finance&control as business partner: objective, concepts

Finance&Control as Business Partner: Finance&Control as Business Partner: Objective, Concepts, Implementation Examples

- Report About Current Practice In European Enterprises -

Juergen H DaumJuergen H. DaumChief Solution Architect,

Business Solution Architects Group, SAP EMEA,d C F d f th SAP B t P ti N t kand Co-Founder of the SAP Best Practice Network

University of Mannheim, 04 March 2009

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)(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 |

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

The SAP Finance Best Practice Network(founded in 2004)( )

For CFOs and Finance Directors onlyGet a quick understanding of new emerging topics

CFO Exchange of „Best Practice“ strategies in finance transformationDefinition of strategic direction of FBPN activities

CFORound-

table(2x per year,

two half days)

Strategic Direction

Development of Implementation

Concepts

For senior finance professionals / financearchitects (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 projectExchange of „Best Practice“ on process level

Ideas and concepts Id tif i b t ti

Focus Workshops, Site Visits, Customer Forums (on demand)

Ideas and concepts (of individuals /single

companies)

+

Identifying best practiceLearning from each otherTesting new ideasDeveloping 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:

http://www.juergendaum.com/jd-Dateien/SAP_Best_Practice_Network_J_Daum.pdf

The SAP Finance Best Practice Network: Participants of past events (Selection)Participants of past events (Selection)

© 2002-2009 Jürgen H. Daum, Guest lecture at the University of Mannheim, 04 March.2009 | © SAP 2008 / Page 4

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 achievementspast decade: summary of achievements

Current finance transformation focus:Finance&Control as a true business partner

What’s ne t? Ho ill the crisis affect theWhat’s next?: How will the crisis affect the understanding of ‚Finance&Control excellence‘?


“The CFO as Business Partner“ idea - is not really new

Concentrates on formal accuracy and is backwards oriented

Likes to work „in the backoffice“

Reacts only slowly to new requirements

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

Old: administrator

Sees him or herself as a partner for the businessSees him- or herself as a partner for the business and drives profitable growth together with his management collegues

M fi f i l i t l i id

Ne b siness partner

Manages finance as a professional internal service provider

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

New: business partner

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 i lland 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 fimprove 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

The key role of the CFO in creating enterprise value: a value creating business partnerg

Example: View of a private equity investor

“We like the CFOs and their role and we always make sure that we have a goodCFO 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 g yhow much value CFOs create. We have a huge respect for a great system and agreat culture.

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

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-classWorld-classEffectivenessp 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 processness

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 Ef

fect

iven

World-classEffianalysis

• 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 HighLow


Achieving finance excellence requires improvements in efficiency and effectiveness

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)


The role of the CFO / of Finance&Control – The CEO View

Example: U.S. Multinational (CEO view)Example: U.S. Multinational (CEO view)

help create leadership development Navigator/help create a new future

leadership developmentwinning business models

Add

ing Navigator/

Leader

Val

ue A

built the [new] system of accountability

risk & opportunity managementfinancial planning & analysis

BusinessPartner

csV of accountability financial planning & analysis Partner

ensure the foundation of integrity

rigorous oversightsustainable controllershipB

asic

Steward/Controller


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


1Source: 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

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 haveFinance 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


1Source: 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., Moorhead, D.: Innovation management and the role of finance: status, challenges and vision, in: Controller Magazin, 6/2007, pp 595-603

Agenda






How to get there? – the CFO view

Example: UK Bank (CFO view)


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., Moorhead, D.: Innovation management and the role of finance: status, challenges and vision, in: Controller Magazin, 6/2007, pp 595-603

The best practice finance ‚business model‘ - to enable finance excellence (I)( )

From Financial to Business Governance

From Cost Manager toCorporate

CFO R l

Governance, Risk Mangmt.

& C li

Value-AddedParenting &B D l t From Cost Manager to

Strategist & Value Portfolio Manager

CFO Roles & Compliance:„Stewart“

Bus. Development:“Navigator”

BUs

GIO

Ns

GIO

Ns sites

Operative

RE

GBUs

RE

GBusiness

“Business Partner”

From Back Office Administrator to Professional Service

Business SupportServices

Shared Services/‚Finance Factory‘

Centers of Expertise Professional Service

ProviderServices 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 ystandardization, simplification and automation of processes.

