Objective, Concepts, Implementation Examples

(1)

Finance&Control as Business Partner:

Report About Current Practice In European Enterprises

-Juergen H Daum

Juergen H. Daum

Chief Solution Architect,

Business Solution Architects Group,

SAP EMEA,

d C F

d

f th SAP B t P

ti

N t

k

and Co-Founder of the SAP Best Practice Network

(2)

About Juergen H. Daum

►

CFO-adviser and Chief Solution Architect, Business Solutions Architects

Group at SAP EMEA. Co-founder of the SAP Best Practice Network

►

Author, lecturer and trainer in enterprise management, finance

trans-formation, innovation management and entrepreneurship, + founder of

the International Institute of Enterprise – Heidelberg

(see: www.iioe.eu)

Professional background:

►

Since 2007: President and founder of the International Institute of Enterprise – Heidelberg (IIOE)

(in addition to the role at SAP)

►

Since 2002: advising CFOs, and finance professionals

of European companies - current focus on

finance transformation & enterprise performance management. Co-founder and conceptual father

of the SAP Finance Best Practice Network (SAP FBPN)

(

)

►

Five years in SAP’s product development

:

Product Manager

SAP R/3 EC and

Strategic Enterprise

Management

(SEM),

Program Director for mySAP Financials

►

Five years in SAP’s field organization

in Germany and Europe: sales consulting product

►

Five years in SAP s field organization

in Germany and Europe: sales, consulting, product

management with the focus on financials and enterprise management

►

COO and CFO

in a mid-sized German company before joining SAP in 1992

F

tl

bli hi

d

ki

t

i

t fi

t

f

ti

d th

©

2002-2009 Jürgen H. Daum, Guest lecture at the University of Mannheim, 04 March.2009 | Page 2

Frequently publishing and speaking on enterprise management, finance transformation and other

management topics; author of the books "Intangible Assets and Value Creation“ (2003) and “Beyond

Budgeting” (2005). More / complete personal profile at:

http://www.juergendaum.com/jd.htm

(3)

The SAP

Finance

Best Practice Network

(founded in 2004)

(

)

For CFOs and Finance Directors only

Get a quick understanding of new

emerging topics

CFO

Exchange of „Best Practice“ strategies in finance

transformation

Definition of strategic direction of FBPN activities

CFO

Round-table

(2x per year,

two half days)

Strategic

Direction

Development of

Implementation

Concepts

For senior finance professionals / finance

architects (finance transformation program

manager, group controller, chief

accountant, finance operations manager, …)

Exchange of „Best Practice“ implementation

Finance Best

Practice

Workshops

two half days)

concepts for finance transformation

Identification of demand for Focus Workshops

For domain / project leaders, who currently

work on an implementation project

(3x per year,

two full days)

Special Workshops:

Level of Detail

work on an implementation project

Exchange of „Best Practice“ on

process level

Ideas and concepts

Î

Id

tif i

b

t

ti

Focus Workshops, Site Visits,

Customer Forums (on demand)

Ideas and concepts

(of individuals /single

companies)

+

Î

Identifying best practice

Î

Learning from each other

Î

Testing new ideas

Î

Developing practical solutions that

k i

ifi

i

Cross company

network (of finance

professionals)

work in a specific company environment

For more information about the SAP Best Practice Network see:

(4)

The SAP

Finance

Best Practice Network:

Participants of past events (Selection)

©

(5)

Agenda

What F&C leaders want to achieve:

Vision for the future role of Finance&Control

The typical finance transformation journey of the

past decade: summary of achievements

Current finance transformation focus:

Finance&Control as a true business partner

What’s ne t? Ho

ill the crisis affect the

What’s next?: How will the crisis affect the

(6)

“The CFO as Business Partner“ idea

- is not really new

z

Concentrates on formal accuracy and is backwards oriented

z

Likes to work „in the backoffice“

z

Reacts only slowly to new requirements

z

Is mainly regarded as a „cost foctor“ in the company

Old: administrator

z

Sees him or herself as a partner for the business

z

Sees him- or herself as a partner for the business

and drives profitable growth together with his management

collegues

z

M

fi

f

i

l i t

l

i

id

Ne

b siness partner

z

Manages finance as a professional internal service provider

z

Generates significant monetary and strategic

value-add for the enterprise

©

Source: Presentation of Juergen H. Daum „Die künftige Rolle des Bereichsleiters Finanzen und Controlling innerhalb der Unternehmensführung“ at the

conference „Modernes Controlling, Finanz- und Informationsmanagement“, 04.03.1998 in Frankfurt / Main, Germany

(7)

What has really changed the role of CFOs

in the last decade

Drivers of change - examples:

►

Companies have considerably grown internationally and have become more complex – and

are thus confronted with serious control and steering issues

►

Market volatility and the pace of change have significantly increased

– creating serious control

d

i

ll

and steering issues as well

►

The opening of capital markets together with a much larger transparency in the business world

(that create a competition for performance) have

increased the pressure to continuously

i

f

improve performance

►

At the same time the

requirements to ensure good corporate and financial governance have

massively grown

(SOX etc.)

►

Accounting regulations

(e.g. through IFRS) and financing (e.g. through new financial

instruments) have become

more sophisticated and complex

►

CFOs need to actively sell“ the company to the investment community and

need to have the

►

CFOs need to actively „sell the company to the investment community and

need to have the

standing to communicate with critical investors, bankers, auditors and regulators

C

i

t d

d

l CFO

i

fi

f

i

l

h

t

Companies today need real CFOs, i.e. finance professionals who can act as a

trusted partner to the business and who can provide financial leadership

(8)

The key role of the CFO in creating enterprise

value: a value creating business partner

g

Example: View of a private equity investor

“We like the CFOs and their role and we always make sure that we have a good

CFO in the companies we invest, because they are the ones who ensure

fact-based, rational decision making. I would encourage you to not underestimate

,

g

y

how much value CFOs create. We have a huge respect for a great system and a

great culture.

For us the CFO is always the second key person the number 2 in the company

For us the CFO is always the second key person, the number 2 in the company.

