Wednesday, July 30, 2014
Iglo-Ola (Unilever Belgium): An Interview with Iglo-Ola’s Financial Controller Ghislain Malcorps
News categories: The New Economy Economics, Finance and Acounting, Performance Management and Controlling
by Juergen H. Daum1
The following article and interview is an extract from the book: Juergen H. Daum, Intangible Assets and Value Creation, John Wiley & Sons Ltd, Chichester/UK, 2003, p.348-357, (German edition: Jürgen H. Daum, Intangible Assets oder die Kunst, Mehrwert zu schaffen, Galileo-Press, Bonn/Germany, 2002, S. 387-397).
The Management Cockpit2 is first a concept for the ergonomic design of a management meeting room (see picture below), but also for the structuring of performance management meetings. It is intended to make management teams more productive by improving communication between team members and by focusing them on the strategic issues. The Management Cockpit, developed by neurologists, human intelligence scientists, and computer engineers in 1989 (see interview with it’s creator, Patrick M. Georges) is today in use in more than 50 European and American companies. Iglo-Ola (a Unilever company in Belgium) is one of them. In the following interview, Gishlain Malcrops, the former financial controller, who oversaw the implementation and introduction of the Management Cockpit at Iglo-Ola, explains what problem the Management Cockpit solved at Iglo-Ola and is sharing his experiences.
A Management Cockpit room to support efficient management team meetings
At the heart of the Management Cockpit is a measurement system of about 100 indicators and other critical unstructured business information that are depicted on the four walls of the Management Cockpit room through ergonomically design graphics. These graphs or visuals that present the measures are designed to meet especially the decision support needs of senior executives. During the meetings only those measures and graphs are visible, which are relevant for the actual discussion or decision to be made. This should motivate managers to take action, by presenting them during the meeting the strategic core indicators status and allowing them to understand relationships between the various underlying business processes and success factors represented by these indicators. The concept has been developed by Patrick M. Georges, a human intelligence scientist based in Brussels, and by his company N.E.T. Research.
The elements of the concept are the four walls with their logical views, the so called flight deck in one corner of this room that is powered by a six screen computer, and training and check lists that should help a management team to conduct more efficient team meetings and to make faster decisions. The Black Wall depicts the main key performance indicators/measures in six logical views covering all relevant management areas of the company. Each logical view is dedicated to one of the key areas that have to be monitored by the management team. It is oriented on the question and answer principle. Therefore a logical view always represents an answer to a question like: Are we in good shape concerning our financial performance? How are we performing on the market compared to the competition? How successful are we in satisfying and retaining customers and acquiring new ones? How efficient are we internally with our business processes? The answer is given through six frames for each logical view. Such a frame present each either a graph or a text information (see picture below).
Example for a logical view of the Management Cockpit
The other three walls present, each again through six logical views, answers and indicators to more detailed questions. The Red Wall presents information about the market and customers, the Blue Wall about internal processes and resources, and the White Wall about he status of important projects and strategic initiatives. So the structure is very much in line with the Balanced Scorecard concept.
Such a software enabled Management Cockpit allows also to provide each of the management team members with an access through his web based portal to the Management Cockpit data and information. They can use it to analyze the data and run simulations from their offices or from their homes in order to prepare for example for the next management meeting.
According to Patrick Georges’ concept, the Management Cockpit structure also reflects the structure of the management meetings held in it. The meeting starts with an investigation of the actual status by analyzing and discussing the information from the Black Wall. Moving on to the Blue and Red Wall will then deepen this discussion and analysis. Then the status of the most important projects and initiative will be analyzed and discussed on the basis of the White Wall. When the meeting is finished, the management team will have made all urgent decisions and will have focused on the really important topics.
So the Management Cockpit represents a useful concept to establish a common management information and communication basis in an enterprise through structured communication processes in and around management meetings, such as in the preparation or follow up phase.
