The Future of Corporate Performance Management

Ideas and approaches for designing corporate performance management for the VUCA world

Impulse und Ansätze zur Gestaltung einer Unternehmenssteuerung für die VUCA-Welt von Valsight© Hector J. Rivas, Unsplash

Future of Corporate Performance Management – Ideas and Approaches

The increasing complexity and dynamics of markets often require immediate responses to new complex questions. To ensure long-term success, companies must not only react but rather anticipate the potential impacts of future events today, enabling them to agilely define and implement measures for tomorrow.

The term "controlling" encompasses economic processes such as financial analysis, control, planning, coordination, and management of a company. The specific scope and focus of controlling are individual and vary for each company. Therefore, controlling is a comprehensive concept that involves various business measures.

Corporate Performance Management – the Key Task of Controlling

Corporate or enterprise performance management is central to the functioning of a company – it is where all the numbers-driven management threads come together. It is a key instrument and the core task of controlling. Within the scope of corporate performance management, the achievement of goals related to financial metrics is tracked, and possible measures are derived for it. The goal is to efficiently optimize operational measures to contribute to the company's objectives. This involves thinking across disciplines; ideally, all areas of the company should be involved in the steering processes. Whether it's production, logistics, human resources, or sales – all departments are considered in the planning and control of a company.

Corporate performance management takes place in various processes of business administration. It includes financial planning, which includes strategic and operational planning. Given the increasingly uncertain and complex market environment that requires speed and flexibility, these sub-areas rely on new methods and tools to achieve success and continue to evolve. Logistics controlling, HR controlling, financial controlling, IT controlling, or investment controlling are just a few examples of areas where planning and coordination are of high importance and where new approaches and software solutions can lead to increased efficiency.

An increasing importance is also placed on sustainability controlling, also known as green controlling. Not least due to rising societal and, consequently, political pressure, sustainability becomes more relevant in all areas of companies and increasingly becomes a central part of their strategies. The approaches to sustainability management are already advanced, but the focus is currently on reporting. In the future, the key will be to integrate sustainability control even more strongly into the overall financial management. The finance and controlling departments will play a leading role in this endeavor.

New Demands on Corporate Performance Management

In addition to the demand for sustainability, there are many other factors that both small and large companies must consider in today's world to secure their future. In the widely cited VUCA world, businesses are subject to significant fluctuations. The acronym VUCA stands for Volatility, Uncertainty, Complexity, and Ambiguity, describing the complex market environment that companies must adapt to in the current time. Events such as the Covid-19 pandemic and the ongoing climate change demonstrate the unpredictability of the world and emphasize the importance of being able to respond to unexpected events. Growth is no longer as linear as it once was. Digitalization leads to uncertainties and pressures for change. In short, complex decisions need to be made, often on an ad hoc basis. This must also be reflected in the field of controlling to ensure long-term business success.

Agile Corporate Performance Management as an Answer to the New VUCA World

How does corporate performance management meet the complex requirements of the VUCA world? Quite simply: by becoming agile. Agility is a term that sounds promising in theory and whose implementation requires new thinking. Agility can be achieved through flexibility and adaptability of planning and performance management. Lengthy and static financial planning is no longer needed in agile corporate performance management and dynamic and strategic planning is further developed and increasingly used. Through agility and other measures, corporate performance management can also be successfully implemented in a challenging environment.

Strategic planning has an increasingly controlling character and can react more flexibly to situations that arise at short notice. How agile corporate performance management can look like is explained here using the example of a call centre. You can find further insights in our white paper on financial planning and agility.

Methods and Tools of Agile Corporate Performance Management

Speed, flexibility, and adaptability are three key strengths that agile Unternehmenssteuerung brings to ensure greater future security. While mid-term or long-term planning, such as for one, five, or ten years, remains relevant, the essential aspect of agile planning is the principle of top-down planning instead of bottom-up planning. Planning is no longer driven by individual cost centers but occurs across the entire organization and its departments "top-down". As a result, budget coordination does not get lost in details but creates a general strategy, reducing effort while maintaining the quality of strategic planning.

Driver-Based Planning With Scenario Simulation Allows Organizations to Make Assumptions About the Future at the Click of a Button

In order to make predictions in companies better, faster, and more securely, ad hoc simulation of various future scenarios is of central importance. With the ability to depict specific scenarios in seconds, financial scenarios can be flexibly explored, making decision-making easier.

For conducting simulations, value driver models are formed, which include the key drivers for the respective company. Based on these driver models, assumptions are made, and individual financial scenarios are simulated. Driver-based simulation can efficiently help execute the company's strategy and make crucial decisions, when needed, directly in campus planning sessions or management meetings.

The time-consuming creation of page-long reports can be put in the background by concentrating more on the possibilities of operative steering. Volkswagen Commercial Vehicles, Commerzbank or Thalia are some examples of companies that show the extent to which new methods and tools of agile corporate performance management can financial planning processes.

New Roles for Controllers – From Pushing Numbers to Strategic Consulting?

The role of controlling in companies has evolved – it must become more flexible and proactive. Controlling no longer simply involves collecting, verifying, and analyzing important financial indicators. Instead, it has developed into an active operational and guiding area within the company's structure. As the demands on controlling have grown, the traditional job description of controllers has also evolved. In the past, the role of controlling was characterized by complex and detailed analysis and planning, often carried out using Excel spreadsheets. Gathering data from various business areas frequently consumed significant time, making spontaneous interventions in strategic and operational planning and performance management almost impossible.

In the current times, adaptability is more crucial than ever. As a result, controlling methods have been developed that render endless and time-consuming number-crunching in Excel obsolete. Innovative technologies such as machine learning or artificial intelligence now enable the rapid and reliable analysis of large datasets. Controllers are no longer solely responsible for providing numbers. Their role and function within the company have expanded. Nowadays, controllers frequently take on an advisory role and act as business partners for the management. To support strategic decisions, controllers are increasingly becoming data scientists, as the analysis and utilization of existing data are of great importance for agile corporate performance management. Controllers of the future, therefore, carry greater responsibility, enjoy an extended scope of action, and hold a more significant significance for the entire company.

What is the Future of Corporate Performance Management?

Modern, agile corporate performance management must accomplish many tasks and cover a broad spectrum of activities. It no longer solely entails traditional analysis tasks but has become more diverse and, consequently, more relevant. To meet these challenges, the structures and processes of corporate performance management have also evolved. Agile corporate performance management involves flexible and comprehensive collaboration in analysis, control, planning, coordination, and taking on an expert role through consulting activities for management. The complexity of a company should be fully understood and considered, enabling the development of individual goals and action plans specific to each company, serving as the collective foundation for decisions throughout the organization.

Static and detailed planning takes a backseat in agile corporate performance management, and dynamic strategic planning is increasingly employed. Additionally, it is essential to continuously review and update the planned objectives to ensure their feasibility. Short-term planning for individual months or quarters can be increasingly automated and digitized through modern systems. Agility and flexibility are crucial pillars that can be implemented through new and modern methods. A shift in mindset is necessary in the future of modern corporate performance management to make analysis, planning, and coordination processes adaptable and actively changing, optimizing these processes and enhancing overall business success.