In addition to everything he does related to the financial systems, it's his job to

root out the inefficiencies and to lead the necessary changes. And he also has

to have the ability to tell the CEO 'no'. ”

y

Managing Partner, international private equity company

CFOs ensure fact-based rational decision making. And a CFO

has to have the ability to tell the CEO ‘no’, if that is necessary.

©

Source: CFO panle disucssion, organised by Juegen H. Daum

(9)

What is today regarded as

finance&control excellence?

EFFECTIVENESS

EFFICIENCY

Example: How Hackett defines ‘World-Class performance’

EFFECTIVENESS

• Industry relative total

excess return

• Operating profit volatility

EFFICIENCY

• Overall function cost as a

% of revenue

• Process cost as a % of

High

World-class

Effectiveness

p

g p

y

• Cost of capital

• Days sales outstanding

• Days payables

outstanding

Process cost as a % of

revenue

• Technology cost per

function FTE

• Staffing levels by process

ness

Effectiveness

outstanding

• Days Inventory on-hand

• Quality metrics

• Accuracy of forecasts and

• Staffing levels by process

• Cycle times and iterations

• Unit cost of transactions

• Utilization of self-service

Effective

n

World-class

Effi

analysis

• Functional role in strategic

decision making

• Percent of time analytic

for inquiry

• Application complexity

• Automation of transactions

• Reliance on spreadsheets

E

Effi-ciency

Source: Presentation of Tom Bangemannn, VP Business Transformation, The Hackett Group, at the SAP FBPW, 12-13 June 2008 in Hamburg / Germany

focus in on proactive

decision making

p

• Percent of business reports

distributed electronically

A hi

i

fi

ll

i

Efficiency

High

Low

Achieving finance excellence requires

improvements in efficiency and effectiveness

(10)

The role of the CFO / of Finance&Control

– The CFO View

What is expected from the CFO - results of a McKinsey survey:

(Survey among CFOs - respondents could select more than one answer)

(Survey among CFOs respondents could select more than one answer)

(11)

The role of the CFO / of Finance&Control

– The CEO View

Example: U.S. Multinational (CEO view)

help create

leadership development

Navigator/

help create

a new future

leadership development

winning business models

A

dd

in

g

Navigator/

Leader

V

alue

A

built the [new] system

of accountability

risk & opportunity management

financial planning & analysis

Business

Partner

cs

V

of accountability

financial planning & analysis

Partner

ensure the foundation

of integrity

rigorous oversight

sustainable controllership

Basi

c

Steward/

Controller

(12)

Finance&Control effectiveness

- the CFO View

h l t d i

“One major issue [for finance is] to develop the role

further to

improve support to better manage the

„help to drive

the business“

further to

improve support to better manage the

business – and not just leave it up to the CEO

to drive

the business, to drive results..”

1

Michael Silbermann, CFO of Microsoft Germany, Munich, D

2

©

1_{Source: Daum, J., Koppelman, P., Lévi, Ch., Silbermann, M., “Go for Growth - a discussion with the CFOs and senior finance executives of BHP Billition, Electricité de France (EdF),}

(13)

Finance&Control effectiveness

- the CFO View

If we consider the key drivers that will influence the role of

Finance in the future then on one side

there are increasing

but we have

Finance in the future, then on one side

there are increasing

regulations that will require even more attention

from

Finance. […] On the other hand

we need a strong focus on

‘business navigation

’.”

1

D

i i M

h

d CFO R

h Ph

„but we have

to live a dual role

in finance“

2

Dominic Moorhead, CFO, Roche Pharma

1_{Source: panel discussions at the SAP CFO Roundtable, 02 December 2005 in Vienna, Austria. See: Daum, J., Brandes, D., Brandt, W., Davies, D.C., Kestens, J.,}

(14)

Agenda

What’s ne t? Ho

understanding of ‚Finance&Control excellence‘?

(15)

How to get there? – the CFO view

(16)

How to get there? – the CFO view

“At SAP, our task as a business partner role as finance people is to

support the transformation of the company [ ]

“We have to free up

[fi

t]

support the transformation of the company. […]

We have to support this

by implementing shared service structures

around the world in order to free up resources to then better support

the business

.”*

resources [first]

to [be able] to then

better support the

business ”

Dr. Werner Brandt, CFO of SAP

business.”

©

*_{Source: panel discussions at the SAP CFO Roundtable, 02 December 2005 in Vienna, Austria. See: Daum, J., Brandes, D., Brandt, W., Davies, D.C., Kestens, J.,}

(17)

The best practice finance ‚business model‘

- to enable finance excellence (I)

( )

Î

From Financial to Business

Governance

Î

From Cost Manager to

Corporate

CFO R l

Governance,

Risk Mangmt.

& C

li

Value-Added

Parenting &

B

D

l

t

Î

Strategist & Value Portfolio

Manager

CFO Roles

& Compliance:

„Stewart“

Bus. Development:

“Navigator”

BUs

G

IONs

G

IONs

sites

Operative

RE

G

BUs

RE

G

Business

“Business Partner”

Î

From Back Office

Administrator to

Professional Service

Business Support

Services

Shared Services/

‚Finance Factory‘

Centers of

Expertise

Provider

Services

y

p

“Service Partner”

Moving to centralized business support services is a catalyst for

Source: :Daum, J.H. Die Entwicklung der Rolle des CFO in europäischen Unternehmen. Auswirkungen auf und Zukunftsperspektiven für Controller und Controlling – Ein Praxisbericht.”, in: ZfCM – Zeitschrift für Controlling & Management, volume 52, 6/2008

g

pp

y

(18)

Finance Transformation I (Examples)

Standardization, Simplification, Automation of processes

,

p

,

p

“We transformed finance into one transnational process-oriented organization.”

“We decided to adopt a worldwide organization according to business sectors.

As a service provider to the business, finance had to face to this challenge.

