the magazine for decision makers. july 2008 reputation ... · reputation. why the reality has to be...

ceo*The magazine for decision makers. July 2008

Reputation. Why the reality has to be right before you can work on appearances.The Lucerne KKL. How to successfully manage a cultural monument.Minergie. Why IKEA is saving energy and money with ecological concepts.

Publisher: PricewaterhouseCoopers AG ceo magazine, Birchstrasse 160, CH-8050 Zurich, Switzerland

Editors-in-chief: Alexander Fleischer, [email protected], Franziska Zydek, [email protected]

Creative director: Dario Benassa, [email protected]

Contributors of this issue: Michael Craig, Ella Sarelli, Giselle Weiss

Concept, editing and design: purpur ag, publishing and communication, zurich, [email protected]

Photos: cover: Cédric Widmer, page 3: Andreas Teichmann, pages 5, 23: Martin Rütschi/Keystone,

page 14/15: Reinhard Görner/artur.

Copyright: ceo magazine PricewaterhouseCoopers. The opinions and views expressed by the authors do not necessarily reflect those of the publisher.

ceo magazine appears three times a year in English, German and French. Circulation: 30,000

Free subscriptions and changes of address: [email protected]

Lithography/Printing: ud-print AG, Lucerne. Paper: Magno Satin FSC, woodfree, two side coated, silk, bright white

ceo/editorial 03

Accelerating, staying on course, maintainingspeed, not losing anyone on the way – forme, these are concerns shared by anymanager in the business world. Acceler-ation and stability are the two poles of adilemma that has to be solved on an almostdaily basis. For Formula 1 racing teams andtop sportsmen and -women, this isn’t apastime, it’s their primary occupation, andthey set an interesting example for busi-ness. While racing cars aim to stay close tothe ground at all times, ski acrobats have torelinquish any contact with the groundwhilst following a precise path – when itcomes to letting go in a controlled manner,business could learn a great deal fromsport. The IT sector is also worth a closerlook as only a few commercial sectors offera comparable pace of development. Ulti-mately, CEOs too are affected themselvesby the powers of acceleration and requiredto retain or regain their personal stabilityafter setbacks. Change, after all, stops at no one.

The focus is on promoting agilityChange is the key issue at all times. Youmight think you’ve heard it all before in the1980s and 1990s: change, value change,

change management. But whereas it wasindividual events back then bringing changethat had to be overcome, change today is astate of affairs. Actual change managementis clearly becoming less important; in itsplace, the focus is on promoting agility.Change is no longer a project; it is a charac-teristic. It is agile companies with agilestructures, processes and people that getahead in the marketplace. So it is notsurprising then that change, along with theagility that it necessitates, is increasinglybecoming the core topic of our day-to-daywork. In this issue of ceo magazine, the newLeader Advisory, Markus Bucher, explainsthe opportunities presented by entrepre-neurial agility in more detail.

In with the new means out with the oldAs a new member of our ManagementBoard Markus Bucher is himself an exampleof agility as opposed to doggedness orparalysis. We also have a change at the top,in our Board of Directors. As the Chairmanof the Board of Directors, Hans Wey will becontributing his substantial experience as abusiness consultant and manager in theimplementation of the necessary targetadjustments. In with the new means outwith the old. We will not only miss EdgarFluri, our departing Chariman of the Boardof Directors, and Kurt Hausheer, our depart-

Change is no longer a project; it is a characteristic. So it is not surprising then that change, along with theagility that it necessitates, is increasingly becomingthe core topic of our day-to-day work.

Dr Markus R. Neuhaus CEO PricewaterhouseCoopers Switzerland andEurofirms Senior Partner

ing head of business consulting, on apersonal and technical level but also asauthors for the ceo magazine. In this func-tion, I would like to take the opportunity toexpress my sincere thanks to these twohighly respected colleagues. They havemade a substantial contribution to ourcompany’s reputation.

The economic dimension of reputationReputation is an important driver ofcommercial events, and not only in ourextremely trust-intensive industry. We alsoexamine this economic dimension of repu-tation in this issue of ceo magazine. It isfascinating to watch how the concept of a company’s reputation becomes increas-ingly clearer when seen through the eyes of different members of the businesscommunity.

I hope that in this issue too you will findideas and information that inspire you in your work and creativity. I wish you an exciting read and a relaxing summer.

Markus R. Neuhaus

ceo2/08. contents

Roland Rasi writes in ceo* Forum:“As a manager, you have to have a sense of how much acceleration you’re allowed to unleash – and have the stability yourself to master all kinds of accelerations.”

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Anton Lüthi, physician, writes in ceo* Forum:“Athletes set their bodies in motion anddecelerate them again after their physicalfeats. In the time in between, they do notrelinquish control for a single second.”

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Willy Rampf, technical director of the BMWSauber F1 Team, writes in ceo* Forum: “We need to accelerate not only vehiclesbut also our development. We need tobecome faster quicker!”

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Kurt Bylang, General Manager Getronics(Schweiz) AG, writes in ceo* Forum:“Technological progress has its own goal.For only in this way can developmentsbecome transparent and systematic.”

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pwc expertise

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Agile organisations: Organisations operatein an environment of constant change. Toassure a successful future, organisationsneed a new core competency.

29Value management: To succeed in globalcompetition, organisations must managetheir value creation consistently and effectively.

31Operational real estate: Managing theseholdings professionally can add substan-tial value to the business as a whole.

34Corporate reporting: Companies are realising that transparency helps ensure afair valuation for their business.

365 minutes: Business information andresearch by PricewaterhouseCoopers.

37Service: Events, publications and analyses.Subscriptions and addresses.

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Cover picture: Cédric WidmerThe Lucerne KKL

«Ulysses», the leadership development programme at PricewaterhouseCoopers. Help for self-help in Ethiopia.

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Rolf Dörig, Managing Director of the SwissLife Group, writes: “Reputation is a questionof credibility. No academic theories areneeded to answer it.”

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ceo/contents 05

Dossier Reputation

The Lucerne KKL offers culture, culinary specialities and congresses of the highestorder. An entrepreneurial challenge.

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Efficient use of energy : IKEA Switzerlandbuilds according to the Minergie standard,thus saving millions in heating costs.

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Reputation managementis more a managementtask than a communica-tion discipline. Leadersfrom ZKB, Novartis, LGTand Inficon air their views.

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Martin Scholl, CEO ZKB, page 18

Dr Roland Rasi advises “fallen” CEOs. Heknows the situation from his own experi-ence. As a top manager at the former SwissBank Corporation, he lost out in an internalpower struggle, left his job and began anew career.

The free fall from management level is hardly slowed by a golden parachute. Manymanagers, however, do not realise this until they’ve hit the ground. In my case, Ihad an “emergency parachute”: music andculture – interests that got me going again.Although I jumped voluntarily, the landingwas still hard. A moment like that is dramat-ic for anyone. Suddenly, your diary is empty,you don’t get invitations anymore, nobodywants anything from you, friends avoid you and you haven’t got any hobbies either,because you hardly had any time for thembefore. You would have ample time for themafter the fall, but you don’t know where tostart. When life runs in slow motion insteadof in the fast lane, we’re dealing with anacceleration phenomenon. In the generalsense, acceleration means any change of adirection vector, i.e. not only an increase in speed but also a slowing down or change

in direction. I am convinced that many prob-lems of our time are acceleration phenom-ena. An abrupt change in speed or directioncan have a destabilising effect. The topmanagement at SBB wanted to acceleratechange; the workers of the cargo plant inBellinzona wanted to slow it down. Theacceleration in the sub-prime market wastoo much for the banks, and the economystarted to lurch. Accelerations are nothingother than disruptions – sometimes they’reintentional, sometimes they’re not. Bystability, therefore, we do not mean a statebut rather the ability or talent to return to the initial state after disruptions.If we assume that, in a complex anddynamic world, the frequency and the inten-sity of accelerations is on the increase, itcan be concluded that the importance ofstability is on the rise. Companies thatrecover after setbacks and crises and revertto normality again have an advantage. This applies in the figurative sense topeople too. In my professional practice, Iregularly observe that managers who have alife outside of their job, who have an intactfamily, who have a broad circle of friends to call their own, are interested in sport,culture and other non-business matters aremore stable than managers who only live for their job and their career. Tragically and wrongly, these people perceive non-professional ties as hindrances rather thanstabilisers. I felt the same at the time. I liked speed and got annoyed when peoplearound me couldn’t keep up. The high,

yet constant pace suggested a stability thatin reality was non-existent. I thought I wasin the driving seat and enjoyed the speed.But in most cases you’re not only the driver,you’re also the passenger – you’re both the accelerator and the accelerated. As amanager, you therefore have a doubleresponsibility. On the one hand, you have to have a sense of how much accelerationyou’re allowed to unleash so as not todestabilise those affected by the acceler-ation. On the other hand, you have to havethe necessary stability yourself to master all kinds of accelerations.My diary is full again without my having lostthe control over it. I enjoy being able todetermine myself what I do and when I do it,and I appreciate the freedom of being able to go at my own pace. Although it isperhaps not as high as it once was, I nowenjoy the ride. //

Photo: Anne Morgenstern

forum1. acceleration/stability

Roland Rasi: As a manager, you have to havea sense of how much acceleration you’reallowed to unleash – and have the stabilityyourself to master all kinds of accelerations.

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Physician Dr Anton Lüthi works at the SwissFederal Institute for Snow and AvalancheResearch in Davos and, in collaborationwith the Swiss national ski acrobatics teamfrom Swiss-Ski, is researching the successfactors for a perfect jump.

When you see ski acrobats performing theirbreathtaking somersaults and spins on tele-vision or live, as one of the uninitiated, youhave no idea how precisely these jumps arecalculated. The course of the flight is speci-fied by the height of the jump; its curvature,which generates the angular momentum;the speed of the athlete, which is deter-mined by the length and steepness of theapproach; and the athlete’s weight andequipment. From take-off to landing, phys-ical powers such as centripetal force andgravitation are at work. And these are thesame for every ski jumper.Nevertheless, the performances are differ-ent. This means that during the dynamicsequence of a jump every athlete has thechance to make the best out of the givenconditions – to control and optimise them.And to do so although the flight phase inwhich he or she is transported at a height ofup to 15 metres lasts all of three seconds.The perfect jump is created out of theprecisely timed interaction between accel-eration and stability. Or put simply, athletesset their bodies in motion and deceleratethem again after their physical feats. In thetime in between these two actions, theycontrol the flight within the realms of theirpossibilities and do not relinquish control for a second.

The Swiss ski acrobats have set themselvesthe goal of jumping a triple somersault withfive spins by the next Olympics. There areathletes who are already able to do this – sofar, however, it has not been a standardfeature in a ski jumper’s repertoire. Thanks to sponsors and the support of acompany specialised in biomechanicalanalyses, we had the opportunity to exam-ine in detail the sequence of many jumpsfrom take-off to landing. At the water jump,where sportsmen and women train, we builta huge frame with 20 infrared cameras. Wethen attached 48 mark points to the bodiesof five athletes and had them jump for awhole night. Hats off to their sporting dedi-cation! It paid off. For now, as in a cartoon,we can analyse every sequence of the flightpath of each jump. We keep letting ourmatchstick figures on the screen jump inslow motion. We observe their movement in fractions of seconds, stop them, make them fly backwards. For me, it was amazingto discover that you can recognise the individual sportsman or -woman by his orher sequence of movement – although thematchstick people look entirely identical on the screen. This shows that the samemovements are made in a highly individualway – and how much personal freedom of interpretation each athlete has, in spite of physics. We now have a quite precise knowledge ofmany of the factors required for a success-ful jump. In a second phase, we have start-ed to play around. We modified certainparameters and observed what happens inthe simulation. What is the flight path likewhen the skis are shorter? Longer? Lighter?Heavier? What happens when you increaseor reduce the speed? One consequence ofthis work is that the Swiss ski acrobats are

currently having a completely new ski devel-oped in collaboration with the companyOxess on the basis of the knowledgegained. This ski is intended to help themattain their Olympic goal.To achieve new top performances in thissport, the interaction of different factors isrequired. A pivotal factor is a precise under-standing of the processes that lie outsideour sphere of influence. In ski acrobatics,these are, for instance, the constructionalfeatures of the ski ramp and the physicalforces that an athlete is subjected to duringthe jump, as well as the effects of uncon-trollable influences such as wind. We canthen attempt to optimise everything that wecan influence, for example the material. Andultimately it lies with the athlete to make theright decisions under time constraints andthe stress of competition – or to instinctivelyinitiate the right measures from experiencein a fraction of a second. In addition, from my observations, there arealso soft factors, such as the interactionbetween coach and athlete that go beyondany calculations or axioms. You need someone to retain an overview of the situa-tion during the jump-off phase and to guidethe athlete when something unforeseenhappens – for instance, when the windconditions change. The right assessment of the situation, collaboration in a team, acommon code – the calls must be extremelyshort and unmistakable – and mutual trust are undoubtedly just as decisive forsuccess as the perfect ski. //

Photo: Roth und Schmid


Anton Lüthi: Athletes set their bodies in motion and decelerate them again after theirphysical feats. In the time in between, they donot relinquish control for a single second.

