The Controlling Concept. Horváth & Partners Management Consultants

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СКАЧАТЬ alt="image"/> How is the “House of Controlling” structured in your company?

      Thus, an effective controlling system must consist of the following elements in order to be able to complete the tasks of a planning and control system and of an information supply system (cf. Fig. 1.7):

      •Block 1: Management Accounting (cf. Chapter 2): First of all, it is vital that corporate management is supplied with the information necessary to objectively prepare for and take the right decisions. Here, the first important step is to determine precisely what information is needed, to gather that information and to present it in an appropriate format. The most important source of information within the information supply system is (internal) management accounting. Management accounting regularly calculates actual values and compares them with target values to gain information about the real degree to which operative targets are being achieved. This comparison of actual values with targets (target-actual comparison) and the analysis of the deviations form the basis for further performance management measures by corporate management. Effective management accounting consists of cost and profit accounting, investment appraisal and financial statements.

      •Block 2: Strategic planning (cf. Chapter 3): Frequently, controlling systems are set up purely with the aim of improving the efficiency of operations. Clarity concerning overall company strategy and the strategy of the individual business areas (divisions) is a prerequisite for this perspective. As the general conditions for the strategic management of companies are characterised by growing dynamism, internationalisation and complexity, aspects of strategic management and strategic planning are becoming increasingly important. The most important support activities for strategic management and strategic planning lie in coordinating and managing the strategy process and in supplying management with the information necessary for decision-making. At the centre of this are preconceived developments which represent both opportunities and risks for the company and thus a “potential for success”. The aim of strategic planning is to ensure the competitiveness and earning power of a company in the long term.

      •Block 3: Operative planning, budgeting and forecasting (cf. Chapter 4): In contrast to strategic planning, during operative planning controllers deal with developments which have already manifested themselves in the present through costs and activities. Budgeting is the transfer of operative plans into numbers and figures. Regular forecasts are created in order to facilitate ongoing monitoring and management of target achievement in the quantified operative plans during the year. A forecast is the projection of planned values throughout the year (e. g. projected annual earnings). This projection forms the basis for deviation analyses and enables the early initiation of reactions and counter-measures.

      •Block 4: Financial planning and performance management (cf. Chapter 5): Alongside securing the earning power and the economic production of goods and services of a company, the second most important factor for securing the viability and thus existence of a company is to ensure its financial strength, i. e. liquidity. To this end, financial planning and performance management is dedicated to ensuring the company’s day-to-day solvency, to securing short- and mid-term financing and to guaranteeing long-term liquidity.

      •Block 5: Management reporting (cf. Chapter 6): In many companies there is an organisational separation between the collection of information (e. g. in management accounting) and the use of that data. For this reason, there must be a transfer of information in the form of a suitable reporting system between the points of information creation and information use. Here it is important that we transfer such information in the form of appropriate key performance indicators (KPIs) as it will support the planning and control work of corporate management. This means that first we must select the most important information, then consolidate it into suitable KPIs, and finally prepare and present it in a suitable form tailored to the needs of individual recipients.

      •Block 6: IT system (cf. Chapter 7): Instruments of data processing and modern IT have become an integral and indispensable part of management reporting for companies today. The use of modern IT both improves the quality of the information supplied and of planning and control and makes the processes involved far easier (e. g. through automated data preparation, IT-based planning models or automated reporting systems). The biggest challenge here is digitisation.

      •Block 7: Organisation (cf. Chapter 8): Generally, Controlling organisation is seen as the combination of the organisational and operational structures in Controlling. When creating the organisational and operational structures, we should ask ourselves the following questions: Which fields of activity should be assigned to a Controlling department? At which level in the company organisation should Controlling activities take place? In which order do Controlling processes take place? How are the Controlling activities integrated into the processes and procedures of the other corporate functions?

      •Governance (cf. Chapter 9): In order to exercise direction, coordination and monitoring, it is necessary to have a regulatory framework which ensures that rules and regulations are adhered to and that risks can be countered. This adherence to rules and regulations is vital and is known as compliance.

      Fig. 1.7:“House of Controlling” – Building blocks of an effective Controlling system

      The Horváth & Partners “House of Controlling” comprises all the necessary building blocks of an effective Controlling system (cf. Fig. 1.7).

      When designing the “House of Controlling”, the following questions must be answered for each individual component:

      •What are the tasks?

      •How should the processes be designed?

      •Which interfaces and touchpoints must be considered?

      •Which instruments are used and where?

      •Who is involved and how?

      •How is this embedded in the organisation?

      •What IT support is planned?

      During the course of this book we will provide a detailed description of each element in the House of Controlling and its main characteristics, and create design checklists for managers and controllers.

1.6The “House of Controlling” and its context factors

      The previous section summarised the central elements of an effective Controlling system in the form of the “House of Controlling”. Now, however, we have to ask the question: How should we design the specific details of those building blocks, i. e. how should we breathe life into the House of Controlling? The answer to this is that there is no “one” controlling system which suits all companies. Rather, the House of Controlling depends on the business model of the specific company СКАЧАТЬ