This meant that […]

we had to transform our various local, splintered finance

organizations into one transnational finance organization which is more

organizations into one transnational finance organization, which is more

efficient and less complex, and that achieves enhanced process quality”

1

Dr. Carlo Mackrodt, former vice president for Global Financial Services, Henkel

Process organization

Common process definitions

Process organization

Driving process optimization

and benchmarking

Driving process optimization

1_{Source: Daum, J.H., Mackrodt, C.,}

„Wir haben bei Henkel international eine einheitliche Arbeitsweise im Finanzbereich geschaffen“ Ein

©

Finanzbereich geschaffen – Ein Interview mit Carlo Mackrodt, vormals Vice President Global Financial Services, Henkel KGaA,

in: ZfCM – Zeitschrift für Controlling und Management, volume 52, issue 5/2008, pp 220-224.

Shared Services

(19)

Finance Transformation I (Examples)

,

p

,

p

Standardization of business information (incl. of look&feel)

by “Business Information Management” at Consumer Products Multinational

by Business Information Management at Consumer Products Multinational

Standardization of MI and of management process

The objective: standardized business information

+ more efficient and effective delivery mechanism

y

New service delivery mechanism (through

regional Controlling CoEs + global BIM group)

(20)

Finance Transformation I (Examples)

,

p

,

p

Simplification of performance management process

The objective: rolling, more dynamic performance

management process

(example: Footwear & Clothing Multinational)

The mean: re-engineering sub-processes and tools

(example: Petrochemical Multinational)

(

p

g

)

(21)

Agenda

What’s ne t? Ho

(22)

The best practice finance ‚business model‘

- to enable finance excellence (II)

Corporate

CFO Roles

Î

From Financial to Business

Governance

Î

Governance,

Risk Mangmt.

& Compliance:

Value-Added

Parenting &

Bus Development:

( )

CFO Roles

Î

Strategist & Value Portfolio

Manager

Î

From Staff-function

& Compliance:

„Stewart“

Bus. Development:

“Navigator”

BUs

GIONs

sites

Operative

Business

Î

From Staff-function

to Enabler

Î

From Control to Influence

Î

From “Watch dog”

t N t W

k

RE

BUs

RE

Business

to Net Worker

Î

From Financial Control

to Business Performance

Management

“Business Partner”

Business Support

Services

Î

From Back office

Administrator to

Shared Services/

‚Finance Factory‘

Centers of

Expertise

Services

Provider

“Service Partner”

The local business partner role is key to fulfill the two core tasks of finance.

Developing it means: focus is shifting from standardization and efficiency

©

Developing it means: focus is shifting from standardization and efficiency

to differentiation and effectiveness

Source: :Daum, J.H. Die Entwicklung der Rolle des CFO in europäischen Unternehmen. Auswirkungen auf und Zukunftsperspektiven für Controller und Controlling – Ein Praxisbericht.”, in: ZfCM – Zeitschrift für Controlling & Management, volume 52, 6/2008

(23)

The Finance&Control Business Partner Idea:

A Co-Pilot supporting the Pilot

pp

g

(= Business Manager)

Mission of the Co-Pilot:

Provide relevant &

action oriented Information

Support for

(24)

Vision for Finance&Control: to become a true

business partner and navigator

p

g

Example: EDF Group, France

“The role of finance is to help a company as a whole to grow in a profitable way..

[…In order to make that possible], the first thing for us in finance is to make sure we

have defined a clear target and we are committed to a good challenge.

The second thing is that we have to build efficient and effective processes. Our role in

finance is to create the transparency - both the finance view and the management view, so that

managers can focus on management, on sales, on marketing and so on.

And that means, we have to be as effective as possible, as low-cost as possible. Managers should

see finance not as a constraint, not just as the cost-cutter, but that it can be value-added to help

th

i th i j b ”*

them in their job. ”*

Christian Lévi, Senior Vice President and Head of EDF Group Finance Transformation, EDF Group

“Th

l

f fi

i t h l

h l t

“The role of finance is to help a company as a whole to grow

in a profitable way and should be regarded as value-added

to help managers in their jobs.”

©

*Source: Daum, J., Koppelman, P., Lévi, Ch., Silbermann, M., “Go for Growth - a discussion with the CFOs and senior finance executives of BHP Billition, Electricité

de France (EdF), and Microsoft Germany,, in: Finance Director Europe, issue 2, 2008, pp 60-63

(25)

Finance Transformation II (Examples)

Becoming a value-creating business partner

g

p

Finance-Business Partnering

at Consumer Prod. Multinational

to drive profitable growth

Business Partnering at Siemens

Belux

to improve decision

support for management teams

Finance-Business Partnering

at Pharma Multinational

to ensure ‘Financial Peace’

to drive profitable growth

to ensure ‘Financial Peace’

support for management teams

What are the benefits of a ‘Management Cockpit War Room’? What are the benefits of a ‘Management Cockpit War Room’?

„Nowadays we are in a position

to relate the reality of day-to-day business and strategy not only once in the planning stages, but almost on a daily basis. […This has] enabled us to master the

Guy Bourdon

transformation from tactical to strategic management. […]

Also, our controlling and controlling mee-tings have become much more efficient: quarterly controlling meeting of a business divisions typically takes only 30-60 minutes. It used to take two to four hours.”2

Guy Bourdon,

Chief Consultant, Siemens Belux

2_{Source: Daum, J.H./Bourdon, G., Strategy & Performance}

Management bei Siemens Belux und die Rolle des Management Cockpit War Rooms. in: Jürgen H. Daum (ed.), Beyond Budgeting,

(26)

Finance- Business Partnering with Marketing - example:

How a consumer products company is optimizing value

creation from marketing investments

Inflation

Th

d

Th

d

Demand Model (Influence Diagram)

Customer segments:

Inflation

GDP

They do

not know

the brand

They do

not like

the brand

Customer segments:

Non-Buyers

GDP

Unknown

Refusers

Unknown

Refusers

New product

launches

no. of

potential

buyers

Convinced

They are aware

of

the brand

They perceive

its value

proposition

They are fully

convinced and

committed

Buyers

Trade

Brand aware

Quality perceived

Quality perceivers

Convinced

Product not available at shelf

Discount

s

Adv.