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Willy Rampf is the technical director of theBMW Sauber F1 Team. In this position, he isresponsible for technical concerns and forthe vehicles used by the Formula 1 team onthe racetrack.

The fastest car wins – in most cases. That is why when I hear “acceleration” and“stability”, I think of the vehicle first, andspecifically of the acceleration at the start ofthe race, the braking stability and of coursethe output. That is the power that is gener-ated by the air that flows above and aroundthe chassis, the wings and the suspensionparts and presses the car to the ground.This makes high speeds on bends possible,for instance. Formula 1 cars generate somuch output that they could drive on theceiling at a speed of approximately 170 kilo-metres per hour or more. More outputmeans higher stability on bends and alsomore air resistance. Depending on the racetrack, one or the other feature is moreimportant. In Monaco, a winding but slowtrack, output is everything. In Monza, ahigh-speed track, low air resistance is de-cisive. The racetrack is a given. The idealtuning is therefore different for each track.Per lap, our vehicles are still currently

around three- to five-tenths slower thanthose of Ferrari. Our first task is therefore to make our cars half a second faster. Andwe will manage that in the course of theseason. But Ferrari, too, is developing andbecoming faster. We need to accelerate not only vehicles but also our development.We need to become faster quicker!This challenge is a very complex one, bothfrom a technical and human perspective. InFormula 1, the technology is already at anextremely high level. Nevertheless, I believethat there are no limits to development. Thisis of course leading to increasing speciali-sation among experts. The staff know theirparticular area better than I do. My task is to specify the development direction, filterthe ideas of the employees and ensurecooperation between specialists. For, asimportant as every single detail on the caris, its impact and efficiency is only as goodas the interaction between the components.This is exacerbated by the rapid speed of development, a speed that we want toaccelerate further, indeed have to acceler-ate further to reach the very top. But there’sscarcely time even to keep up. Our windtunnel, for instance, operates 24 hours aday, but it is still impossible to test every-thing. You couldn’t win a teacup in Formula 1with a policy of hedging your bets. You haveto be willing to take risks and allow errors –at least in areas that are irrelevant to safety.It may sound odd but in Formula 1, which is overloaded with technology, you shouldnot only trust your calculations but alsoyour gut feeling – and that of your staff.

My second thought on the topics of “accel-eration” and “stability” therefore refers tothe team and the human aspects. An accel-erated technological development is onlypossible with a stable team. Sauber washugely “accelerated” through the mergerwith BMW. In 2005, the racing team had280 or so staff. When we analysed the situ-ation at the time and planned the future of the BMW Sauber F1 Team, it was clear tous that we would need more manpower to be successful in sport. Today, just under700 employees work in our team; 430 of them work in Hinwil and the rest inMunich. We are thus still one of the smallerconstruction teams. Nor did we intend to be the biggest; our aim was to be the mostefficient team. All the same, the increase in personnel at Hinwil by around 50 per cent was considerable. The new employees not only had to have a very high degree ofspecialist expertise. They also had to fit infrom a human perspective. The expansionwas completed in 2007; today, we are a top team. //

Photo: Helmut Wachter


Willy Rampf: We need to accelerate not only vehicles but also our development.We need to become faster quicker!

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Kurt Bylang is the general manager ofGetronics (Switzerland) AG. The company isactive in the area of information andcommunications technology (ICT).

The IT sector has long been seen as thequintessence of constant innovation. Today,it is in good company. The pace of changehas generally become high – in the financialsector as well as in the machine industry or in retail. The driver behind the generalacceleration is not solely IT but the peoplewho operate in and shape the variouseconomic sectors. IT supports this acceler-ation with fast, global and comprehensiveaccess to all kinds of information.The two terms “acceleration” and “stability”incorporate what it’s all about for us, as ICT service providers – innovation, on theone hand, and sustainability, on the other.Getronics verifies new developments of itstechnology partners Microsoft and Ciscoand of other market leaders and integratesthe individual components into a customer-specific work platform with high availabilitythat, at the customer’s request, can also be operated by Getronics. Stability and acceleration – they go hand inhand. Maintaining a balance between thetwo is a major challenge. As the generalmanager, I am confronted with this chal-lenge on three levels: in the market, in ourcompany and in my private life.In the market, always having state-of-the art technology and being on the ball is amatch decider for us. The requirements ofmodern and often mobile places of work

are changing rapidly and continuously. Asan infrastructure integrator and outsourcingcompany, we sit between the technologypartners and users and make our living fromthe trust we inspire. People and companiesmust be able to trust us; ultimately, ourcustomers put their IT infrastructure andthus an important production factor in ourhands. As is well known, trust cannot beswitched on and off. Instead, it has to bedeveloped, with stable, interpersonal rela-tionships and with impeccable services.They ultimately determine the day-to-daybusiness and the added value provided forour customers. It is also expected of us that we offer thelatest technology at all times and are able toimplement this smoothly and faultlessly;and that our solutions are robust and welltested and thus without any risk for thecompany. These are not projects with abeginning and an end. We are talking aboutbusiness relationships with a long-termorientation. In short, although our solutionsand tasks change quickly, as serviceproviders we stand for stability – in the formof reliability and calculability. The same applies internally. Motivating top performance from employees who areconfronted with constantly changing technology requires a corporate culture of stability and reliability. For me as anemployer it means finding and maintainingthe balance between a high frequency ofinnovation and a clear orientation of thecompany. Our employees need to knowexactly where the journey is heading. Thismeans that calm can be maintained in thecompany in a time of constant change sothat everyone can concentrate on the taskat hand. Or, put another way, technological

progress has its own goal. For only in thisway can developments become transparentand systematic. The buzzword of the hour is “unifiedcommunication”. It means that all commu-nication, whether it be via mobile, PDA,fixed network, PC or laptop, operatesthroughout the company via a singlecommunication platform and not, as up tonow, via several different platforms that are usually independent of one another. We provide the showcase – both for ourcustomers and for our employees – in ourcompany ourselves. All 24,000 Getronicsjobs around the world are in the communi-cation loop. Externally, we thus become areference for the Future-Ready Workspaceourselves. Internally, everybody knows what it is all about because they are work-ing with it. That, too, provides stability. Personally, I know how important it is to befully a part of everyday life and not to bedefined by your profession alone. It is there-fore important for me to spend a lot of timeboth in the office and at home. This meansthat, when I am at work, I am entirely here.When I am at home, I am entirely there.That, too, provides stability! //

Photo: Markus Bertschi


Kurt Bylang: Technological progress has its own goal. For only in this way can developments become transparent andsystematic.

dossier reputation

The reality hasto be rightbefore you canwork onappearances.

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“Once your reputation’s lost, just spend – no need to count thecost.” Even though this statement might still have been valid inWilhelm Busch’s time, it is certainly not the case today. We live inan age of blogs and networking platforms, and the rule of thesesocial media is “reputation by recommendation”. Lose your reputa-tion and you are ostracised in your private life and ruined commer-cially. The need to promote and protect our reputation influencesour activities almost on a daily basis. Nor is it surprising that anever greater industry sector lives from meeting this requirement –and promises to establish a good reputation and avert or containdamage to an existing one.Ask what sector the maintenance and protection of a reputationbelongs to, and you normally get the following answer: the commu-nication industry. Indeed, the opportunity in this sector is constant-ly growing: reputation monitoring, reputation consultants, CEOconsultants, PR agencies. Undoubtedly, image is a constructionbuilt by communication. But reality still matters more than appear-ances. James E. Grunig, probably the most influential PRresearcher of the last decades, summarised it succinctly himself:“Reputation cannot be managed… only the behaviour of manage-ment.” Reputation management is more a management task than acommunication discipline. And since strategy and managementconsultancies have started dealing intensively with the topic ofsustainability, they can no longer bypass the topic of reputation.That is also the case at PwC. “With every strategy project, reputa-

tion is a dominant driver, even if it is an unstated one,” confirmsRalf Schlaepfer, Head of Consulting at PwC. “The skill is in oper-ationalising it in small, decisive steps.” The global manager ofsustainability consulting at PricewaterhouseCoopers, the SwissThomas Scheiwiller, sees the topic of reputation in a very matter-of-fact way, and his personal definition is just as dry: “Reputation isthe aggregated metric for external relationships.” External relations – so public relations, after all? But in the literalsense? With his aggregation definition, Scheiwiller is on a wave-length very similar to that of today’s communication research. TheUS professor Charles Fombrun is the founder and CEO of the international Reputation Institute and the creator of the RepTrakScorecard. His model is based on reputation in the form ofemotions, trust, respect and admiration developed in seven dimen-sions: 1. Products/services (high quality, good price-performanceratio, fulfilled consumer requirements), 2. Innovation (innovative,first on the market, adapts quickly to change), 3. Employer(performance- and employee-oriented, embraces equality ofopportunity), 4. Governance (open and transparent, ethicallycorrect, fair business practices), 5. Citizenship (responsibletowards the environment, charitable, positive influence on society),6. Management (well organised, inspiring leaders, superb manage-ment, clear vision for the future), 7. Performance (profitable, betterresults than expected, good prospects for growth). For Fombrun,the public perception of a company is measured in all these ways.

Good performance, good reputation?And this leads us to the core of the dilemma in the modern-daypractice of reputation management. Reputation is measured,honed and polished, and then measured again. Yet it would bemuch more interesting to know what needs to be done to ensurethat it does not have to be honed and polished anymore – so thatthe reality speaks for itself. Viewed in this light, reputation manage-ment becomes less of a communication task and more of a jobdescription for the company management:

dossier reputation

By Alexander Fleischer, President of the Chief Communications Officers’ “HarbourClub” and Head of Marketing and Communication at PricewaterhouseCoopers Switzerland.Photos: Roth und Schmid

Reputation management is a management task rather than a communication discipline.

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• Generate a desire among management to be responsible entrepreneurs.

• Establish a functioning corporate governance (with checks and balances).

• Set up operational processes that ensure that no fraud, misconduct, inefficiencies or deviation from the specified goal will remain undetected.

• Be successful, i.e. act better than the competition (deliver performance; this is the real crux of the matter).

• Generate internal transparency with regard to how value is created in the company, where this is done and to what extent.

• And, ultimately, create external transparency.

When all these factors are taken into consideration, a company willperform well. And does this then lead to a good reputation? Notquite – because this is where communication comes into playagain. Tests by Prof. Claudia Mast from the University of Stuttgarthave shown that almost all medium-sized companies in Germanyundervalue themselves. We can assume that a similar situationexists with regard to Swiss SMEs. The cause of this unused reputa-tion potential probably lies in the unrecognised importance ofcorporate communication, reflected in how little is invested in it.But being a “hidden star” is not really worthwhile from a commer-cial vantage. As stated rather mercilessly by Marie von Ebner-

Eschenbach: “Those who are satisfied with little fame do notdeserve to have a lot of it.” Getting both the performance and the communication right is atype of insurance for difficult times. Thomas Scheiwiller calls this“hysteresis” and explains: “It is like inertia with a magnet. A goodreputation creates a buffer for times of crisis – then I can allowmyself two or three errors without being punished straight away forthem.”

Spelling things out clearlySo the board of directors and the CEO deliver the results, and thecommunications manager or consultant makes them public? Inpractice, the function of the Chief Communications Officers (CCOs) goes beyond this. They already play a pivotal role in manycom-panies in shaping reality. From their daily exposure to theoutside world they experience first-hand where the actual strengthsand weaknesses of a company lie. These external impulses are im-portant in finding and formulating a strategy – particularly in thedialogue with the CEO, because reputation and communication are the boss’s job.CCOs also have an important role vis-à-vis discipline in implement-ing strategy, namely that of the company’s conscience. If what aCCO is communicating does not tally with what employees,customers, shareholders and others experience, his or her credibil-ity is soon undermined – as well as that of the company he or sherepresents. That is why it is also one of the tasks of the CCO tospell things out clearly: To tell it like it is. To exert influence. Toensure that in the eyes of the general public – whose advocate heor she is in this role – things proceed in the right direction. In theprocess, CCOs often have to dig in deep and defend positionsinternally; otherwise they will be taken apart in their external rela-tionships. They know that the satirist Lucian was right when hedeclared: “The label should not be bigger than the bag.” //

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“Nothing is moreimportant.”

Interview: Corinne Amacher

Mr Scholl, after the enforced resignationof your predecessor, Hans F. Vögeli, you,as the new CEO, had to restore trust inZürcher Kantonalbank virtually overnight.What was that like for you?As a member of the ZKB Executive Board, Iwas already used to standing up in front ofcustomers and employees. When I tookover the operational management of thebank, everything focused even more on me.It was a hectic time, but with the trust ofcustomers and employees, you can masterdifficult situations too. I have always beentrue to myself throughout my career andtherefore have never had to pretend to beanything to anyone. When I say that thesituation is under control, people believeme. Aside from that, the main part of acompany’s reputation is formed without anyinput from the CEO. It is our customeradvisers who contribute to the bank’s goodreputation on a day-to-day basis with theirspecialist and personally competent work.

