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Aligning Budgeting To Corporate Planning - ABF Conference on Corporate Budgeting

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Information about Aligning Budgeting To Corporate Planning - ABF Conference on Corporate...

Published on February 25, 2008

Author: kennyong

Source: slideshare.net

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ALIGNING BUDGETING TO CORPORATE PLANING
*How budgeting and strategic planning fit together in the overall business plan
*Aligning KPIs with business objectives and the budget
*Effectively identifying leading and lagging KPIs in the budget
*Identifying the gaps between the actual and the budget figure to enable allocation of resources for corporate plan
*Resolving the variances between the actual vs the budget figures
*Effective strategies to resolve the gaps to drive the strategic direction of the organisation
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ALIGNING BUDGETING TO CORPORATE PLANNING CNI’s Journey, Mistakes, and Lessons Learned Kenny Ong CNI Holdings Berhad

Intro: CNI 18 years old Core Business: MLM Others: Contract Manufacturing, Export/Trading, eCommerce, F&B Retail Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan Staff force: ± 500 Distributors: 250,000 Products: Consumer Goods and Services

18 years old

Core Business: MLM

Others: Contract Manufacturing, Export/Trading, eCommerce, F&B Retail

Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan

Staff force: ± 500

Distributors: 250,000

Products: Consumer Goods and Services

Our History of Strategic Planning and Budgeting

How “Planning” got started Succession Planning (Business Continuity) Talent Management Differentiation Performance Management System Budgeting + Planning KPIs BSC Business Model

How “Planning” got started Succession Planning (Business Continuity) Talent Management Differentiation Performance Management System Budgeting + Planning KPIs BSC Business Model Today’s focus

Planning in the “old” days Budget ‘top down’ – no questions asked Only two budget goals – revenue, expenses The only planning we needed to do was “do better than last year” Planning was ‘bottom up’ - compilation of plans within set budget No one knew what the other was planning FAC’s role was only to compile budget for approval KPIs were not used Sales was resource priority, everything else not important Assumed no major changes in market R&D was ‘bottom up’

Budget ‘top down’ – no questions asked

Only two budget goals – revenue, expenses

The only planning we needed to do was “do better than last year”

Planning was ‘bottom up’ - compilation of plans within set budget

No one knew what the other was planning

FAC’s role was only to compile budget for approval

KPIs were not used

Sales was resource priority, everything else not important

Assumed no major changes in market

R&D was ‘bottom up’

Problems from the start (1/2) No money Split Objectives: Sales? Share Price? Image? Independent entities FAC controlling schedule S&M always running over budget Compounding activities BOD expectations too high without proper explanation nor justification Lack of Market research Expenses not spent gets punished

No money

Split Objectives: Sales? Share Price? Image?

Independent entities

FAC controlling schedule

S&M always running over budget

Compounding activities

BOD expectations too high without proper explanation nor justification

Lack of Market research

Expenses not spent gets punished

Problems from the start (2/2) Budgeting for known, consistent, and predictable business conditions Never learn from past mistakes, usually in under-budgeting (e.g. staff and PCs) Wrong Business Model – blame Budgeting & Planning. Having a good planning process cannot correct a bad business model Focusing on the Process (KPIs), instead of “Business” Planning & budgeting treated as separate processes by businesses/functions

Budgeting for known, consistent, and predictable business conditions

Never learn from past mistakes, usually in under-budgeting (e.g. staff and PCs)

Wrong Business Model – blame Budgeting & Planning. Having a good planning process cannot correct a bad business model

Focusing on the Process (KPIs), instead of “Business”

Planning & budgeting treated as separate processes by businesses/functions

Today’s Agenda

Summary: Planning & Budgeting L ong-term Plans O bjectives S trategies E nablers R esources Also known as L.O.S.E.R.