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 moreorganizations 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 optimizationand benchmarking Driving process optimization

1Source: 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 ServicesEnabled by one ERP instance


Standardization of business information (incl. of look&feel) by “Business Information Management” at Consumer Products Multinationalby Business Information Management at Consumer Products Multinational

Standardization of MI and of management processThe objective: standardized business information + more efficient and effective delivery mechanismy

New service delivery mechanism (through regional Controlling CoEs + global BIM group)



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 )


Agenda



Current finance transformation focus: Finance&Control as a true business partner



The best practice finance ‚business model‘ - to enable finance excellence (II)

Corporate CFO Roles

From Financial to Business Governance

From Cost Manager to

Governance, Risk Mangmt.

& Compliance:

Value-AddedParenting &Bus Development:

( )

CFO Roles From Cost Manager to Strategist & Value Portfolio Manager

From Staff-function

& Compliance:„Stewart“

Bus. Development:“Navigator”

BUs

GIO

Ns

GIO

Ns sites

Operative Business

From Staff-function to Enabler

From Control to Influence

From “Watch dog” t N t W k

RE

BUs

REBusiness to Net Worker

From Financial Control to Business Performance Management“Business Partner”

Business SupportServices

From Back office Administrator to Professional Service

Shared Services/‚Finance Factory‘

Centers of ExpertiseServices

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 efficiencyto 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

The Finance&Control Business Partner Idea: A Co-Pilot supporting the Pilot (= Business Manager)pp g

Mission of the Co-Pilot:


Provide relevant & action oriented Information

Support for „Business Navigation“

Vision for Finance&Control: to become a true business partner and navigatorp 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[…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

Finance Transformation II (Examples) Becoming a value-creating business partnerg 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 support for management teamsto ensure ‘Financial Peace’

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


2Source: 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, Munich 2005, pp 203-226

Finance- Business Partnering with Marketing - example: How a consumer products company is optimizing value creation from marketing investmentscreation 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

Advertisement

Unknown RefusersUnknown Refusers New product

launches

no. ofpotentialbuyers

Convinced

They are aware of

the brand

They perceive its value

proposition

They are fully convinced and

committedBuyers

Trade

Brand aware Quality perceivedConvinced

Brand aware Quality perceivers ConvincedProduct not available at shelf

Discounts Adv. Sales

Force

TradePromotion

s

The levers of marketing

Economic Results


Economic Results

Demand Salesvolume

Marketshare Margin Profit before

overhead% ShelfSpace

Finance- Business Partnering with R&D - examples: How Big Pharma is optimizing value creation across the R&D project portfoliothe 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&Cthroughout the R&D value chain

Global Management Support and Finance-Business Partnering aligned with customer management Process at Consumer Product Multinationalat Consumer Product Multinational

Customers

Customer Management

Customer Planning

Opportunity Management & Sales

Customer Retention

Customer

Credit Management & Collection Sales Forecasting

Customer Financial RiskCustomer 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 + Budgeting3 year strategic plans

Financial Options, Deal Structuring, Contract Analysis,Pricing / EPL Support (Strategic + Tactical),

Customer Profitability analysisLegal Matters Compliance

Common Financial Elements

= Finance tasks


Legal Matters- Compliance Risk Analysis

tasks

Innovative Finance - Business Partnering at Consumer Product Multinational II

The Goal: Transformation, not just Tools

Innovative Business Partnering Roadmap

Substandard PracticeStage 1

Standard PracticeStage 2

Good PracticeStage 3

Best PracticeStage 4

Breakthrough PracticeStage 5

Finance’s role is budget management

Finance has basic appreciation of marketing and sales principles

Finance well educated in marketing/sales principles and

Finance have credible experience in applying marketing/sales

Opportunities for staff to move between Marketing, Sales, SC and

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

Only a few good practices in place to evaluate investment with little to no Finance

sales principles and processes

Good practices applied in areas with irregular

principles and processes

Good practices embedded in key areas of

marketing/sales principles and processes

Best practices embedded with

Sales, SC and Finance

More advanced, integrated and predictive toolslittle to no Finance

involvementwith irregular Finance involvement

areas of investment with regular Finance involvement

embedded with Finance as an enabler

Some integrated

predictive tools embedded

Collaborative Decision Support

and predictive tools

Common learning programs across Finance, Sales,

embedded throughout organisation


, ,and Marketing

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 fiA 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 / ITthe 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

True finance-business partnering require a shift in focus on people and organizationp p g

Example: Mission of finance-business partnering at Financial Services Company (UK)


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 tco-pilot concept

us?

Clearly defined business partner / co-pilot roles (tasks&responsibilities)

E bli b i


Enabling business partnering:

F&C Training Program

Enabling Finance-Business Partnering at Pharma Multinational: Finance Career Framework


The Finance transformation challenge

D l i fi l d hiDeveloping finance leadership

Phase II: Focus on people and organization

Phase I: Focus on processes and technology

Processes

Organi-zation People

IS / IT


Mission of finance-business partnering: CFO message of Consumer Product Multinational

us?