What did you undertake yourself tostrengthen the bank’s reputation?My colleagues on the Executive Board and Iconducted an intensive dialogue with all thestakeholders and in particular also with ouremployees. We allowed ourselves to beinterviewed twice by TeleZüri programmemanager Markus Gilli in front of 400employees each time. These were veryintense podium discussions. Markus Gillididn’t go easy on us, and the feedback fromthe audience was good. We then attended

customer events and conducted individualvisits to important customers.

The ZKB had been criticised because ithad a dual role towards its client Sulzer.What lessons have you learned fromthat?There is nothing more valuable for a bankthan its good reputation. Within the bank,we once again had to sharpen the sense ofthis principle, which you learn as a banker inyour first year of apprenticeship. The aware-ness that reputation represents an import-ant strategic asset is now firmly re-estab-lished in the minds of all employees.

Specifically, which measures weretaken?As always in cases like that, there wereimmediately calls for checklists and rules.But they’re no use at all because the nextcrisis will definitely go differently. Awarenessof critical topics and an open culture ofdiscussion are most important. The employ-ees have to recognise when a business isproblematical and they need to be able totalk about it. Once a sensitive topic hasbeen recognised, it needs to be brought tolight, and then a decision can be made. Wehave created a conflict committee specifi-cally for this purpose that decides on busi-ness transactions with a potentially excep-tional impact on the bank’s reputation. Thebusiness unit manager affected by thespecific case, the Chief Risk Officer and I asthe CEO sit on this committee; the head ofthe Legal Service has an advisory capacity.A conflict of interests between the clientand the bank, a critical customer relation-ship, a trade deal with a country like Iran

that represents a substantial political riskeven if it does not harbour any direct mate-rial risks: all these are relevant to the bank’sreputation and cannot be dealt with usingchecklists. Here, it’s much more aboutbalancing legally protected interests.

How great is the risk that the employeeshold themselves back in their workbecause all they can think about is therisk involved?This risk should not be underestimated. It isan important task of management to ensurethat this does not happen. You need toensure that risk awareness does not resultin an overly conservative attitude. Thebanking business is based on risks; that’sjust how things are. The employees have toknow that they also have decision-makingcompetences despite all the risks and thatthey should make use of these.

Which methods have you introduced torecognise sensitive topics?Together with the Public and Social Affairs(fög) research department at the Universityof Zurich, we have developed a reputationmonitoring that we combine with our ownbrand and market research instruments. Sothat this monitoring does not land in a draw-er somewhere, it is integrated into the exist-ing processes at the bank. Through system-atic media analysis, we gain informationabout current and future topics that couldhave a negative and positive impact on thebank’s reputation. In the first quarter of2008, a detailed report on the development

Martin Scholl, CEO of Zürcher Kantonalbank, on the lessons to belearned from the Sulzer case and the value of a good reputation.

reputation. zkb

Martin Scholl: “The employees have to know thatthey also have decision-making competencesdespite all the risks.”

20 ceo/reputation

Committed to ethicalbusiness conduct.

Sometimes Dan Ostergaard likes holding up the mirror to others.When he gives a presentation, he tends to remind his audience ofthe different benchmarks that are applied, for example, betweenbringing up children and everyday business life. In the evening, afather reminds his son to do his math test without cheating; in themorning he succumbs to the temptation of acquiring a lucrativecontract by unfair means. As Head of Corporate Integrity & Compliance, Ostergaard, who isan attorney with an MBA, is primarily responsible for establishingthe ethical values and principles of the health care corporationNovartis in everyday corporate practice. It’s not an easy undertak-ing to get 100,000 staff around the world with a correspondinglybroad range of social and cultural backgrounds to commit to oneethical line. But it’s a worthwhile and essential task. “Responsiblecorporate management makes good business sense,” says Ostergaard. “It helps us reduce our risks, become trusted by ourstakeholders and motivate our employees.”

Focusing on promoting ethical leadershipSince he joined the company in 2002, Ostergaard has established acomprehensive management framework – the Novartis Integrity &Compliance Program. It supports management to establish high standards of integrity, promote the company’s values throughleadership, objectives and incentives as well as training. It enforcesthese standards through specific decision-making processes,monitoring and reporting, complaint handling and auditing. It goesbeyond traditional compliance programs – which rely on rules,awareness training and auditing – by focusing on promoting ethicalleadership, fostering a speak-up culture, and creating incentives forthe right behaviour. The Corporate Integrity & Compliance organisation is a centralisedone in Novartis to highlight that business integrity is a managementresponsibility that should be integrated into business operations.Therefore, Ostergaard has a small team in the Novartis headquar-ters in Basel and a network of full-time and part-time colleagues inthe 98 country organisations of Novartis. They are responsible for

Compliance with a code of conduct ispart of the performance appraisal for allNovartis employees and affects theirremuneration. “We thus reward respon-sible rather than ethically risky behav-iour,” says Dan Ostergaard, Head ofCorporate Integrity & Compliance.

reputation. novartis

of our reputation was drawn up for the firsttime. The results are now being discussed.

What lessons have you learned fromthat?It is still too early to draw conclusions fromthe reputation monitoring. A broadly basedstakeholder survey, however, gave usimportant information for our future strat-egy. Last year, we surveyed several hundredemployees, clients, media representativesand politicians on the strategy, structureand culture at the ZKB. One result in par-ticular is worth mentioning: We have a needfor clarification with regard to our tradingbusiness. Our investment banking is not justa gambling division; it has an importantfunction within the bank. But we need to liveit accordingly too and depict it in a crediblemanner.

Crisis management is part of a CEO’s jobprofile. Which type of conduct do youhave planned for yourself personally inthe event of a crisis?Retrospectively, I have to say that we were too hesitant in our communication inthe Sulzer case. In a crisis situation, it isimportant to disclose the facts of the caseas quickly and as completely as possibleinstead of revealing the truth in measureddoses. From experience, companies with anopen, transparent communication strategyare only affected once by a crisis and notrepeatedly, spread out over several weeksor even months. Almost as a prophylacticmeasure against a crisis, we would like toshow the general public over the next fewmonths that the management of the bankdoes not rest only on the shoulders of theCEO but is distributed across severalmembers of the board. Otherwise, it willundoubtedly be the case that the CEO musttake responsibility in the event of a crisis. //

Dan Ostergaard: “Leading companies seeintegrity not as an obstacle to competitiveness,but as a driver of differentiation, for reputationand also for innovation.”

22 ceo/reputation

“A healthydose ofcommon sense will suffice.”

“A company’s reputation is said to be itsmost valuable commodity. I wouldsubscribe to that straight away. Broadacceptance is needed to develop a largeorganisation further. At Swiss Life, we haveexperienced for ourselves what it meanswhen a company’s reputation takes a bash-ing and the brand is no longer well posi-tioned. It becomes embedded in people’sminds and stays there. A damaged reputa-tion cannot be overturned in the space oftwo years – and very definitely not withwords alone. Reputation cannot beconjured up, and it cannot be made. It hasto be developed. The topic is also important for me becauseof its significance for our company. Yet, itdoesn’t have an institutionalised import-ance. To be honest, I don’t think much of allthe reputation management models; theyare too theoretical for me. The same applies

Reputation is a question of credibility. No academictheories are needed to answer it, writes RolfDörig, Managing Directorof the Swiss Life Group.

reputation. swiss life

the local implementation of the Integrity & Compliance Programand inform local management regularly on the implementationstatus of the program and about cases of misconduct.Under no circumstances does Ostergaard want to be seen as akind of corporate policeman; he sees himself as the promoter ofproper conduct. Because employees primarily do what they arepaid to do and in particular because they need “institutionalsupport”, especially in ethical grey areas, he puts his faith in asophisticated incentive system. Compliance with a code ofconduct is part of the performance appraisal for all Novartisemployees and consequently affects their remuneration. “We thusreward responsible rather than ethically risky behaviour,” saysOstergaard.

Driving performance by building a culture of integrityTraining is important to build awareness and develop skills fortaking responsible decisions. New recruits at Novartis are invitedwhen they arrive to attend a course on the code of conduct thatdefines the standards valid throughout the corporation with regardto discrimination, conflicts of interest, insider trading, cartel agree-ments, data protection, bribery and compliance with local laws. In2007, 210,000 of these courses were held around the world, mostof them computer based. All employees – from the productiondepartment to the management board and board of directors –have to complete the course. “Managers often make their deci-sions under economic pressure,” says Ostergaard. “It is thereforeall the more important that they are sensitised to delicate situa-tions.” To give the employees and external stakeholders the chance to beable to report on potential and actual cases of misconduct in aconfidential and protected manner, the Business Practices Office(BPO), which is independent of the Integrity & Compliance depart-ment, was set up at the headquarters in Basel. The responsibilityfor the processing and decisions and sanctioning for reports ofpossible and actual misconduct was thus brought together in oneoffice. “Because the Business Practices Office examines cases in acentral, uniform and confidential way, the commitment of Novartisto impeccable corporate management is strengthened and alsofirmly established in the minds of the employees,” says Ostergaard.So-called “Integrity Telephone Lines” have been set up in 70 coun-tries and 51 languages. In 2007, 906 cases of suspicion werereceived by the BPO; of these, 290 proved to be entirely or partiallysubstantiated; 168 employees had their contracts of employmentterminated as a result. At Novartis, Integrity & Compliance is not part of Legal Service, aswith many other companies. Instead, it belongs to the CorporateAffairs department, where it is a pillar of the Corporate Citizenshipinitiative, focusing on the social responsibility of Novartis. “Doingbusiness with integrity is not only the right thing to do, but alsodrives performance by building a culture of integrity, managingrisks, strengthening our reputation and fostering competitiveadvantage,” says Ostergaard. “Leading companies see integritynot as an obstacle to competitiveness, but as a driver of differentia-tion, for reputation and also for innovation.” //

ceo/reputation 23

to the trend of wanting to quantify a compa-ny’s reputation. The idea behind it is easy tounderstand. Reputation is a decisive factorin a company’s success; that is why itbelongs on the balance sheet. The imple-mentation, however, is too abstract. Itattempts to put a value on something thatcannot be expressed in monetary terms.Reputation is about questions such as:Does a company management meet theexpectations that it arouses? Do its actionsmatch what it has communicated as a goal?Do words and deeds tally? In short, reputa-tion is a question of credibility. You don’tneed academic theories to answer it; ahealthy dose of common sense will suffice.

Good figures but a poor image In the assessment of credibility, businesssuccess, attractiveness for shareholders,attractiveness as an employer, the quality ofthe products and also the image that thegeneral public has of a company do ofcourse play a role. Each individual aspect isessential for a company’s reputation, whichis good when each subaspect is good as

well, and only then. Or, put another way: A company can have good figures but apoor image. Today, I am highly satisfied with the reputa-tion of Swiss Life. We have a remarkableperformance record, a good name and astringent business model, although we areseen by many individual analysts as beingtoo conservative. However, our long-termview is proving to be the right one, particu-larly at the moment. We have remainedunaffected by the subprime crisis.

It’s about fairness and respectFor a brand like Swiss Life, a code ofconduct which everyone here commits toois decisive. It’s about fairness and respect incustomer relationships, and reliability andtrust in business conduct – that is essentialin our industry; that is what we survive on.The challenge is in living these values anddefending them, including against the pres-sures and temptations of the market, forreputation is a fragile commodity. Losing itis infinitely easier than acquiring andprotecting it.However, you’ll only get ahead if you areconstantly prepared to take entrepreneurialrisks. We examined this topic, for instance,in the run-up to the AWD takeover. AWD fitsin with our growth strategy. We want tostrengthen distribution. Because our busi-ness is ultimately local, we need access tocustomers locally and we can broaden thisaccess substantially with AWD. Thetakeover was also positively received withregard to its strategic intention. However,we were also asked – but only in Switzer-land – whether the aggressive AWD fits withthe very solid and respectable Swiss Life.The answer to this came easy to us: theAWD Group is celebrating its 20th anniver-sary this year and its 2-millionth customer.This would not have been possible withoutsatisfied customers. Not everyone believesus yet that the cooperation between SwissLife and AWD will be a success. And here,too, the same principle applies: We cannotconjure up this success, we have to devel-op it. We will be presenting the first resultsin six to twelve months.”

Recorded by Iris Kuhn-Spogat

“It set a great deal in motion.”

Interview: Franziska Zydek

Your Highness, how is the LGT doing?The LGT is doing well. In the first quarter, we were able to generate good results underthe circumstances, with a profit at the levelof the prior-year period and a substantialpositive new net cash inflow overall, even if it was below that of the prior year. The tax affair has primarily had an impact in Liechtenstein, where below the line we lostassets. In all other countries, including in our on-shore business in Germany, wewere able to post cash inflows. That was notnecessarily to be expected and is very gratifying for us.

In your opinion, how great is the damagesustained to your bank by the German taxaffair?It is difficult to quantify, and it will probablyonly be possible to estimate it after a certainperiod of time has passed. Financially, weare still not expecting any substantialimpact. The data theft and the resultinggreat media interest have, however,undoubtedly resulted in a loss of reputation– and there’s no point trying to put a glosson it. After the crisis management phase, weare now very actively working on re-estab-lishing the trust we have lost among ourstakeholders.

What was your most important goal whenhandling the crisis?Our main focus was on our employees andclients. Primarily, it was about limiting thedamage and minimising the uncertainties.We wanted to make clear that the affair only

concerns customer relationships of LGTTreuhand. The trustee business accounts foraround 9 per cent of the assets managed byour overall group.