Sales

Force

Trade

Promotion

s

The levers of

marketing

Economic Results

©

Economic Results

Demand

Sales

volume

Market

share

Margin

Profit before

overhead

% Shelf

Space

(27)

Finance- Business Partnering with R&D - examples:

How Big Pharma is optimizing value creation across

the R&D project portfolio

The challenge: high risk in the R&D portfolio:

The solution: Proper R&D portfolio information management & business partnering

R&D portfolio control portal for scientists

Continuous business partner support by F&C

throughout the R&D value chain

(28)

Global Management Support and Finance-Business

Partnering aligned with customer management Process

at Consumer Product Multinational

Customers

Customer Management

Customer

Planning

Opportunity

Management & Sales

Customer

Retention

Customer

Credit Management & Collection

Sales Forecasting

Customer Financial Risk

Customer

Business Cases

Simulation Modeling

Credit Management & Collection

Sales Forecasting

C

Fi

i l El

t

Terms of trade; Financial Techniques

eg Factoring, Discounting

Guarantees, Bank communication

Target + Budgeting

3 year strategic plans

Financial Options, Deal Structuring, Contract Analysis,

Pricing / EPL Support (Strategic + Tactical),

Customer Profitability analysis

Legal Matters Compliance

Common Financial Elements

= Finance

tasks

©

Legal Matters- Compliance

Risk Analysis

(29)

Innovative Finance - Business Partnering at

Consumer Product Multinational II

The Goal: Transformation, not just Tools

Innovative Business Partnering Roadmap

Substandard Practice

Stage 1

Standard Practice

Stage 2

Good Practice

Stage 3

Best Practice

Stage 4

Breakthrough Practice

Stage 5

¾

Finance’s role is

budget

management

¾

Finance has basic

appreciation of

marketing and

sales principles

¾

Finance well

educated in

marketing/sales

principles and

¾

Finance have

credible experience

in applying

marketing/sales

¾

Opportunities for

staff to move

between Marketing,

Sales, SC and

Stage 1

Stage 2

Stage 3

Stage 4

Stage 5

¾

Only a few good

practices in place

to evaluate

investment with

little to no Finance

sales principles

and processes

¾

Good practices

applied in areas

with irregular

principles and

processes

¾

Good practices

embedded in key

areas of

marketing/sales

principles and

processes

¾

Best practices

embedded with

Sales, SC and

Finance

¾

More advanced,

integrated and

predictive tools

little to no Finance

involvement

with irregular

Finance

involvement

areas of

investment with

regular Finance

involvement

embedded with

Finance as an

enabler

¾

Some integrated

predictive tools

embedded

¾

Collaborative

Decision Support

and predictive tools

¾

Common learning

programs across

Finance, Sales,

embedded

throughout

organisation

,

and Marketing

(30)

The Finance transformation challenge

“You have to have the skill sets [for business partnering].

A b

i

t

i fi

t

i

t

b d

h i

l

fi

A business partner in finance to me is not somebody who is only a finance

expert. He has to have much broader business knowledge […] and has to

understand how the business operates.”*

Paul Koppelman, CFO of Commercial BHP Billiton, The Hague, NL

Finance Transformation II: Focus on

people and organization

Paul Koppelman, CFO of Commercial BHP Billiton, The Hague, NL

Finance Transformation I: Focus on

processes and technology

Processes

*Source: Daum, J., Koppelman, P.,

Lévi, Ch., Silbermann, M.,

“Go for Growth - a discussion with

the CFOs and senior finance

©

Organi-zation

People

IS / IT

the CFOs and senior finance

executives of BHP Billition,

Electricité de France (EdF), and

Microsoft Germany,

in: Finance Director Europe,

issue 2, 2008, pp 60-63

(31)

True finance-business partnering require a

shift in focus on people and organization

p p

g

(32)

True finance-business partnering require a shift in focus

on people and organization

example: Consumer Product Multinational

- example: Consumer Product Multinational

Description of mission and

purpose of business partner /

il t

t

co-pilot concept

us?

Clearly defined business

partner / co-pilot roles

(tasks&responsibilities)

E

bli

b

i

©

Enabling business

partnering:

F&C Training Program

(33)

Enabling Finance-Business Partnering at Pharma

Multinational: Finance Career Framework

(34)

The

Finance transformation challenge

D

l

i

fi

l

d

hi

Developing

finance leadership

Phase II: Focus on

people and organization

Phase I: Focus on

processes and technology

Processes

Organi-zation

People

IS / IT

(35)

Mission of finance-business partnering

:

CFO message of Consumer Product Multinational

us?

Required are not only financial skills and business

knowledge, but also social and leadership skills

(36)

Mission of finance-business partnering:

CFO message of U.S. Multinational

“Finance Occupies a Unique Position

g

“Finance Occupies a Unique Position …

►

No Other Function Has Same Involvement In Business Issues

►

All Operational Activities Ultimately Expressed In Financials

p

y

p

Key is Leveraging the Position to Improve Results …

►

Know How “Moving Parts” Individually Translate Into Results

►

Know How Each “Moving Part” Affects The Others

►

Change Operational Behaviors To Improve Business Condition.”

CFO U S

lti

ti

l

CFO, U.S. multinational

True business partnering requires finance people

to influence others and to drive change!

©

(37)

Finance people as ‚growth generating leaders‘ –

example:

CFO message of US Multinational

The Leader

The Foundation

CURIOUS

PASSIONATE

E t

l F

The Leader

The Foundation

ACCOUNTABLE

RESOURCEFUL

External Focus

Clear Thinker

Growth

+

=

RESOURCEFUL

COMMMITTED

Imagination + Courage

Generation

Leaders

TEAMWORK

OPEN

Inclusive Leader

Expertise

OPEN

ENERGIZING

Expertise

(38)

Finance&Control as change agent

and business partner / co-pilot

Example: Consumer Product Multinational

p

“Finance is a change agent by doing benchmarks, by creating scorecards, by making data

transparent, because this will make people more responsible. I am more responsible and

more accountable if I can see how my working capital performance is versus my 10 other

peers or my 5 other business units. With this finance can drive change very quickly.

Fi

i

h

t b

fi

th

h l t

d l th f t

d t

Finance is a change agent, because finance can then help to raw model the future and to

enable the business to change by ensuring that the company really knows what it often

only thinks it knows.”

CFO consumer product multinational Europe

CFO, consumer product multinational, Europe

“I really see the role of finance as change agents in the organization.

