Contrast‘s origins date back to 1980, when the first “Controller Day” took place at the public Vienna University of Economics and Business (WU).
1 2 1980 1982 1991
Research
▲ The 1st “Controller Day“ is organised at Vienna University of Economics and Business (WU)
▲ Main objective: “…to contribute to the development of management control and strategic management in both science and practice”
Education
▲ Controller Institut founded as a non-profit-society
▲ Objective: “…to offer excellence education and research in the areas of:
▲ Management Control
▲ Finance
▲ Management“
Management-Consulting
▲ Establishment of consulting business with primary focus on strategy and management control
▲ Objective: “…to offer toptier managementconsulting in addition to high-quality education activities.“
Today the organisation benefits greatly from its strong interrelations between management consulting, education and research.
Research
▲ Several research studies are conducted in cooperation with Contrast
▲ New research findings from WU are integrated in course offerings of the Controller Institut
Education
▲ New educational products, such as business simulation games for managers, are developed in cooperation with Contrast
▲ Programmes offered together with WU, such as the MBA in Controlling
Management-Consulting
▲ CEO of Contrast is Head of the Institute for Strategic Management at WU
▲ Contrast Consultants share their practical experience in seminars and courses of the Controller Institut
Definition of Controlling
Controlling is a management activity that makes sure that companies reach their objectives.
Controlling according to IGC
As partners of management Controllers make a significant contribution to the sustainable success of the organization.
Controllers …
▲ design and accompany the management process of defining goals, planning and reviewing so that every decision maker can act in accordance with agreed objectives
▲ ensure that decision makers act with foresight and thus make it possible to take advantage of opportunities and manage risks.
▲ integrate an organization's plans into a cohesive whole
▲ ensure the quality of data and provide decisionrelevant information.
▲ are an organizations economic conscience and thus committed to ensuring its success
▲ Controller believe that clear and accepted objectives are at the core of management. By ensuring the definition of these objectives the controller substantially contributes to successful management.
▲ Controllers take care of planning and reporting.
▲ The Controller has to use all his resources to support management in achieving their objectives. The resources include financial know-how, fast and flexible information as well as constant reviews and checking. The sophisticated controller calls this sparring or consulting.
▲ To be efficient, the Controller needs to have his systems under control. This takes up a lot of her time.
▲ By strictly administering management processes, the Controller forces the company into a regular review cycle, thus making sure that problems and opportunities are being identified early on.
Motivation for the Study
Recent developments influence the role of the CFO
▲ Financial crisis and high insecurity of the economic environement
▲ The challenges become more and more diverse and interdisciplinary
▲ Next to data integration, compliance and financing, including the CFO in strategy development becomes more and more important
▲ Time of crisis strenghten the position of the CFO
▲ The role of the CFO devlops towards the real strategist behind the board’s plans
▲ The CFO becomes challenger and sparring partner for management, also for strategic issues
The study has targeted the Controllers of the top 500 companies in Austria and the Czech Republic
▲ How is Controlling organized?
▲ What makes Controlling efficient?
▲ What are the dominant tasks?
▲ What are the key benchmarks?
▲ Which instruments does the Controller use?
Framework and Key Questions
The study has targeted the CFOs of the top 500 companies in Austria
Key Questions
▲ What are the key challenges?
▲ What is the State of the Art of the CFO function?
▲ What are the dominant CFO-Roles?
▲ How does the CFO contribute to strategy?
▲ Which instruments does the CFO use, when working on strategy?
Controlling is Interaction
Controlling depends on a close interaction of manager and controller. The only thing that counts is the next decision = the future!
▲ Controlling
• Is seamless interaction to bring the car (company) forward
• has no time to look back
• Is the combination of different talents
▲ Controller
• Is part of the team
• Is only successful, when the team wins
• Needs to really understand the driver
• Looks forward and wants to win
▲ Manager
• Has enough to do to keep the car on the road
• Needs fast and precise information
• No distractions, no nonsense
• Pushes forward and wants to win
Controlling has challenges in many areas. MIP, opportunities/risk control and performance increase are among them.
