-flow management to be fully centralised.. The main benefit is that we can optimise how we use our cash if it is controlled in one place and protect the business against problems such as fraud. Where this approach can fall down is if we centralise so much that we make it difficult for our local countries to run their businesses, because they have insufficient cash balances. One of the lessons we learned as we moved all of our bank accounts in Europe to a single bank is that you have to make sure that all the special arrangements, such as direct debits, from the previous bank accounts are moved across. When something stops being paid because you don’t know what it is, then it creates operational problems for local managers. Antony Barnes, Experian: Our group treasury function is centralised in Dublin. Cash flows are received in operating businesses, but centralised to group treasury as soon as possible. The benefits are the reduction of working capital and faster use of funds. Operating businesses report cash balances regularly and these are monitored and controlled by group treasury, group finance and the group treasury committee. What lessons have you learned about how to optimise the accuracy of cash-flow forecasts? Marina Wyatt, TomTom: We have worked on improving the end-to-end forecasting process from sales, through the supply chain, to the components that we buy in our factories. That process hasn’t changed, but in times of economic uncertainty we carry less buffer stock so everything is run more tightly. That puts more stress on the system if the sales forecasts turn out to be wrong because of an error, or because a customer decides they want a different product. The more accurate the
‘The more accurate the sales forecast, the better we can run working capital’ sales forecast, the better we can run working capital. What advice would you give on clear communication with business managers at different levels in order to remove any obstacles to effective cash management? Marina Wyatt, TomTom: The most important thing is for business managers to understand the forecasting process inside out, know what they are responsible for and understand the importance of forecast accuracy. We’ve always run forecasting as a cross-functional process involving all the relevant people, and senior management take it seriously. My advice is to have a forecasting cycle that is followed at the same time every month. You can then measure forecast accuracy, refine the process and demonstrate the impact of inaccuracies to the sales force. We also include forecast accuracy as part of the performance measures used to determine sales commissions in order to reinforce the correct behaviour. Another important issue is to ensure that business managers involved in negotiating contracts with customers or buying products understand that the working capital terms (the collection and payment terms) are not given away as part of a negotiation. Payment terms can be given away too readily when people are chasing revenues. Antony Barnes, Experian: It is important to emphasise that the “order to collect” cycle does not end when customer payments are received, but only when that cash is available for other group purposes. In practice, this will normally mean when the cash has been centralised to treasury. So the group must work to maximise the automation of cash sweeping and centralisation, while monitoring and moving balances in countries and banks where this is not possible. n
Antony Barnes Barnes was appointed director of tax and treasury at Experian in July 2011, with responsibility for global tax, treasury and insurance activities. He had been group treasurer of Experian since its demerger from GUS in 2006, having joined GUS as group treasurer in 2004. Before this, Barnes held senior treasury positions at pharmaceuticals firm Amersham, where he managed currency and interest rate risk and global cash, and Toyota Motor Finance. He was previously at Midland Montagu (now HSBC) and qualified as a chartered accountant in the growth companies group at Deloitte Haskins & Sells (now PwC).
