Best Practices in Planning and Performance Management E-Book

David A. J. Axson

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 549

Veröffentlichungsjahr: 2010

Beschreibung

A practical framework for effectively managing performance in today's complex, competitive and risky global markets

The Third Edition provides a complete framework for building best practice management processes for today's complex and uncertain world. Fully updated to reflect the events of the global economic crisis, this book provides further practical examples of companies that are successfully using the practices identified.

• Updated for the implications of the global economic crisis on management practices
• Completely rewritten section on "What it Takes To Be An Effective Manager In An Uncertain World
• Added examples and mini case studies throughout the book from companies such as Qualcomm, IBM, Dominos, Target, Toshiba and Facebook
• Establishes new benchmarks for performance management process and practice
• Fully updated to include recent events, new learnings, technologies and emerging best practices

This book includes serious rethinking of the way companies plan and manage performance-from the role of accounting to the skills needed to be an effective manager-including new technologies, techniques and real time management processes.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Preface to the First Edition

Preface to the Third Edition

Acknowledgments

Introduction

Part One - Why Performance Management Matters

Chapter 1 - Traditional Management Processes Are Obsolete

BETTER-INFORMED CUSTOMERS

CHANGING MARKET AND BUSINESS MODELS

STRUCTURAL CHANGE IN THE ECONOMICS OF BUSINESS

GLOBALIZATION

REGULATORY REVOLUTION

GROWTH THROUGH ACQUISITION AS THE NORMAL COURSE OF BUSINESS

REDEFINING ASSET VALUES

CHANGING DELIVERY CHANNELS

COMPRESSED CYCLE TIMES

VAST NEW INFORMATION SOURCES

TECHNOLOGY AND SYSTEMS

NEED FOR A BURNING PLATFORM

NOTES

Chapter 2 - What Is Performance Management?

DEFINING PERFORMANCE MANAGEMENT

BEST PRACTICES DEFINED

TYPES OF BEST PRACTICE

APPLYING BEST PRACTICES

BEST PRACTICE ADOPTION IS NOW A NECESSITY

NOTE

Chapter 3 - Sizing the Opportunities

BEYOND BENCHMARKING

DEFINING THE RIGHT METRICS

CONCLUSION

NOTES

Part Two - Best Practices

Chapter 4 - Using Best Practices to Drive Change

A BRIEF HISTORY

FROM BATTLEFIELD TO BOARDROOM

COMPONENTS OF A BEST PRACTICE FRAMEWORK

BEST PRACTICE RECIPE

SELECTING THE RIGHT BEST PRACTICES

GOLDEN RULE OF BEST PRACTICE APPLICATION

TIME TO SACRIFICE A FEW SACRED COWS

NO SILVER BULLETS

NOTES

Chapter 5 - Strategic Planning: Ideas That Drive Results

DEFINING STRATEGY

TYPICAL PROCESS

STRATEGIC PLANNING BEST PRACTICES

COMMUNICATE, COMMUNICATE, COMMUNICATE

STRATEGIC PLANNING IS A COLLABORATIVE PROCESS

CEO AS CHIEF STRATEGIST

HARD SIDE OF STRATEGY

ACID TEST

LESSONS FOR A VOLATILE WORLD

BEST PRACTICE SUMMARY

NOTES

Chapter 6 - Tactical and Financial Planning: Translating Strategy into Action

DEFINING TACTICAL AND FINANCIAL PLANNING

TYPICAL PROCESS

TACTICAL PLANNING BEST PRACTICES

FINANCIAL PLANNING BEST PRACTICES

LESSONS FOR A VOLATILE WORLD

BEST PRACTICE SUMMARY

NOTES

Chapter 7 - Management Reporting: From Information to Insight

TYPICAL PROCESS

MANAGEMENT REPORTING BEST PRACTICES

PUTTING IT ALL TOGETHER

LESSONS FOR A VOLATILE WORLD

BEST PRACTICE SUMMARY

NOTES

Chapter 8 - Forecasting: Pass the Crystal Ball

TYPICAL PROCESS

FORECASTING BEST PRACTICES

UNDERSTAND VARIABILITY

LESSONS FOR A VOLATILE WORLD

BEST PRACTICE SUMMARY

NOTES

Chapter 9 - Risk Management: Place Your Bets

NO EXCUSES

GLOBAL INTERDEPENDENCE

DEVELOPING AN EFFECTIVE BUSINESS RISK MANAGEMENT CAPABILITY

RISK MITIGATION TECHNIQUES

LESSONS FOR A VOLATILE WORLD

NOTES

Chapter 10 - Technology: Panacea or Pain?