L ong-term Plans

O bjectives

S trategies

E nablers

R esources

Summary: Today’s presentation 1. Business Model 2. Strategy 3. Resources

Assumptions 1: Audience Business Government Non-profit

Business

Government

Non-profit

Assumptions 2: Starting Point Wanting to start proper planning & budgeting process, or Wanting to improve planning & budgeting process

Wanting to start proper planning & budgeting process, or

Wanting to improve planning & budgeting process

1. Get the right Business Model first

How to fail without trying 1. Wrong Business Model

How to fail without trying

The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy

Denial and Defense “ It’s not really good value our competitor is offering, because it doesn’t include a lot of our features.” - ABC vs Air Asia “ It’s good value but not in our preferred customer market.” - ABC vs Toyota “ Sure they’re hurting us, but with their unfair advantage, what can we do?” – ABC vs MILO “ The rules we are playing by have always worked before” – AMEX vs VISA

“ It’s not really good value our competitor is offering, because it doesn’t include a lot of our features.” - ABC vs Air Asia

“ It’s good value but not in our preferred customer market.” - ABC vs Toyota

“ Sure they’re hurting us, but with their unfair advantage, what can we do?” – ABC vs MILO

“ The rules we are playing by have always worked before” – AMEX vs VISA

The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy

Ad Hoc Tactics Selectively hold discounts to hold business that has started to go elsewhere Introduce new promotions, terms, conditions, and offers to confuse and cloud the market Beef up customer service by adding people to fix mess-ups and quicken delayed shipments Delay capital investments and adjust accounting methods to portray quarterly financial results more favorably Introduce “new and improved” products that are new in form, but not in substantive ways that are of consequence to purchasers Introduce Balanced Scorecards and Performance Management Systems

Selectively hold discounts to hold business that has started to go elsewhere

Introduce new promotions, terms, conditions, and offers to confuse and cloud the market

Beef up customer service by adding people to fix mess-ups and quicken delayed shipments

Delay capital investments and adjust accounting methods to portray quarterly financial results more favorably

Introduce “new and improved” products that are new in form, but not in substantive ways that are of consequence to purchasers

Introduce Balanced Scorecards and Performance Management Systems

The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy

“ What is the moral of the story?”

“ What is the moral of the story?”

What is the Business Model? USP Market Discipline Profit Model

Intro: Market Discipline Mamak stall

Mamak stall

Intro: Market Discipline "Exactly what I need" Customized products Personalized communications "They're very responsive" Preferential service and flexibility Recommends what I need "I'm very loyal to them" Helps us to be a success "They are the most innovative" "Constantly renewing and creative" "Always on the leading edge" "A great deal!" Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership "A no-hassles firm" Convenience and speed Reliable product and service Product Leadership Operational Excellence Customer Intimacy

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service and flexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes Relationship Image

Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes Price Quality Time Selection √ √ Smart Shopper Relationship Image Operational Excellence : Quality and selection in key categories with unbeatable prices

Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes √ Brand Time Function √ √ Best Product Relationship Image Product Leadership: Unique products and services that push the standards

Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes √ √ √ √ Service Trusted Brand Relationship Image Customer Intimacy: Personal service tailored to produce results for customer and build long-term relationships Relations

Strategy: Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)

Summary: Today’s presentation 1. Business Model 2. Strategy 3. Resources  Done

2. Set the Strategies Dangers of BSC, KPIs and other evils sold by Consultants

“… in the past 18 months, we have heard that profit is more important than revenue, quality is more important that profit, people are more important than profit, customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our performance is inconsistent" CEO, Anonymous

“… in the past 18 months, we have heard that profit is more important than revenue, quality is more important that profit, people are more important than profit, customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our performance is inconsistent"

Before we start… In the old days of HR… Average training hours per staff % of staff attending training # of training programs % of training programs conducted Training needs analysis conducted Competency models developed Training budget as % of payroll What’s wrong with this picture?