Patrick Georges has supported so far the implementation and operation of a Management Cockpit room in more than 50 mainly European organizations. One of the first adopters was Iglo-Ola (Unilever Belgium), where Gislain Malcorps, the former Financial Controller promoted the installation of a Management Cockpit room.
The main purpose of the Management Cockpit to facilitate
effective management dialogs and to make management team meetings more productive
Interview with Ghislain Malcorps: Experiences in implementing and using the Management Cockpit at Iglo-Ola
Iglo-Ola (Unilever Belgium) is a subsidiary of the Unilever group. Turnover of Iglo-Ola was 6 bn BEF ($169 Mio) at the time of the interview and the company employed 300 people, of which 50% in the logistics area. It is operating only in Belgium and Luxembourg and is focused on Frozen Food and Ice cream. The Belgian operation is a pure marketing and sales organization and all products sold are imported from foreign sister companies. The company delivers directly to retailers. The two main functions to be managed at Iglo-Ola Belgium therefore are marketing and advertisement, and logistics.
I visited Ghislain Malcorps (see picture on the left), former Financial Controller of the company, and his company’s Management Cockpit room in November 1998, a few months after it went live. He played an important role in introducing this new concept in his organization and in bringing the Management Cockpit to live. He also served also as the so called ‘Cockpit Officer’. The following interview was conducted in spring 2000. In the meantime he has retired.
Juergen Daum: Mr. Malcorps, you had been one of the promoters of this innovative concept of the Management Cockpit in your organization and the responsible person for its implementation. The Management Cockpit Room at Iglo-Ola is now in use for more than two years and you gained a lot of experience in this time. Why did you and your management team implement such a corporate “war room”?
Ghislain Malcorps: Well, if we look back to the situation before we used the Management Cockpit, it can be characterized from a manager point of view as a situation, where we had an abundance of data but a lack of information and knowledge. There was a lot of data available in the company, but nobody knew exactly at which data he had to look at, what was really important. Often data was not linked to other data, it was difficult to retrieve and to interpret. The available management data did not met the needs of senior and middle management. It was not well prepared for them and not “digestible”. It contained many contradictions, many versions, too many figures and there was no visual representation. And very often, there was not enough focus on strategic issues and parameters. The daily experience of the executives and deciders of the company was a lack of knowledge and awareness of the company’s strategies and a lack of efficient executive communication about the strategies.
Juergen Daum: I can imagine, that this is a typical situation in many business organizations.
Ghislain Malcorps: You are probably right. But I assume that many managers and executives do not know how much better the management system and available management information and knowledge could be – simply because they have no comparison. In our case this came to our consciousness when we found out about the Management Cockpit and learned more about this innovate concept through it’s inventor Prof. Georges. The concept of a meeting room and communication tool where the board displays very openly the chosen strategies and which guarantees that everybody is informed, that the strategies and the business fundamentals are clear to and shared by everybody and that short term decisions are fully compatible with the long term strategies seemed to us to be the solution for our problem which we just identified to it’s full extent. Therefore the decision was made by our chairman and the management team to implement at Iglo-Ola such a Management Cockpit room.
Juergen Daum: The adoption of such a different management system in your company – different compared to the management system before, which consisted of the classical financial reports – represented probably a major challenge for everyone in management and in the finance department. How did you proceed in implementing the Management Cockpit room at Iglo-Ola?
Ghislain Malcorps: Yes, it really was a challenge. The Management Cockpit should serve as a unifying and strategy focusing interface between the Chairman and the Board and between the board and the extended board, which includes the managers responsible for the operations. Therefore the first task we had to solve was, to create a common understanding of the company’s mission and strategies.
Juergen Daum: Didn’t they exist before?
Ghislain Malcorps: Yes, they existed before. But the company’s mission and strategies had not been reviewed and re-discussed regularly like it was done with monthly financial reports. The reporting and management system used so far did not stimulate managers to discuss strategies. Therefore every manager and executive had his own understanding of the company’s mission and strategies and therefore his own priorities. It was one of the major goals of the Management Cockpit project to create common strategic priorities in the abundance of management information, to make sure that short term decisions are fully compatible with the long term strategies. For this, there needed to be first a coherent understanding of the company’s mission and then of this strategies within the company.