▲ Controlling has the following priorities
▲ operational planning / budgeting ▲ forecast
▲ analysis and reporting (internal)
▲ strategic controlling
MIP
▲ cost accounting
▲ data management
▲ analysis and reporting (external)
▲ project and investment control
▲ opportunity and risk control
▲ internal consulting
▲ functional controlling (sales, HR)
▲ control of measures
▲ development of processes and systems
▲ special projects
present
future
Challenges from the pespective of the CFO
The key challenges lie in risk management, financing and strategic controlling
Top-3-Challenges of the CFO
risk management is well established, but lacks a relation to other systems
optimizing the financial mix is an essential part of treasury strategy gains in importance, but needs more sophisticated instruments
Ruthner, R./Feichter, A.: „Der CFO als Strategic Performance Manager“. In: CFOaktuell Sonderheft, 7. Jahrgang, März 2013.
Quelle:
Dimensions of the CFO role
The role of the CFO can be described in three characteristics
financial excellence
▲ The CFO ensures efficient structures, processes and systems …
─ state-of-the art finance organization and processes
─ information and integration standards
─ automatization of data analysis
integrated control
▲ The CFO ensures an integrated control system …
▲ Devising and implementing a master plan for finance and controlling
─ financial and nonfinancial levers of control (KPIs)
─ on all relevant corporate levels
─ broad employment (decision support, reporting and incentives)
▲ managing volatility of results
service & sparring
▲ The CFO acts as a service and sparring partner to management (= business partner)
─ support to profit centers and business units
─ personal relation to decision makers
─ adapting organization structure (close to the customer)
▲ establishing relevant communication platforms and tools
Seperating CFO Roles
The "Strategic Performance Manager" is an ideal vision for the corporate CFO
Role Focus requirements
Finance Manager
Performance Manager
Exzellence in structures, processes & systems in finance
integrated control system for strategy and operations
Business Partner
Strategic
Performance Manager
accepted service& sparringpartner for management
financial excellence integrated control service & sparring financial excellence integrated control service & sparring financial excellence integrated control service & sparring financial excellence integrated control service & sparring
financial excellence
financial excellence
integrated control, service & sparring
financial excellence controlling the implementation of strategy through an integrated control system
Quelle: Ruthner, R./Feichter, A.: „Der CFO als Strategic Performance Manager“. In: CFOaktuell Sonderheft, 7. Jahrgang, März 2013.
Roles of the Austrian CFOs
In Austrian companies the role of the "Strategic Performance Manager" is dominating
Finance Manager (1%) Performance Manager (13%) Business Partner (33%)
& sparring
Strategic Performance Manager (41%)
High rates in the areas of financial excellence, integrated control systems, service & sparring
-in-the-middle“ (11%)
& sparring
& sparring
Quelle: Ruthner, R./Feichter, A.: „Der CFO als Strategic Performance Manager“. In: CFOaktuell Sonderheft, 7. Jahrgang, März 2013.
Elements of Strategic Performance Management
Realising a Strategic Performance Management System involves many interwoven activities
• Clear and accepted strategy linked to
• a strategic financial goal.
• Incentive systems linked to strategy,
• integrated management processes
• fit of organizational structure and strategy
activities
developing objectives from a strategic and financial goal system devising and priorising project-/ and program portfolios to implement strategies
mid-term planning linked to strategy as the basis for operational budgets
setting up a clear and precise reporting to support implementing strategies
logical, strategic value drivers for a flexible planning and simulation model controlling volatilities (risks)
In-between Strategy and operative Controlling
Strategy and strategic/financial objective
Integrated strategic and financial goalsystem
Project-/Program portfolio-management
Strategy-focused middle-term-planning
CFO-Study 2012 „The CFO as Strategic Performance Manager“
CFOs of Austrian companies more and more become "Strategic Performance Managers" – financial excellence is an important basis for this development
▲ The CFO is challenger & sparring partner of management and is an important player in corporate strategy
▲ The role of the CFO as a Strategic Performance Managers (41%) dominates in Austrian companies
▲ Financial excellence is an important condition for development in the dimensions integrated control and service & sparring
▲ In Strategic Performance Management more work is needed to ensure a forceful implementation of strategies
▲ The contributions of the CFO to corporate success are considerable and will increase in the future
Schools of strategic management
Most eminent authors
Market-based view
External: Industry attractiveness
Advantageous positioning in the competitive environment Michael Porter
Resource-based view Internal: Availability of resources Better availability of scarce resources and core competencies
Translation of strategies into a middle-term measure-program
Inclusion of external benchmarks
Documentation of planning premises
Avoidance of a „HockeyStick“-planning
Realization of strategies
In order to reach strategic objectives, relevant measures have to be defined. Through measurement parameters goal attainment can be determined.