How did your clients react during thecrisis?The uncertainty was of course greatestamong those directly affected. Most of theother clients were very philosophical aboutit. The affair had a highly polarising effect;the procedure adopted by the Germanauthorities triggered great surprise anddispleasure on the part of some people.

How did you define your communicationsstrategy for the first phase of the crisis?We realised immediately that it was a seriousmatter and that we would have to actoutside of the usual processes and struc-tures. On the very same day, we decided toput all the facts known to us on the tablewith absolute transparency and minimumdelay.

What was unusual about that? In the first few days, we were not entirelysure whether the affair was actually triggeredby the data theft at LGT Treuhand in 2002.We were even less aware who had passedthe data on to whom, and whether any otherdata were involved. In the press, sourcesclose to the Federal Intelligence Service(BND) were quoted at the time, and theymentioned more recent data. The talk was of“breaking into the entire bank”. It onlybecame public a short time later that thedata thief had sold the same data that hehad stolen in 2002 to the BND. The normalreaction in such a woolly situation would

have been not to communicate anythinguntil reliable information was available. Butour aim and top priority was to limit thedamage.

Did you achieve this goal?Yes. I think we managed relatively quickly tolimit the case to the LGT Treuhand and tothe time up to and including 2002. At notime was there a rush on our bank or anyother extreme event. Our employeesbehaved impeccably, and normal businessoperations were ensured at all times. Ourcommunications reached the target groups,and we were able to clarify the situation forour clients relatively quickly.

How could you be so sure that the BNDdid not have any additional, more recentclient data?We analysed the reporting on a continuousbasis and compared each new piece ofinformation with the facts known to us. Ourmanagers know their staff and business divisions very well; they were able to pursuepossible trails promptly and quickly excludefurther leaks. When it came down to it, wenoticed in the crisis how reliably our internalstructures and systems work.

What structures and systems are youreferring to?At LGT too, there are the usual safety meas-ures for data, IT, building protection, etc.Here, we are undoubtedly operating at thetop level. However, when you analyse similarcases, you discover that the greatest riskfactors are not to be found on the technicalside but rather on the human side. In thisarea, we have learnt a lot from the data theftin 2002. We weight the human side veryhighly and have, for instance, reacted withrigorous training of managers.I think that there is a culture today in ourcompany – a particular mindset – that is

H.S.H. Prince Max von und zu Liechtenstein, CEO of LGT, on theconsequences of the tax affair and onthe handling of sudden, unwantedmedia attention.

reputation. lgt

24 ceo/reputation

S. D. Prinz Max: «Der Datendiebstahl und die darausresultierende grosse Medienpräsenz haben abersicher zu einem Reputationsverlust geführt – da gibtes nichts schönzureden.»

Prince Max von und zu Liechtenstein: “The data theft and the resulting mediainterest have undoubtedly resulted in a lossof reputation – and there’s no point trying to put a gloss on it.”

26 ceo/reputation

“Continuity; equality of treatment; deliverwhat you promise.”

Text: Iris Kuhn-Spogat

To be or not to be – for Lukas Winkler, CEO of Inficon, the questionis ultimately decided by his company’s reputation. Firstly, becausethe company is listed on the stock exchange and in the financialmarkets, reputation is important. Secondly, because, as a nichesupplier in niche markets (see box), Inficon has to be the marketleader. By nature, niches are small; if you are not in control of them,you won’t earn enough money. Before Inficon was listed on the Swiss stock exchange in Novem-ber 2000, the company was part of Unaxis (today OC Oerlikon).The topic of reputation first became important with the IPO, as thethe company set about finding its own identity and honing itsprofile for potential investors. At the time, the financial marketswere on a New Economy high. One obvious solution was to posi-tion Inficon as a supplier to the semiconductor industry; after all, 50 per cent of the turnover came from this sector. When the NewEconomy bubble burst, it dragged the share price of Inficon downwith it – even though the other 50 per cent of turnover had nothingto do with semiconductors or the New Economy. To date, Inficon appears in the category “semiconductors” withsome analysts, although the share of turnover of this business division has since fallen to approx. 20 per cent. “We can’t shake off this image entirely,” says Winkler, “but it’s our own fault.” One consequence of this problem of perception is that the shareprice of Inficon does not adequately reflect the company’s value –in other words, it is too low. That is a temptation for financiers suchas Tito Tettamanti: last summer, he bought a stake of more than 5 per cent via his investment company Sterling Strategic Value.Alongside UBS Fund Management, Corisol Holding, Polar Capitaland Schroder, he is the largest shareholder today. Is Inficon a takeover candidate? “As a company listed on the stockexchange, we are theoretically permanently up for sale,” saysLukas Winkler. “Being seen as a takeover candidate does notnecessarily have to damage our reputation as long as the oper-ational performance is right.”Neither the options for correcting its image nor the importance ofnew major shareholders nor the ups and downs of the share priceaffect the day-to-day business at Inficon. “Our staff are notinvolved in events on the stock exchange in any way,” says

Lukas Winkler, CEO of Inficon, on theimportance of the share price for hisSME and on the principle of reputationthrough performance.

reputation. inficon

sensitised to human and intrapersonalfactors. In my eyes, this is an operativesecurity provision that should not be under-estimated.

Looking back, how do you rate the exter-nal communications – after all, Liechten-stein reacted harshly to the criticism fromGermany?There is not enough differentiation here. Asthe owner of the LGT, the Royal Housefollows a clear policy of corporate govern-ance. The family members who are polit-ically active for the Principality of Liechten-stein – the heir to the throne and my father,the Prince – do not have any function withinthe bank. As the CEO of the bank, I am notresponsible for the politics. My brotherreacted to the very vehement rhetoric fromGermany in a level-headed manner and inthe process also made reference of courseto the legally questionable purchase of thestolen data. At the LGT, however, we havenever offered a political opinion at any time.

Did the affair also have a positive side foryou? It is too early to assess that, but we areundoubtedly doing everything now to ensurethat we turn the crisis into an opportunity.Today, we communicate much more activelythan we did a few months ago, and ourexperience with this approach has been verygood so far. We have also used the situationas a chance to review our image, our posi-tioning and certain strategic nuances. Thisprocess is currently still ongoing. I think thatwe have survived the crisis well up to now.We are, however, more than aware that thereis still a lot of work to do.

What is your personal conclusion?Short decision paths, a good managementteam, loyal and motivated employees, and astrong internal culture are absolutely pivotalfactors in mastering a crisis. It has been agratifying experience to see that the LGThas these pillars. That is why I am also highlyconfident about our future. //

ceo/reputation 27

Winkler. “Nor do we measure our success by the share price.Instead, we measure it solely by the profit that we generate.”Winkler’s philosophy is that if the performance is right, the com-pany will flourish and this normally will be rewarded by the financialmarket with increasing share prices. He looks after the sharehold-ers according to the simple principles of “Continuity; equality oftreatment; deliver what you promise.” The CEO also acts the sameway with the customers. “Our customer relationships stand and fallwith our technological know-how and with our reliability,” saysWinkler. “Our reputation is entirely dependent on it.” Winkler issatisfied with the way things are turning out. Since he has been incontrol, turnover has been growing in the two-digit range year on

Facts and figuresInficon’s holding company is domiciled inBad Ragaz and its CEO/CFO office in Balzers (FL). The company produces instru-ments for the analysis, measurement andcontrol of gases, in particular for demandingvacuum applications. Inficon supplies thefour markets of semiconductors and vac-uum coating (35 per cent of turnover),general (42 per cent of turnover), air-condi-tioning and refrigeration technology (16 percent of turnover) and emergency and safety(7 per cent of turnover). Inficon produces atthe three main sites of Balzers (FL), Syra-cuse (USA) and Cologne (D); including thesales staff who are spread around theglobe, the company employs some 870staff who in 2007 generated a turnover ofUSD 236.6 million.

year; operating income as a percentage of sales has more thantrebled over this period, from 3.9 per cent to 13.8 per cent. So far,Winkler has not experienced any slumps, apart from those in theshare price. He’s prepared himself nevertheless: he has introduceda profit-sharing scheme for all the employees. When business isgood, every member of staff will receive a cash bonus. In toughertimes, Winkler can use the planned budget as a reserve – and doesnot have to react to slumps with staff lay-offs straight away.Winkler refers to lay-offs as “one of the biggest risks to reputation”for a company that has local roots as strong as Inficon’s. //

28 ceo/pwc expertise

ceo2/08. pwc expertise

Agile organisations: Equipped for change. Page 29

Management: Value management has many facets. Page 31

Interview: Dr Peter Wilden, Ferring. Page 33

Operational real estate: Harnessing unexploited potential. Page 34

Corporate reporting: Improved transparency will be rewarded. Page 36

5 minutes: Business information and research by PricewaterhouseCoopers. Page 37

Service: Events, publications and analyses. Page 39

ceo/pwc expertise 29

Agile organisations: Equipped for change.Organisations operate in an environment of constant change. It is not enough to merely respond to changes in the market. To assure a successful future, organisations need a new core competency: agility, or the ability to find the right balance between standardisation and flexibility, writes MarkusBucher, member of the Management Board and new Leader Advisory.

[email protected]

It has long been commonplace to talk of thefast-changing times in which we live. Butrapid change is a real phenomenon thatcompanies experience. There has alwaysbeen change, but it used to come in inter-mittent waves rather than the constant,ever-more relentless change that we facenowadays. Thanks to the Internet we’re inpermanent communication, which haschanged the way the markets work. Global-isation has brought new, virtual forms ofdoing business. Domestically and interna-tionally, in specific sectors or across indus-tries, new regulations and codes of conducthave made compliance much more compli-cated than ever.To operate successfully in an environmentlike this, organisations have to be in per-manent readiness to tackle changes whosenature and scale are often impossible togauge in advance. The challenge is not tolet change take you by surprise, but tomake sure you’re equipped to deal with anumber of different future scenarios andeventualities. The fact that many organisa-tions are realising this is underscored by theeleventh “Annual Global CEO Survey”

conducted by PricewaterhouseCoopers. Ofthe 1,150 CEOs polled, 88 per cent saidthat they viewed the ability to adapt theirbusiness model rapidly to internal andexternal change was one of the keys tocompetitiveness.

Agility: a new core competencyBut what does this really mean? How canan organisation cope with change or eventurn it to its advantage without even know-ing what direction it will take? The answerlies in agility: having the mobility, supple-ness and skill to strike a balance betweenstandardisation and flexibility and ensurethat this balance is rooted in the organisa-tion and its strategy. Agility means beingable to anticipate change rather than merelyreacting to it. Regardless of the industry,this will be one of the core competencies ofthe future.The music industry is a prime example ofthe serious consequences of failing to adaptan operating model to a changing environ-ment in time. The whole industry’s highlyprofitable business model has been shakento its foundations by the Internet. Thanks toe-commerce, on-line providers and, aboveall, the option of downloading individualtracks, the industry was faced with a raft ofnew competitors it hadn’t thought wouldeven dare enter the market, never mindconquer it. But the conventional music

companies’ struggle with the new competi-tion has turned out to be futile, because theyoung pretenders have the consumers ontheir side.

Identifying core processesAgility means finding the right strategic mixof standardisation and flexibility. The aim isfor an organisation to hone capabilities thatit doesn’t need right now, but may need inthe future. In its efforts to make existingprocesses as efficient as possible, acompany can easily lose flexibility. By standardising things too much, organisa-tions run the risk of failing to take sufficientaccount of change, so that every change inthe market environment makes the businessvulnerable, and the organisation fails toseize the opportunities that emerge whenchange does happen.Standardisation and flexibility are apparent-ly conflicting aims, one of which is oftenachieved at the expense of the other. Find-ing a balance means repeatedly and rad-ically questioning the business model andthe organisation. For this to happen,management must have a clear idea ofwhich business processes are key to valuecreation. In turn, concentrating on thesecore processes entails two major culturalshifts: adopting a process-orientedapproach which sees business processesacross the whole organisation rather thanfocusing on isolated silos of activity, andadopting a collaborative managementapproach.Processes must always be seen in thecontext of people. Business processes

StrategyCompetitionGrowth

Markus Bucher, member of the Management Board and Leader Advisory


don’t happen by themselves, but in theinterplay with people and the way theybehave. Here technology is of only second-ary importance; it merely serves as a facili-tator. Technology has enabled organisationsto make huge efficiency gains. But this hascome at a price, as organisations have losta great deal in terms of their understandingof processes.

Four steps to agilityBasically there are four key steps involvedin making a company agile enough to adaptrapidly to changes as they emerge:

• Detailed scenario planning: management teams assess the economic, environmen-tal, regulatory and geopolitical factors thatare most likely to impact their businessesin the next three to five years. Alongsidethe familiar SWOT analysis, tools such asPEST analysis are gaining in importance:analysing the political, economic, socialand technological trends and placingthem in the context of the business.

• Getting to know your business: through rigorous process assessments, executivesgain a deeper understanding of whichprocesses or business activitiescontribute to a company’s core valueproposition and which simply facilitatebusiness as usual.