Juergen Daum: What exactly is the Management Cockpit and how does it look like at Iglo-Ola Belgium?
Ghislain Malcorps: The Management Cockpit is a decision center, where the management team meets on a regular basis to discuss business performance and strategies. It is also a strong communication tool: the board displays very openly the chosen strategies and the cockpit guarantees that everybody is informed. On its four walls, mission, critical success factors and key performance indicators are displayed in graphical form on panels. The Black Wall shows what is important for the company: certainly the trading profit or contribution and all key goals that reflect the strategies and the mission statement, like innovation, growth etc.. The Blue Wall describes the internal environment of the company, like productivity in some sensitive areas (logistics), cost contention, quality of staff etc.. The Red Wall describes the external environment of the company: customer and competitors watch, market shares, macro economic indicators, evolution of sensitive raw material prices etc.. The White Wall contains the broad action plan of the management team with its strategic thrusts and the 3 rolling milestones.
Juergen Daum: What are strategic thrusts?
Ghislain Malcorps: The strategic thrusts are the main strategies derivated from the companies mission statement. The summary of this main strategies is called “Broad Action Plan”. These thrusts are mostly action driven and are represented through one visual with a list of those thrusts at their respective status on the white wall. The other panels of the white wall are dedicated to human resources indicators and especially to all the “projects” which are intended to realize the strategies. The follow-up of the various projects was – according to our experiences at Iglo-Ola - a major role of the Cockpit.
Juergen Daum: Can you give us an example of such a project?
Ghislain Malcorps: An example for such a project and for such a visual at the White Wall of the Management Cockpit room is “More Value from SAP” – that is, create more value out of our SAP ERP implementation. The project is divided into several phases with a deadline for each of them. Among such projects, you also find acquisitions, mergers, larger investments, restructurings. On the visual you see one colored bullet that tells you whether the responsible is on track or not. Each project has of course a responsible whose variable pay is, generally speaking, linked to the realization in time of his project.
Juergen Daum: Those visuals you mentioned seem to play a key role in the concept of the Management Cockpit. How they are used at Iglo-Ola?
Ghislain Malcorps: Each wall is subdivided into so called logical views. Each logical view has a title and a question referring to the Broad Action Plan. The question is answered by the 6 visuals belonging to the logical view, some of them being linked to other visuals in the cockpit. The visual represents usually a single Key Performance Indicator (KPI), like in a scorecard, because the visual should be restricted to one single information: less is more. They are color coded: green, yellow and red make them very easy to read and to digest. There is a natural tendency, mainly in the beginning, to overload the visuals with explicative and quantitative information. In such “patchwork” cases, the visual losses its power and, sometimes, becomes completely ineffective.
Juergen Daum: Are there management responsibilities defined for each KPI / Visual ?
Ghislain Malcorps: Each visual and KPI has a sponsor, the director of the concerned department, and a data owner. The controller, who is the head of the management accounting department, me, is responsible for the documentation and the general management of the cockpit. After some experience, the need for a full documentation became very clear. We had to protect our know how and acquired experience, and, at the same time, to offer a documentation to every manager who has to understand the visuals. We decided to create a “Visual Guide Book” as soon as the whole cockpit was more or less stable.
Juergen Daum: What did you document?
Ghislain Malcorps: The documentation is composed off a description about the visual owner and data owner, definitions of the visuals with the complete formula and of a brief and full description how to read the visual, how to interpret the data and how often it is updated - the refresh frequency.
Juergen Daum: I can imagine, that this type of “Management Information” is exposed to structural and content changes much more often than traditional management reporting. How often does the content of the Management Cockpit change?