Required are not only financial skills and business


Required are not only financial skills and business knowledge, but also social and leadership skills

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 Financialsp 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 lCFO, U.S. multinational

True business partnering requires finance people to influence others and to drive change!


to influence others and to drive change!

Finance people as ‚growth generating leaders‘ –example: CFO message of US Multinational

The LeaderThe Foundation

CURIOUSPASSIONATE

E t l F

The LeaderThe Foundation

ACCOUNTABLERESOURCEFUL

External Focus

Clear Thinker Growth + =

RESOURCEFUL

COMMMITTED

Imagination + CourageGeneration

Leaders

TEAMWORK

OPEN

Inclusive Leader

ExpertiseOPENENERGIZING

Expertise


Always Executing with Integrity

Finance&Control as change agent and business partner / co-pilot

Example: Consumer Product Multinational

p p

“Finance is a change agent by doing benchmarks, by creating scorecards, by making datatransparent, because this will make people more responsible. I am more responsible andmore accountable if I can see how my working capital performance is versus my 10 otherpeers 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 tFinance 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 EuropeCFO, 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.”

Source: CFO panel discussion, organized by Juergen H. Daum

How to make it happen?

Example: Consumer Product Multinational


How to make it happen?

Example: Financial Services (UK)


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?across the world?

What is the role of controllers / finance people at corporate level, in the business, in the business services centers? ( 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 toHow 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 processesHow 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)?

Source: SAP Focus Workshop “Finance as a Business Partner, 24/25 May 2007, Basel/CH, organised by Juergen H. Daum for 4 European companies

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

Source: Juergen H. Daum, IIOE-Heidelberg

Key success factor: Manage the hard and the soft factorsg

“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 communityand about good communication to make change reallyand 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.

Agenda






How the understanding of ‚finance excellence‘ might be affected by the financial crisismight 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 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 i h i / hmajor 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?

Source: IIOE-Heidelberg

The discussion has already started- examples (business community)

The end of DetroitB Mi h li M d

p ( y)

December 2008 issue:

By Micheline Maynard

How the Big Three lost their Grip on the American Car MarketDoubleday New York 2003

With long breathThe stock exchange-focused capitalism perishes due to the financial crisis Doubleday, New York, 2003financial 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 buyThe 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 theirMany 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

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 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


‘Entrepreneurial sustainability’ in enterprise management is likely to become a cornerstone of ‘good management’ in the future

‘Entrepreneurial Sustainability’: What does this mean for controlling?

Brand/

Buyer‘s ViewValue

Seller‘s View

PriceEnvironm

Function-alitly

Brand/Lifestyle

ImageAdd

Revenue

Distribution

Marketing

Production

SocialPerf.

Environm.Perf.‘

Profit/CF

Costs

others

►Customer Value Add Management & Control(achieving sustainable customer value add and pricing power)

►Strategic Enterprise Cost Management & Control (achieving sustainable [structural] cost efficiency)

►Stakeholder RelationshipManagement & Control(achieving sustainable stake-holder relations and reputation)

►Strategic Working Capital Management & Control(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)


‘Entrepreneurial Sustainability’: What does this mean for enterprise management?

►Managing for sustainable competitive advantage and enterprise survivability:

Value Creation Model

Operation model

R&D

ValueValue Business Partners

Fullfill-mentCRM

HumanCapital

StructuralCapital

RelationshipCapital

Price

Drive distinctiveness & price/value i

Costs

Drive sustainable productivity & i / t i t Core competencies /

Intangible Assetsimprovements & price/costs improvements

* *


*

© 2002-2009 Jürgen H. Daum, Guest lecture at the University of Mannheim, 04 March.2009 | *Source: Presentation of Juergen H. Daum ‚Business 2015 and the Role of Finance – Some Food for Thought’ at the SAP CFO Roundtable, 29-30 May 2008, Barcelona, Spain

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 ttreasury 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 anlooking 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‘

Interview with Juergen H. Daum about ‘Entrepreneurial Sustainability’ in Controller Magazin, 1/2009y g ,

„The ability to achieve sustainable management– and thereby enterprise sustainability – isy p yessentially based on the ability to generateadded value organically and to maintain thiscapability over market cycles.

Investors, other important stakeholder groups,and the general public are paying increasingattention to whether and how a company is ablep yto create original, sustained value for its owncustomers, investors, and stakeholders.

