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Using Real-Time Financial Benchmarks to Drive Dynamic Decision-Making and Action (Proformative Webinar)

Slides for the Proformative webinar <br>"Using Real-Time Financial Benchmarks to Drive Dynamic Decision-Making and Action" <br>by Niels Pflaeging, BetaCodex Network

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Using Real-Time Financial Benchmarks to Drive Dynamic Decision-Making and Action (Proformative Webinar)

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  1. Ask, Share, Learn Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals Using Real-Time Financial Benchmarks Using Real-Time Financial Benchmarks to Drive Dynamic Decision-Making and Action to Drive Dynamic Decision-Making and Action

  2. Sponsor

  3. Learning Objectives After attending this event you will be able to: •  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  

  4. Proformative Event Notes Links to today's presentation and the recording of this webinar will be sent out to all attendees within 24 hours of the event and the presentation is already posted on Proformative at the event’s landing page for free download. Those who would like CPE credits (through NASBA) will need to answer all polling questions during the event and remain for the entire duration of the event. For any questions on CPE credits, please send an email to cpe@proformative.com. Please ask questions on today's topic via the "Questions" box in your GoToWebinar control panel at any time during the event. We will do our best get to your questions during the Q&A/panel discussion at the end of the event. If we do not get to your question, a speaker or webinar sponsor will follow up with you directly to address your question. You will be asked to take a short survey today regarding the webinar, and we would greatly appreciate your feedback regarding our event today as we always strive to improve the ROI we offer our event attendees for their valuable time. •  •  •  • 

  5. Welcome to Proformative Proformative is the leading educational resource for corporate finance professionals. Announcing the new Proformative Academy: •  On demand video courses taught by peers and SMEs •  Over 125 finance and accounting courses and growing rapidly •  CPE for CPAs, CMAs, CTPs, and CIAs Check it out at www.ProformativeAcademy.com

  6. Ask, Share, Learn Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals Using Real-Time Financial Benchmarks Using Real-Time Financial Benchmarks to Drive Dynamic Decision-Making and Action to Drive Dynamic Decision-Making and Action Niels Pflaeging, Author, Influencer, Advisor on Leadership Transformation Jon Kondo, Sr. Software Executive and Advisor

  7. The historic course of market dynamics Local markets, Local markets, high customization high customization high dynamics

  8. The historic course of market dynamics Local markets, Local markets, high customization high customization Spacious markets, Spacious markets, little competition little competition high dynamics Sluggish/dull, low dynamics

  9. The historic course of market dynamics “Outperformers” exercise “Outperformers” exercise market pressure over market pressure over conventional companies conventional companies Local markets, Local markets, high customization high customization Spacious markets, Spacious markets, little competition little competition high dynamics high dynamics Sluggish/dull, low dynamics

  10. The “Taylor Bathtub” - and what it means for companies today “Outperformers” exercise market pressure over conventional companies Local markets, high customization Spacious markets, little competition high dynamics Sluggish/dull, low dynamics high dynamics Dynamic part of value Dynamic part of value creation creation Solution: Man Age of Crafts Manu- facturing Industrial Age/ Age of Tayloristic Industry Age of Global Markets Formal part of Formal part of value creation value creation Solution: Machine 1850/1900 1970/80 today

  11. We must stop riding the dead horse: Let´s work on the model, not in the model!

  12. 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 •  …

  13. How to let go of traditional Performance Management practices •  Transparency & Improvement •  Comparisons between peers •  Comparisons with previous periods •  Dialog and Dissent •  Social and group pressure •  Pay by market value •  Results Sharing •  … High dynamics High dynamics •  Fixed, individual targets •  Management by Objectives •  Budgets and Plans •  Performance Appraisal •  Hierarchical Pressure •  Pay by Position or Performance •  Incentives and Bonuses •  … Low dynamics Low dynamics

  14. Polling Polling Question Question

  15. Some pioneers of the new model Industry Retail It It is is possible possible. . Services Government/ NGOs

  16. From fixed to relative targets & measures Fixed, negotiated targets Fixed, negotiated targets Target: absolute ROCE in % (here: 15%) Plan Relative, self-adjusting targets Relative, self-adjusting targets Target: relative ROCE in % (to market) Target Actual Actual Comparison: Market-Actual Comparison: Plan-Actual Most important competitor (28%) Most important competitor (28%) Target: ROCE in % better than market avrg. Market (25%) Market (25%) Actual (21%) Actual (21%) Plan (15%) [expected market Ø: 13%] [independent from expected market Ø] •  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! •  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!

  17. Practice: Relative measures & reporting Snapshot (static) w/benchmarks Snapshot (static) w/benchmarks Accounts/KPIs Accounts/KPIs vs vs prev. periods prev. periods Rankings (“league tables”) Rankings (“league tables”) last mnth Same mnth last year Same mnth prev.. year Ø last 12 mnths Ø 12 prev. mnths Company Competitor A Competitor E Competitor C Us Competitor B Competitor D Competitor G 10% Competitor F KPI 31% 24% 20% 18% 13% 12% 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% Compe- titor A Our unit A KPI 2 Indicators or Groups of accounts Compe- titor B Us Our unit B KPI 1 8% Trend with tolerance Trend with tolerance Trend with references Trend with references (A) Maximum Trend with benchmark Trend with benchmark Tolerance levels Us KPI KPI KPI (B) Gliding average Us Competitor A Curve with variance out of bounds Time (Actuals) Time (Actuals) Time (Actuals)

  18. Polling Polling Question Question

  19. From org design principles for the industrial age to contemporary ones Law Law Beta § 1 § 1 Freedom to act Freedom to act § 2 § 2 Responsibility Responsibility § 3 § 3 Governance Governance § 4 § 4 Performance climate Performance climate § 5 § 5 Success Success § 6 § 6 Transparency Transparency § 7 § 7 Orientation Orientation § 8 § 8 Recognition Recognition § 9 § 9 Mental presence Mental presence §10 §10 Decision-making Decision-making §11 §11 Resource usage Resource usage §12 §12 Coordination Coordination Beta Alpha Alpha Connectedness Cells Leadership Result culture Fit Intelligence flow Relative Targets Sharing Preparedness Consequence Purpose-driven Market dynamics not Dependency not Departments not Management not Duty fulfillment not Maximization not Power accumulation not Top-down prescription not Incentives not Planning not Bureaucracy not Status-oriented not Commands

  20. Practices of the past (selection) ”Meritocracy“ Dress codes Org charts Holiday applications Paid extra hours Budgeting Planning HR Plan-Actual variances Forecasting Performance Appraisal/360° Control of work hours Allocations Incentives Individual targets Target negotiation Job titles Sales quotas Forecasting Jours fixes Job Descriptions Pay for Performance Travel policies SWOT analysis Bonuses MbO Salary ranges Cost Management Strategic planning Competencies Management Suggestion boxes Knowledge Management Training budgets ”Personnel Expenses“ Earnings guidance Personnel Development Assessment Centers 20

  21. Q & A Q & A  

  22. Polling Polling Question Question

  23. Contact, book, and more @NielsPflaeging nielspflaeging.com organizeforcomplexity.com betacodex.org slideshare.net/npflaeging www.organizeforcomplexity.com www.organizeforcomplexity.com

  24. Thank You Thank You  

  25. A few final items •  You will be prompted to take a short survey once this webinar concludes, we would greatly appreciate your feedback regarding this event. •  Join us at www.proformative.com to continue this conversation with your peers in our community •  Check out http://www.proformative.com/courses to see our great lineup of Proformative Academy on-demand courses taught by your peers and subject-matter-experts •  Thanks to our speakers

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