It's the best function that can allow you to see things as they are,

that allow you then to build business not on quicksand,

©

t at a o

you t e to bu d bus ess ot o qu c sa d,

but on solid foundations.”

(39)

How to make it happen?

(40)

How to make it happen?

Example: Financial Services (UK)

(41)

Becoming a true business partner

– some initial questions

How to establish the necessary ‚financial leadership‘ in the organization?

How to become ‚one financial team‘ across levels and departments and drive a common agenda

across the world?

What is the role of controllers / finance people at corporate level, in the business, in the business

services centers? (

Î

who does what / how to organize?)

What does business partnership mean in terms of competencies and skills of finance&control

people? What are the consequences for training, recruitment, …)?

How to set up and structure processes, e.g. in performance management and decision support to

fulfill the business partner role?

How can a finance – R&D business partnership improve R&D productivity?

How can we become more strategic in R&D decision making processes

(rather than focusing just on the technical issues)? How can R&D performance management and

decision support be simplified?

How to gain acceptance as a business partner? („finance has to earn its stripes“)

How to gain acceptance as a business partner? („finance has to earn its stripes )

What are the building blocks of a successful transformation of finance to become a true business

partner? What are the first steps?

How to leverage tools (information systems)?

(42)

Defining the journey towards finance excellence

►

How do we define

‚finance excellence‘

►

What do we have to

change?

►

How do we organize

our ‚finance

►

Where are we?

►

What are our

►

What are the priorities?

►

What is the right

transformation‘?

►

What are the

subproject targets?

objectives?

sequence?

subproject targets?

The finance transformation journey

©

The finance transformation journey

(43)

Key success factor:

Manage the hard

g

and

the soft factors

“

You need

clear goals and a common understanding

.

Then

take on a long-term perspective and break it down into small steps and

milestones

.

That way, everyone in every process – no matter how small – will know what to

do. By following that method, you break the work down into

bite-sized pieces that you will not choke on and are easy to digest.”*

Dr. Carlo Mackrodt, former vice president for Global Financial Services, Henkel

But it’s also about leveraging the internal finance community

and about good communication to make change really

happen and to achieve the finance mission!

*Source: Daum, J.H., Mackrodt, C., „Wir haben bei Henkel international eine einheitliche Arbeitsweise im Finanzbereich geschaffen“ – Ein Interview mit Carlo Mackrodt, vormals Vice President Global Financial Services, Henkel KGaA, in: ZfCM – Zeitschrift für Controlling und Management, volume 52, issue 5/2008, pp 220-224.

(44)

Agenda

What’s ne t? Ho

understanding of ‚Finance&Control excellence‘?

(45)

How the understanding of ‚finance excellence‘

might be affected by the financial crisis

A (may be provocative) thesis:

►

Corporate ‚finance excellence‘

is associated today with the concept

A (may be provocative) thesis:

►

Corporate ‚finance excellence‘

is associated today with the concept

of shareholder value management

.

►

‘Shareholder value management’ is

regarded in the public opinion as a

j

f h fi

i l i i

(b

i

h

i

/

h

of shareholder value management

.

►

‘Shareholder value management’ is

regarded in the public opinion as a

j

f h fi

i l i i

(b

i

h

i

/

h

major cause of the financial crisis

(by triggering short termism/too much

focus on short term profit, causing too much debt…).

►

As a result the concept of shareholder value management‘ might be

major cause of the financial crisis

(by triggering short termism/too much

focus on short term profit, causing too much debt…).

►

As a result the concept of shareholder value management‘ might be

►

As a result, the concept of ‚shareholder value management might be

regarded in the future as ‘old-fashioned’ if not as harmful and plain wrong

– changing the understanding of corporate ‚finance excellence‘.

►

As a result, the concept of ‚shareholder value management might be

regarded in the future as ‘old-fashioned’ if not as harmful and plain wrong

– changing the understanding of corporate ‚finance excellence‘.

What does this mean for the future role of finance and of the CFO?

(46)

The discussion has already started

- examples (business community)

The end of Detroit

B Mi h li

M

d

p

(

y)

December 2008 issue:

By Micheline Maynard

How the Big Three lost their Grip

on the American Car Market

Doubleday New York 2003

With long breath

The stock exchange-focused

capitalism perishes due to the

financial crisis

Doubleday, New York, 2003

financial crisis.

Now a new era begins – the

idea of sustainability is entering

enterprise management.

Toyota, Honda, Mercedes and BMW

have

made vehicles customers want to buy

The shareholder value strategy, misunderstood as

short termism, is in crisis

- a result of the financial

chaos of which it is one of the causes.

Many CEOs have

ignored their core business

: they

made vehicles, customers want to buy,

their ultimate priority

.

Deals [managed by finance men] and to be big,

not product development

, have driven GM, Ford and

Chrysler in the past decade With that they lost their

Many CEOs have

ignored their core business

: they

did not care for new customers, new products, new

business methods. They just acted as “Wheelers

and Dealers”.

„

We now experience a new renaissance of

entrepre-Chrysler in the past decade. With that they lost their

grip on the American car market.

By the end of the decade

one of the American car

makers will no longer exist

in its present form.

„

We now experience a new renaissance of entrepre

neurial sustainability

, says Dieter Heuskel, former

head of Boston Consulting Germany. „Those

enter-prises will profit from the crisis that do not just orient

on the short term expectations of capital markets,

©

but

that do have in view as well their ‚futureability‘

and their social responsibility

.“

Source: (German) manager magazin, December 2008 issue, pp 129-136

The Big Three CEOs, lan Mulally (Ford), Robert Nardelli (Chrysler) und Rick Wagoner (General Motors), from left to right, during their ‘crisis’ hearing at the US Senate, November 2008

(47)

The discussion has already started

- examples (finance community)

p

(

y)

‚Shareholder value‘ has become a synonym for short term profit greed and

Prof. Alfred Rappaport, the father of shareholder value management:

‚Shareholder value has become a synonym for short term profit greed and

for a cause of the financial crisis. Are this all misunderstandings?