In the old days of HR…

Average training hours per staff

% of staff attending training

# of training programs

% of training programs conducted

Training needs analysis conducted

Competency models developed

Training budget as % of payroll

Before we start… Moral of the story… Innovation: Business models Products Services Market Leadership Competitive differentiation Get the picture?

Moral of the story…

Innovation:

Business models

Products

Services

Market Leadership

Competitive differentiation

“ What is the moral of the story?”

“ What is the moral of the story?”

What is Strategic Planning? Strategic Planning Variables: Research Growth Risks Stakeholders Constraints SWOT Misc. Output: Plans Priorities KPIs

Before we start… Which comes first? Strategies -> KPI? KPI -> Strategies?

Which comes first?

Strategies -> KPI?

KPI -> Strategies?

Focus: Corporate Alignment Financial “ To satisfy our stakeholders, what Financial objectives must we accomplish?” Internal Process “ To satisfy our customers, in which internal business processes must we excel?" Customer “ Who are our target customers? What is our value proposition?” Learning & Growth “ What capabilities and tools do our employees require to help them execute our strategy?

Linking BSC to Strategy Revenue Growth Base Retention Share Gain Positioning Adjacent Market New Business Operational Excellence Product Leadership Customer Intimacy Competencies Information Systems Motivation, empowerment, alignment Financial Learning & Growth Internal Process Customers Investment Strategy Productivity Market Value

Focus: Corporate Alignment Financial Learning & Growth Internal Process Customers / Distributors Revenue Growth Productivity Market Value Department Operations Supplier & Alliances External Involvement Target Markets Products/ Services Channel Strategies Human Resources Technology Information & Intelligence Systems & Processes

Example: Selection of KPIs for BSC Customer satisfaction Customer loyalty Market share Customer complaints Complaints resolved on first contact Return rates Response time per customer request Price relative to competition Total cost to customer Average duration of customer relationship Customers lost Customer retention Customer acquisition rates Percentage of revenue form new customers Number of customers Annual sales per turnover Win rate (sales closed/sales contact) Customer visits to the company Hours spent with customers Marketing cost as a percentage of sales Number of ads placed Number of proposals made Brand recognition Response rate Number of trade shows attended Sales volume Share of target customer spending Sales per channel Average customer size Customers per employee Customer service expense per customer Customer profitability Frequency (number of sales transactions)

Customer satisfaction

Customer loyalty

Market share

Customer complaints

Complaints resolved on first contact

Return rates

Response time per customer request

Price relative to competition

Total cost to customer

Average duration of customer relationship

Customers lost

Customer retention

Customer acquisition rates

Percentage of revenue form new customers

Number of customers

Annual sales per turnover

Win rate (sales closed/sales contact)

Customer visits to the company

Hours spent with customers

Marketing cost as a percentage of sales

Number of ads placed

Number of proposals made

Brand recognition

Response rate

Number of trade shows attended

Sales volume

Share of target customer spending

Sales per channel

Average customer size

Customers per employee

Customer service expense per customer

Customer profitability

Frequency (number of sales transactions)

Example: 1 st Level BSC & KPIs Financial Learning & Growth Internal Process Customers / Distributors Profit after Tax. Revenue. Cash-to-cash cycle. Operating cash flow Customer Complaints. Customer Acquisition Rate. Product Availability. Product Quality & Service. Renewal Annual Subscription. Distributor Rank Achievement. No. of Active Distributor. No. DC/Regional Sales. Distributor with commission Customer Database Availability. Accuracy of Forecast Planning. Continuous Improvement. Response Time to Customer Needs. Perfect Order Fulfillment. Inventory Turnover. Number of Effective Sponsoring Program. On Time Delivery. No. of Effective Training. Number of Effective A&P % of staff evaluated on Core Competency Framework. % of staff with Career Development Plans. No. of training hours completed per staff. % of staff with access to strategic information. Q12 Index. % staff evaluated on Culture alignment