The tools of decision making
A CIMA roundtable discussion in partnership with SAP brought together ten CFOs to discuss how benchmarking, KPIs and data â&#x20AC;&#x201C; whether accurate or fast â&#x20AC;&#x201C; can help the finance function play an increasingly pivotal role in informing business decisions
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t the latest in a series of CIMA-hosted roundtable discussions, this time in partnership with technology and software provider SAP, ten leading CFOs discussed a number of issues relating to the role of the finance function in the wider business. A major part of the discussion, held at CIMA’s London office, was the impact the finance function can have as an influencer on decisions, support and strategy through working collaboratively with the rest of the business. It was broadly agreed that, as finance evolves into a more influential role across the business, benchmarking and performance management are increasingly being deployed by organisations. One participant, speaking of her experience in implementing performance measurement tools, specifically within the public sector, said that they are often used differently in the private and public sectors: “Performance management as a tool is great if you’re actually going to enforce and help drive change, and be systematic about change. Within the public sector you find it is used as a tool to say to the government, ‘are we doing a good job?’ or ‘we’ve done what you’ve said’, but then does it actually make a difference? If, however, you take a pharma client, that organisation would be more likely to use that type of performance management knowledge to look at the whole business model holistically and actually work through an end-to-end process to measure the impact of strategy – not just on a one-year timescale but three, five, seven or nine years. That is very different.” A participant from the private sector agreed: “We find that benchmarking is quite an interesting tool with which to measure ourselves, both internally and against the competition. It’s something that’s very healthy, in my opinion.” Another member of the discussion group, from the pharmaceutical industry, agreed, adding: “I think the metrics and the performance management is embedded now. It is in our blood at the end of the day. It’s done and dusted.” However, while the participants agreed that performance management and measurement was now embedded in most organisations, one participant raised a question around benchmarking and finance costs, recalling a discussion she recently witnessed between two finance professionals on the subject. “Is finance really an overhead, now that we’ve got this businesspartner and value-creation role, where we really are
growing the organisation and helping business partners be more profitable and enter new markets – should we be seen as an overhead?” she asked. And secondly, should finance be benchmarked, for example to ‘x’ per cent of total turnover?” In response, one participant argued: “Yes, finance is an overhead. From an overhead it’s moving to ratio – and it’s a declining ratio.” In response, the person who originally posed the question added: “I guess the case I was discussing was where the finance function was being told ‘you’re a bit fat versus your quartile, you need to trim and obviously you know we’re in crisis’. The vice president for finance was adamant that actually this crisis is when you need finance to actually show you where you can get better efficiencies, whether that’s cost or process, but also where that real value is. And he was locking horns with a global CFO and CEO as to whether or not the scissors would actually come out.” “I think it varies,” added another attendee. “One senior leader once said if there’s a fire, the last person they want on the ladder is a finance person. I think finance is going to be under constant pressure. Within my organisation we have made finance leaner, made it more efficient, made it more effective. I think that’s the only way you can benchmark in terms of the finance in the system, making sure that you’re getting the right productivity out of the finance people. Continuous improvement is probably the key thing that you can only hope for in a finance function.” Wrapping up the subject of benchmarking and performance measurement, the host of the roundtable event, CIMA’s Robert Jelly, asked who is responsible for driving the growing influence of the finance function within organisations – whether it is finance or demand from the rest of the business. “It’s a mixture,” Santosh Takoor, from event partner SAP commented. “I talk to customers a lot, as you can imagine, and it’s a mixture. In a lot of cases finance has point problems which it is trying to fix and maybe that can be the trigger point for the bigger efficiency drive across an organisation. So the other functions ask me for better performance, better reporting, better ‘x’ or ‘y’, a better service out of finance.”
