Negotiating around the numbers – linking with operative knowledge

When discussing the interactive performance measures in the monthly management meeting, the emphasis was placed on linking accounting numbers to operational knowledge. The importance of lifting up locally generated cues and interpretations from lower levels of the organization was evident. One of the division presidents explained how grass root judgements became crucial I order to keep up with the risks of the operative business:

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I have to know what has really happened there, let’s say the factory in Norway. If ships deliveries are late there, then I need to be able to report it here. I need to know why their delivery accuracy has dropped by 20% or e.g. why in Vaasa Wärtsilä Diesel has been upset with us, or why China has not been able to deliver to us all that they should have. (Division president C)

Furthermore, the mere numbers reported in the monthly performance report were not perceived to have enough information content, despite the vast coverage they had into the company’s operations. Numbers were only numbers – despite the myriad of measures, numbers remained too aggregate to reveal the pieces of operative knowledge that was focal information to this organization. Judging by the numbers only, the company risked missing out on the real reasons behind the metric. This could ultimately lead to drawing incorrect conclusions. The discussion around the performance measures was used to build a more comprehensive picture around the numbers – it provided the means to arrive at collectively crafted interpretation.

Ultimately, this would make sense of the accounting data.

So for instance, if the number of customer goes down, then we need to also track that they have not made a deal with anybody else, so we try to analyze it. For example if prices fall and volumes drop and that is pretty drastic, and then you could assume that the customer has made a deal with another company. But actually not necessarily has that happened. It can be that the customer’s own business has dropped. So these are the kinds of things we analyze constantly. (Division president C)

These vital cues had to be collected from lower levels of organization. In this sense the hierarchic system of using interactive performance measures provided a way of building structure to the information exchange in the organization, between different hierarchical levels. It became a structured way of lifting up focal pieces of localized views and evaluations. It was seen as an effective medium for lifting and promoting information distribution from sometimes quite operational issues, as the division president C explains:

Oh yes (numbers are good for opening up discussion)! The thing is that at the same time we discuss all the investments and everything, so the number data goes through and they get discussed, and then all this sort of informal information goes through as well. So you get the informal issues all the way up here. It of course gets filtered all the time, you cannot know everything... But then I can explain the overall picture forward in the organization, so I think it works pretty well. (Division president C)

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Furthermore, interactive controls were clearly able to achieve pressure. The business people were expected to come up with explanations and action plans to the numbers.

The systematic discussion achieved through the standardized use of interactive performance measures gave structure and direction to the dissemination of critical cues.

The packages that we go through, the business presents them and then they actually know what our next question is. So they have already some kind of a presentation on how the numbers will evolve. So now we are able to get more pressure to them. If we compare, then previously somebody might have asked for some background information on the figures, but now it is more systemized (Division president C)

When negotiating the meaning around the numbers the linking of operational knowledge was in a decisive role. Controllers became responsible for linking the operational knowledge to the accounting numbers so that they would become meaningful to the rest of the organizational members. In encouraging the operative organization to share their views one of the business controllers emphasized the importance of the controller in turning the numbers into the language of the recipient:

The controller needs to kind of read the numbers out loud, because the others are no controllers. They don’t read numbers like we do, and we can’t expect them to. An active controller is not a person producing a lot of reports and sending them by email.

An active controller is a person lifting up an important issue, and being like ”tell me a little about this”. And then the person can explain it in his own words, but he doesn’t have to look at the report and be like ahhaa, now I’m going to lift up this and that (that is the job of the controller). (Business controller A)

Operational information was, in fact, seemingly important in other ways as well. In order to encourage and achieve fruitful interactive discussions around the accounting numbers, the controller’s business understanding in terms of being aware of changes in prevailing market situation, understanding customer base as well as having sufficient operational knowledge, was imperative. In achieving an understanding of the state of the business, the controller used the various KPI:s as a mediating tool.

The controller has to strongly understand the business and how it is done. If they’re selling a brick, he needs to understand how the brick is made and what the customer base is like and the market, what is happening there and so on. He needs to understand all that in order to get the discussion fruitful. Otherwise he’s just the guy who brings the report to the table and doesn’t understand anything about anything. (Division controller B)

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