PERFORMANCE MANAGEMENT

Performance management has to be aligned with the company’s specific business model in order to create a basis for successful implementation of the company’s strategy and development. Current trends indicate that rigid, resource-intensive planning and reporting processes are replaced by flexible, efficient and forward-looking approaches.

Based on the current trends and our many years of experience in corporate finance management, we put our understanding into practice through effective performance management based on 6 principles. These principles provide a basis for assessing a company’s existing approaches and for identifying potential improvements.

Put strategy first and set cascaded targets

The applicable strategy and long-term financial goals are put into practice through strategic initiatives. Systematic operationalisation is ensured through proper cascading of targets based on financial and operational value drivers. In the course of performance management, systematic reviews are conducted to ensure that the strategic initiatives are performed and that the targets are achieved, ensuring a perfect correlation between performance management and strategy. Operational Management is familiar with the specified management indicators and knows the main influencing factors.

Implement a dynamic & efficient planning

Budgeting and forecasting processes are harmonised and formulated in the form of rolling or partially-rolling forecasts in accordance with business model. In planning, the focus is placed on the key value drivers. For optimal efficiency and flexibility, as many planning elements as possible are standardised and automated. By using scenarios, future developments can be simulated transparently as a basis for corporate finance management.

Check planning incentives

The goal of planning is to enable a realistic estimate of future developments. In general, Management should not have any incentives to over- or underestimate future performance. This means, in particular, that the performance assessment should not be based on meeting a budget or a forecast but rather on the most objective possible benchmarks and on improvements relative to the prior period.

Be focused and fast in monitoring your core business – assess & act

The management reports are designed for the relevant target group with a focus on key management information. Besides the analysis of financial and operational value drivers and competitive and market trends, a status update on the strategic initiatives and specified measures forms an integral part of the monitoring. Management reporting is the key management tool, providing meaningful information about both current financial and operational performance and future developments. The reporting processes are efficient and automated whenever possible so that the relevant management information is available to the decision makers in a timely and consistent manner.

Integrate your investment process

Investment projects are evaluated and approved based on a standardised, clearly structured process. Rigid investment budgets are made more flexible to enable seizing profitable opportunities in line with the company’s strategy. Standardised instruments and reports are used to evaluate and implement investments. Setting up investment monitoring helps promote successful implementation of investment projects and improved evaluations of future investments.

Implement lean processes and use technology as enabler

All the components of performance management are coordinated, optimally organised and integrated into an overall process. The system landscape is distinguished by a high degree of uniformity, data consistency and few interfaces. An integrated, driver-based and flexible system solution enables an optimal degree of information value and efficiency in planning. Intensive automation of the reporting processes ensures that the resources will be available for use in problem analysis, in particular.

Financial policy essentially includes the basic principles of liquidity, capital structure, investment and risk policy. Our specialists can assist with evaluating your existing financial policy and help you formulate a new one, if necessary. Our holistic, company-specific description of each subject area of your financial policy will give your business a solid foundation for financial leadership and effective performance management.

More and more companies are realizing that it is necessary to reassess their well-accustomed, but inefficient planning processes. To do so, it is necessary to break down the usual ways of thinking concerning conventional budgeting. An innovative, needs-based solution is an essential contribution to long-term successful corporate development. We help our customers with the following topics, in particular:

Developing a model of value drivers and defining Key Performance Indicators (KPIs)

Developing a company-specific model of value drivers will help you identify operational and financial drivers that are decisive for successful implementation of your strategy. The Key Performance Indicators defined on the basis of that model can then be used to bring your planning and financial management into line. Focussing on the key KPIs is an important prerequisite for setting up efficient and well-targeted planning processes.

Establishing an effective target-defining process

The financial targets derived from the strategy are formulated concretely in a mid-term plan according to top-down approach and subdivided into the specified Key Performance Indicators. The central focus is on optimally efficient and complete strategy operationalisation through appropriate target cascading as a basis for operational planning.

Developing a company-specific planning philosophy

Budgeting and forecasting processes should be harmonised and brought into line with the specific business model and management culture in the form of rolling or partially rolling forecasts. Focusing on key value drivers lets you organise forecasts efficiently and flexibly. Forecasts should be decoupled from the management incentive system so that the most realistic possible forecasts can be used for effective corporate management. Forecasts should not be set up to monitor Management but rather as a management instrument to help implement the strategy.

Implementation of the specified planning philosophy

As part of the implementation of the company-specific planning, standardised workflows and processes should be established. In that context, it is important to make sure that the periodic business reviews are coordinated with the planning cycles in the operational units. Based on optimal process designing, dynamic yet efficient forecasting can be implemented with reasonably detailed planning (focus on key value drivers) and an integrated system solution. By using driver-based planning software, the impact of the generally unclear market environment can be mapped and analysed transparently in the forecast based on scenarios and sensitivities.

The information value of reporting has a significant impact on the quality of strategic and operational corporate management and is a key factor in internal and external corporate communications. In our experience, reporting is often insufficiently focused on financial value drivers and therefore much too extensive, which makes it ineffective for corporate finance management. We also believe it is essential to supplement reporting of current financial and operational performance by making forward-looking management information an integral part of reporting. We help our customers with the following topics, in particular:

Review of the existing reporting

Effective management reporting should be tailored to the strategic goals and key value drivers and addressed to the appropriate level. Reporting should go beyond displaying the figures and give in-depth analyses of current and future developments. The goal of each report is to give recipients an optimal basis for decision-making, which is a prerequisite for introducing concrete measures for purposes of implementing the strategy. Thanks to innovative display options, information can be tailored to the proper level and communicated in a standardised and understandable manner. Efficient processes and system solutions ensure that decision-makers will receive consistent and timely management information. These main principles of effective reporting for the basis of assessing existing reporting solutions and identifying potential improvements.

Developing reports tailored to the target group

Based on our analysis of your existing reporting solutions, the potential improvements identified can be systematically implemented in the areas of content (relevant management information), layout/design (information displayed intuitively and tailored to the target group), processes (efficient automated workflows) and systems (consistent and timely data processing using the latest system solutions). One of the main keys to success is to make sure that the reporting processes are aligned with the forecasting processes and with the periodic business reviews carried out in cooperation with the operational units.

Optimal capital allocation for implementation of the strategy is one of the main keys to success in performance management. In particular, we help our customers set up a comprehensive process to evaluate investments, develop and use standardised analytic tools and ensure effective investment monitoring.

Setting up a comprehensive process to evaluate investments

Both expenditures on capital goods (CAPEX) and any mergers and acquisitions (M&A) should be evaluated and approved on the basis of clearly defined processes. Standardised workflows and responsibilities and competencies ensure efficient and well-targeted evaluation of investments.

Developing standardised analytic tools

Developing and setting up standardised analytic tools facilitates efficient and well-founded evaluation of investment projects. In particular, decision-makers are provided with standardised investment proposals summarising company-specific profitability analyses, opportunity and risk analyses, scenario and sensitivity analyses as well as the essential milestones of implementation.

5.3 Ensuring effective investment monitoring

Setting up investment monitoring provides Management with a tool allowing prompt responses to any cost overruns, market changes and, in general, to any problems encountered when implementing an investment project. In addition, one of the main objectives of investment monitoring is to gain knowledge to improve the analysis and evaluation of future investment projects.

YOUR CONTACT PERSON

Dr. Thomas Vettiger, Managing Partner

thomas.vettiger@ifbc.ch

Christian Hirzel, Partner

christian.hirzel@ifbc.ch

OUR PROJECTS

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