Information – accuracy versus speed Another major discussion point was the role of information in terms of using performance information and data as a successful management support tool. Raising the subject, Jelly said: “I have learned just through this process this new phrase ‘big data’. Years ago we talked about analysis paralysis – in other words »
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so much data that either you’re overwhelmed by it or you start to make almost silly mistakes. I think the issue with data today is about going back to basic skills, stepping back and saying, ‘does this make sense?’ Elena Shishkina, CFO UK&Ireland, SAP, said that providing both detailed and usable ‘big data’ was a difficult balancing act. “I have a strong view that the information has to be timely, in real-time and accurate,” she said. “You need to have systems and processes. You can’t have a trade-off between time and accuracy. The two have to come together.” Another attendee, from another pharmaceutical company, argued that speed or accuracy of information was the crucial issue with data and performance information – depending on what it’s required for. “If you want to make a decision, you’ve got to be in a position to provide ‘what if’ scenarios. For me, if I can get 80-90 per cent accuracy in that information, I’m comfortable with that, because ultimately it should start off that trend to say ‘OK, we can discount that and move in this direction’,” he said. “So I think time is probably the key – the accuracy can suffer a bit. However, when you go down that route, and as you go further into the funnel as there’s data coming in, then you can really worry about the accuracy to get it right. That’s the way I think people make good, quick strategic decisions.” Another participant agreed. “I’m a little aligned to that view in the sense that from a strategic point of view the accuracy of the initial data set is not the biggest part of the decision-making process by any means,” he said. “So rather than waiting to have a 100 per cent crystalclear vision of exactly where we stand now before moving forward, and then the first decision you make is whether the market’s going to grow or not. For me, it’s more about timely data. “And as part of timely data, I’ll often be prepared to lose accuracy, because what I need is summarised data,” he adds. “I simply can’t cope with the volumes of data – by product, by channel, by customer – that can be thrown at me by various systems. So I’ve got people that I spend a lot of time with before and outside of decisionmaking processes, trying to work out what kind of summarised data is going to help the decision-making process, and enabling them to produce that as quickly as possible so that I’ve got a way of tracking the business that I can understand. Otherwise I physically can’t handle it all.” Responding, Santosh Takoor of SAP said: “So some questions: ‘what if you didn’t have that trade off? What if you could have 100 per cent of the data without waiting? Would that be useful?’ That’s what we’re trying to do. The customer is asking us for that.” “Don’t get me wrong, I think I would be interested in that, and I’ve embarked on several projects to deliver
that, although I’ve never delivered it,” the original respondent remarked. Summarising this issue, one respondent commented: “I think there are two issues here. There’s one which is the history, and that can be 100 per cent accurate and 100 per cent timely. Then there’s the bit that’s often colouring the judgment and the decisionmaking: the assumptions, the expectations, the forecasts about how we are going to grow, about what the competitor is doing. These are things that aren’t recordable and aren’t in our nice, tidy system. So I think the system handles all the history and probably handles that with close to 100 per cent accuracy and in close to a timely fashion. With the intuitive stuff you’re making your 80/20 (per cent) call. And, if it’s 80/20, I think it’s a pretty sound call.”
KPIs as a measurement tool Another major topic of discussion was how businesses can apply consistent key performance indicators (KPIs) throughout the organisation. One respondent, from an an engineering and infrastructure organisation, said that one difficulty with KPIs can be standardising them in global businesses. “I think it depends on the organisation. Our organisation is a little disparate to have a set of standard KPIs, so I don’t think that works and, interestingly, it doesn’t necessarily even work across geographies,” he said. “KPIs have to reflect the local markets, the local conditions, and benchmarking with externals is probably more meaningful sometimes than trying to standardise right across every function, every