Ghislain Malcorps: Modifications or redefinitions of visuals are generally agreed during board meetings. The frequency of refreshing the visuals is mainly monthly; in some cases, it is every 2 month such as with the Nielsen indices, or quarterly or even yearly such as with the customer satisfaction survey. One major revamping is organized every year in December, after discussion of the detailed implementation plan for the next year.
Juergen Daum: Let us come back to the implementation phase of the Management Cockpit. You mentioned, that the first step consisted in the definition of the Mission Statement.
Ghislain Malcorps: Yes, the definition of the mission statement was the first step of the process and it was a crucial step because it gave the company a identification, a direction to follow which will be difficult to modify in the future. The question to answer was “Who are we?. What are our values? Our strength but also our weaknesses ? What’s our role in the company’s environment?”. But also “what are we wanting to be?”
Juergen Daum: How did you achieve to come up with a consistent mission statement which was agreed by all the managers? Did you have somebody who facilitated this process?
Ghislain Malcorps: Prof. Georges played the role of the facilitator in the creation of our Management Cockpit at Iglo-Ola. He had many discussions, first with each member of the board, which consisted of 6 people, thereafter, with the whole board. Group discussions were held at a lower level: the extended board, consisting of 20 people, who helped the board screening and finalizing the Mission Statement; it was also a kind of roll out of the Mission Statement to the second level of management.
Juergen Daum: What was the next step in the implementation process after you had finished the mission statement?
Ghislain Malcorps: The next step was now to derivate the main strategies from the mission statement. This was the already mentioned “Broad Action Plan” with a list of the 12 main strategic thrusts. Very important was, not to define only strategic thrust in general but to define on the time dimension, which strategic thrusts are important very short term within 3 months, mid term within 1 year and long term, that is later than 1 year. For this we defined 3 visuals on the White Wall of the Management Cockpit with the “rolling milestones”, where all the strategic thrusts had been listed with their status. To each strategy or strategic thrust we also assigned then targets like in the area of innovation, where we wanted that innovation represents 20% of our yearly turnover or in the area of overheads where we wanted to reduce the overheads every year by 0.5% on turnover, during 5 years.
Juergen Daum: Are this the KPI targets?
Ghislain Malcorps: No. This are the mere targets. To define, how targets are measured through KPI’s is another step in the implementation process. Very often, this step and the proceeding one are combined. To define KPIs and the related targets is also critical and often difficult, leading to long discussions, which you cannot avoid.
Juergen Daum: Can you give us an example, what has to be discussed here?
Ghislain Malcorps: For example if you want to measure innovation, you have to agree how you are going to measure it. One way could be, to count product launches. But then you have to agree if you count them since last year, or since last 12 month, or since the last 24 month. Even if you finish with this, another point has to be discussed explicitly: Do you accept that the past is so dominant in this innovation indicator or should it better include more data of the present or even future outlook ? And what about the launches which are not successful, the “flops” ?. Do we count them as well into the overall number ? And do we have to take into account the relative profitability of each innovation or is the turnover a sufficient indication?
Juergen Daum: I see. If you leave the usual common ground of financial figures where everyone can built on his knowledge from business school, you have to define for non-financial KPIs much more carefully what you measure and how...
Ghislain Malcorps: … and you have to take into account possible future developments of the underlying business or at least you have to react to such developments very quickly by adapting the calculation scheme of such indicators to avoid that indicators are suddenly becoming irrelevant and useless, without that managers and executives are taking notice of it immediately. That means: you need a very experienced active controller.
Juergen Daum: Can you please be more specific on this? Why should an indicator become suddenly useless or irrelevant if it has been selected with such a care?
