using real-time financial benchmarks to drive dynamic decision-making and action (proformative...
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Slides for the Proformative webinar "Using Real-Time Financial Benchmarks to Drive Dynamic Decision-Making and Action" by Niels Pflaeging, BetaCodex NetworkTRANSCRIPT
Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals
Using Real-Time Financial Benchmarks to Drive Dynamic Decision-Making and Action
Sponsor
• Identify the benefits of self-setting, continuous, “relative” performance systems and on-demand decision-making for your company
• Learn how to develop the right benchmarks and associated peer groups for your company to maximize the value of your investment in real-time benchmarking
• Understand how to use real-time benchmarks to produce continuous dialog and reflection, and deliver the information company leaders need to develop and maintain competitive advantage
After attending this event you will be able to:
Learning Objectives
Proformative Event Notes
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Welcome to Proformative
Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals
Using Real-Time Financial Benchmarks to Drive Dynamic Decision-Making and Action Niels Pflaeging, Author, Influencer, Advisor on Leadership Transformation Jon Kondo, Sr. Software Executive and Advisor
high dynamics
Local markets, high customization
The historic course of market dynamics
The historic course of market dynamics
Sluggish/dull, low dynamics
high dynamics
Spacious markets, little competition
Local markets, high customization
Sluggish/dull, low dynamics
high dynamics
high dynamics
Spacious markets, little competition
“Outperformers” exercise market pressure over
conventional companies Local markets,
high customization
The historic course of market dynamics
Formal part of value creation
Solution: Machine
Dynamic part of value creation
Solution: Man
Sluggish/dull, low dynamics
high dynamics
high dynamics
Age of Crafts Manu-
facturing
Industrial Age/ Age of
Tayloristic Industry
Age of Global Markets
1850/1900
Spacious markets, little competition
“Outperformers” exercise market pressure over
conventional companies
Local markets, high customization
1970/80 today
The “Taylor Bathtub” - and what it means for companies today
We must stop riding the dead horse: Let´s work on the model, not in the model!
• Fixed, individual targets • Management by Objectives • Budgets and Plans • Performance Appraisal • Hierarchical Pressure • Pay by Position or Performance • Incentives and Bonuses • …
How to let go of traditional Performance Management practices
• Fixed, individual targets • Management by Objectives • Budgets and Plans • Performance Appraisal • Hierarchical Pressure • Pay by Position or Performance • Incentives and Bonuses • …
• Transparency & Improvement • Comparisons between peers • Comparisons with previous periods • Dialog and Dissent • Social and group pressure • Pay by market value • Results Sharing • …
How to let go of traditional Performance Management practices
Low dynamics
High dynamics
Polling Question
Industry
Retail
Services
Government/ NGOs
It is possible.
Some pioneers of the new model
Fixed, negotiated targets
Most important competitor
(28%)
Market (25%)
Plan (15%)
Actual (21%)
Target: absolute ROCE in % (here: 15%)
[expected market Ø: 13%]
Plan
Comparison: Plan-Actual
Actual
• Interpretation within the plan-actual-comparison: “Plan was outperformed by 6 percentage points” > positive interpretation
• Better ROCE of the market average and the performance of the most important competitor remain unnoticed!
Relative, self-adjusting targets Target: relative ROCE in % (to market)
Most important competitor
(28%)
Market (25%)
Target: ROCE in % better
than market avrg. Actual (21%)
• Interpretation within actual-actual comparison: “Performance was 4 percentage points below competition!” > negative interpretation
• Absolute assumptions at the moment of planning don't matter.
• Targets always remain updated and relevant!
[independent from expected
market Ø]
Target Actual Comparison: Market-Actual
From fixed to relative targets & measures
Accounts/KPIs vs prev. periods
last mnth
Same mnth last year
Same mnth prev.. year
Ø last 12
mnths
Ø 12
prev. mnths
Indicators or Groups of accounts
Rankings (“league tables”)
Company KPI Competitor A 31% Competitor E 24% Competitor C 20% Us 18% Competitor B 13% Competitor D 12% Competitor G 10% Competitor F 8%
Regions KPI Region G 7% Region E 7% Region B 6% Region F 4% Region A 3% Region D 3% Region C 1% Region H 0%
Snapshot (static) w/benchmarks
KPI 2
Us Our
unit B
Our unit A
Compe- titor B
Compe- titor A
KPI 1
Trend with references (A) Maximum
Curve with variance
KPI (B) Gliding average
Time (Actuals)
Trend with benchmark
Us
Competitor A
Time (Actuals)
KPI
Trend with tolerance
Tolerance levels
Time (Actuals)
KPI
Us
out of bounds
Practice: Relative measures & reporting
Polling Question
Law Beta Alpha § 1 Freedom to act Connectedness not Dependency § 2 Responsibility Cells not Departments § 3 Governance Leadership not Management § 4 Performance climate Result culture not Duty fulfillment § 5 Success Fit not Maximization § 6 Transparency Intelligence flow not Power accumulation § 7 Orientation Relative Targets not Top-down prescription § 8 Recognition Sharing not Incentives § 9 Mental presence Preparedness not Planning §10 Decision-making Consequence not Bureaucracy §11 Resource usage Purpose-driven not Status-oriented §12 Coordination Market dynamics not Commands
From org design principles for the industrial age to contemporary ones
Practices of the past (selection)
20
”Meritocracy“ Budgeting Planning
Control of work hours
Job Descriptions
Competencies Management
Incentives Individual targets
Performance Appraisal/360°
Salary ranges
Training budgets Personnel Development
Org charts
Target negotiation
Holiday applications
”Personnel Expenses“
Suggestion boxes
Assessment Centers
Knowledge Management
Pay for Performance
Paid extra hours
Bonuses
Sales quotas
Dress codes
Job titles
HR
Allocations
Cost Management
Plan-Actual variances
Forecasting
MbO Strategic planning
Travel policies
Forecasting
Jours fixes
SWOT analysis
Earnings guidance
Q & A
Polling Question
@NielsPflaeging nielspflaeging.com
organizeforcomplexity.com betacodex.org
slideshare.net/npflaeging www.organizeforcomplexity.com
Contact, book, and more
Thank You
A few final items
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• Thanks to our speakers
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