Sample: Other 1 st Level KPIs across industries… Single view of customers across supply chain Zero-error order capture Streamline opportunity to cash processes Leverage investment in ERP and backoffice systems Increase customer loyalty and preference Maximize customer revenue Improve service quality and efficiency Capture and close sales opportunities Personalized customer experience Maximize share of wallet Player/customer loyalty Multichannel customer service Manufacturing Travel & Leisure Hospitality Anticipate and prevent churn despite compensation Increase number of products per customer Turn call center information opportunity to up-sell and cross-sell Increase customer satisfaction and loyalty Understand customer behavior related to customer conversion, acquisition, and retention Single view of customer Multichannel customer experience Personalized customer experience Maximize ARPU Minimize Churn Mutichannel customer service Telecommunications Retail Financial Services

Single view of customers across supply chain

Zero-error order capture

Streamline opportunity to cash processes

Leverage investment in ERP and backoffice systems

Increase customer loyalty and preference

Maximize customer revenue

Improve service quality and efficiency

Capture and close sales opportunities

Personalized customer experience

Maximize share of wallet

Player/customer loyalty

Multichannel customer service

Anticipate and prevent churn despite compensation

Increase number of products per customer

Turn call center information opportunity to up-sell and cross-sell

Increase customer satisfaction and loyalty

Understand customer behavior related to customer conversion, acquisition, and retention

Single view of customer

Multichannel customer experience

Personalized customer experience

Maximize ARPU

Minimize Churn

Mutichannel customer service

Lagging and Leading KPIs Historical, Outcome, Results, 1 st Level, Usually Financial or tangible, Quarterly and Annually Current, Indicators, Drivers, 2 nd Level onwards, usually non-financial or intangible, Weekly, Monthly and Quarterly Leading Lagging

Developing ‘Driver’ KPIs Customer Retention % Lagging, 1 st Level Customer Satisfaction Index Leading, 2 nd Level On time delivery Time to market for new products TNA % Defect levels, warranty claims Leading, 3 rd Level onwards

What is the Objective? ‘ Do-or-Die’ KPIs for CNI Revenue ARPU Sponsoring Retention Commission Plan (BDP) Product Corporate Image

‘ Do-or-Die’ KPIs for CNI

Revenue

ARPU

Sponsoring

Retention

Commission Plan (BDP)

Product

Corporate Image

Strategy: Disciplines, Priorities, and KPIs Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)

The McPlaybook* Make it easy to eat 50% drive-thru Meals held in one hand Make it easy to prepare High Turnover Tasks simple to learn & repeat Make it quick “ Fast Food” Tests new products for Cooking Times Make what customers want Prowls market for new products Monitored field tests *Adapted from: Businessweek , Februrary 5 th 2007

Make it easy to eat

50% drive-thru

Meals held in one hand

Make it easy to prepare

High Turnover

Tasks simple to learn & repeat

Make it quick

“ Fast Food”

Tests new products for Cooking Times

Make what customers want

Prowls market for new products

Monitored field tests

Product Leadership New, state of the art products or services Risk takers Meet volatile customer needs Fast concept-to- counter Never satisfied - obsolete own and competitors' products Learning organization Strategy: Disciplines, Priorities, and KPIs Operational Excellence Competitive price Error free, reliable Fast (on demand) Simple Responsive Consistent information for all Transactional 'Once and Done' Customer Intimacy Management by Fact Easy to do business with Have it your way (customization) Market segments of one Proactive, flexible Relationship and consultative selling Cross selling

Product Leadership

New, state of the art products or services

Risk takers

Meet volatile customer needs

Fast concept-to- counter

Never satisfied - obsolete own and competitors' products

Learning organization

Operational Excellence

Competitive price

Error free, reliable

Fast (on demand)

Simple

Responsive

Consistent information for all

Transactional

'Once and Done'

Customer Intimacy

Management by Fact

Easy to do business with

Have it your way (customization)