Ghislain Malcorps: I will give you an example: To measure and manage overheads, you have to compare it with another indicator. Absolute overheads do not tell you very much if overheads are to high or not. For example, you can measure overheads as a % of turnover. This is in line with common sense. Usually everyone would agree, that this is a good comparison, because overheads would increase, if operations will grow. But the implicit assumption behind this measure is, that there is every time a relation between level of operations and turnover. If you are not aware that this is an assumption and not a natural law, the result could be, that management is still using and relying on an indicator, which has become irrelevant if not wrong. What if exploding fish prices due to the shortage of fish catches should boost our frozen fish turnover? If you do not care for this beforehand, for example by “neutralizing” such effects during the calculation of the indicator, this would account as positive performance for the relevant manager. Another external factor, which has to be taken into account if you want to measure turnover targets is inflation. You have to agree within the management team, if you don’t care or if such effects have to be neutralized. All these questions are important and have to be treated as such, in order to build an efficient tool and to make it credible to the users.
Juergen Daum: Running through all this discussions, indicator per indicator seems to be very important in order that the Management Cockpit is as useful as possible in the future. But do you not risk that people are loosing the overview?
Ghislain Malcorps: This is the reason why the next step in the process is the so called “certification phase”. After having had discussions on the Performance Indicators, we had a certification phase: it consists of a mapping between all the statements of the initial Mission Statement and the list of indicators. Here we discussed questions like: Does every strategic statement have its performance indicators; how many? Enough? Not too much ? Does every indicator fit a strategic statement ? If not, should we revise the strategic statement or, at the contrary, drop the indicator ? With this “alignment” we make sure, not to loose strategic track be stepping down into operative indicator discussion and on the other hand to make sure, that every strategic objective is measured in the day to day business.
Juergen Daum: But to define the measures, calculations and possible adjustments is not all. A very important element of the Management Cockpit concept is the visualization of those indicators on the wall panels.
Ghislain Malcorps: Yes, and this is the last step of the process, to choose the most appropriate visual for each indicator. Here too, we had long discussions, because it was the first time that we were confronted to the new displays, the traffic lights etc… These discussions were also part of the learning process. During this step, you have not only to choose the appropriate visual, but you have also to define the frequency of updating, the visual owner etc…
Juergen Daum: What are your conclusions and the summary of your experiences after passing through this process?
Ghislain Malcorps: As you can see, it’s not just putting some nice visuals to display the status of some accidentally selected KPI’s. This is real work and it will take some time. The Cockpit Room is only the visible pit of the iceberg. Do not forget the previous steps, the discussions, the research made on several subjects, the choices that were made and the priorities that were put. All that is in fact a first positive result of the cockpit, before even having started the cockpit itself. Even if you should stop the cockpit at that stage, in any case, your management tools would be much better than before. Note that the Cockpit room is the visible pit of the iceberg. The conditions of success of the cockpit are in fact included in the implementation steps.
Juergen Daum: How long does it take in total to implement a Management Cockpit?
Ghislain Malcorps: In our case we had to manage some extraordinary hurdles with the result, that we needed additional time. For example, the whole board of our company was replaced during the time of implementation – 5 people had been promoted, one retired. The software we used and struggled with at the beginning caused another problem. At this time, there was not yet SAP’s Strategic Enterprise Management software available, which now includes standard Management Cockpit software. We had to create our own application using MS Excel. In more normal circumstances, the duration of the process will be about nine months in order to create about 100 stable visuals, which is the usual number for a complete cockpit. But as you typically start with the most important ones on the “Black Wall”, it is possible to use the Cockpit in a prototype version earlier. This is also helpful to gain some experiences, which can be incorporated into the final version.
Juergen Daum: How is the Management Cockpit Room used at Iglo-Ola Belgium ?
Ghislain Malcorps: The Cockpit is used for the board meetings, the extended board meetings and the departmental staff meetings. Each board meeting starts with a 2 hour “walk” through the visuals and indicators with a clear focus on the visuals presenting a red or orange traffic light. So the key issues are identified, the “reasons why” are immediately discussed and everybody is immediately informed about problems, the proposed solutions and the actions taken. An important point is, that there are no longer discussions about the accuracy of the figures. Because figures are translated into meaningful visuals which compare for example actuals with targets and concentrate on the visualization of the variance, the focus is not on the underlying figures but on the situation itself, on the “hot points”, where corrective action have to be taken in the business itself.