Strategic objectives
e.g. develop clear communication structures towards customers
Measures the extent of goal attainment
Measurement parameters
e.g. customer-satisfaction
Contribute to a better goal attainment
Measures
e.g. conceptualising and implementing complaint management
Identifies whether the single measure has been reached
Controlling of measures
e.g. concept for a complaintmanagement exists
Operationalization of strategies
Starting situation
▲ Defined strategies at corporate-, BU-, and department-level.
▲ Availability of results regarding the qualitative and quantitative strategy evaluation (incl. premises)
▲ Availability of rough strategic measures
Reasons for the failure of strategies
▲ No sufficient specification of the vision or the strategy
▲ No link between strategy and resource allocation
▲ No link between strategy and targets of departments, teams and employees.
To Do’s during strategy specification
▲ Derivation of strategic sub goals
▲ Make the implementation of strategic (sub-) goals measurable
▲ Agreement on plan-targets for departments, teams and employees
▲ Development of a detailed measureprogram for goal attainment
▲ Allocation of strategic budgets and employee resources for implementation of measures
▲ Coordination of sub goals, plan-targets and measures between business units
Development of strategic options: Approaches
Step 1: Development of ideas and starting points
Analytical approach
Objective:
With the help of instruments, theoretical development possibilities are developed in an analytical process
Sample instruments:
▲ Business model (Strategy Map)
▲ Product/market-matrix
▲ Industry value chain modell
Step 2: Consolidation to consistent strategic options
Creative approach
Objective:
Through creative exercises thinking barriers are breached.
Sample instruments:
▲ Convention Hunting
▲ Wear a different hat
▲ What-if Process
Central value-creation-opportunities
Analysis results
Environment, industry Company Business area
Supporting instruments
Contrast business model databank
Growth (examples)
Derivation of central value creating possibilities for the company
▲ Growth in the core business
▲ Approach new customers
▲ Growth in market share through acquisition of competitors
▲ Opening up new regional markets
▲ Increasing the degree of integration
▲ Development of new business areas with existing core competencies
▲ Internal vs. external growth
Re-dimensioning and re-engineering (examples)
▲ Portfolio correction
Withdrawal from regional markets
Withdrawal from business areas or customer segments
▲ Withdrawal from certain value chain stages
▲ Reengineering/cost management in central processes
From strategy to action
Business model-based strategy
Vision/ Strategy
Top 3 position in the premium segment
Processes
Resources and potentials
Operationalization of the strategy
What are the key success factors?
“24-hourservice hotline” Action program
What it has changed?
Why Shareholder-Value-concepts?
Industry-related reasons
▲ Increasing pressure from the capital market
▲ Competitiveness necessary not only in the product market but also in the capital market
▲ Globalisation and internationalisation of capital markets
▲ Traditional profit ratios barely correlate with the development of the market value
Internal „technical“ reasons
▲ Imperfection of the middle-term planning
─ Limited planning horizon
─ Lack of consideration of risk aspects
─ No consideration of the time value of payment flows
─ Distortion at investing in intangible assets
─ Wrong incentives for management (problem of underinvestment)
Balance sheet vs. value orientation Long-term approach
„There is no profit unless you earn the cost of capital“ (Peter Drucker, 1954)
Linking financial and strategic values
Initial situation I
„Strategy world“ and „financial world“ often co-exist and are most of the time not linked systematically
▲ Insufficient specification of strategic objectives and strategies
▲ Missing quantification of strategic objectives and strategies
▲ Performance Measurement is only concentrated on operative financial indicators
▲ Market-based and financial planning- and management systems are not sufficiently integrated
▲ Measures in order to optimize market performance and financial performance are not sufficiently coordinated
▲ Profound understanding of value- and cost-drivers is often missing in the management team
Linking financial and strategic values
Initial situation II
The degree of financial penetration of strategic decisions is too low.