EVOLUTION OF INFORMATION TECHNOLOGY IN BUSINESS

WHY THE TIME FOR CONVERGENCE IS RIGHT

APPLYING TECHNOLOGY TO PERFORMANCE MANAGEMENT—DAWN OF THE DIGITAL MANAGER

BEST PRACTICES FOR LEVERAGING TECHNOLOGY

LESSONS FOR A VOLATILE WORLD

BEST PRACTICE SUMMARY

NOTES

Part Three - Moving from Data to Decisions

Chapter 11 - Implementing Best Practices

GETTING STARTED

MOVING TO IMPLEMENTATION

UNDERSTAND THE OVERALL STRATEGIC GOALS AND OBJECTIVES

DEFINE THE CRITICAL SUCCESS FACTORS AND DRIVERS

DEFINE THE APPROPRIATE PERFORMANCE MEASURES

LINK MEASURES TO THE OVERALL STRATEGY

DEFINE THE REPORTING DIMENSIONS

DETAIL AND SOURCE THE PERFORMANCE MEASURES

DESIGN THE USER EXPERIENCE

DESIGN AND BUILD THE REPORTING PROCESS

INTEGRATE THE REPORTING AND PLANNING PROCESSES—ALIGN INCENTIVES

DEVELOP THE REQUIRED SKILLS

Chapter 12 - Implementation Secrets

LEARN FROM THE MISTAKES OF OTHERS

EFFECT CHANGE AND THEN SUSTAIN IT

IT’S ABOUT COMMITMENT AND EXECUTION

NOTES

Chapter 13 - Managing in an Uncertain World

LEADERSHIP QUALITIES

DON’T UNDERESTIMATE THE IMPACT OF LEADERS

NOTES

Chapter 14 - Looking to the Future

FAST, FLAWLESS EXECUTION WILL BE THE DISTINGUISHING CHARACTERISTIC OF ...

GLOBAL ACCOUNTING AND REPORTING STANDARDS WILL BECOME A REALITY

THE FOCUS WILL SHIFT FROM BUYING TECHNOLOGY TO USING IT

THE ANNUAL BUDGET WILL DIE—AND FEW TEARS WILL BE SHED

FINANCE EXECUTIVES WILL REQUIRE NEW SKILLS OR NEW JOBS

FINAL THOUGHTS

NOTES

About the Author

Index

Copyright © 2010 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Axson, David A. J.

p. cm.

Includes index.

ISBN 978-0-470-53979-8 (cloth)

1. Benchmarking (Management) 2. Managerial accounting. 3. Business planning. I. Title.

HD62.15.A97 2010

658.4’ 012—dc22

2010003840

To Mum and Dad: I miss you both

Preface to the First Edition

This book has its origins in my father’s study during the late 1970s. Dad had bought one of the first Commodore Pet computers to be sold in the U.K. and was writing BASIC programs to automate the financial reporting for the family furniture business. I was his data entry clerk.

After staying up into the early hours of the morning writing programs and laboriously copying them onto cassette tapes—this being before the days of the first floppy disk—I would help him key in the day’s transactions before leaving for school. Over the next few months, we developed a full accounting, budgeting, and financial reporting system for the business—complete with customer database, inventory management system, and scorecard reporting system. We did not know then that this is what these features would come to be called, but they worked. Thus was my interest sparked in planning, management reporting, and the application of computers to business.

Dad sold the family business soon after and moved into computing full time; I left for university to study accounting and computer science. Twenty-five years later, I feel ready to document what I have learned in my journey through the application of technology to business planning and management reporting processes. Starting with my first job at Lloyds Bank (now Lloyds TSB) in London, followed by 18 years in consulting and moving on to research this book, information has been my career. Throughout that time, one of Dad’s earliest pieces of advice to me has remained one of my guiding principles.