Of course, we have to guarantee a high degree of quality and accuracy of the data behind the visuals, otherwise the cockpit would become incredible. Here is an obvious responsibility of the controller and “cockpit officer”. The Management Cockpit has become the only place in the company, where all the strategies are written, are visible and where they will be adapted if necessary. Here everybody can also see the rate of success of these strategies. So the Management Cockpit is at the same time the brain of the company with its strategies in it and the muscle of the company where actions are defined, to reach strategic goals or adapt strategies themselves.
Juergen Daum: What happened with the management reporting which was used before ? Does it still exist or was it replaced by the Management Cockpit?
Ghislain Malcorps: We thought that the existence of the Cockpit would reduce the amount of paper reporting – that is our classical monthly financial reports. In fact, the reduction, if any, was very limited, around let’s say 2%. The reason is, that the Cockpit is a strategic tool that replaces nothing; it’s additional to the classical reporting and is needed by legal and fiscal authorities, budget controlling and reporting to the headquarter. Nevertheless the Cockpit gives strategic weighting to these reports and so, helps to structure them or eliminate them at least partly.
Juergen Daum: What are, according to your experiences, the critical success factors for the implementation and for the use of a Management Cockpit? What would you recommend to other companies that want to implement it?
Ghislain Malcorps: First, you need full support of the chairman and of the board members and the Cockpit has to be perceived as the main management tool, that makes strategies clear to everyone. Also discipline, with respect to the updating deadlines, is critical and patience during the implementation phase. And do not underestimate the amount of necessary resources needed to set up a Cockpit and to operate it. Also think about how to buy in other people in the organization in order to tie them into the strategy system of the company.
Juergen Daum: If I would ask you for a summary about your experiences with the Management Cockpit, what is your answer?
Ghislain Malcorps: The Management Cockpit is an excellent tool to create strategic focus in a company and enable the management team to much better concentrate on strategic issues in the day-to-day business. It is also an excellent tool to capture and retain management know how in the organization. The changes in our board during implementation have shown, that it makes eventual higher rotations of the board member, which is very usual in multinational organization, much easier. The reason is, that it captures and stores the experiences and management knowledge of the past and is offering an “intelligent” and efficient documentation for the new incomers.
Juergen Daum: Mr. Malcorps, thank you very much for this very interesting interview.
1 is an internationally recognized expert, author, speaker, and consultant in enterprise management. He currently acts as the Chief Solution Architect of the Business Solutions Architect Group at SAP AG and advises senior executives, CFOs and finance professionals in finance transformation and enterprise performance management best practice. He is a frequent speaker on enterprise and performance management topics and a frequent contributor of articles for leading journals. He is the author of the book Intangible Assets and Value Creation (John Wiley & Sons, 2003).
2 The Management Cockpit concept has been originally developed by Patrick Georges and his company N.E.T. Research. The intellectual property rights of the Management Cockpit concept have been acquired in 1998 by SAP AG. The name Management Cockpit is a trademark or registered trademark of SAP AG.
“Fixed budgets don’t work today. A budget is a too static instrument and locks managers into the past - into something they thought last year that it was right. To be effective in a global economy with rapidly shifting market conditions and quick and nimble competitors, organization have to be able to adapt constantly their priorities and have to put their resources where they can create most value for customers and shareholders. In order to do that, they need the right concepts, management processes and tools – concepts such as the Beyond Budgeting Management Model. The introduction of new management instruments such as the Balanced Scorecard, which help to better align the entire organization with corporate strategic objectives and to focus it on the essentials, has created the right foundation. Because if corporate strategy and the objectives are clear for all people in an organization, one can principally react faster to changing market conditions. But then the fixed budget comes into their way and prevents them from really doing the right things. Though what is often missing is a more flexible operational planning and control model. The Beyond Budgeting model wants to fill exactly this gap.”
Juergen H. Daum
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