department and every sector,” agreed another respondent. “We have some consistent KPIs in terms of what is measured, with a different benchmark standard globally. But that only ever tells a standard set of measures. So for every country, every market, every situation, there’s always swathes of other hidden KPIs that get reported in various different methods, usually in duplicate and usually in back-up. “But I think it is useful to have a set of standard KPIs. Our problem is that we’ve had different standards from different matrixes of the organisation and they don’t ever quite join up. So they’re always almost the same, but not quite the same, which is a local frustration, and I think that’ll work its way through as we get a little bit more used to it.” n This feature was developed from a CIMA senior roundtable, as part of CIMA’s work on the transforming finance function. Supported by
63 Excellence in leadership | Issue 1, 2012
xxxxxxxxxx xxxxxxxxxxxxxxxxxxx Celebrating the 20th anniversary of the Balanced Scorecard Finance functions have experienced a relentless pressure to increase their efficiency, to provide better management information and an increasing expectation that they should become more engaged in performance management, and make a greater contribution to their organisation’s governance and, therefore, success. 2012 marks 20 years since Kaplan and
Norton first promoted the Balanced Scorecard, the most widely adopted framework that incorporated non-financial measures and provided some balance to the more traditional financial methods used to judge corporate performance. CIMA will be celebrating the 20th anniversary by launching new research on performance management-related topics at many exclusive events in 2012. We are pleased to announce that among
our special guests attending some of these events throughout the year will be Professor Robert Kaplan and Dr David Norton. If you would like to get involved by sponsoring any of the high-profile events, please contact Hilton Young, commercial account director at CIMA via: T. +44 (0) 20 7775 5522 E. Hilton.firstname.lastname@example.org W. www.cimaglobal.com
Further events CPD Resources: Free online training session Business Source Corporate 17 January, 12.15pm 19 January, 2.15pm The session will be suitable for members new to searching Business Source Corporate, or for those who wish to refresh their skills. You will need a computer with internet access and either a telephone or headset to connect to the session. To register visit www.cimaglobal. com/businesssourcecorporate Please note that places are strictly limited to 200. Why would anyone want to be led by you? (joint event with CMI) 19 January Swansea For many years the question has been “why should anyone be led by you?” This presentation will look at how leaders can become prize commodities. Book at www.cimaglobal.com/ southwestenglandandsouthwales
Forensic accounting spilling the beans 25 January, 6.30pm for 7pm Birmingham This event will explain what a forensic accountant does and look at the skills required. www.cimaglobal.com/westmidlands CPD technical update: better decision making in difficult economic times 6 March Perth, Scotland This workshop is designed for participants from any sector who want to gain an up-to-date overview of evidence-based management. It should be of particular interest to directors, managers and accountants in a performance improvement or strategy execution function, as well as individuals who simply want to upscale or refresh their skills. For more information E. email@example.com
Performance and influence in pressure environments 29 March, 7pm Bickenhill, near Birmingham As the pressure and complexity of modern business life increases, time and resources are scarcer than ever. Mark Sheasby will share some of the secrets of performance and influence under pressure. www.cimaglobal.com/westmidlands CIMA Mastercourse Driving down costs 24 April London A toolkit of key ideas and cost management strategies, frameworks for analysing cost and practical techniques for implementing cost reduction. The course will cover urgent one-time cost cutting and longterm cost management. Cost: £599 +VAT (£539 +VAT for CIMA members) Visit www.cimaglobal.com/ mastercourses E. Mastercourse@cimaglobal.com
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CIMA offices CIMA UK 26 Chapter Street, London SW1P 4NP Tel: +44 (0) 20 8849 2251 Email: cima.contact @cimaglobal.com www.cimaglobal.com
CIMA China Chongqing Flora Hu: business development manager Room 1202, Metropolitan plaza, No 68 Zou Rong Road, Yuzhong District, Chongqing 400010, P.R.China New office tel: +86 (0)23 6371 3538 Email: Chongqing @cimaglobal.com