One night I was sitting in his study and we were talking about the potential of computers to change the world. I am sure Steve Jobs and Steve Wozniak and Bill Gates and Paul Allen were having similar conversations around the same time. As Dad and I discussed the potential applications to which computers could be put, Dad commented, “The real power of computers will only be realized when the user needs to know nothing about them in order to find them useful.” He was right then and he is still right now. The full potential of computer technology to add value to life in general, and planning and management reporting in particular, will only be realized when the user does not need to have any computer knowledge at all to benefit.

Dad passed away in 1999. I hope this book follows his mantra of keeping it simple by explaining complex things in words people can easily understand.

David A. J. Axson March 2003

Preface to the Third Edition

The second edition of this book was published in early 2007, just as the first signs of a housing bubble were emerging in the United States. By early 2008, Bear Stearns had failed and signs of further stress in the housing market were clear. However, many commentators were still predicting that the fallout would be limited. Then came September 15, 2008, and the collapse of Lehman Brothers; suddenly all bets were off. I was in Prague that day, and as I observed the beginning of the near collapse of the global financial system, I was conflicted. On one hand, I, along with everyone else, saw the value of my investments plummeting, while on the other hand, here was incontrovertible proof that the management processes upon which organizations have relied for more than half a century were totally broken. In this edition I have updated all the best practices to reflect the learnings from the “crash,” or was it the “crunch”? In almost all cases, the argument for best practices has simply been made stronger. Each of the best practice chapters (5 through 10) now contains a new section, “Lessons for a Volatile World,” which summarizes the key lessons managers should take away from the events of 2007 to 2009. Use this book as a road map for driving fundamental change so that we will all be better prepared next time.

David A. J. Axson

January 2010

Acknowledgments

Numerous people contributed their knowledge and insight to the ideas developed in this book. One of the joys of consulting is that you have the opportunity to learn from many very smart people, both colleagues and clients. Thanks are owed to many current and former clients and colleagues who helped expand my thinking and challenge my stubbornness, including Doug Barton, Pete Brewer, Reuben Chaudhury, Carolynne Cox, Robert Craven, Stu Dressler, Mary Driscoll, Lou Eyermann, Mike Geltzeiler, Christine Gattenio, Greg Hackett, Jeff Holker and the IBM Cognos Innovation Center, Greg Horn, Ian Hunt, Alex Jaime, Art Krause, Mark Krueger, Vinnie Mirchandani, Tim Murphy, Dave Paul, Steve Player and the team at the Beyond Budgeting Roundtable, Jeff Rosengard, Rick Roth, Lawrence Serven, Holly Snyder, Helene Uhlfelder, Mike Upchurch, Nic Walsh, and Liz Wenzel.

Most of all I want to thank my family. My wife, Donna, proofread much of this book and offered constant support and encouragement. As always, she was the principal reason I was able to get the job done. My two children, Eleanor and James, provided much light relief as I struggled with various sections. Their smiles and love ensured I kept my priorities right.

Introduction

There is no doubt that that we live in the Information Age. A typical weekday edition of the NewYork Times contains more information than the average person was likely to come across in a lifetime in seventeenth-century England. Consider how the average manager feels when asked to develop plans, build budgets, report progress, and make decisions in response to today’s increasingly competitive, fast-paced, and volatile environment. Traditional planning and management reporting processes are simply too slow, too detailed, and too disconnected for today’s competitive world. Managers are seeking new decision-making processes and tools that will enable them to shorten the cycle time to make and implement a decision.

This book summarizes the current state of the art with respect to best practices for business performance management or performance management, as I shall refer to the topic going forward. Best practices have been the subject of much discussion in recent years, and a growing body of knowledge has emerged that purports to define best practices and quantify their value to an organization. A lot of anecdotal evidence links best practice application to improved performance. This book seeks to establish a framework for identifying and implementing best practices in performance management.

The underpinning of the research and analysis contained in this book is my work over the last 25 years with over 250 different companies: first as a consultant with Deloitte and A.T. Kearney in London, then as a cofounder of The Hackett Group, as head of corporate planning at Bank of America, and now as president of my own firm, the Sonax Group.

This book illustrates how leading companies are rethinking the way they make and implement decisions. The aim is to provide a practical guide to managers and students of business on the processes and tools that can be used to consistently make and execute better decisions faster.

