Controlling 4.0 – Management Control Processes and ... · Controlling 4.0 - Management Control...

28.5.2015 I Congreso del ACCID - Barcelona I Heimo Losbichler

Controlling 4.0 - Management Control Processes and Controllers' Role of the Future

FH-OÖ Steyr

Controlling, Rechnungswesen und Finanzmanagement

Controlling 4.0 – Management Control Processes and Controllers'

Role of the Future

Heimo Losbichler ICV - International Controller Association

University of Applied Sciences Upper Austria, Steyr

FH-OÖ Steyr


Congreso del ACCID, Barcelona, May 28, 2015 | Controlling 4.0 – Management Control Processes and Controllers‘ Role of the Future | Seite: 2 Heimo Losbichler

Table of contents

§  Review §  The pace of change in controlling - has controlling really changed so radically?

§  Outlook §  Possible path to the future of controlling

§  Controlling 4.0 §  Selected trends and potential consequences

§  Digitization §  Gen Y

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Radical change in controlling – illusion or reality?

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How new are our controlling processes and instruments?

Modern Budgeting Fast Close Integrated Reporting, GRI IFRS Volatility Big Data

Industry 4.0 ...

? Future

Direct C

osting

1899

RO

I, Du-Pont-System

Strategic planning

Budgeting

1910-1930

Capital Budgeting

Cost of C

apital

1950-1965

Experience Curve

BCG

-Portfolio Target-C

osting

1970er

Shareholder Value

Six S

igma, E

FQM

A

ctivity Based C

osting

1980er

BS

C

1990 G

reen Controlling

IGC

-Processmodell

2015

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Even the "New" was usually not so new!

„The message we bring is not new, but it is not as well understood or as widely practiced even today as it should be.“ Stewart, The Quest for Value, 1991, S. xxiii

„EVA is based on something we have known for a long time… I discussed EVA at considerable length in my 1964 book, Managing for Results, but the last generation of classical economists, Alfred Marshall in England and Eugen Böhm-Bawerk in Austria, were already discussing it in the late 1890s.”

Drucker P.: The Information Executives Truly Need, HBR, January-February 1995, S. 59

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Planning and reporting were and are top priorities in the tasks of controllers

81

75

53

48

30

25

15

11

10

10

7

6

3

3

Planung, Budgetierung

Berichterstattung

Abweichungs-, Ergebnisanalyse

Rechnungswesen, Kostenrechnung

Finanzbuchhaltung

Allg. Betriebswirtschaft

Investitions-, Produktplanung, Wirtschaftlichkeitsrechnung

Beteiligungscontrolling

Finanzplanung

Organisation

Unternehmensstrategie

Erarbeitung eines Planungssystems

Revision

Aufbau eines Informationssystems

Source: Bornemann, Controlling heute, S. 25, 1986; Eisl, Losbichler, Hofer, Höfler, 2011

Tasks 1986

56

85

6

75

Tasks 2011

16

Planning, Budgeting

Reporting

Analysis of variances and results

Cost accounting

Financial accounting

General economic issues

Capital budgeting, investment appraisal

Controlling of subsidiaries

Cash budgeting

Organization

Strategic planning

Introduction/revision of the planning system

Internal auditing

Introduction/overhaul of IT-Systems

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Ongoing issues – role change, automation, efficiency

Planning!and!

reporting!

Number crunching!

Integrated!systems!

Role change!

Process standards!and quality!

Analysis, business!partnering, projects !

More partnering, less number crunching, lower costs!

Source: 2005!

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Ongoing issues – progress in IT: Big Data vs. Excel

Is the End Finally Near for Spreadsheets? §  But despite advancements in enterprise applications, spreadsheets

have remained business users’ go-to app. That could be changing:

§  63% say their spreadsheet tool does not offer a collaboration function

§  55% say their spreadsheet tool does not offer permission management

§  51% say their spreadsheet tool does not offer security control

§  Nearly 70% say their spreadsheet tool does not offer version control

Quelle: IMA-Newsbrief, 22.1.2015

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Controllers gained influence and controlling is now a key component of management and financial control

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Conclusion about past changes in controlling

§  Slow but deep transformation

§  Controlling and controller adapted primarily to the changing competitive environment and took advantage of new technological possibilities

§  Advancement of the role of controllers

§  Increased involvement and responsibility (sparring partner, Co-manager, ...)

§  Increased complexity (global, higher number of consolidation units, planning items, ...)

§  Faster processes

§  More and faster information

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Table of contents





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Change of competitive environment

Cur

rent

suc

cess

Hig

h lo

w

high low

Controlling today

Today, controllers have a good position but no time to rest on their laurels

HR today

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The cornerstone of controlling will not change: the management process of setting objectives, planning and control

Measureperformance

Setobjectives

Communicateinitiatives

Analyzevariances

Define initiatives

Management

Counter-initiatives

Execute initiatives

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The cornerstone of controlling will not change: instruments are conceptually advanced and available in abundance

SCOR

BSC EFQM Performance Pyramid

Pro

cess

es

Lear

ning

C

usto

mer

Fin

anci

al

2 4 5

9 10 11 12 14

20 21 22

23

24 25

26 27

28 29

6 Increase

CSI

Maximizing value

Reduce costs

Increase Revenue

Faster service Reduce

throughput time

MBO Customer centric cultur

Tableau de Bord Value driver trees

Example: management cockpits

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The likely path to the future of controlling

§  The cornerstones of controlling will not change §  Management process of setting objectives, planning and control §  Existing controlling instruments §  Controllers as sparring partners

§  Who act free from emotions

§  Who actively support decision making and restrict managers as guardians of company interests

