The sustainable way
to improve corporate
performance
Corporate Performance
Program
Roland Berger
Bundling performance-enhancing initiatives with corporate performance programs
Leading a company to success can be a Sisyphean task at times. No sooner have you mastered one challenge than a series of others are already looming up ahead. The economy remains persistently downbeat. The strong trend toward consolidation remains unbroken. Investors are skeptical. And the competitive pressures in many industries are literally devastating. All of which makes it difficult for German managers to lay a solid, sustainable foundation for business success. In our day-to-day work, we repeatedly encounter companies that are trying to combat all these difficulties with one-dimen-sional activities that focus only on a single lever. True, down-sizing and capacity rollbacks can improve earnings in the short term. However, companies that plot this course leave vast areas of business potential untapped and unused.
We recommend that companies bundle their energies and activities. The best way to sustainably improve business performance – and thus to increase the value of the company – is to launch a corporate performance program that focuses on the company as a whole. The trick is to reconcile the needs of the enterprise as a single entity to the specific requirements of its individual business units. It is the management's job to set the program objectives top-down. These must, however, then be validated from the bottom up – by the business units – if they are to be acknowledged as plausible and therefore accepted. It is almost impossible to overstate the importance of corporate culture in the context of corporate performance programs.
Figure 1: Why companies are under pressure to act
Pressure to act
Fierce competition
New industry paradigms and business models
A weak economy
Globalization
Regulatory changes Skeptical investors
> More intense competitive pressure > More efficient markets (as products/
services can more easily be compared)
> Leaps in innovation that force com-panies to adapt quickly and radically > Progress that dictates the
reconfiguration of value chain structures
> Consumers more sensitive to price changes
> Reluctance to consume
> Internationalization of competition and markets
> Greater number of competitive products
> Changes in tax laws
> Steps to promote or inhibit investment > Rising wage and non-wage labor costs > Higher risk/return expectations on the
part of investors (raising the cost of equity capital)
> Stricter requirements (ratings, etc.) on the part of lenders
Multidimensional, holistic corporate performance programs from Roland Berger
Our corporate performance program (CPP) pans out to see the big picture. It takes account of the multidimensional nature of the levers that exist throughout the entire enterprise. Together with our clients, we therefore apply programs that are both vertical (in the sense that they focus on the specific goals of each business line or unit) and horizontal (also accommodating across-the-board issues).
The latter are enterprise-wide initiatives – such as drives to reduce capital employed or increase service as a proportion of the total business volume.
One special aspect on which Roland Berger focuses is the issue of "cash for growth". The aim here is to reduce the volume of capital employed. This allows our clients to expand and safe-guard their financial leeway. Effectively, it frees up in-house funds to finance growth.
Figure 2: Examples of across-the-board issues (BU = business unit)
BU1 BU2 BU3
"Sales up"
"Cash for growth" Lower fixed costs
Six Sigma Service offensive Others
Across-the-board programs and initiatives can be highly effec-tive. Even so, they are only components (or modules) of a wider corporate performance program. CPPs always have a modular structure, although we tailor the individual modules and their composition to the specific situation of each customer. All modules are interlinked and integrated continually throughout the entire program.
We aim to help our clients design as efficient a corporate performance program as possible. Accordingly, they first have to define how best to manage the program, and how to coordinate the methods, tools and existing knowledge used, as well as the new knowledge that is generated during the program.
We recommend that clients should not set a time limit for their performance programs. On the contrary, it is important to stay open to ongoing performance enhancements.
Figure 3: Model of a "cash for growth" initiative
> Transparency about the absolute amount of capital employed and its exact composition
> Periodic analysis of inventories > Periodic analysis of receivables > Periodic analysis of payables
> Integration of supply chains and value chains > Differentiation of delivery service
Potential
> Definition of targets and incentives
> Assignment of personal responsibility for capital employed
> Overcoming a unit-focused mindset by establishing cross-functional goals
> Introducing metrics/tools
> Applying strict action management to monitor/ensure target compliance
Program principles
> Capital costs money. In addition, the capital markets judge us by how efficiently we use our capital > We shall deal carefully and sparingly with our capital
resources and willingly be judged by our success in doing so
> In a concerted campaign, we aim to free up capital employed needlessly in all BUs
Methodology
> Roland Berger Cash for Growth Navigator (tool) – Cash check (profile of working capital, with
benchmarks)
– Excellence and process check (receivables, payables, inventories, etc.)
