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A tool for performance management.
A tool for performance management.
In previous posts (Why we build Mattsskk, Why you choose Mattsskk) we talk about “Fixing Strategy focused Management”, and “… Performance management should continually push for change and better solutions and fight against inertia and conformism …”.
The main idea behind these phrases is the fact that Mattsskk not only pretends to be a tool for improving (data-based) decision taking by simulating possible future outcomes. It also wants to be a tool for improving performance management.
The problem with budgeting.
The problem with budgeting.
In (too) many enterprises, the yearly budget serves as a mayor yardstick (together with the comparison with previous periods) to measure the performance of the management team. This yardstick is heavily negotiated through lengthy iterations (bottom-down, bottom-up, final corrections, …), and generally at a (financial) level which makes it difficult to really measure each department’s efficiency or contribution to improved results.
The “Beyond Budgeting” movement (source: corporatefinanceinstitute.com) denounces the traditional yearly budgeting exercise as:
Time-consuming and costly.
Rarely focused on the company’s strategy.
Not stimulating the value creation.
Creating obstacles for changes.
Increasing the centralization of power within an organization.
As an alternative to the traditional budgeting process, the same corporatefinanceinstitute.com cites the following techniques:
Use rolling forecasts, created monthly or quarterly rather than annually.
Base the company’s targets on key performance indicators (KPIs).
Evaluate the performance of the company’s managers based on external benchmarks rather than their past performance.
Empower operational managers to react to the changes in the business environment and to dynamically coordinate their actions.
The Mattssk Solution.
The Mattssk Solution.
The Mattsskk tool enables exactly these same techniques, not only through its ease of producing updated rolling forecasts, but also because of the following reasons:
LT projections are made in the same tool as forecasts, allowing for greater consistency of the projection with the strategic goals.
The strategic goals are related to future cashflows, and therefore value creation and company value.
The tool allows to relate the (financial) forecasts with operational KPI’s and Business Drivers, and to relate the projected costs to productivity gains and additional value creation.
In other words, the tool allows to objectively measure the performance of the different managers based on KPI’s and benchmarks.
It obliges the managers to justify the use of resources, to explain why they need these resources and why they can(not) improve the productivity of the resources (accountability).
It therefore continually pushes the managers for change and better solutions and fight against inertia and conformism.
Mattsskk implements this performance management technique through area-specific reports, through “Stories”. The story is a dashboard which shows the contribution of each CXO to the long term cash creation through the following metrics:
A list of products/services delivered by the area, and the activities needed to deliver the output.
The area’s KPI’s and activity drivers.
The areas resources/costs and its relation to the total revenue of the company.
The capacity utilization of the assigned resources based on the activity drivers and the sources used in each process to realize the activity and deliver the output (Bill of Resources).
The evolution in the productivity of the area, by measuring evolution of the hours spent per volume unit of activity, facilitating the comparison with external benchmarks.
The potential value contribution of a productivity gain of 10%.
The idea behind the stories is to have a monthly follow-up of the performance of the area, and to monitor the evolution over the last 3 years. Each department thus has monthly updated performance KPI’s and can/should justify the evolution over time.
Accountability made easy.
Accountability made easy.
Every CXO is expected to be able at any time to explain his KPI’s and drivers, their comparison with benchmarks and the actions undertaken to continually improve the ratios. While the CEO tells his monthly story to the board of Directors, all the other CXO’s should be able to defend their own monthly story and justify their use of resources.
This is the main ambition of Mattsskk: make it a painless, routine practice to continuously foresee and monitor the future cash flows, and the contribution of each CXO to the optimization of these flows. And so obtain clear accountability for all major decision makers.
The document “Contribution Story - CFO” (see in the Resources) showcases a story board for the CFO, in the same way as the document “Sample Financial dashboard for the Board of Directors” showcases the CEO’s (financial) dashboard for the board of Directors. In the coming months we will showcase some more stories for other CXO’s.
We at Mattsskk are quite excited to be able to deliver this functionality and think it could be a major tool for improving the performance of businesses. What do you think? Do you think the additional complexity of measuring detailed KPI’s is worth the effort? We think that Mattsskk precisely reduces the complexity in such a way that it becomes indeed a painless, routine and extremely beneficial practice, enforcing clear accountability on all mayor players.
If you are curious about what this tool could do for you, please contact us so we can prepare you a demo.
Please let us know your thoughts and comments in our LinkedIn post. They help us to improve and focus on the right things.
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