Influence on substancial financial performance
Level of action Strategic positioning / business model
Business area strategy
Extent and level of detail of quantification
Degree
Linking financial and strategic values
Challenges I
Contentual business planning and business controlling as well as financial planning and financial controlling have to be systematically linked between all levels of action.
▲ Specification and quantification of strategic objectives and strategies
▲ Supplementation of performance-measurement through strategic pre-control measures
▲ Integration of market- and financial-based planning and controlling systems
▲ Missionizing the company for financial performance targets
Challenges II
Overcoming the dichotomy of the planning and management pyramid
Goal: Integrated strategic and financial planning and controlling pyramid
Contentual vision
Company strategy
Business area strategy
Allocation of resources Department strategy
Usage of available resources (measures)
Financial performance vision
Accretion-potential (NPV, option value)
Financial Leadership
Financial Leadership links strategy with corporate finance!
Strategy
▲ Creation and defence of competitive advantages
▲ Objectives with regard to
Business portfolio (what?)
Area (where?)
Business model (how?)
Market position (product/ market performance)
Corporate Finance
▲ Creation of economic value
▲ Objectives with regard to Company value
Economic value added/ company profitability
Capital market performance (TSR)
Cost of capital
Capital productivity/ capital expenditure (CAPEX)
▲ Fields of action for goal attainment
▲ Controlling of measures
▲ Financial and strategy-based success control
What distinguishes Financial Leadership as a management-approach?
Conventional management approaches
▲ CEO-centric
▲ Role models and vision as prevalent guidance
▲ „Pre-management“ via leadership style as well as corporate culture (mindsets, values)
▲ Alignment of all managers to the contentual goals of corporate development
Financial Leadership
▲ Underlining the importance of the whole management team
▲ Emphasising the necessity of strategic objective-systems as well as integrated planning- and management-processes
▲ Completition through a set of strategybased performance-indicators (financial and non-financial)
▲ Alignment of all managers to financial performance targets and creating awareness for value- and cost-drivers
Quality characteristics of a strategy-based financial corporate management
▲ Ensure compatibility of strategic goals with financial performance goals
▲ Essential management processes have to be „financially sharpened“ (especially strategy planning, investment decisions)
▲ Strategic awareness: Consideration of the impact of all substantial decisions on the company‘s strategic position as well as on strategy execution
▲ Breaking down strategic goals and strategies into detailed goals regarding resources / organizational capabilities, processes, market performance and financial performance
▲ Financial controlling of strategy execution
▲ Compatibility of management incentive systems with the company‘s objectives
The roll of Controlling
Genuine tasks of strategic controlling
▲ Strategy evaluation
─ qualitative
─ quantitative
▲ Strategy implementation: Linking of strategy and operations
─ Measurement plans and budgeting
─ Balanced Scorecard
─ Strategy-based incentive systems
▲ Monitoring of strategy execution:
─ Control of execution (basis: action plans)
─ Control of outcome (basis: BSC)
─ Control of premises (basis: assumptions during strategy planning)
─ Strategic foresight
Linking financial and strategic values
Success-critical fields of action
▲ Strategy quantification: Financial evaluation of strategies and success potentials (NPV, value of options)
▲ Strategic resource allocation (strategic investment- and de-investment-decisions: Especially design of business portfolios and value chains)
▲ Value-based profit measurement
▲ Company-wide strategic risk management
▲ Measurement controlling of strategy implementation
▲ Cost/utility-optimization of accounting-, planning-, and management-systems (reduction of complexity)
▲ Improving strategic and financial awareness of responsible management staff (management development, teambuilding)
What
is
Strategic Performance
Management? What is Outcome oriented management?
Strategic Performance Management ensures that strategies in the public administration are implemented as planned and efficiency and effectiveness objectives met.
Insufficient link between strategy and operational execution Strategy How do we meet our objectives?
Medium-term
planning –What measures do we need to take?