> Plan of action to realize cash for growth > Working Capital Reduction (tool)
> Global Footprint Tool (asset productivity, etc.) > Process reengineering (Strategic) analysis and orientation Benchmarking, target-setting Across-the-board issues, Enterprise-wide initiatives Pilot projects Controlling, Monitoring Enterprise-wide program control Toolbox, knowledge provisioning Training, Coaching Communi-cation
What exactly do we do to help you?
The above puzzle chart makes one point very clear. Faced with such complexities, companies that tackle this kind of perfor-mance program are exposed to the risk of frictional and hence performance losses. Roland Berger's experienced experts apply proven methodologies to ensure the lasting success of your corporate performance program.
1. We work with your business management to lay the foundation and design the strategic orientation of the program. We are fully aware that the program must be clearly defined and tailored precisely to your company if it is to meet your across-the-board and line-specific goals.
2. We collaborate with your business managers to structure the program and thus create a framework for the realization of defined goals.
3. We help you embed the program firmly throughout the enterprise. On every level of the company, projects – and the methods contributed by Roland Berger – are practiced until your people can independently apply and distribute them throughout the organization. This approach ensures the sustainable success of your program.
Our approach is based on the cascade principle. Implemen-tation takes place from the top management level down through every single company site. From the earliest stages, we work with you to launch pilot projects. These make quick wins visible in short order, helping you to convince your people of the prog-ram's value and so secure their active involvement. A central organizational unit maintains control of all the various aspects of the program. This "command center" manages the program, coordinates tools and methods, and ensures that knowledge is transferred appropriately. A broadly-based communication strategy ensures transparency and motivates your people. Every step of the program is closely coordinated with your manage-ment team and employees.
Corporate performance programs must be managed from a strategic perspective. This principle applies not only for diversi-fied conglomerates, but increasingly also for growth-oriented SMEs. Whatever the size of your company, you certainly stand to benefit from our corporate performance program.
We would be more than happy to talk to you about the advan-tages of a corporate performance program, or to discuss any similar program you may already be running. We are naturally also willing to place our experience at your disposal to help your company master the challenges it is currently facing. We look forward to hearing from you.
> Cultivate understanding of the company's strategic orientation > Audit the business units'
existing performance > Identify and operationalize
actions needed throughout the enterprise
> Achieve consensus on the definition of goals for the business units
> Define across-the-board issues and/or "initiatives" with which to achieve corporate goals
Lay the foundation
> Implement pilot projects to realize quick wins
> Launch the program organiza-tion and set up a central project office
> Install the toolbox and coordi-nate methodologies
> Initialize the communication strategy
Launch the program
> Hold workshops in all business units to define specific actions and new projects
> Evaluate and integrate ongoing projects
> Implement decentralized pro-jects with support from across-the-board initiatives
> Provide central support for project work
> Establish periodic reviews and target-setting exercises in a self-propagating process
Embed the program
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Roland Berger Strategy Consultants –
Competence Center Corporate Strategy & Organization
Roland Berger Strategy Consultants advises industrial and service companies and public institutions of international rank in all areas of corporate management – from strategic orientation to the introduction of new business processes and organizational structures.
"Creative strategies that work" are our core strength. We do not just develop innovative concepts: we also provide active, hands-on support as our customers implement them. Such close teamwork delivers sustainable value for our customers. We are convinced that any strategy that doesn't pay off is not a valid strategy at all. Accordingly, we use systematic methodologies to quantify every one of our recommendations from start to finish. Quantitative analytical procedures and tools are applied from the outset to help us achieve this goal.
Who to contact about corporate performance programs (CPPs)
Roland Berger Strategy Consultants
Corporate Strategy & Organization Competence Center
Dr. Tim Zimmermann is a Partner at Roland Berger's Munich
office. For over thirteen years he has been advising successful international companies on issues such as enterprise manage-ment, organization and processes, post-merger integration, cost efficiency (especially overheads), business process reenginee-ring, holding management, business segmentation and management, and international management.
[email protected] +49 89 9230-8362
Andreas Schwilling is a Partner at Roland Berger's Munich
office and has been providing consulting on issues such as strategy development, strategic planning, management and controlling systems, value-based management and organization for more than twelve years.
[email protected] +49 89 9230-8364
Björn Witte is a Senior Consultant at Roland Berger's Munich
office. He has accumulated extensive experience of transfor-mation and reorganization projects and in designing and implementing multiproject management systems. [email protected]
+49 89 9230-8844
Thilo Tern is a Senior Consultant at Roland Berger's Munich
office and has extensive experience of value and portfolio management projects. He has also been instrumental in designing and implementing an array of process reengineering and restructuring projects.
[email protected] +49 89 9230-8479