As a result it will be more important for CFOsAs a result, it will be more important for CFOsand controllers to not only secure theircompanies’ ability to control and optimize thefinancials, but to integrate all the aspects ofg psustainable value generation into theiroverarching enterprise control system in thefuture…“


Published (in German) in: Controller Magazin, 1/2009, pp. 72-76.English Version:http://www.iioe.eu/fileadmin/files/publications/Interview_Sustainability_Juergen_Daum_final_en.pdf

Interview mit Jürgen H. Daum zum Thema ‘Entrepreneurial Sustainability’:y

„Nachhaltigkeit in der Unternehmensweltbeginnt meiner Meinung nach mitbeginnt meiner Meinung nach mitwirtschaftlicher Nachhaltigkeit. Die beidenübrigen Aspekte, soziale und ökologischeNachhaltigkeit folgen daraus.

[Und] die Fähigkeit zum nachhaltigenWirtschaften und damit zu Nachhaltigkeiteines Unternehmens überhaupt basiert imeines Unternehmens überhaupt basiert imWesentlichen auf der Fähigkeit, zurorganischen Mehrwertgenerierung.

Fü di CFO d C t ll i d d h lb iFür die CFOs und Controller wird es deshalb inZukunft wichtiger, nicht nur die finanzielleSteuerungs- und Optimierungsfähigkeit zusichern, sondern alle Aspekte einersichern, sondern alle Aspekte einernachhaltigen Mehrwertgenerierung in dieUnternehmenssteuerung zu integrieren.“


Erschienen in: Controller Magazin, 1/2009, S. 72-76http://www.iioe.eu/fileadmin/files/publications/Sustainability_Management_Interview_JDaum_CM.pdf

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. 60-63http://www iioe eu/fileadmin/files/publications/FDE031 022 Daum 3 final pdfhttp://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. 595-60http://www iioe eu/fileadmin/files/publications/Pod Disc CFO RT Wien Controller-Magazin pdfhttp://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. 203-226steuerung, Meidenbauer Verlag, München, 2005, pp. 203 226http://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 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 , pphttp://www.iioe.eu/fileadmin/files/publications/Interview_Sustainability_Juergen_Daum_final_en.pdf

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. 387-393http://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. 60-63http://www iioe eu/fileadmin/files/publications/FDE031 022 Daum 3 final pdfhttp://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. 595-60htt // ii /fil d i /fil / bli ti /P d Di CFO RT Wi C t ll M i dfhttp://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 g p g g g g gund –steuerung, Meidenbauer Verlag, München, 2005, S. 203-226http://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 FinancialFinanzbereich 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. 220-224http://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. 72-76http://www.iioe.eu/fileadmin/files/publications/Sustainability_Management_Interview_JDaum_CM.pdf

Thank You !Thank You !

Juergen H. DaumChief Solutions Architect

Business Solutions Architects Group, SAP EMEA

[email protected] or


[email protected]

Juergen H. Daum - Publications (selection)

Books:Upcoming:

Intangible Assets oder die Kunst, Mehrwert zu schaffenvon Jürgen H. Daum

G lil P B 2002

Intangible Assets and Value Creationby 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, 2002ISBN 3-89842-112-0

Mehr Informationen unter:http://www.juergendaum.de/mybook_d.htm

,ISBN 04708455120

More information athttp://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 undRonald Gleich (Hrsg.)Schäffer-Poeschel, Stuttgart, 2004ISBN 3791021079

von Peter Horváth undKlaus Möller (Hrsg.)Vahlen, München, 2004ISBN 3-8006-3035-4

by Cedric Read andDieter Scheuermann John Wiley & Sons, Chichester, 2003ISBN 047085149X

by Shyam Sunder Kamberhammettu (ed.),Le Magnus University Press, Hyderabad, 2005 ISBN 81-89333-00-3


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 – EinPraxisbericht, in: ZfCM – Zeitschrift für Controlling und Management, 6/2008, pp 2-8Praxisbericht, 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, vormalsVice 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 financefunction? – a discussion with the CFOs and senior executives of BHP Billiton, Electricité de France and Microsoft Germany, in: Finance Director Europe, issue 5/2008, pp60-63

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 - adiscussion 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 AndEcosystem Management, in: Neely, Andy/Kennerly, Mike/Walter, Angela (Hrsg.): Performance Measurement and Management 2006, Public and Private - Papers from theFifth 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 theCFOs 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 fürControlling & 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, ChiefConsultant, 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-BasedPerformance Measurement, in: Neely, Andy/Kennerly, Mike/Walter, Angela (Hrsg.): Performance Measurement and Management 2004, Public and Private, Papers fromthe Fourth International Conference on Performance Measurement and Management PMA 2004, Cranfield, 2004, pp 1055-1062

For the complete publication list see: http://www.juergendaum.com/publications.htm

finance&control as business partner: objective, concepts

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