In order to sustainably expand and secure business success, corporate goals must be clearly defined and translated into measures and key performance indicators. Deviations must be constantly monitored in order to be able to take countermeasures at an early stage. Anyone who can convert information provided by management into entrepreneurial action has a competitive advantage. Key performance indicators represent the core of successful corporate management. The most important metrics are known as key performance indicators (KPIs).
Potential of Corporate Management Based on Key Performance Indicators
Instead of having key performance indicator systems closely interwoven and connected with the corporate strategy, however, companies often actually have “historically grown sets” of individual key performance indicators that are not related to each other and make consistent and targeted controlling difficult. Unclearly defined key performance indicators and unclear responsibilities in the collection process often lead to the “uncontrolled growth of key performance indicators” in which the focus on the essentials is often lost. A detailed examination of the key performance indicators used also tends to show that, relatively speaking, too many financial metrics are used. Key performance indicator systems set up in this way cannot develop to their full potential for controlling.
Implementation of KPIs and Balanced Scorecards for a Holistic Management Approach
Our many years of experience show that a holistic and integrative approach is necessary for establishing a controlling-relevant and anchored set of key performance indicators. KPIs must be derived from the value drivers of the business model in order to make the corporate goals measurable and operationalizable.
All the facets of the corporate goals must be identifiable in the controlling. This succeeds if the relevant KPIs and controlling dimensions are derived in a structured manner from the goals and value drivers of the business model. The use of driver-based models derived from a top-down approach is excellent for this. It involves taking the critical key performance indicators for the value drivers of the business model and breaking them down into their operational details. This makes it possible to establish a self-contained and consistent controlling logic across all corporate divisions and levels.
Non-financial and External Indicators Complement Financial Performance Metrics
Effective controlling that allows both internal and external changes to be identified at an early stage and enables sufficient detail for both retrospective variance analyses and forward-looking forecasts requires a share of non-financial and external indicators. These must complement the financial performance metrics and make them controllable as a leading indicator. For analysis and forecasting purposes, they should be directly related (arithmetically or logically) to financial indicators. The introduction of balanced scorecards can provide a holistic and balanced view of all relevant parts of the company, business processes and stakeholders, and thus track the development of the business vision.
Continuous Optimization of the KPI Set
The definition, collection and evaluation of KPIs, with the accompanying implementation of suitable measures for active controlling, is to be understood as a continuous process and can be represented in a controlling cycle. KPI sets must be regularly checked for their relevance for controlling and realigned, if necessary. The collection of the key performance indicators themselves must also be subject to a constant efficiency review in order to focus on value-adding activities, such as commenting on the KPIs and deriving measures.
Clearly defined key performance indicators, specifications and responsibilities for the collection and evaluation of key performance indicators (e.g. in KPI manuals) strengthen the comparability of the figures and create transparency in the database. The clear definition of target key performance indicators and measures that are taken if the indicators are outside the tolerated range are at least as important.
Disruptive Technologies Enable Effective and Efficient Collection & Controlling of Key Performance Indicators
The use of disruptive technologies, such as SAP S/4 HANA, Big Data and Business Intelligence systems, enables new approaches in the collection of key performance indicators and corporate management. If processes and application systems are designed efficiently and flexibly, sustainable leaps in efficiency are possible. Meaningful compromises between standard and client-specific developments have to be weighed and found.
Making Corporate Visions Operationalizable
FAS AG supports you holistically from the development or reorientation up to effective and efficient corporate management based on key performance indicators. The focus here is on your corporate vision, which we make operational through the close integration of measures and key performance indicators. Depending on the starting point in your case, we will work with you to carry out a key performance indicator inventory and an analysis of the current situation. Then we will jointly derive a top-down KPI set for your company based on our expert knowledge and best practice approaches. Our proven technical and process experts and the technical know-how from our partner network will let us accompany you all the way to sustainable implementation. We use the latest technologies, such as SAP S/4 HANA, the Jedox BI system for creating visually supported reports and the analysis of big data.
If you are interested or have any questions, please contact us.