Part One makes the case for a radical change in the way managers manage performance. Chapter 1 explains the need for effective performance management in today’s fast-paced world. Chapter 2 explores why many of the processes that organizations rely on today are completely unsuitable for the tasks. Chapter 3 provides a series of diagnostic tools and measures to help you size the improvement opportunity.

Part Two describes the principal best practices for each element of the performance management process. Chapter 4 describes the approach for putting best practices into context and provides a brief review of the current state of the art. Chapters 5 through 10 describe best practices for strategic planning, tactical and financial planning, management reporting, forecasting, risk management, and technology respectively. In this third edition a new section entitled “Lessons for a Volatile World” has been added to each chapter in Part Two. These sections summarize the key lessons managers should take away from the tumultuous economic events of 2008 and 2009.

Part Three provides insights into the steps required to design a best practice- inspired process that is right for your organization (Chapter 11) and to understand the critical success factors for implementation (Chapter 12) and the importance of effective leadership (Chapter 13). Chapter 14 offers my own predictions for the future evolution of performance management updated for events of the last few years.

I have tried to use terms consistently throughout the book—not always an easy task. I have used the term performance management as shorthand for business performance management throughout. The terms financial planning and budgeting are used interchangeably since no adequate definition of the difference exists. Similarly treated are the terms organization, business, company, and firm, and the terms user and customer when describing the recipients of management information. Overall, I have tried to use the most descriptive term for the context.

This is a book for anyone who has questioned the value of the budget process, been frustrated at the inability to get good information quickly, wondered why so much time is spent developing forecasts that are always wrong, or been angered by the repeated failure of technology to deliver on its promises.

Part One

Why Performance Management Matters

Chapter 1

Traditional Management Processes Are Obsolete

Change is inevitable in a progressive country. Change is constant.

—Benjamin Disraeli

If anyone had any doubts that traditional management practices such as complex multiyear strategic plans, detailed annual budgets, quarterly forecasts, and monthly management reports were obsolete, they were blown away on September 15, 2008. Much as Netscape’s initial public offering on August 9, 1995, marked the dawn of the Internet age, Lehman Brothers’ bankruptcy filing put the final nail in the coffin of calendar-based, accounting-driven performance management. Managers must now operate in a world of unprecedented complexity, volatility, uncertainty, and risk. Static management processes based on historic data simply do not work anymore. The facts speak for themselves. How many strategies, plans, budgets, or forecasts that were crafted with such care in 2007 assumed that:

• Oil prices would rise from $45 a barrel to a peak of $147 before collapsing to $35?

• U.S. automotive sales would fall from an annualized rate of 16 million in 2007 to less than 10 million one year later?

• The Dow Jones index would lose 54 percent of its value, from 14,164 on October 9, 2007 to 6,547 on March 9, 2009?

• The $/£ exchange rate moved from $1.35 in March 2008 to $2.07 in January 2009 before falling back to $1.66 in July 2009?

• The H1N1 virus would move from a minor flu outbreak in northern Mexico to a global pandemic in six weeks?

We live in an uncertain world and it isn’t going to change anytime soon. Continued globalization and technological change, combined with the emergence of issues such as environmental sustainability and global terrorism, is changing forever the role of managers and, more important, the processes and tools needed to manage performance. Let’s explore some of the major forces of change in more detail.

BETTER-INFORMED CUSTOMERS

I was going to title this section “Smarter Customers”; however, more knowledge does not always equate with more wisdom. Notwithstanding this nuance, there is no doubt that customers have access to better information than ever before when considering a purchasing decision.

Easy access to multiple sources of information and advice, not all of them good, has created customers who feel more confident, knowledgeable, and empowered. The balance of power between suppliers and customers has shifted irrevocably. For example, more than 80 percent of prospective car buyers research their purchase online before entering the dealership: They compare product and pricing information, assess financing options, and check the value of their trade-in all before they ever step into the salesperson’s lair. The Internet has become the first stop for those seeking the best airfares or searching for a new job. Despite the wealth of new information available to customers, more information does not necessarily mean better decision making. In fact, the ease of accessing vast quantities of not-always-reliable information is likely to increase the frequency of speculative bubbles. Part of the exuberance that accompanied both the dot-com bubble and the housing bubble can be attributed to the incessant media and Internet coverage of the near-certain fortunes to be made. Organizations need to understand the implications of dealing with a better-informed if not necessarily smarter customer base.