§  Need to adapt to the accelerating pace of change of the competitive environment §  Instruments, IT, processes, organizational structure, roles, behavior

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Table of contents





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Digitization will significantly effect controlling and controllers

§  Shared/Collaborative Economy §  Instruments

§  Internet of Things - Industry 4.0 – Big Data §  Reporting §  Automation and the job of controllers

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Traditional economic paradigms

§  Size as competitive advantage – Minimum Efficient Scale (MES):

Economies of scale Experience curve Entry barriers - capital requirement

§  Transaction cost as key-driver of vertical integration

Purchasing

Production

Sales

Fixed cost per unit

quantity accumulated quantitiy

A B C Competitors

(Mio. €) Groß Klein

Umsatz 1.000,0 10,0

F&E-Aufwand 100,0 1,0

Large Small

Revenues

R&E-Expense

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The internet lowered transaction costs significantly

Size and vertical integration partly become obsolete

0

20

40

60

80

100

120

140

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Britannica hard copy sales

Quelle: Philip Evans, Ted-Talks, 11/2013

Wik

iped

ia la

unch

Web 2.0: User creation

Wikipedia pages (m)

4,0 Web 1.0

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The „Shared/Collaborative Economy“ challenges existing paradigms

§  Fragmentation of „economies of scale“ across the community §  Many individuals can achieve the same as large,

hierarchically organized companies (horizontal rather than vertical!)

Purchasing

Production

Sales

A B C

You have!

I need!

§  The changing nature of business §  Direct rather than redundant §  Shared access rather than ownership §  Transparency §  Increased utilization of assets and productivity

§  Gatekeepers and companies who do not add value will vanish §  Banks vs. crowdfunding §  Gault Millau vs. TripAdvisor §  New business models at breathtaking speed

(many times in a legal gray area)

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New business models at breathtaking speed

§  Airbnb §  Hilton: 93 years to build 678,000 rooms in 91 countries §  Airbnb: 4 years for the same number of rooms in 192 countries; 2014: +25,000,000 guests

§  Uber §  6 years: operating in 277 cities; $ 2 billion in sales §  No drivers, no cars

§  Coursera

§  In 3 years: more than 25 million students from 190 countries §  In the most popular course 240,000 students participated at the same time

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We need to adapt controlling instruments to the changing environment: e.g. learning curve

§  Two types of experience §  Fulfilling demand

§  Efficiency in operations

§  Shaping demand §  Effectiveness in business development

Source: BCG Classics Revisited – The Experience Curve, 2013

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0

20

40

60

80

100

120

140

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Wik

iped

ia la

unch

Web 2.0: User creation Web 1.0

Britannica hard copy sales

Source: Vgl. Evans

Connectivity of people (Facebook, ...)

Wikipedia pages

Dzt. ca. 5 Mrd. internetfähige „Dinge“

2014

20

15

2016

20

17

2018

20

19

2020

?

Total connectivity (people and things)

Internet of Things - Industry 4.0 - Big Data

5 bn of „internet-ready“ devices

today

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Visualization: Eye-tracking can truly help to optimize reports

Which state increased its operating profit in 2013 in Euro the most?

Operating profit (in 1.000 EUR)

Operating profit (in 1.000 EUR)

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... and provides reliable insights that make a difference

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Analytics: increasing automation and the nature of the controllers’ job

§  What we know: §  Increased automation in the future

§  Automation of the mind

§  Industrial revolution §  Technological unemployment caused by mechanical automation §  Mechanical alienation and tedious assembly line work

§  „Automation makes us dumb“ §  Current questions

§  New unemployment in our controlling departments? §  Digital alienation?

§  Do we have to submit to algorithms? §  Digital Taylorism? §  Monotony or enrichment?

§  How do controllers feel when they can no longer challenge analytics provided by IT-systems? §  „A fool with a tool is still a fool“ or „A fool with a tool is cool“? §  Push or pull?

§  Standard reports vs. Google-like queries of management?

§  15h workweek? – „John Maynard Keynes – Economic Possibilities for Our Grandchildren“

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Gen Y - Millenials

§  A new generation pervades the labor market (born from the early 80s to the late 90s) §  2017: the age group with the highest

purchasing power §  2020: already almost half of workers

§  New values §  Status symbol self-determination §  Work life balance §  Today and the immediate benefit counts §  Time limited commitment rather than loyalty

§  Average employment: 2 years

§  „non-committal“ high potentials

§  Two worlds collide §  51% of executives say Gen Y has “out-of-line

demands“

§  How attractive are controller jobs for this generation?

April!

July!December!

January!

Oct

ober!

MR

MR

MR

MR

MR

MR MR

MR

MR

MR

MR

MR

6th WD

Financial statement 15th working day

Forecast 1

Forecast 2

Fore

cast

3

Controller‘s treadmill: fast close and time pressure

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Conlusion

§  Remarkable wrong predictions §  „The car is a temporary phenomenon. I believe in the horse. “

Emperor Wilhelm II

§  „The Internet is a gimmick for geeks, we see no future in it.“ Ron Sommer, CEO Deutsche Telekom, 1990

§  Controlling 4.0 – management control processes and controllers‘ future role §  No alternative to the concept of controlling (WHAT we do!)

§  Management process of setting objectives, planning and control §  "The objective determines the journey" rather than "the journey is the objective" §  Being prepared (agility), acting coordinated and aligned, making economically sound

decisions §  Continuous adaption to the changing environment (HOW we do it!) §  Many open questions

Creating future

Today Tomorrow

Forecasting future

Trends, changes

§  Wish §  Controllers should actively shape their future role and not leave it to others

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