Rappaport:

“It is more than a misunderstanding. The original meaning of

shareholder value has been pushed aside and it

has been captured by those who

have no interest at all in the long term development of enterprises

– i.e. by fund

managers and [some] corporate executives.

We should remember what SHV management is really about: Yes, it‘s about

growing cash flows, but

it‘s also about long termism and risk estimation

.”

Source: (German) manager magazin, December 2008 issue, pp 130-131

Siegfried Gänßlen, President of the International Controller Association and CEO Hansgrohe AG:

“Successful controlling for successful enterprises

has to deal now more than ever with the

questions of ‘sustainability

’ […]

- questions [related] to modern enterprise planning and budgeting and working capital

management as well as to price and risk management, communication, and green controlling.”

g

p

g

,

g

Source: Press release of the International Controller Association: WHU-Studie zur Krise: „Was tun die Controller“, November 2008

‘Entrepreneurial sustainability’ in enterprise management is likely

to become a cornerstone of ‘good management’ in the future

(48)

‘Entrepreneurial Sustainability’:

Î

What does this mean for controlling?

Brand/

Buyer‘s View

Value

Seller‘s View

Price

Environm

Function-alitly

Brand/

Lifestyle

Image

Add

Revenue

Distribution Marketing Production

Social

Perf.

Environm.

Perf.‘

Profit/

CF

Costs others

►

Customer Value Add

Management & Control

(achieving sustainable customer

value add and pricing power)

►

Strategic Enterprise Cost

(achieving sustainable

[structural] cost efficiency)

►

Stakeholder Relationship

Management & Control

(achieving sustainable

stake-holder relations and reputation)

►

Strategic Working Capital

(achieving sustainable working

capital efficiency across the

+

business network)

©

Enabling to manage for sustainable competitive advantage and enterprise

survivability (= managing performance, value and risk in a holistic way)

(49)

‘Entrepreneurial Sustainability’:

Î

What does this mean for enterprise management?

►

Managing for sustainable competitive advantage and enterprise survivability:

Value Creation

Model

Operation model

R&D

Value

Value _{Business Partners}

Fullfill-ment CRM Human Capital Structural Capital Relationship Capital Price

Drive distinctiveness & price/value

i

Costs

Drive sustainable productivity

&

i

/

t i

t

Core competencies /

Intangible Assets

improvements

& price/costs improvements

*

Source: IIOE-Heidelberg

*

(50)

What does this mean for the future role of

finance and of the CFO?

„Crisis demands new CFO Skills“, CFO.com, October 17, 2008:

►

A shift began to take shape away from the certified public accountant

background

(needed in the past to master Sarbox compliance) to the typical

MBA profile with a broader education and finance perspective and to people with

t

d fi

i l

l i b k

d

h

d

t d

it l

k t

treasury and financial analysis background, who understand capital markets

►

The priority on fund-raising may not be long-lived though

. Many companies

are

looking already now for CFOs with heavy experience in operations

And an

looking already now for CFOs with heavy experience in operations

. And an

operations background will become even more coveted to the extent the

financial-markets turmoil lengthens and deepens.

►

CFOs are in demand, who have the vision to make a link between operations

and strategy

. They do not have only to drive cost reductions, but also provide

broader insights on opportunities to improve margins, manage capital more

ff ti l

d id tif b i

t iti

th t

lt f

h

i

Finance&Control and the CFO have to become now even more a true

effectively, and identify business opportunities that result from changing

economic conditions.

©

Finance&Control and the CFO have to become now even more a true

‚business partner’ and ‚business navigator‘ / ‘business co-pilot‘

(51)

Interview with Juergen H. Daum about ‘Entrepreneurial

Sustainability’ in

y

Controller Magazin,

g

,

1/2009

„The ability to achieve sustainable management

– and thereby enterprise sustainability – is

y

p

y

essentially based on the ability to generate

added value organically and to maintain this

capability over market cycles.

Investors, other important stakeholder groups,

and the general public are paying increasing

attention to whether and how a company is able

p

y

to create original, sustained value for its own

customers, investors, and stakeholders.

As a result it will be more important for CFOs

As a result, it will be more important for CFOs

and

controllers

to

not

only

secure

their

companies’ ability to control and optimize the

financials, but to integrate all the aspects of

g

p

sustainable

value

generation

into

their

overarching enterprise control system in the

future…“

Published (in German) in: Controller Magazin, 1/2009, pp. 72-76.

English Version:

(52)

Interview mit Jürgen H. Daum zum Thema

‘Entrepreneurial Sustainability’:

y

„Nachhaltigkeit

in

der

Unternehmenswelt

beginnt

meiner

Meinung

nach

mit

beginnt

meiner

Meinung

nach

mit

wirtschaftlicher

Nachhaltigkeit.

Die

beiden

übrigen

Aspekte,

soziale

und

ökologische

Nachhaltigkeit folgen daraus.

[Und]

die

Fähigkeit

zum

nachhaltigen

Wirtschaften und damit zu Nachhaltigkeit

eines

Unternehmens

überhaupt

basiert

im

eines

Unternehmens

überhaupt

basiert

im

Wesentlichen

auf

der

Fähigkeit,

zur

organischen Mehrwertgenerierung.

Fü di CFO

d C

t

ll

i d

d

h lb i

Für die CFOs und Controller wird es deshalb in

Zukunft wichtiger, nicht nur die finanzielle

Steuerungs-

und

Optimierungsfähigkeit

zu

sichern,

sondern

alle

Aspekte

einer

sichern,

sondern

alle

Aspekte

einer

nachhaltigen

Mehrwertgenerierung

in

die

Unternehmenssteuerung zu integrieren.“

©

Erschienen in: Controller Magazin, 1/2009, S. 72-76

(53)

Recommended Literature

Daum, J.H.: The Evolution of the Role of the CFO in European Enterprises: Impact on and Future Prospects

for Controllers and Controlling Results of a Study of Current Finance Transformation Projects, in: ZfCM

-Zeitschrift für Controlling & Management 6/2008 pp 387-393 English version:

Zeitschrift für Controlling & Management, 6/2008, pp. 387-393. English version:

http://www.iioe.eu/fileadmin/files/publications/Evolution_CFO_role_JDaum_ZfCM_06_2008_en.pdf