Market segments of one

Proactive, flexible

Relationship and consultative selling

Cross selling

Operational Excellence Move know-how from top performing units to others Benchmark against best in class Ensure operations training for all employees Use disciplines like TQM for continuous learning to reduce costs and improve quality Strategy: Value Disciplines

Operational Excellence

Move know-how from top performing units to others

Benchmark against best in class

Ensure operations training for all employees

Use disciplines like TQM for continuous learning to reduce costs and improve quality

Strategy: Value Disciplines Customer Intimacy Capture knowledge about customers Understand customer needs Empower front line employees Ensure that everyone knows the customer Make company knowledge available to customers

Customer Intimacy

Capture knowledge about customers

Understand customer needs

Empower front line employees

Ensure that everyone knows the customer

Make company knowledge available to customers

Product Leadership Reduce time to market Commercialize new products fast Ensure that ideas flow Reuse what other parts of the company have already learned Ensure there are multiple sources of funding Strategy: Value Disciplines

Product Leadership

Reduce time to market

Commercialize new products fast

Ensure that ideas flow

Reuse what other parts of the company have already learned

Ensure there are multiple sources of funding

Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)

Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)

Sample KPIs for Each Discipline Operational Excellence Price Selection Convenience Zero Defects Growth Customer Intimacy Customer Knowledge Solutions Offered Penetration Customer Data Customer-success focus Product Leadership Marketing Functionality # of Successes # of Failures Learn from key users Interdisciplinary teams Pipeline

Operational Excellence

Price

Selection

Convenience

Zero Defects

Growth

Customer Intimacy

Customer Knowledge

Solutions Offered

Penetration

Customer Data

Customer-success focus

Product Leadership

Marketing

Functionality

# of Successes

# of Failures

Learn from key users

Interdisciplinary teams

Pipeline

MBO – Sources of KRAs and KPIs, Targets Department Scorecard [E3], Employee’s Job Description, Department SOP, Department Quality Objectives, Corrective Action Requests (CAR), Preventive Action Requests (PAR), or Special Projects relevant to the employee.

Department Scorecard [E3],

Employee’s Job Description,

Department SOP,

Department Quality Objectives,

Corrective Action Requests (CAR),

Preventive Action Requests (PAR), or

Special Projects relevant to the employee.

E3 – Department BSC Financial Perspective Budgeting On Time Delivery Innovation Quality OPEX CAPEX Targets Measures Goals

Individual Performance 2.0 Goals and Targets for Q1 6.0 Appraiser Overall Comments/ Feedback 5.0 Rating (Merit x Weight) 4.0 Merit* 3.0 Achievements and Efforts for Q1 1.0 Key Results Area (Max 6)

Summary: Today’s presentation 1. Business Model 2. Strategy 3. Resources  Done  Done

3. Budgeting The art and science of allocating and aligning Resources to strategic plans

Budgeting: Some thoughts… Two major roles of Budgeting: Provide real-life CONSTRAINTS to strategic planning Provide RESOURCES to realize strategic plans

Two major roles of Budgeting:

Provide real-life CONSTRAINTS to strategic planning

Provide RESOURCES to realize strategic plans

Alignment: 4-Wheels Model Culture Business Model Strategic Planning Structure Person Leadership Resources

Alignment: Framework Focus point Alignment Quality Innovation & Differentiation Risk taking Performance Management Corporate obsession Decision making Culture

Focus point

Alignment

Quality

Innovation & Differentiation

Risk taking

Performance Management

Corporate obsession

Decision making

Alignment: Framework Org Structure Job Design C&B Policies & procedures Decision making Job fit Management Systems BSC and KPIs Decentralized & Empower Structure

Org Structure

Job Design

C&B

Policies & procedures

Decision making

Job fit

Management Systems

BSC and KPIs

Decentralized & Empower

Strategy: Framework Role modeling Vision/Mission/Philosophy Leadership Style Delegation & Empowerment C&B, Promotions Sense of Urgency Speak regularly about Performance Leadership

