• Business is not (yet) a top sport

    Here's how your company scores on Performance Management

Articles:

Business is not (yet) a top sport

17 September 2021

In a world full of fake news, uncertainty increases exponentially with every news item. Making informed decisions that drive your business forward has never been as necessary and complicated as it is now. It is therefore crucial that you set priorities as an organisation and determine the course of the facts yourself. But how do you do that? What facts can you trust? Why is fact-based decision-making so important? And can you get better at it?

How easily companies are able to make decisions is directly linked to their maturity level. Dries Van Nieuwenhuyse, expert in strategy formulation and realisation and author of “Fact-Based Decision-Making” (2020), examined in 2019 the extent to which some 520 companies are able to make fact-based decisions. To this end, Van Nieuwenhuyse (2019) conducted a survey to determine their maturity level. In this context, he defines maturity as “the ability to respond to a changing environment through Performance Management and management skills”. The concept therefore does not necessarily reflect the age or size of an organisation, but the measurement and management capacities and how suitable they are to respond to changes in the environment.

The study found that the subject matter of the decision, the branch of industry and the size of the business and the decision-maker’s position in the organisation influenced the level of maturity of a business to make decisions. Van Nieuwenhuyse (2019) observed that companies often do not yet have sufficient skills and technologies. More education and awareness of trends and innovation is required to identify opportunities for cross-pollination with market research and problem-solving thinking.

>> Consult the full study here.

Get started with EPM and transform your business

Making better and faster decisions is not something you do overnight. If you are not sure how to go about this, Enterprise Performance Management (EPM) is a good way to start. EPM refers to the general task management of a company and describes the methods and solutions that can support you in this, such as budgeting, value creation, consolidation of results and performance analysis. Clearly defined KPIs give you insight into your sales figures, general operating expenses and your ROI to measure and analyse your performance.

Moreover, EPM goes beyond the financial department alone and can also be applied in all kinds of other processes where understanding data is essential to success.

Of course you are not on your own here. Our BDO experts will be happy to help you!   

Is your budget ready for the new (financial) year?

An important part of this performance analysis is budgeting the expected business results.

Budgeting must occur within the context of a business strategy. In many companies, the budget is still not sufficiently a translation of the strategy. A good approach is to translate the desired results into strategic guidelines that guide the budgeting process. Typical questions to help define such guidelines include, for example:

  • What objectives will contribute most strongly to success?
  • What proportion of resources should we apply to continuing current business activities versus business changes (innovation)?
  • How will we distribute available resources across the various customer segments?

When resources are well aligned with strategic priorities, you can make difficult choices more effectively during the planning process. For example, with scenario-based budgeting, you can ask that departments not only propose recommended resources, but also describe what performance they can achieve with a 25% increase or a 25% decrease in resources, without specifying the strategic objectives.

Brief, highly focused budget cycles are preferable. Furthermore, initiate the process as late as possible. The later you start, the more insight you have into the figures for the current financial year and the better a reference point these are for the next one. The longer the cycle, the greater the risk that certain assumptions will be out of date before the cycle has run its course.

By adjusting forecasts every quarter or month, you can systematically improve their accuracy as you go. Assuming sufficiently challenging objectives and adapting these frequently as lessons are learned seems to be the most advisable budgeting approach.

How can BDO help you?

Together with our Financial Advisory experts, you can figure out your wildest ideas in a feasible plan that we then translate into a concrete model. We will convert your financial strategy into a solid business plan that serves as a GPS and maps out the direction of your company. No empty rhetoric, but insightful figures, facts and knowledge. For you and your employees, the goal becomes crystal clear, which significantly promotes decision-making.

>> Find out more about Financial Advisory at BDO

You can also count on BDO Digital to implement Oracle Cloud EPM, a cloud software package that helps to analyse, understand and report on your organisation. Oracle Cloud EPM sends precise, coherent plans throughout your company and prepares you for what comes next. The solution removes uncertainty and instead makes room for more accurate planning thanks to scenario modelling, built-in best practices and artificial intelligence at a financial, business and operational level. Oracle EPM is known for:

  • Shorter planning time
  • More accurate forecasts
  • In-depth insight into business performance
  • Automation of repetitive tasks

>> Read more about our Oracle Cloud EPM service