• Aligning around value-creating activities: with a shared view of their businesses,management teams can collaborativelyidentify best practices and performancestandards for executing the value-creatingactivities that are common across func-tions.

• Re-examining value-creating activities in the context of likely change: with anoutlook towards a number of possiblefutures, executives identify whichprocesses must be made flexible andwhich must be standardised for thecompany to continue creating valuethrough change. By putting this strategicmix in place, senior management createsa flexible operating model that canaccommodate many different sources ofchange, rather than just one.

The result is a blueprint that will allow theorganisation to operate successfully,

however the environment changes andwhatever scenarios come to pass. But thetransformation to agility will only be pos-sible if a culture of change pervades theentire organisation, and its people havereally internalised the necessity of beingflexible. This also means having systems ofincentives in place that reward a willingnessto change.

Strategy and performance measurementThe ability of an organisation to cope withchange is a key factor in its efforts toimprove business performance. The valueproposition of PricewaterhouseCoopers’Advisory line of service reflects this: “Weadvise and we implement – to design,manage and execute lasting change.” Toimprove business performance in aconstantly changing environment meansthat the planning and implementation ofstrategy can no longer be seen as separatesteps. Instead, they constitute an ongoingprocess – a cycle that is in a state of per-manent renewal.The measurability of success is always partand parcel of effective implementation. Assoon as there is a discrepancy between theplanned and actual results, it’s time to takeanother look at the strategy. It may be thatthe original strategy is no longer the rightway of differentiating the organisation in thepresent and future environment. So the trickis always to take account of both aspects:the measurability of success, and thestrategic foundation of business decisions.

Promoting agility in dialogueTo gain agility, organisations must be able toforesee and recognise changes in theiroperating environment, incorporate thesechanges into their strategy, and implementthis strategy to achieve a measurableimprovement in performance. This is noeasy task for management. In many casestalking to an external partner can make itquicker and easier to get a clear picture ofwhere the challenges lie and what has to bedone to tackle them. An expert sparringpartner can help management find answersto questions like the following:

• How can we boost revenues? The industry expertise of an external part-ner can help a company identify customerexpectations and efficiently produce ordeliver the corresponding products andservices.

• How can we manage performance? Performance management frameworksprovide information and decision-makingtools that help companies translate strategies into operational measures andachieve lasting process change.

• How do we manage our people in an environment of change?Systems of incentives can help influenceemployee behaviour to facilitate changeand boost value creation.

• How do you deal with regulation? In most cases it’s not the regulations assuch that are the problem, but yourawareness of them and the way you dealwith the specific impact of rules and regu-lations on your own organisation.

• How do you make good decisions?Primarily by analysing all the possiblechances and risk scenarios. Given thegrowing complexity of organisations and the environment in which they operate, coupled with the high expectations in terms of transparency and compliance, risk is an ever-moreimportant consideration.

All businesses aim to create value andimprove their business performance –something that is getting increasingly diffi-cult in an environment of permanentchange. The challenge for managers is torethink their business model from theground up and make change scenarios anintegral part of the organisation, its pro-cesses and culture. By adopting a cycle ofcontinually formulating strategy and meas-uring progress and success, an organisationcan boost its performance even when theenvironment changes.

SUMMARYThe ability to manage change – asa chance – is what characterisesan agile organisation. An organisation that takes a long-termview and is geared to operatingsuccessfully and improving its performance in a changingenvironment.


Management: Value management has many facets.To succeed in global competition, organisations must manage their value creation consistently and effectively. Value management involves steering theinterplay of strategy, management, structure and culture to focus the wholeorganisation on value.

[email protected]@ch.pwc.com

Do companies know their key value driversand their impact on the value of the busi-ness? Do they have appropriate instrumentsand structures in place to manage thesevalue drivers effectively and add value tothe business? Both these things are neces-sary for survival as a successful player in acompetitive arena. Any organisation wishingto systematically generate value should findout where the hidden potential lies andexploit it. But value-oriented managementonly works if the interests of both ownersand management are aligned to addingvalue. So further questions arise: does the

present compensation system givemanagers sufficient motivation to addvalue? Are they rewarded appropriatelywhen they generate value for the business?A company can do a lot to encouragevalue-oriented business behaviour byensuring that all management activities anddecisions are aligned to long-term valuecreation.

Value-oriented management is independent of ownershipTo enhance value creation, the first step isto ascertain the actual value of the businessand identify its key value drivers. Corporatevaluations and an analysis of value develop-ment are helpful for both listed and privatelyowned businesses. For companies whose

shares are traded on the stock exchange,market capitalisation can serve as a bench-mark of the way the value of the business isdeveloping. But since market capitalisationis often affected by exogenous factors,many companies also use other methods tovalue the business. Unlisted companies thatdo not have this external benchmark areautomatically reliant on alternative valuationmethods. One of the main valuationapproaches used nowadays is thediscounted cash flow (DCF) method inconjunction with comprehensive valueanalysis and a process to model the keyfinancial value drivers.

1. Business analysis: What is the value

of your business, andwhat are your key

value drivers?

2. Value improvement: What is your value-

enhancing potential?

3. Change management: How can you effectively

create value?

4. Compensation: How can you link reward

to value creation?

Ensuring effective and sustainable value management.


Once valuation has taken place, the organi-sation can identify potential improvementsalong the value chain and pinpoint hiddenpotential for adding value. At the same timeit has to examine the possible strategicoptions and assess their impact. The mostinteresting options for the company in termsof value creation can then be translated intoconcrete action and embedded in corporatestrategy, processes and culture. Only thenis it possible to set measurable objectivesfor value creation; these objectives shouldalso be built into the system of incentivesfor managers.In the struggle to attract qualified managers,listed companies have the advantage ofbeing able to offer equity and option-basedcompensation as a form of performanceincentive. In the war for talent, privatecompanies that are in direct competitionwith their listed counterparts need similarlyattractive incentive systems to hire, moti-vate and retain good managers. For com-panies that do not wish to disclose detailsof ownership, systems such as phantomequity plans where, for example, shares aremodelled in the form of certificates, are asuitable option.

Comprehensive value managementmodelRegardless of ownership, the fact of thematter is that companies wishing tosucceed in today’s highly competitive econ-omy must manage value creation systemat-ically and effectively – which means beingaware of and managing all facets anddimensions of value generation. Pricewater-houseCoopers has developed and success-fully tested a value management model thatlinks questions of valuation, strategy,change management and compensation

(see graphic page 31). While the model willtypically be applied in the sequenceoutlined below, it is flexible enough to startat any point in the cycle, in other wordswhere the organisation’s needs are mostobvious:

1. Business analysis: The first step is toascertain the value of the business and itscomponent businesses. Then the valuedrivers are analysed and evaluated in linewith an industry benchmark.

2. Value improvement: If the business analy-sis revealed hidden sources of potentialvalue creation or showed that the organisa-tion does not have as firm a grip on its valuedrivers as its competitors, this means thatthere is room for improvement in terms ofvalue creation. Depending on the specificsituation, this potential may best beharnessed by adapting strategy, optimisingprocesses or other operational measures.Parallel to this, the process allows theorganisation to identify opportunities fororganic or acquisitional growth, ways ofmitigating cost drivers, and defining keyperformance indicators (KPIs). At the end ofthis phase, the company will have a practic-able implementation plan.

3. Change management: The implementa-tion phase is about making value creationan integral part of the organisation’s strat-egy, structure and culture. Here the key is tosystematically implement and communicatethe concept of optimised, long-term valuegeneration. The KPIs defined in the previous

phase and the company’s managementmodel will help steer behaviour in thedesired direction. To ensure that this valueorientation remains firmly embedded in theorganisation’s culture, all stakeholdersshould be involved in the process ofchange.

4. Compensation: The goal of this phase isto align compensation with the organisa-tion’s value-oriented strategy. The key is tocreate incentives for long-term value gener-ation. Short-term incentives are hardly likelyto work. What is needed is long-term formsof compensation which reward the desiredbehaviours as well as the resulting financialimprovements. The transparency of thecompensation system is a matter of goodcorporate governance.

The implementation of this type of compen-sation system closes the value manage-ment circle, ensuring that managers have avested interested in managing value driversprofitably and in identifying and harnessingnew value creation potential on an ongoingbasis. This holds for both listed and privatecompanies. Unlisted companies in particu-lar, which are not subject to sanctions fromthe markets or the scrutiny of analysts andrating agencies, face especial challengeswhen it comes to exploiting this valuecreation potential. Organisations that put allcomponents of value management intopractice will ultimately succeed in managingvalue in both senses: cultural and financial.

SUMMARYValue management is a carefullycoordinated process involvingbusiness analysis, harnessingvalue creation potential, changemanagement and managementcompensation. As the market environment becomes tougher, the challenge for companies is to manage value creation effec-tively – in other words being aware of and managing all thefacets and dimensions of long-term value creation.

MotivationAdded value

Franco Monti, Advisory – Strategy & OperationsRemo Schmid, Human Resource Consulting


What made you introduce a value-orient-ed management with EVA key ratios inyour company?We were looking for a model that bringstogether the goals of our shareholders andthose of our management, and offers theright incentives. EVA goes beyond theconcept of short-term success. It shifts thefocus away from the profit and loss state-ment towards sustainable value creation.This is extremely important, particularlywith private companies, because share-holders have a long-term rather than short-term investment horizon.

What have been the effects of the intro-duction of value-oriented companymanagement on corporate strategy?It is important for our shareholders todevelop substance in a company over alonger period of time. This is reflected e.g.in investments in research and develop-ment. Sometimes, these goals are to thedetriment of a short-term profit strategy. Webase our long-term ten-year strategy on afive-year business plan that is revised atperiodical intervals. Plans, however, are notdeterministic. It is important to stick to

Ferring – a practical example.“The incentive plan strengthened cooperation.”

Dr Peter Wilden has been CFO of Ferring since 2000. In 2005, the company introduced a value-oriented management based on theconcept of economic value added (EVA). The EVA key ratios are linked to a long-term incentive plan for the management.

goals; we can regularly redefine the path toreaching them, using the EVA key ratios.EVA makes both the goals and longer-terminvestment projects more transparent.

At Ferring, part of the managementremuneration is dependent on the attain-ment of the EVA key ratios. Has thisresulted in a convergence of manage-ment interests with those of the share-holders?Our long-term incentive plan offersmanagement the opportunity to participatein our long-term business success withoutaltering the ownership structure. This incen-tive system reflects the weighting of ourgoals. With it, we have also found an add-itional argument to recruit and retain quali-fied managers. The programme has beenrunning for a good two and a half years.During that time, we have not lost a singleone of our key employees.

What role does the incentive system playin the recruitment of highly qualifiedmanagers ahead of companies listed onthe stock exchange?Working for a private company is attractiveprimarily because it offers the opportunity todevelop the business yourself up to acertain degree. But managers also want toreceive an appropriate remuneration for fullycontributing their entrepreneurial thinking,their commitment and their performance.This is where the remuneration system kicksin. A long-term incentive plan like ours canby all means compete with the remuner-ation packages of major corporations listedon the stock exchange.

How did the change managementprocess at Ferring go?The idea for the initiative came from theshareholders and the Board of Directors,and this was also a decisive factor in itssuccess. We agreed on the EVA concept indiscussions between the management andthe Board of Directors. In a second step, theremuneration committee of the Board of

Directors weighed up the interests andtranslated the concept into an incentivesystem. The task of the management was tofirmly establish the concept and the incen-tive system in the organisation. We gaveourselves a year to do this.

Has the process of reorientation nowbeen concluded?The process is still ongoing. The journeyfrom the introduction of new key controlratios to working with these key ratios on adaily basis is a long one. EVA is a modelthat can be communicated and is easy tounderstand because the key ratios arederived from the audited annual statement.But education and training are necessary forthe concept to be understood in all localcompanies. We have already managed thisquite well. This year, the managers werealso able to see for a second time how theincentive plan is developing.

In your opinion, what are the advantagesof hiring one single external consultantfor the different aspects of valuemanagement?The advantage of a single point of contactis that all the aspects, whether of manage-ment, personnel management or taxes, aregiven the same amount of attention. In thisrespect, we are highly satisfied with thepath that we have taken. Together, we havebeen able to develop high-quality solutionsfor all facets of value management andremuneration.

Looking back, what did the greater valueorientation improve at Ferring?The collaboration between the departmentshas become much more intensive. EVA isan overarching instrument, and themanagers from the different divisions see atonce that they are working for a commongoal, namely long-term value creation. Thisis precisely the goal that our shareholdersare pursuing.

Ferring is an international player in the biopharma-ceuticals sector, generating turnover of well overEUR 750 million with 3,200 staff worldwide, 380 ofwhom work at the company’s headquarters in Saint-Prex, in the canton of Vaud. The company isprivately owned.


Operational real estate: Harnessing unexploited potential.Many companies have recognised and have started to harness the true potential of their operational real estate. Managing these holdings professionallycan add substantial value to the business as a whole.