Role modeling

Vision/Mission/Philosophy

Leadership Style

Delegation & Empowerment

C&B, Promotions

Sense of Urgency

Speak regularly about Performance

Strategy: Framework Recognition Recruitment Training Profit sharing Values Motivation Self Efficacy Awareness Useful Competencies Career aspirations Attribution (control) Person

Recognition

Recruitment

Training

Profit sharing

Values

Motivation

Self Efficacy

Awareness

Useful Competencies

Career aspirations

Attribution (control)

Strategy: Framework Enablers Technology Equipment Materials Human Intellectual Property Partners Property Funding CAPEX OPEX Resources

Enablers

Technology

Equipment

Materials

Human

Intellectual Property

Partners

Property

Funding

CAPEX

OPEX

Alignment: 4-Wheels Model Culture Business Model Strategic Planning Structure Person Leadership Resources

Product Leadership Each Discipline Requires Different Priorities & Resources Operational Excellence Customer Intimacy Organization, jobs, skills Management systems Information and systems Culture, values, norms

Product Leadership

Each Discipline Requires Different Priorities & Resources Operational Excellence Central authority, low level of empowerment High skills at the core of the organization Disciplined Teamwork Process, product- driven Conformance, 'one size fits all' mindset Integrated, low cost transaction systems The system is the process Command and control Quality management Organization, jobs, skills Management systems Information and systems Culture, values, norms

Operational Excellence

Central authority, low level of empowerment

High skills at the core of the organization

Disciplined Teamwork

Process, product- driven

Conformance, 'one size fits all' mindset

Integrated, low cost transaction systems

The system is the process

Command and control

Quality management

Product Leadership Ad hoc, organic and cellular High skills abound in loose-knit structures Concept, future-driven Experimentation and 'out of the box' mindset Person-to-person communications systems Technologies enabling cooperation Rewarding individuals' innovative capacity Risk and exposure management Product Life Cycle profitability Each Discipline Requires Different Priorities & Resources Organization, jobs, skills Management systems Information and systems Culture, values, norms

Product Leadership

Ad hoc, organic and cellular

High skills abound in loose-knit structures

Concept, future-driven

Experimentation and 'out of the box' mindset

Person-to-person communications systems

Technologies enabling cooperation

Rewarding individuals' innovative capacity

Risk and exposure management

Product Life Cycle profitability

Each Discipline Requires Different Priorities & Resources Organization, jobs, skills Management systems Information and systems Culture, values, norms Customer Intimacy Empowerment close to point of customer contact High skills in the field and front-line Customer-driven Variation and 'have it your way' mindset Strong customer databases, linking internal and external information Strong analytical tools Customer equity measures like life time value Satisfaction and share management Focus on ‘Share of Wallet’

Customer Intimacy

Empowerment close to point of customer contact

High skills in the field and front-line

Customer-driven

Variation and 'have it your way' mindset

Strong customer databases, linking internal and external information

Strong analytical tools

Customer equity measures like life time value

Satisfaction and share management

Focus on ‘Share of Wallet’

Managing Gaps between actual and planned budgets Budgeting vs. Priorities Basic Budgeting policies Activity Grid to determine budget priorities Budgeting for Investments based on the ‘BCG Matrix’ principles

Budgeting vs. Priorities

Basic Budgeting policies

Activity Grid to determine budget priorities

Budgeting for Investments based on the ‘BCG Matrix’ principles

Budgeting vs. Priorities Priority = Time + Money

Priority = Time + Money

Budgeting vs. Priorities Upturn Flat Downturn Fight Complacency Sharpen Edge Keep Momentum Conquer NPD Cycle Time Improve Edge Extensions Counter Competitor Innovation Acquire Profits Build momentum Sales Cash Flow Focused on ‘Breakthrough’ JV, In-source, Out-source Eliminate bottom 20% Improve Top 15% revenue-generating products ↓ R&D, ↑ Sales Example: Business Situation vs. R&D Priorities

Basic Budgeting policies Flexibility to switch between line items Reserve Funds Loans/External Funding

Flexibility to switch between line items

Reserve Funds

Loans/External Funding

Activity Grid to determine budget priorities Eliminate (-) What are features/ activities/services to eliminate? Reduce (↓) What are features/ activities/services to reduce? Create (+) What are features/ activities/services to introduce? Increase ( ↑) What are features/ activities/services to increase?

