The Corporate Planning Suite enables us to act according to a plan instead of simply reacting.
Led by experience, driven by numbers
Value-driven corporate performance management at GST Service AG
If everybody, from the CFO to the manager of a major construction site, were to bring their experience to the planning process, corporate performance management would gain not only in acceptance, but also in eﬃciency. The example of GST Service AG in Gelsenkirchen, North Rhine-Westphalia, which depicts a value-driven corporate performance management model using the CP-Suite software, demonstrates how successful this approach can be.
From the CFO to the manager of a major construction site, professionals know their business inside out. If everybody were to bring their experience to the planning process, corporate performance management would gain not only in acceptance, but also in efficiency. The example of GST Service AG in Gelsenkirchen demonstrates how successful this approach can be. GST Group, with service companies in Germany and Eastern Europe, supervises mainly large-scale building sites for power plant construction. In 2007, a holding company was set up, which has been offering commercial services as a pure service company since 2011. The practical side of the business is performed by the subsidiaries at numerous European locations. A tax accountant was entrusted with the accounting and fiscal tasks to start with. However, this meant that there was a time delay between the results being realised and the arrival of the management analysis reports, which made the management slower to respond. For this reason, an in-house financial accounting department was gradually set up. With increasing demands on financials and reporting, Christian Widera, as CFO, took on the corporate performance management tasks.
With the introduction of the corporate performance management and consolidation software CP-Suite, he initially encountered resistance at the foreign subsidiaries. Against a background of economically uncertain times, his objective was to bring the planning and reporting across all group companies into line and to avoid accumulating countless Excel sheets. He hoped to gain time from the automation of the processes while also increasing transparency. But the data were only handed over reluctantly, incompletely and hesitantly, particularly on the part of the East European companies. There was wariness towards direct comparability and the disclosure of success and failure.
Bottom-up planning on site
This scepticism vanished when the site managers were actively involved in the planning. Three value-driving factors were identified which substantially influence the success of a project or company: turnover, materials hire, and external services. The individual site managers and sales staff were sufficiently experienced to be able to assess these three values. What had always been dismissed as unplannable in the past would now become the basis for a bottom-up plan. The local sales managers use historical values and previous experience in order to determine how much material they will need in the next planning period, which activities will have to be bought in as external services from subcontractors, and what the company will be able to achieve by itself. The more turnover is planned, i.e. the more projects, the more materials will be required. The specialists on site do not only enter the amounts incurred, but also the time schedule of the orders and projects to be taken on. The values from all companies are merged by Christian Widera in Gelsenkirchen. He can see at a glance whether the entire contingent of group-owned materials has been budgeted, or whether there are any reserves which would remain unused in the long run and could be deployed elsewhere. If additional material is necessary despite internal transfers, an investment decision has to be prepared and taken.
On the basis of the plan values for the value drivers which are now at his disposal, the management accountant draws up a complete enterprise plan. It is he who pulls all the strings. Being solely responsible for group accounting and corporate performance management, he is always pressed for time. This is another reason why he enlisted support in the form of professional corporate performance management software. In the Corporate Planner module, all the plan values come together to form an overall plan. In the clear tree structure, he can differentiate according to country and project, or instead have the group displayed as a whole. He uses the data for the value drivers: turnover, cost of materials used, and bought-in services, as the basis for calculating all the other values. These are often directly related to the size of the value-driving factors. As a seasoned number-cruncher, he knows which of the items are fixed, which are semi-fixed and which are variable. “We are not a manufacturing company, but a service provider. Almost all the major cost items are linked to the turnover,” he emphasises. All the values to be quantified can be derived from the three principal factors. Using a forecast calculation, Christian Widera has a preview produced every month. The costs over time are updated in relation to the other plan items and on the basis of historical values. The regular target-actual comparison, with the help of a variance analysis, also shows how close the site managers‘ estimates were.
Reporting in CP-Excel
Widera, as the service provider, makes the results available to various target groups. On the one hand, the supervisory board and the banks require information about the business situation, and on the other hand the local project managers and site managers are issued with their results and analyses. For this, Christian Widera works with a number of different report templates in the CP-Excel Plus add-on module. The plan and actual data from the Corporate Planner module can thus be visualised in an Excel interface. For each recipient, he assembles the data individually and in different layouts. All the important information is succinctly displayed in a few pages, not overly detailed but reduced to the minimum number of values and key ratios. The reports, forwarded as PDF files, are precisely tailored to the needs of his recipients, as they only wish to see the essential results concerning the business development in order to deduce recommended actions and consequences. “Acting according to a plan instead of simply reacting,” is how Christian Widera hits the nail on the head. With their experience, all those involved have made their contribution towards GST Group having achieved this objective.