[email protected]

For many Swiss companies, property is oneof the biggest – if not the biggest – item onthe balance sheet. This is reflected in theimportance companies attach to their realestate portfolio: 43 per cent view real estateas an important or even irreplaceableresource, and for another 44 per cent, realestate is a necessary component of theiroperational processes. This view is sharedby companies regardless of their size orindustry.This is one of the findings of a survey en-titled “Kennen Sie den Wert Ihrer Immo-bilien?” (Do you know the value of your realestate?) conducted by Pricewaterhouse-Coopers among financial decision makersat Swiss companies. PwC wanted to findout how Swiss companies view, value andmanage their operational real estate. Nowa-days, the trend internationally is to treat realestate as a value driver rather than just abundle of costs, and property-heavycompanies such as retailers and hotelchains are increasingly choosing to activelymanage their property holdings with an eyeto value. Besides the tax and accountingbenefits, this value-oriented approach alsohelps expand a company’s refinancing

options, can add (sometimes significant)value to the business, and can result inlucrative gains when property is sold.

Cost factor or value driver?But not all Swiss companies have recog-nised the potential value of these assets. Ofthose polled, 29 per cent do not evenformulate financial objectives in connectionwith managing their real estate. Of theremainder, almost two thirds emphasise thecost aspects and say that the primary goalof their real estate management efforts is tominimise the expense. However, value-driv-en management isn’t just a matter of reduc-ing costs. Operational or not, property ismuch more than a matter of write-downsand expenses; it also has the potential toadd value to the business overall. But only11 per cent of the companies polledexpressly aim to increase the value of theirreal estate.Another finding of the survey underscoresthe extent to which some companies under-estimate the value-adding potential of theirreal estate: only around 60 per cent of those

polled say they have conducted an internalor external valuation of their property. Whencompanies do have their real estate valued,an interesting phenomenon arises: mostreal estate assets turn out to containconsiderable hidden value, often 50 percent or more of their book value. Butbecause many companies still focus on thecost side, they carry real estate in theirbalance sheets at amortised acquisition orconstruction cost, less cost of maintenance,rather than following the international trendto fair value accounting and presenting theirfinancial position and results of operationson a true and fair basis. Companies that want to manage their realestate holdings professionally have to dotwo things. Firstly, they have to rethink theirapproach to property. Rather than viewingtheir real estate as a cost factor, they shouldbe treating it as an asset that has to bemanaged like any other asset to ultimatelyadd value to the business. Secondly,companies have to know what their realestate is worth: by having the market valueor intrinsic value of their property holdingsassessed, they have a basis for managingthis value.

Internal management, or transaction?Companies that do not wish to investresources in managing their real estatethemselves also have the option of exploit-ing the value of their holdings through trans-actions such as OpCo/PropCo. This type oftransaction involves separating the owner-ship and operation of the property by creat-

Asset managementAppreciation

Kurt Ritz, Swiss Real Estate Industry leader


ing a structure where an operating company(OpCo) sells the operational property to aproperty company (PropCo) and simultan-eously leases it back.Some of the companies polled in the surveyare still fairly sceptical when it comes to realestate transactions. The greatest obstacleas they see it lies in the relative or completelack of a market for their operational realestate. They are also afraid of the loss ofoperational independence that selling prop-erty could, as they see it, entail. But boththese obstacles can be overcome with theright long-term lease. This approach canenhance the company’s long-term location-al security as well as the marketability oftheir property. Experience has shown thatthere is a market for any property, regard-

less of its location or state of repair, with alease of ten years or more.The main considerations for companies thathave conducted an OpCo/PropCo transac-tion or are considering doing so have to dowith financing. Selling and leasing backproperty is a good way of generating cash,generally at better terms than with a loan ormortgage. OpCo/PropCo is a way forcompanies wanting or having to reducedebt to release the necessary funds withouthaving to resort to any form of internalfinancing such as selling off a business.Besides these financing considerations, thistype of transaction can also enable acompany to manage its assets more effi-ciently, reduce the costs of capital andmake its real estate costs more transparent.Since transactions of this sort reducebalance sheet assets, they can also be away of optimising profitability, liquidity anddebt ratios.

SUMMARYReal estate assets, like any other assets, must be managedwith an eye to adding value to the business. To harness the realpotential of their real estate assets,companies must know their true,current value. Companies have the option of actively managingthe value of their real estate themselves or outsourcing thefunction by selling and leasingback property.

7% Achieving overarching corporate targets

10% Market profitability and appreciation of property

14% Exploit accounting and tax advantages

40% Focus on minimising property-related costs

29% No financial objectives formulated for real estate

What is your main financial objective in terms of operating real estate?


[email protected]

“I should be able to read an annual reportand know what the business is doing andknow the key drivers.” With these fewwords an American financial analyst putsthe expectations of the financial markets ina nutshell: when it comes to corporatereporting, they expect the management andboard to paint an accurate picture of thereality of their business.Getting an insight into the actual develop-ment of a company’s business is importantfor all its stakeholders, but particularly forthe investment community. After all, it’s thedecisions made by investors, and especiallyinstitutional investors, that determine thevaluation of the stock. The reality, however,is that the needs and expectations of thiskey group of stakeholders are often notadequately reflected in either corporatereporting or the financial reporting require-ments that govern it.For more than a decade, Pricewaterhouse-Coopers has been asking financial analystsand institutional investors what informationreally matters to them. The surveys consis-tently reveal the huge appetite of profes-sional investors and analysts for the information that management uses tomanage and steer the company. And over

the years nothing – including tighter rulesfrom the standard 18 setters and regulatorsand the corporate world’s growing aware-ness of transparency – has altered thesefindings.

Closing the information gapNow two new empirical studies have beenpublished giving an insight into the invest-ment community’s needs and requirementsin terms of corporate reporting. Researchconducted by the University of St Gallenentitled “Corporate Perception on CapitalMarkets: Non financial success factors incapital market communication” looks atinformation needs that go beyond purelyfinancial data. The second study, “Corpor-ate reporting: Is it what investment profes-sionals expect? International survey ofinvestors’ and analysts’ views on the infor-mation that companies provide”, publishedby PricewaterhouseCoopers, concentrateson financial reporting, revealing that gapsstill exist between the value the investmentcommunity places on key information andthe way this information is actually reported.

To be able to value a business appropriatelyand thus ensure that capital is allocated effi-ciently within the economy, investors needinformation of both types: financial andnon-financial. Information that gives an indi-cation of a company’s future prospects isgenerally qualitative or non-financial innature. This is information that showswhether management is consistently pursu-ing a sustainable strategy matched to themarket situation, whether it’s aware of andeffectively managing the factors drivingvalue within the business, and whether allthis is resulting in a convincing businessperformance. This in turn will be reflected inthe company’s financial figures – and in itsreputation.

Disclosing strategyThe St Gallen study, which surveyed morethan 200 financial analysts and institutionalinvestors, is based on a model of the quali-tative factors influencing the capitalmarket’s perception of a company. Thesefactors fall into seven categories: corporatecommunications, management quality,corporate strategy, corporate governance,corporate culture, customer and industrialrelationships, and public affairs. Theresearchers found that while participantsrated almost all these categories as havingabove-average importance, three specificfactors in particular were viewed as key:long-term strategy, management’s ability to

Added valueCorporatecommunication

Peter Ochsner, member of the Management Board and Leader Assurance

Corporate reporting: Improved transparencywill be rewarded.Corporate reporting has become more transparent – in part because of tighter disclosure requirements, and in part because companies are realising that transparency helps ensure a fair valuation for their business.


The value of real estate.For many companies, operating real estateis the biggest item on the balance sheet.Ten per cent of companies systematicallyseek to increase the value of their realestate assets. For 40 per cent, the priorityis to minimise real-estate-related costs,while 29 per cent of companies say theydo not even have any financial objectiveswith regard to real estate. Forty-one percent of Swiss companies do not know thecurrent market value of their own operat-ing real estate. One third of companieshave conducted property transactions inrecent years, 44 per cent of which relatedto transfers within the organisation, and 56per cent of which were conducted with athird party. Twenty-four per cent of Swisscompanies are planning property transac-tions in the next few years. These are thefindings of a PricewaterhouseCoopersstudy entitled “Kennen Sie den Wert IhrerImmobilien?” (Do you know the value ofyour real estate?; see page 34).www.pwc.ch/en/press_room

Climate change.Fifty-five per cent of Swiss powerproviders believe that fewer statutoryrequirements facilitate investment in theenergy infrastructure. Ninety-two per centbelieve that prices will rise in the liber-alised energy market over the next four orfive years. According to 77 per cent ofSwiss providers, technological innovationwill lead to progress in terms of energysavings and efficiency in the next tenyears. Here, Swiss power providers seethe greatest potential on the consumerside, with household, commercial andindustrial users. Mergers and acquisitionswill also increase in the Swiss energy busi-ness. These are the findings of a reportpublished by PricewaterhouseCoopersentitled “Energiestudie Schweiz – wieverändert sich das Klima im SchweizerEnergiemarkt?” (Swiss energy study: howwill the climate change in the Swiss energybusiness?).www.pwc.ch/en/press_room

Telecoms deals.In 2007 there was a global decline inmergers and acquisitions in the telecom-munications industry, with transactionvolumes shrinking to EUR 185 billion fromEUR 332 billion in 2006. The acquisition ofItalian company FASTWEB SpA by Swiss-com AG was one of the top ten transac-tions worldwide last year. Two trends areemerging for the future. Firstly, emergingnations will see an increase in M&A. Theacquisition of the Indian company Hutchi-son Essar by Vodafone was an indicationof things to come. Secondly, there is greatpotential for mergers in the mobile Internetand infrastructure businesses. These arethe results and predictions of the “M&AInsights” study conducted by Pricewater-houseCoopers for the telecoms industry.www.pwc.ch/en/press_room

Look into the future.The ongoing process of globalisation isshifting the balance of power from theestablished OECD states to emergingnations. China looks likely to overtake theUS as the world’s largest economic poweras soon as 2025. By 2050, per capitapurchasing power parity in the emergingmarkets will be double that of the estab-lished economies. The purchasing powerof the E7 nations (China, India, Brazil,Russia, Indonesia, Mexico and Turkey)currently comes to 65 per cent of thepurchasing power of G7 states (UnitedStates, Japan, Germany, the UK, France,Italy and Canada). According to a PricewaterhouseCoopers study entitled“The world in 2050. Beyond the BRICs: abroader look at emerging market growthprospects”, investors should not be focus-ing exclusively on the BRICs (Brazil,Russia, India and China); new emergingnations such as Vietnam, Nigeria, thePhilippines and Egypt also have outstand-ing growth prospects.www.pwc.ch/en/press_room

5 minutes: Business information and research byPricewaterhouseCoopers.


implement strategy effectively, and compre-hensive disclosure (see box).A company’s long-term strategic orientationis reflected most clearly in its investmentand research and development activities.But it is also manifest in management’s abil-ity to pursue this strategy reliably over thelong term. An organisation’s ability to imple-ment its strategic plans is closely bound upwith the quality of its management; in otherwords, management must be credible andhave a successful track record to match.However, the markets can only assess thisperformance reliably if management’sobjectives are quantified and published. Theinvestment community thus values consis-tent, ongoing information – both qualitativeand financial – very highly.It’s important to remember that the financialperformance of a company is the result ofstrategic decisions and the ability tomanage value drivers effectively. Reportingtransparently on things like market position-ing, strategy and value drivers in no waydetracts from the importance of detailedfinancial figures allowing market partici-pants to assess and value the business.Even though – indeed perhaps because –

financial reporting standards have becomemore detailed and complex in recent years,annual reports often fail to completely satis-fy the information needs of the investmentcommunity.

Explaining financial performance figuresThe international PricewaterhouseCoopersstudy on corporate reporting mentionedearlier in this article shows that financialofficers still have scope for boostinginvestors’ understanding of the perform-ance of their business and, in the longerterm, for ensuring that their company isvalued appropriately by the markets. Forexample, there is a call for more differenti-ated reporting on the specific sources ofrevenues and earnings, segment reporting,detailed breakdowns of costs, and revalua-tions of assets and liabilities. Investors alsovalue summary earnings numbers such asEBITDA.But PricewaterhouseCoopers’ research alsoshows how much many companies havedone in the last ten years to meet theinvestment community’s information needs.Professional investors and analysts areconvinced that these efforts work to thebenefit of companies. An Australian analystsums it up: “Improved transparency will berewarded.”

SUMMARYThe financial markets have sophis-ticated needs and high expecta-tions when it comes to corporatereporting. A long-term strategicorientation, the ability to reliablyimplement strategy, and transpar-ent information are the mostimportant factors for professionalinvestors and financial analystswhen assessing a business. Theinvestment community would liketo see annual reports containingmore differentiated information onfactors such as the sources ofrevenue and earnings.

With the support of organisations including PricewaterhouseCoopers, the University of St Gallen’s Institute for Media and Communica-tions Management conducted an empirical survey on the qualitative factors influencing corporate communications. These factors fall into seven categories. The findings from the more than 200 financial analysts and institutional investors who took part underscore theimportance of non-financial information in corporate reporting. The table summarises the scores for the ten most important factors (1 = irrelevant, 5 = very relevant).

The ten most important factors in market perceptions of companies.