CIMA Australia Paul Turner: country manager 5 Hunter Street, Sydney, NSW 2000, Australia Tel: +61 (0)2 9376 9902 Email: firstname.lastname@example.org CIMA Bangladesh Zareef Tamanna Matin: manager Suite-309, RM Center (3rd Floor), 101 Gulshan Avenue, Dhaka-1212, Tel: +8802 8815724 +8802 8816306 Email: Zareef.Matin @cimaglobal.com CIMA Botswana Moses Sikwila: country manager Plot 50374 , Block 3 First Floor, Southern Wing, Fairgrounds Financial Centre, Gaborone Tel: +267 395 2362 Email: gaborone @cimaglobal.com CIMA China Head Office Li Ying Vicky: regional director Shanghai, Unit 1508A 15th floor of AZIA Center 1233 Lujiazui Ring Road Pudong, Shanghai, PRC. 200120 New office tel: +86 (0)21 6160 1558 Email: infochina @cimaglobal.com CIMA China Beijing Xina Zhang: senior education development manager CIMA China Beijing, C 201, 2/F Landmark Tower 2, 8 Nort Dongsanhuan Rd, Beijing 100004 New office tel: +86 (0)10 6590 0751 Email: Beijing@cimaglobal.com
CIMA Ghana Paul Aninakwah: country manager 7th Floor Gnat Heights, 30 Independence Avenue, Ridge, Accra, PMB, CT 460 Accra Tel:+233 (0)30 701 0965 Email: paul.aninakwah @cimaglobal.com CIMA Hong Kong Damian Yip: director Suite 2005, 20th Floor, Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong Tel: +852 (0)2511 2003 Email: hongkong @cimaglobal.com CIMA India Arati Porwal: chief representative Unit 1-A-1, 3rd Floor, Vibgyor Towers, C-62, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051, India Tel: +91 2242370100 Fax: +91 2242370109 Email: email@example.com CIMA Ireland Denis McCarthy: director 5th floor, Block E, Iveagh Court Harcourt Road, Dublin 2, Ireland Tel: +353 (0)1 6430400 Fax: +353 (0)1 6430401 Email: firstname.lastname@example.org CIMA Malaysia Irene Yeng: regional director Venkkat Ramanan: head of CIMA Malaysia Lots 1.03b & 1.05, Level 1, KPMG Tower, 8 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan Tel: +60 (0)3 77 230 230 Email: kualalumpur @cimaglobal.com
CIMA China Shenzhen Eric Pan: regional head – South China 16/F, CITIC City Plaza, Shennan Road Central Shenzhen 518031 Tel: +86 (0)755 3330 5151 Email: Shenzhen @cimaglobal.com
CIMA Malaysia: Penang Ms Tan Chiew Ann: business development executive Suite 12-04A, 12th Floor Menara Boustead Penang, No. 39 Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia Tel: +60 (0) 4 226 7488/8488 Email: Penang@cimaglobal.com
CIMA Malaysia: Sarawak Doreen Tan (Manager of Sarawak Branch) Sarawak Branch Sublot 315, 1st Floor No. 21 Jalan Bukit Mata, 93100 Kuching, Sarawak, Malaysia Tel: +6082 233 136 Email: Doreen.Tan@cimaglobal.com CIMA Middle East Geetu Ahuja: regional manager Office E01, 1st Floor, Block 3 PO Box: 502221, Dubai Knowledge Village, Al Sofouh Road, Dubai - UAE Tel: +9714 4347370 Email: middleeast @cimaglobal.com CIMA Nigeria Musliu Olajide: business development manager Landmark Virtual Office, 5th Floor Mulliner Towers (former NNPC Building) 39 Alfred Rewane Road, Ikoyi, Lagos Tel: +60 (0)7 333 5302 Email: lagos @cimaglobal.com CIMA Pakistan Javaria Hassan: office representative No.201, 2nd Floor, Business Arcade, Plot No. 27-A, Block-6 PECHS, Shahra-e-faisal, Karachi, Pakistan Tel: +234-1 4638353 (ext 518) Email: pakistan @cimaglobal.com CIMA Pakistan: Lahore Sahar Saqiq: student development executive Flat No: 1,2-1st Floor Front Block-3 Awami Complex at 1-4, Usman Block, New Garden Town, Lahore, Pakistan Tel: +92 42 35940311-16
CIMA Russia Helen Buniatyan: director Office 4009, 4th floor Zemlyanoj Val 9, Moscow 105064, Russian Federation Tel: +495 967 93 28 Email: russia @cimaglobal.com CIMA Singapore Shavonne Sim: business development executive 3 Phillip Street, Commerce Point, Level 19, Singapore 048693 Tel: +65 68248252 Email: singapore @cimaglobal.com CIMA South Africa Sam Louis: regional director 1st Floor, South West Wing, 198 Oxford Road, Illovo 2196 Tel: +27 (0)11 788 8723 Email: johannesburg @cimaglobal.com CIMA Sri Lanka Bradley Emerson: director Radley Stephen: head of CIMA Sri Lanka 356 Elvitigala, Mawatha, Colombo 05, Sri Lanka Tel: +94 (0) 11 250 3880 Email: colombo @cimaglobal.com CIMA Sri Lanka: Kandy Roshini Wirasinghe: manager 229 Peradeniya Road, Kandy, Sri Lanka Tel: +94 (0) 81 222 7882 Email: kandy @cimaglobal.com
CIMA Pakistan: Islamabad Zunaira Riaz: student development executive 1st Floor, Rehman Chambers, Fazal-e-Haq Road, Blue Area, Islamabad Tel: + 92 51 2605701-6
CIMA Zambia Kennedy Msusa: country manager 6053 Sibweni Road, Northmead, Lusaka, Zambia Tel: +260 1 290 219 Email: lusaka @cimaglobal.com
CIMA Poland Jakub Bejnarowicz: country manager Warsaw Financial Centre , 11 floor, ul. Emilii Plater 53 00-113 Warsaw, Poland Tel: +48 22 528 6651 Email: poland @cimaglobal.com
CIMA Zimbabwe Matilda Nyathi: branch administrator 6th Floor Michael House, 62 Mandela Avenue, Harare, Zimbabwe Tel: +263 4 708 600 or 720379 Email: email@example.com
Cima contacts: New Zealand Tel: +64(0)48017132 Email: firstname.lastname@example.org
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Kenya Email: gmathesh@ yahoo.com