Budgeting for Investments based on the ‘BCG Matrix’ principles CNI’s Performance Market Potential

How to maximize Budget? Align budget to priorities Integration of businesses and functions for teamwork Do practical, implementable stuff that bring real results (hard work)

Align budget to priorities

Integration of businesses and functions for teamwork

Do practical, implementable stuff that bring real results (hard work)

Way back in 2004… Thomas Cup, Indonesia

Thomas Cup, Indonesia

Now in 2007… CNI ‘Beemax’ Factory Visit, China Top Leaders Product Development Media

CNI ‘Beemax’ Factory Visit, China

Top Leaders

Product Development

Media

Planning, Budgeting, Schedules, Processes Tying it all up

The Planning & Budgeting Process Nov-Jan Presentation of Group Budget and Planning summary & distribution Communication of Highlights to the field and staff 5. Communication and Cascading Oct-Nov BSC & Budget to CEOs, followed by BOD Revised and Finalized Plans and Budgets 4. Formal Results Planning Sep - Oct BSC & Budget preparation by HODs to HODivs 3. Functional Strategy and Budgets Sep High-level strategy of Group Corp Plan. Circulation of Main Budget simulation to all departments 2. High-level Group Strategy and Targets July - Sep Current ½ yr budget & revision Next yr options and budgets required 1. Pre-Planning Analysis & Brainstorming Month Output Stages

Presentation of Group Budget and Planning summary & distribution

Communication of Highlights to the field and staff

BSC & Budget to CEOs, followed by BOD

Revised and Finalized Plans and Budgets

BSC & Budget preparation by HODs to HODivs

High-level strategy of Group Corp Plan.

Circulation of Main Budget simulation to all departments

Current ½ yr budget & revision

Next yr options and budgets required

Review processes Result Planning schedule inc. BSC, Budget Quarterly Performance Appraisals EMC – sales performance QMS – non-sales performance Divisional meetings Annual Appraisals Specialized KPI committees CAR, PAR, SCAR KPI improvements Internal Audit & MSD – process problems HRM & TND – people problems Supervisor Induction – PM training Talent Management

Result Planning schedule inc. BSC, Budget

Quarterly Performance Appraisals

EMC – sales performance

QMS – non-sales performance

Divisional meetings

Annual Appraisals

Specialized KPI committees

CAR, PAR, SCAR KPI improvements

Internal Audit & MSD – process problems

HRM & TND – people problems

Supervisor Induction – PM training

Talent Management

Problems still existing No serious budget to tackle key risks Too much optimism or pessimism Innovation vs. Results vs. Baseline Investment ≠ Portfolio Management Top down vs. Bottom up Good to have vs. Need to have Line Manager not thinking like Investors Too focused on KPI and BSC Budget allocation seen as ‘popularity’ vote Public Listing -> pressure for short-term budgets and results vs. long-term innovation

No serious budget to tackle key risks

Too much optimism or pessimism

Innovation vs. Results vs. Baseline

Investment ≠ Portfolio Management

Top down vs. Bottom up

Good to have vs. Need to have

Line Manager not thinking like Investors

Too focused on KPI and BSC

Budget allocation seen as ‘popularity’ vote

Public Listing -> pressure for short-term budgets and results vs. long-term innovation

Alignment: 4-Wheels Model Culture Business Model Strategic Planning Structure Person Leadership Resources

Thank You. soft copy of slides: www.totallyunrelatedrandomanddebatable.blogspot.com

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