How can business controllers become more effective?

Business controllers are facing very tough challenges. Here an excerpt from a recent job search for a business controller: … Taking active part in the development of business processes and procedures, methods, information and systems as well as strategies and action plans in order to improve business performance and company profitability Assist Branch managers to analyse financial and operational information, identifying strengths/weaknesses and recommending improvements in methods and processes Financial investigation and analysis of Branch performance in all areas to local management Monitoring the balance sheet of the branch Oversee and develop the planning model within the Branch through, target setting, action planning, financial projections and simulations as well as follow up and deviation analysis … In essence the business controller is required to understand how his business “ticks”. For example he needs to understand whether improving on customer satisfaction impacts the financial performance of his business. Or whether improving shipments on time improves DSO. Experienced business controllers have very good instincts. But they have no financial evidence of the relationships between operational and financial performance. In particular budgeting and planning remain very tricky. Because business controllers have to decide how to distribute his limited funds. Taking such decisions just based on gut feeling and experience might be perceived as a bit too risky. So what if a business controller could quantify the relationship between operational and financial performance? Or even simulate the impact of operational changes on the financial performance? Like improving perfect fulfillment by 5% has the potential to release $156.5M cash? Too good to be true? Have a look at what our customers have accomplished.   Guenther Tolkmit / Chief Delivery...

What is wrong with Key Performance Indicators (KPIs)? Do we need a True Performance Index (TPI)?

Selecting a set of quantifiable measures to gauge or compare performance in terms of meeting a company’s strategic and operational goals is common practice. But though it is common practice it is very hard to determine the right and the right amount of KPIs. Among the top challenges are What are the critical KPIs? Many KPIs are just describing the past (so-called lagging KPIs). But you want to understand what is happening in the future (so-called leading KPIs). How many KPIs are required? More than five to seven KPIs (per business entity) are impractical because people cannot comprehend more in their daily practice. Are the selected KPIs supporting your strategic goals? More often than not you are using KPIs because you always used them. But are those the relevant ones with respect to your strategy? Are the used KPIs validly reflecting the business reality? Nowadays many if not most KPIs are calculated using multiple layers of business intelligence software. Can you be sure that your reality will not be distorted throughout these multiple transformations? Are the selected KPI targets realistic? Setting performance targets which are impossible to achieve is counterproductive. But how do you know whether you have a realistic chance to achieve them? Are benchmarks the only way to go? The base problem is that operational KPIs are not comparable. For example you cannot tell whether 76.5% shipment on time in Italy is more worth than 83.7% shipment on time in Spain or whether 99.8% shipment on time is more worth than 85.6% shipment of the desired quantity. In essence you cannot gauge a KPI. Therefore we are proposing a performance measure that makes KPIs comparable. We...

Working Capital Optimization is only for the cash-poor companies. Or?

We all understand why we need to optimize our working capital position if and when we are short on cash. Because this is decisive for the future of our business. And we all understand what to do in such situations. We are ensuring that our customers are paying us as the contractually agreed upon payment terms state. We are lowering our stock. We are paying our suppliers as late as possible. That is more or less all what we can do in a distressed cash situation. And in a cash-rich situation there is nothing to be done because we have more important things to look after. Right? Wrong! Far wrong! Because only in a cash-rich situation we are really able to do changes to our operations. We can optimize our working capital position sustainably. But why should we do this at all? We have enough cash already. And having more cash at hand doesn’t get us anything with the current interest rates. Or? Hmm. If this would be true one would have to ask oneself why one of the cash-richest companies in the world – Apple – is raising multiple billions dollars of debt currently. In this case the suspicion is that they have their cash in the wrong countries. But they have also a multi-billion dollar share buyback program going on. Because this is what their shareholders are demanding. Or maybe they have another round of acquisitions on their radar screen. Or they just want to strengthen their war chest for the newly emerging war with Microsoft. Or any other way of making their company more valuable to...