Budget
What 1-3-year-budget is required to achieve our goals?
Strategic Performance Management, understood as systematic performance and outcome-oriented management control in the public administration, aims at ensuring that strategies are implemented as planned in order to meet efficiency and effectiveness objectives.
Based on Proeller, I. & Siegel, J.P., 2009
Strategic Focus on Outcome
Strategies are planned top-down and are based on the outcome that is to be achieved.
Outcome Output Processes Input
What outcome do we want to achieve for our stakeholders?
What processes need to be in place in order to produce the planned output? What output do we need to produce in order to achieve the planned outcome?
Outcome Quality
Impact
(influenced by the organisation and external factors)
Contributes to Effectiveness (“doing the right things“)
Process Quality
What resources do we need in order to guarantee the functioning of the processes in place? (number and qualifications of staff, raw materials, infrastructure)
Structural Quality
Realisation / Implementation (managed by the organisation itself)
Contributes to Efficiency (“doing things right“)
Strategic Focus on Outcome – Objectives, Indicators
and
Measures
Outcome-based objectives need to be defined, which are measured against indicators and achieved through the implementation of measures.
capped
Outcome Output Processes Input
What outcome do we want to achieve for our stakeholders? What processes need to be in place in order to produce the planned output? What output do we need to produce in order to achieve the planned outcome? What resources do we need in order to guarantee the functioning of the processes in place? (number and qualifications of staff, raw materials, infrastructure)
Objectives
What do we want to achieve?
Indicators
How are we going to know if we have achieved our objectives?
Measures
What do we need to do in order to achieve our objectives?
The second implementation phase of the Austrian Federal Budget Reform includes the introduction of the outcome-orientation principle.
Logic of Outcome-Orientation in Austria
Lower number of accidents with personal injury in Austria
Political orders Outcome objectives
Greater safety in Austrian traffic Objective:
• Personnel
• Budget
• Materials
• Partners
• Greater volume of traffic
• Weather conditions Other influences
Processes
Source: BKA (2013), adapted by Contrast
Target Groups of Outcome-orientation
Different target groups benefit from outcome-orientation.
National Council
Outcome-orientation as an Instrument for Four Target Groups
▲ Are better informed for budget negotiations
▲ Can demand performance based on objectves from ministries and the administration
Federal Government and Ministers Public Administration The Public
▲ Has greater transparency over government‘s activities & performance
▲ Benefits from greater efficiency
▲ Increased equal treatment of women and men
▲ Benefit from increased transparency over their activities and performance
▲ Can better justifiy their budget proposal and other policies or decisions
▲ Can work more efficiently
▲ Enjoys greater transparency
▲ Can use performance information and outcome objectives for discussions with stakeholders
Source: BKA (2013), adapted by Contrast
Interdependencies of Outcome-orientation with Other Instruments
The outcome-orientation principle is strongly linked to other contents of the Budget Reform.
Core Contents of the Austrian Federal Budget Reform
From 2013
Institutional basis
Restuls-oriented management control of the public administration
Outcome-orientation (incl. equal treatment of women and men)
From 2009
4-year-expenditure limits, strategy report
Budget structure (Global Budgets)
Source: BKA (2013), adapted by Contrast
Estimation and calculation system
Strategy Analysis, Planning, Implementation and Monitoring
The environment and the organisation have to be analysed first, strategic objectives, measures and indicators derived and implementation monitored.
Environment Organisation
▲ PESTLE Analysis
Strategy Analysis
Strategy
Planning
▲ StakeholderAnalysis
Strategy
Implementation
▲ OrganisationalAnalysis ▲ PotentialAnalysis
Strengths and Weaknesses Opportunities and Threats
▲ Develop strategic objectives (“What do we want to achieve by 20XX?“)
▲ Derive measures (“What do we need to do to accomplish our objectives?”)
▲ Define indicators (“How do we know if we have accomplished our objectives?”)
Strategy
Monitoring
▲ Realise planned measures
▲ Establish Integrated Process and Quality Management System
▲ Track individual milestones in order to ensure implementation of measures
▲ Tack individual indicators in order to guarantee accomplishment of objectives