Factor Category Average score

Long-term strategy Strategy 4.51Implementation of strategic plans Management quality 4.49Comprehensive disclosure Corporate communications 4.47Understanding of business Management quality 4.40Shareholder value Strategy 4.40Management ability Management quality 4.39Accessibility of investor relations officers Corporate communications 4.31Ability to deliver on forecasts Management quality 4.30Continuity Corporate communications 4.29Proactive agenda setting Corporate communications 4.29


Events, publications and analyses.

Chinese market

The experts at our China Business Groupexplain developments in the Chinesemarket and the opportunities that areemerging in terms of your investments. Thethemes of the current issue are the corpor-ate tax reform, new rules on transfer pricing,the opportunities for foreign banks andinsurance companies, and the impact onforeign investors of the new guideline cata-logue of industries for foreign investment.The brochure “pwc: china compass” isavailable in German [email protected]

Events

How do you rate?A study on auditing and controls at medium-sized enterprises

PricewaterhouseCoopers and the Institutefor Accounting and Controlling at theUniversity of Zurich present the findings oftheir study.

Zurich, 4 November 2008Geneva, 11 November 2008

For information and registration:www.pwc.ch/events

2008 Tax ForumThe Tax Forum is where CEOs, CFOs,business owners and tax officers meet toshare practical knowledge and experienceand discuss current tax issues. The 2008forum will take a look into the future,asking the question “What direction isSwitzerland going in terms of tax?”.

Aarau, 25 November 2008Basle, 2 December 2008Berne, 12 November 2008Chur, 20 November 2008Frauenfeld, 18 November 2008Geneva, 25 November 2008Lausanne, 27 November 2008Lucerne, 20 November 2008Lugano, 25 November 2008Neuchâtel, 26 November 2008St Gallen, 26 November 2008Thun, 20 November 2008Winterthur, 20 November 2008Zug, 26 November 2008Zurich, 17 November 2008

For information and registration:[email protected], tel. 058 792 18 49.

Reader service:The authors of the topics covered in the pwc expertise section of this issue of ceomagazine can be contacted directly at the e-mail addresses given in their article. For a comprehensive overview of PricewaterhouseCoopers publications, pleasevisit www.pwc.ch. You can order PwC publications and place subscriptions by e-mailing [email protected] or faxing 058 792 20 52.

Subscriptions:ceo, the magazine for decision makers, is published by PricewaterhouseCoopers.The magazine is published three times a year in English, German and French. To order a free subscription, please e-mail [email protected] specifying yourdesired language.Address: PricewaterhouseCoopers, ceo Magazin, Birchstrasse 160, 8050 Zurich,Switzerland.

Best Tax Firm in Switzerland 2008

PricewaterhouseCoopers has been awarded the Tax Firm of the Year award forSwitzerland for a second year in a row. The award for innovative tax work wasreceived by altogether 24 European national tax firms based on a broad surveymade by “International Tax Review”.

Corporate Tax Reform II

On 24 February 2008, the Swiss electoratevoted in favour of Corporate Tax Reform II.We at PricewaterhouseCoopers areconvinced the model is the right one, andhave argued for it from the outset. The tasknow is to implement the reform properlyand ensure that the right steps are taken ina constantly changing tax environment. Youtoo can benefit from these new solutionsfrom the start. We have summarised themost important changes in a brochure en-titled “Can You Benefit from Corporate TaxReform II”), which is available free of chargein English, French, German or Italian from [email protected]

40 ceo/kkl

Where the music is.

The Lucerne Culture and Congress Centre KKL offers culture, culinary specialities and congresses of the highest order. An entrepreneurial challenge.

ceo/kkl 00

“I want to develop a team with motivated employees and thus takethe company further.” Elisabeth Dalucas, CEO KKL

42 ceo/kkl

Text: Bernhard Raos Photos: Cédric Widmer

It’s hard to miss a wall decoration in theoffice of Elisabeth Dalucas, the director ofthe Lucerne Culture and Congress Centre(KKL): a large poster of the jazz legend KeithJarrett. When asked about it, the KKLboss’s delight is immediately evident:“During his performance two years ago,Jarrett really put our concert hall to the test,finding the right music for our venue. Hewas in top form!”Those of name and rank in the music sceneperform at the KKL – from the Italian starconductor Claudio Abbado, and the Latviancellist virtuoso Mischa Maisky, to the Vien-nese Philharmonic. Events such as theLucerne Festival or the Blue Balls Festivalare events with global appeal.

Acoustics are the trump cardThe white concert hall with its 1,840 seats isthe ace up the sleeve of the KKL to win theservices of international music greats: “Weget the stars we want,” says Elisabeth Dalu-cas, with pleasure. “Many musicians wantto perform in Lucerne solely because of theunique acoustics in Lucerne and don’tpress for their maximum fee.” And the KKLarchitect Jean Nouvel takes his hat off toLucerne: Not even the cosmopolitan city ofParis has a concert hall of this size and withthese facilities. The superb acoustics, the brainchild of the recently deceased American architectand acoustician Russell Johnson, are theculmination of his decades of experience.The hall volume of 19,000 cubic metresoffers great space for the sound to develop,generating a round and soft echo. Thanksto a sound reflector above the stage, themusicians can hear themselves without anysound delay. Around 240 settings make it possible to adapt the acoustics to theindividual piece of music. In this environment, the expectations of theaudience have also increased. “Our hall hasensured that the public’s perception ofmusic has developed. The demands on theprogramme are correspondingly high,” saysDalucas. Facilitating superb culture andmaintaining this standard over a number of

years represents an entrepreneurial balanc-ing act. The director makes no mention of afurther increase in the services offered: “Wewant to consolidate our good position inEurope.” The KKL is an architectural masterpiece. Itsstriking roof with a soffit, almost as big as afootball pitch, is a familiar sight to visitorsfrom all over the world. Dalucas too payshomage to the prestigious building: “It is aprivilege to work for such an institution.”From the Basle-born graduate in fine arts,with a postgraduate diploma in manage-ment, however, more is expected than justartistic inspiration. The 46-year-old directorof KKL Management AG and managingdirector of the supporting foundation hasmultiple feats to accomplish.

Making a cultural temple profitableWhen Dalucas became CEO here five yearsago, the KKL was in a critical situation. Herpredecessors had departed on an almostannual basis; the fluctuation rate amongstaff was a record 30 per cent. In 2003, itwas even threatened with bankruptcy dueto unsecured maintenance costs and highbuilding debts. The KKL was only savedfrom bankruptcy because the Lucernevoters approved CHF 18 million to plug thegaps.Several factors were responsible for theprecarious situation. The building, whichwas originally estimated at CHF 194 million,ultimately cost CHF 226.5 million – 32.5million more than planned. The buildingdebts were supplemented in the first years

of construction by annual deficits of up toCHF 1 million, despite good booking levels.Above all, because of the usage rights:According to the rules of procedure, the cityof Lucerne as the largest financial backerhas 164 usage rights, which are used tosubsidise clubs that use the KKL. For them,the concert hall, for instance, only costsCHF 2,900 basic rent instead of the CHF20,000 required to cover costs. Since 2003,the city has been paying the KKL the differ-ence. The KKL is organised as a public privatepartnership. This means that its privatelymanaged side has to adapt to the require-ments of the public sector and vice versa.Listening to the market, maintainingcontacts with donors and taking intoaccount political sensitivities, that is a verydelicate juggling act. Dalucas knew what she was getting into.Challenging scenarios had always interest-ed her, as she herself stated shortly aftertaking up her position in Lucerne. Previous-ly, as the director of the Museum zu Aller-heiligen and the cultural department of thecity of Schaffhausen, she had managed toturn the institution around. Her style is notto manage with an iron rod but rather withthe power of conviction: “I want to developa team with motivated employees and thustake the company further.”

Value creation in the regionThis was necessary primarily with regard tothe KKL catering which was ailing at thetime. Dalucas invested CHF 1.6 million andtotally revised the concept. Instead of third-party catering, there is now a broad,customer-specific range from the hotel’sown kitchen – from the gourmet restaurantRED (14 GaultMillau points), the World Caféwith self-service, the Crystal Lounge andSeebar for drinks and snacks to the eventcatering, for which the KKL kitchen teamhas been working with top chef HeinzWitschi since October 2007. Last year, theKKL generated a turnover of CHF 11.2million with its catering.

The Lucerne Culture and CongressCentre (KKL)The Lucerne Culture and Congress Centre(KKL) is organised as a public private part-nership. KKL Luzern Management AGmanages the centre; the majority of sharesare held by the supporting foundation. Thegrand opening of the centre, which costCHF 226.5 million, took place in March2000. Converted to full-time positions, thecentre employs 223 people. In 2007, netrevenues amounted to CHF 24.4 million.www.kkl-luzern.ch

The KKL is organised as a public private partnership. This means thatits privately managed side has to adapt to the requirements of thepublic sector and vice versa.

The KKL is an architectural masterpiece. Jean Nouvel has brought the lake into the building – with two water channels that divide the KKL into three: the concert hall section, the middle part with the Lucerne Hall and foyer, and the congress and museum area. The white concert hall with its 1,840 seats has unique acoustics that attract stars from all over the world to Lucerne.

44 ceo/kkl

An orchestra wantsmore.

The Lucerne Symphony Orchestramust pass the test on a worldstage. For its director, this is anexciting starting situation.

“We are not yet at the end of our road. Wewant to and must be among the best in ourleague,” explains Numa Bischof Ullmann.The dynamic director of the LucerneSymphony Orchestra (LSO) is a passionatecellist with commercial training who bringsgood prerequisites with him for his job. Forit’s about both: art and commerce. The LSO is the orchestra in residence at theKKL, the cultural and congress centre inLucerne. It is also the permanent orchestrafor all the music productions in LucerneTheatre. Above all, at the KKL, the sym-phony orchestra must meet the highestartistic requirements if it wants to fill aconcert hall that holds an audience of

1,840 – a provincial orchestra on a worldstage. “More funds were needed for thisinstitution,” says Bischof Ullmann, lookingback. Shortly after he took up office in the 2003/04 season, he succeeded inexpanding the orchestra by 10 strings to 70 musicians – privately financed for threeyears and only partially subsidised withpublic funds. On this topic, Bischof Ullmann says:“Whereas top orchestras such as the Vien-nese Philharmonic discuss how manyStradivari violins they purchase, we are justhappy to be able to employ a sufficientnumber of violinists.” In the past, it was notpossible to play certain works because theydidn’t have the number of musiciansrequired. Now, they are in a position todevote themselves to these fine works, hesays. Of the 11 million or so of the LSO budget,60 per cent comes from public sources; 40 per cent is covered by admission fees,sponsors, foundations and private donors –the LSO has a higher degree of self-financ-ing than most other orchestras in this coun-try. And much of that effort falls to the LSO

director: he invests half of his time infundraising and sponsoring. He is regularlyin contact with most companies in theregion and in the cantons. The LSO benefits from 24 usage rights forthe concert hall at the KKL. The city ofLucerne thus offers a huge reduction on therental for the hall. Money well invested: onaverage, booking levels are around 90 percent. The orchestra has extended its reper-toire to include modern works and, with theClub LSO U25, is aiming to make classicalmusic attractive to a younger audience.Composing contracts are awarded on aregular basis.This summer, the orchestra has been invitedfor the first time to tour Japan for threemonths. At the national level, music criticssee the LSO as second only to the twoleading orchestras, the Tonhalle OrchestraZurich and the Orchestre de la SuisseRomande. A position which, BischofUllmann believes, represents “a nice obliga-tion and challenge”.

www.sinfonieorchester.ch

ceo/kkl 45

This pillar of business is also responsible forhalf the turnover; the other turnover is divid-ed almost equally between culture,congresses and services. Dalucas speaks of the important triad of thethree areas of “Culture, Convention,Cuisine”. Because the instruments havenow been tuned to one another, they “arenow entering a phase of integration, withcontrol and optimisation of the processes”,meaning that better use is being made ofthe synergies between the three areastoday. The net revenues of the KKL grewfrom CHF 23.6 to 24.4 million last year.Below the line, the KKL posted an annualprofit of CHF 114,000. For Dalucas, a satisfactory result. “Our goalis to manage the company so that we covercosts.” She also refuses to join the ranks ofthe doubters who complain about insuffi-cient funds for culture: “Culture is doing well

in Switzerland,” she says. “There is strongcommitment, both from the public sector aswell as from foundations and private individ-uals.” The CHF 226.5 million for the KKL isproof of this, she says. The centre on thelake takes but also gives. According to astudy by the University of St. Gallen, theregion accrues CHF 60 million every year invalue creation.

Focusing on large eventsArchitect Jean Nouvel has brought the lakeinto the building – with two water channelsthat divide the KKL into three: into theconcert hall section, the middle part withthe Lucerne Hall and foyer, and thecongress and museum area. The threesections lie under the 2,500-tonne roof likeships in port. The convention section is fully booked for2008, with the exception of a few singledates. Popular dates are often booked outwell in advance. 160 congress events with 64,494 participants were held last year.