Daum, J.H.: Go for Growth. A discussion with CFOs and senior executives at BHP Billiton, Electricité de

France and Microsoft Germany, in: Finance Director Europe - FDE, 2/2008, pp. 60-63

http://www iioe eu/fileadmin/files/publications/FDE031 022 Daum 3 final pdf

http://www.iioe.eu/fileadmin/files/publications/FDE031_022_Daum_3_final.pdf

Daum, J.H., Brandes, D., Brandt, W., Davies, D.C., Kestens, J., Moorhead, D.: Innovation management and

the role of finance: status, challenges and vision - a discussion with the senior executives and CFOs of six

leading European companies, in: Controller Magazin, 6/2007, pp. 595-60

http://www iioe eu/fileadmin/files/publications/Pod Disc CFO RT Wien Controller-Magazin pdf

http://www.iioe.eu/fileadmin/files/publications/Pod_Disc_CFO_RT_Wien_Controller Magazin.pdf

Daum, J.H., Bourdon, G., Strategy & Performance Management at Siemens Belux and the role of the

Management Cockpit War Room. An interview with Guy Bourdon, Chief Consultant, Siemens Belux, in: Daum,

J.H. (ed.), Beyond Budgeting – Impulse zur grundlegenden Neugestaltung der Unternehmensführung und –

steuerung, Meidenbauer Verlag, München, 2005, pp. 203-226

steuerung, Meidenbauer Verlag, München, 2005, pp. 203 226

http://www.juergendaum.de/fgcontent/interview_Guy_Bourdon_lang_en.pdf

Daum, J.H., Mackrodt, C., “We have created at Henkel one common way worldwide how we work in finance.”

Interview with Carlo Mackrodt, formerly vice president for Global Financial Services at Henkel KGaA, about

the transformation of Henkel finance, in: ZfCM – Zeitschrift für Controlling und Management, Heft 5/2008,

,

g

,

S.220-224.

http://www.iioe.eu/fileadmin/files/publications/Interview_Mackrodt_JDaum_ZfCM_5_2008_en.pdf

Biel, A., Daum, J.H., Interview with Juergen H. Daum, SAP AG, zu ,,Sustainability as Objective for Enterprise

Management and Control, in: Controller Magazin 1 / 2009, pp. 72-76

g

,

g

, pp

(54)

Literaturhinweise zum Thema des Vortrags

Daum, J.H.: Die Entwicklung der Rolle des CFO in europäischen Unternehmen: Auswirkungen auf und

Zukunftsperspektiven für Controller und Controlling - Ein Praxisbericht,

in: ZfCM - Zeitschrift für Controlling & Management, 6/2008, S. 387-393

http://www.iioe.eu/fileadmin/files/publications/Entwicklung_CFO_Rolle_JDaum_ZfCM_06_2008.pdf

Daum, J.H.: Go for Growth. A discussion with CFOs and senior executives at BHP Billiton, Electricité de

France and Microsoft Germany, in: Finance Director Europe - FDE, 2/2008, S. 60-63

http://www iioe eu/fileadmin/files/publications/FDE031 022 Daum 3 final pdf

http://www.iioe.eu/fileadmin/files/publications/FDE031_022_Daum_3_final.pdf

Daum, J.H., Brandes, D., Brandt, W., Davies, D.C., Kestens, J., Moorhead, D.: Innovation management and

the role of finance: status, challenges and vision - a discussion with the senior executives and CFOs of six

leading European companies, in: Controller Magazin, 6/2007, S. 595-60

htt //

ii

/fil d i /fil / bli ti

/P d Di

CFO RT Wi

C t ll

M

i

df

http://www.iioe.eu/fileadmin/files/publications/Pod_Disc_CFO_RT_Wien_Controller-Magazin.pdf

Daum, J.H., Bourdon, G., Strategy & Performance Management bei Siemens Belux und die Rolle des

Management Cockpit War Rooms. Ein Interview mit Guy Bourdon, Chief Consultant, Siemens Belux, in:

Daum, J.H. (ed.), Beyond Budgeting – Impulse zur grundlegenden Neugestaltung der Unternehmensführung

,

(

),

y

g

p

g

und –steuerung, Meidenbauer Verlag, München, 2005, S. 203-226

http://www.juergendaum.de/fgcontent/interview_Guy_Bourdon_lang_de.pdf

Daum, J.H., Mackrodt, C., “Wir haben bei Henkel international eine einheitliche Arbeitsweise im

Finanzbereich geschaffen” – Ein Interview mit Dr Carlo Mackrodt vormals Vice President Global Financial

Finanzbereich geschaffen – Ein Interview mit Dr.Carlo Mackrodt, vormals Vice President Global Financial

Services, Henkel KGaA, zur Neugestaltung des Henkel-Finanzbereichs, in: ZfCM – Zeitschrift für Controlling

und Management, Heft 5/2008, S. 220-224

http://www.iioe.eu/fileadmin/files/publications/Interview_Mackrodt_JDaum_ZfCM_5_2008.pdf

Bi l A D

J H I t

i

it Jü

H D

SAP AG

S t i

bilit M

t N hh lti k it

©

Biel, A., Daum, J.H., Interview mit Jürgen H. Daum, SAP AG, zu ,,Sustainability Management: Nachhaltigkeit

als Ziel für Unternehmenführung und –steuerung,in: Controller Magazin 1 / 2009 (Januar/Februar), S. 72-76

(55)

Thank You !

Juergen H. Daum

Chief Solutions Architect

Business Solutions Architects Group, SAP EMEA

[email protected]

or

(56)

Juergen H. Daum - Publications (selection)

Books:

Upcoming:

Intangible Assets

oder die Kunst,

Mehrwert zu schaffen

von Jürgen H. Daum

G lil P B 2002

Intangible Assets

and Value Creation

by Juergen H. Daum

John Wiley & Sons, Chichester, 2003

Beyond Budgeting

von Jürgen H. Daum (Hg.)