Visitors benefit here from the special ambi-ence, the space offered and from its centrallocation. The KKL is close to the mainstation and has its own underground carpark.Congresses do not sell themselves. Today,event organisers expect multifunctionalrooms for workshops, poster sessions anddiscussions in halls of different sizes,including inviting foyers. Dalucas also hadthis area optimised. She reduced the one-day events and increased the number ofparticipants per event – within five years,from 150 to an average of 403 (2007). Thisbrought more value creation. That now new congress centres are beingbuilt on all sides and numerous hotels areexpanding their infrastructure to includecourses and seminars does not deter theKKL director: “We are focusing above all onlarger congresses and events.” Hotels areprobably more suitable for smaller events.Unless money doesn’t matter: The KKL is awell-positioned, major high-tech machine,and as such it has its price. //

The KKL with its restaurants, multifunctional rooms of varying sizes plus the auditorium and spacious foyer offers what major event organisers expect today.

Today, at the KKL, there isa broad culinary range,from the gourmet restaur-ant RED and the WorldCafé with self-service, theCrystal Lounge andSeebar for drinks andsnacks, to the event cater-ing, for which the KKLkitchen team works withtop chef Heinz Witschi.

46 ceo/ikea

Thrift on a grand scale.When it comes to more efficient use of energy, many companies still have a lot of catching up to do. IKEA Switzerland, for instance, now builds only according tothe Minergie standard, thus saving millions in heating costs in the mid-term.

ikea

ceo/ikea 47

Text: Kaspar Meuli Photos: Nik Hunger

Externally, the building reveals nothing of itsecological secret. The blue and yellow cubeis impressive above all for its size: 200metres long and 100 metres wide. Onlywhen you look more closely do you see thepanels of a solar system on the roof of thenew IKEA furniture store in Spreitenbach.Inside too, the customers notice nothing ofthe “thrift on a grand scale” – as the SwissFederal Office of Energy (SFOE) states in itspraise of the building. In the technology room on the first floor,there are two furnaces powered by woodpellets – the largest of their kind ever to beconstructed to date. Yet the furnaces arejust two of the many elements in the sophis-ticated building technology system. Thissystem makes it possible for the energy

requirements of the new building, whichwas opened at the end of 2006, to bereduced by more than a quarter comparedto buildings constructed in the conventionalmanner. In other words, a substantial potential in savings, which was realised inparticular through efficient insulation of thebuilding shell and through heat recovery.This represents an important step towardsreaching the climate goal that IKEA Switzer-land has set itself. In the next three years,the company’s energy consumption is to bereduced by 25 per cent, the CO2 emissionsare to be drastically reduced. By the end of2008, IKEA Switzerland intends to run itsbuildings so that they are CO2 neutral.

Setting a signThe exemplary management of energy inthe newest IKEA furniture store in Switzer-land – it replaces the branch in Spreiten-

bach which was opened in 1973 and wasthe first store outside of Scandinavia – hasearned it the Minergie label. This certificateof quality is awarded by an association that brings together representatives from,among others, the Swiss Confederation, the cantons and commercial organisations.The requirement for certification is that theconstructor adheres to a number of prin-ciples, of which the most important are:good heat insulation and efficient buildingtechnology systems, and these at costs thatmay be a maximum of 10 per cent higherthan those of conventional buildings. Thechoice of tools with which to meet theclearly defined requirements with regard toenergy consumption is left to the individualconstructor. Beyond this, IKEA intends onlyto use renewable energies from now on.

A 150-square-metre extendable solar system on the roof of the building in Spreitenbach ensures efficient use of energy. The roof has been planted with greenery tocompensate for the green area that was covered over. Green “islands” serve as habitat for micro-organisms.

48 ceo/ikea

Whereas ten years ago, when the Minergieinitiative was launched, it was primarilyidealists who attached importance to en-ergy efficiency in the construction of theirprivate homes, the situation is very differenttoday. Based on the Minergie specifications,buildings of every size and complexity areconstructed, from school buildings toadministration and industry buildings tohospitals, indoor swimming pools andshopping centres. “In terms of floor space,we now certify practically the same numberin the sales and office sector as in the resi-dential sector,” says the CEO of Minergie,Franz Beyeler. This is due to no small extentto companies like IKEA, Migros, or CreditSuisse who are increasingly opting forMinergie standards in their constructionprojects. According to Beyeler, large buildings such as the new furniture store in Spreitenbach “set a signal of course”.And they make sense not only from anecological perspective but also economical-ly. Compared with its previous building,

IKEA is saving around 200,000 litres ofheating oil a year with its new building inSpreitenbach. The savings are far greaterthan originally calculated. But even in theplanning phase, when the price of oil wasconsiderably lower, the showcase projectwas expected to be profitable. “The projectalso needs to be commercially worthwhile,”explains Hans Kaufmann, director of thereal estate department and responsible atIKEA Switzerland for the construction ofbuildings worth CHF 500 million over thepast eight years. “We have clear targets fora reasonable payback period. This pressureis good because we ultimately wanted tofind solutions that can also be implementedat other sites in Switzerland and abroad.”

Going renewableWithout this requirement, says the businesseconomist, the construction project realisedby IKEA in Spreitenbach, which was thelargest Minergie building in Switzerland atthe time of its opening, would haveremained “nothing but a test balloon”. Now,however, the furniture chain is consistentlybuilding and redeveloping in Switzerlandbased on the Minergie standard. And doing

so at full steam. In the space of 13 months,five large buildings have been certified. Thecapital invested additionally due to the highbuilding standards will pay off after variouslengths of time, depending on the localcircumstances. For instance, ground waterthat is used in the Pratteln and Lyssachstores as a source of heat is slightly moreexpensive than pellets are in Spreitenbach.But generally it is true that, to quote HansKaufmann, “if you plan carefully, you willhave saved the additional costs in less thanten years.”Under the slogan “IKEA goes renewable”,the group is now pursuing its ambitiousenergy policy worldwide. The goal is tocompletely do without fossil fuels for heat-ing and air-conditioning/refrigeration andthus the comprehensive use of renewableenergies. Currently, all 37 country represen-tations are having to draw up a report onthe actual energy status in their buildings.IKEA Switzerland owes its interest inMinergie to no small extent to the Aargau-

At the top, the building’s heat and cold distribution system. The light system distributes the cold; the dark one the heat. In the photo on the right, the two furnacespowered by wood pellets – the largest of their kind ever to be constructed to date.

ceo/ikea 49

Construction according to the Minergiestandard is given pivotal importance in thisreport. The reason given for this is that “thecost-efficient and effective management ofenergy is one of the main concerns of ourglobal environmental strategy”. A concernthat appears to be supported by the grassroots. In a survey recently carried out, nineout of ten employees thought it importantfor their company to be active in social andenvironmental topics and 81 per cent wereof the opinion that IKEA is a company thatimplements its social and ecologicalresponsibility in practice.The newest IKEA building in Switzerland islocated in Pratteln, near Basle, and is anoffice building. It offers a well-lit and friendlyplace of work to 350 employees – includingHans Kaufmann, who remarks that thecompany fulfilled the Minergie requirements“with ease”. Not least because there is somuch know-how about environmentallyfriendly building technology in Switzerland.“Today our Minergie buildings are buildingsjust like all the rest,” says Kaufmann. //

based construction director Peter Beyeler.When the positions of the constructor, onthe one side, and the Zurich and Aargausections of the Transport and EnvironmentAssociation (VCS), on the other, becameentrenched during the agreement negotia-tions in Spreitenbach, he suggested thatIKEA should set an ecological signal byconstructing according to the energy-savingstandard. The furniture chain accepted the proposal but was unable to pacify itsopponents in the dispute about the numberof parking places at the new stores. Thedispute with the VCS ended as usual beforethe Federal Supreme Court of Switzerland.“It was utopian to believe that constructingaccording to the Minergie standard would

help us in the approval procedure,” saysHans Kaufmann, looking back.

Management of energyIt is difficult to estimate the extent to whichthe Minergie strategy has had, and willhave, an impact in general on IKEA’s reputa-tion. The communication department hasdone its part, depicting the company’spioneering role appropriately. For instance,after the opening of the showcase buildingin Spreitenbach, it placed large newspaperads with the headline “Do you know wherethe largest Minergie building in Switzerlandis located?”. Yet the head of real estate,Kaufmann, believes that the general publicstill does not know enough about all that his company does in the environmentsector. IKEA’s own workforce is more informed. All2,600 employees were sent the environ-mental report of IKEA Switzerland, whichwas published for the first time last year.

Hans Kaufmann: “We have cleartargets for a reasonable paybackperiod. This pressure is goodbecause we ultimately wanted tofind solutions that can also beimplemented at other sites inSwitzerland and abroad.”

50 ceo/ulysses

“Ulysses”: Help for self-help in Ethiopia

Anne-Sophie Preud’homme’s stay inEthiopia began with a misunderstanding.With her “Ulysses” colleagues, the 38-year-old partner was all prepared to put togethera concept for developing local markets. Thelocal employees of her host, the organisa-tion World Vision, however, were expectinga professional training course on marketing.“In the first few days, we had to discreetlymake clear that we were not the rightpeople for that,” recalls the partner and realestate specialist from Luxembourg. Afterlengthy discussions with the – initiallydisappointed – Ethiopians, they agreed thatthe four-man team from PwC would gain anoverview of the local markets and the workof World Vision and would then help to drawup a business plan for the organisation’snext tasks.It was already obvious during these initial,not particularly easy negotiations that herteam worked very well together, recallsPreud’homme. Unlike most “Ulysses”teams, four instead of three PwC peoplehad been sent this time. Cooperationbetween the two women, Preud’hommeand an Australian, and their two colleaguesfrom Germany and Brazil soon ran smooth-ly. “We were with one another constantly fortwo months and did everything together. Itwas an amazingly intensive and very good

team experience. Nobody took the lead –our strengths were well balanced.”For eight weeks and on many trips into theinterior of the country, the PwC team gotsome idea of the prevailing conditions thereand, in countless interviews, managed togain an overview of the situation. Theresults of this work were astonishing for allthose involved. “We very quickly noticedthat although the people in Ethiopia talk alot to one another and for a long time, theydo not always succeed in exchanging therelevant information,” reportsPreud’homme. “Solutions that were foundand successfully implemented in one regionwere totally unknown in other regions.Everyone worked on their own, withoutbenefiting from the experiences of others.”In return, the PwC team learned that it is notsufficient to transfer solutions that work inone region to another merely by communi-

cating them. “In Ethiopia, I understood thatyou have to give people time and theopportunity to find their own solution.Lecturing from above or conjuring up agood idea out of a hat will end in failure,”says Preud’homme. “I learned that as agood leader you don’t say what has to bedone – you have to be at the heart of thegame and ensure that everyone plays in theright direction.” This insight has had afundamental impact on her style of leader-ship. “Today, I work in a totally different waythan before I went to Ethiopia, and this isalso reflected back to me by my staff.”It was the first stay in an African country forPreud’homme. Even today, she is still over-whelmed by the cordiality and hospitality ofthe people, who have very little and yetshare it generously as a matter of course.That knowledge and experiences can alsobe shared is something that the PwCpeople have conveyed to their hosts. Onelesson, however, that they have learned forthemselves personally and for their day-to-day professional life: “Within every organ-isation, it is important to share information. A good leader is like a moderator whoensures that all information that could leadto a solution is exchanged.” //

The PwC “Ulysses” team analysed the local markets in Ethiopia. Anne-SophiePreud’homme on the right next to her Australian colleague.

“Ulysses” is a leadership development programmeof PricewaterhouseCoopers. The participating PwCpartners demonstrate potential for a career inmanagement and are nominated by their countryorganisations. In multicultural teams (comprisingthree to four persons), they spend two months inThird World countries, working together with socialentrepreneurs, NGOs and international organisa-tions. The selected projects constitute a challengeand offer a chance for participants to put theirprofessional expertise to good use in a totally differ-ent environment.

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PricewaterhouseCoopers has the pleasure to welcome 15 new Partners. Congratulations!

Why should it be lonely at thetop?Gustav Baldinger Advisory Zurich

Claude-Alain Barke Tax and Legal Services Lausanne

Carl Bellingham Tax and Legal Services Lausanne

Nicolas Bonvin Tax and Legal Services Lausanne

Martin Büeler Tax and Legal Services Zurich

Richard Burger Assurance Zurich

Beresford Caloia Assurance Geneva

Martin Frey Advisory Zurich

Martin Kennard Assurance Zurich

Jean-Sebastien Lassonde Assurance Lausanne

Guido Lauber Advisory Zurich

André Maeder Advisory Geneva

Markus Nöthiger Advisory Zurich

Marcus F. Veit Tax and Legal Services Zurich

Karin Verheijen Tax and Legal Services Basel

PricewaterhouseCoopers’ broadly based Partner community is one of the reasons why our firm is the

market leader. 174 business partners, including those 15 new Partners, are now responsible for our

clients’ success – because our client relationship has always been based on a good partnership as well.

© 2008 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

ceo* dossier. reputation

H.S.H. Prince Max vonund zu Liechtenstein:“We are doing everythingto turn the crisis into anopportunity.”

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Rolf Dörig:“Reputation is a questionof credibility.”

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Martin Scholl:“You need to ensure that risk awareness does not result in an overly conservative attitude.”

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Dan Ostergaard:“We reward responsiblerather than ethically riskybehaviour.”

20

*connectedthinking CO

RP

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the magazine for decision makers. july 2008 reputation ... · reputation. why the reality has to be...

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