Martin Meidenbauer Verlag, München 2005

Finance

Transformation

– Der CFO als

Business Partner

Mehr Informationen unter:

http://www.beyondbudgeting.de/bb-buch_d/bb_buch_d.htm

Galileo Press, Bonn, 2002 ISBN 3-89842-112-0

Mehr Informationen unter:

http://www.juergendaum.de/mybook_d.htm , ISBN 04708455120 More information at http://www.juergendaum.com/mybook.htm München, 2005,

ISBN 3-89975-533-2 von Jürgen H. Daum (Hg.) Martin Meidenbauer Verlag, München (in Vorbereitung) ISBN 978-3-89975-105-5

Contribution to book‘s of others (selection):

Neugestaltung

der

Unternehmens-planung

Intangibles

in der

Unter-nehmenssteuerung

The CFO

as Business

Integrator

Business Performance

Measurement

– An Introduction

von Peter Horváth und Ronald Gleich (Hrsg.)

Schäffer-Poeschel, Stuttgart, 2004 ISBN 3791021079

von Peter Horváth und Klaus Möller (Hrsg.)

Vahlen, München, 2004 ISBN 3-8006-3035-4

by Cedric Read and

Dieter Scheuermann

John Wiley & Sons, Chichester, 2003 ISBN 047085149X

by Shyam Sunder Kamberhammettu (ed.),

Le Magnus University Press, Hyderabad, 2005

ISBN 81-89333-00-3

(57)

Publications (articles in journals – selection)

Biel, Alfred. / Daum, Jürgen H., Interview mit Jürgen H. Daum, SAP AG, zu ,,Sustainability Management: Nachhaltigkeit als Ziel für Unternehmenführung und –

steuerung,in: Controller Magazin 1 / 2009 (Januar/Februar), S. 72-76

Daum Jürgen H., Die Entwicklung der Rolle des CFO in europäischen Unternehmen. Auswirkungen auf und Zukunftsperspektiven für Controller und Controlling – Ein

Praxisbericht, in: ZfCM – Zeitschrift für Controlling und Management, 6/2008, pp 2-8

Praxisbericht, in: ZfCM Zeitschrift für Controlling und Management, 6/2008, pp 2 8

Daum, Jürgen H./Mackrodt, C., „Wir haben bei Henkel international eine einheitliche Arbeitsweise im Finanzbereich geschaffen“ – Interview mit Carlo Mackrodt, vormals

Vice President Global Financial Services, Henkel KGaA , in: ZfCM – Zeitschrift für Controlling und Management, 5/2008, pp 220-224

Daum, Juergen H., Koppelman, P., Lévi, C., Silbermann, M., Go For Growth. Managing for sustainable, profitable growth: What does it mean for the CFO and the finance

function? – a discussion with the CFOs and senior executives of BHP Billiton, Electricité de France and Microsoft Germany, in: Finance Director Europe, issue 5/2008, pp

60-63

Daum, Juergen H., Brandes, D., Brandt, W., Davies, D.C., Kestens, J., Moorhead, D.: Innovation management and the role of finance: status, challenges and vision - a

discussion the senior executives and CFOs of six leading European companies, in: Controller Magazin, 6/2007, pp 595-603

Daum, Jürgen H., Innovationsmanagement: Erfolgreiches Controlling und Management von Innovation, in: Der Controlling Berater, Issue 1 / 2007, pp 19-58

Daum, Jürgen H., The Missing Link – Why the World needs Management Accounting Standards, in: FDE – Finance Director Europe, Issue 1 / 2007, pp 64-66

Daum, Jürgen H., Managing For Sustained Growth And Profitability Under Rapid Change And Uncertainty: Insights From An Intangibles-Based View On Enterprise And

Ecosystem Management, in: Neely, Andy/Kennerly, Mike/Walter, Angela (Hrsg.): Performance Measurement and Management 2006, Public and Private - Papers from the

Fifth International Conference on Performance Measurement and Management PMA 2006, Cranfield, 2004, pp 931-938

Daum, Jürgen H., Management Cockpit War Room, in: Controlling - Zeitschrift für erfolgsorientierte Unternehmenssteuerung, Volume 18, Issue 6/Juni 2006, pp 311-318

Daum, Jürgen H., Tableau de Bord: Besser als die Balanced Scorecard?, in: Der Controlling Berater, Issue 7/ December 2005

Daum, Jürgen H., Brandt, W., Buess, T., Francke, L, Kappler, D., The Future of Enterprise Performance Management – From Best to Next Practice: A Discussion with the

CFOs of Four Leading European Companies, in: Controlling - Zeitschrift für erfolgsorientierte Unternehmenssteuerung, Volume 17,

Issue 11/November 2005,

pp 679-684

Daum, Jürgen H., Intangible Assets Management: Wettbewerbskraft stärken und Unternehmenswert nachaltig steigern – Ansätze für das Controlling. in: Zeitschrift für

Controlling & Management / krp-Kostenrechnungspraxis, Special Issue 3/Nov. 2005, pp 4-18

Daum, Jürgen H., Strategy & Performance Management bei Siemens Belux und die Rolle des Management Cockpit War Room. Ein Interview mit Guy Bourdon, Chief

Consultant, Siemens Belux, in: Controller News – Die Zeitschrift für Controlling und Unternehmensführung, issue 4/2005, pp 129-132

Daum, Jürgen H.: Intangible Assets und die wertorientierte Steuerung von Netzwerken in der Automobilindustrie, in: Gleich, Ronald (Hrsg.): Network Value Added –

Planung und Steuerung von Netzwerken in der Automobilindustrie, Forschungsbericht aus der Reihe General Management der Supply Management Group, St. Gallen,

2004, pp 123-182

Daum Juergen H /Bretscher P : Measuring Performance in a Knowledge Economy: Linking the Subjective and Objective Dimension into One System of “Vector Based”

Daum, Juergen H./Bretscher, P.: Measuring Performance in a Knowledge Economy: Linking the Subjective and Objective Dimension into One System of Vector-Based

Performance Measurement, in: Neely, Andy/Kennerly, Mike/Walter, Angela (Hrsg.): Performance Measurement and Management 2004, Public and Private, Papers from

the Fourth International Conference on Performance Measurement and Management PMA 2004, Cranfield, 2004, pp 1055-1062