Enterprise performance management

30/06/20

Nine critical questions to check if your steering model is still set up correctly

The impact of the corona crisis is different for each company, but the need for high-quality real-time steering information remains essential. An organisation's steering model must always be able to adapt quickly and flexibly to changing situations without losing sight of long-term success. Enterprise performance management (EPM) focuses on steering business performance in line with business strategy; it translates accurate and relevant insights into meaningful decision making and concrete actions. Given the uncertain time ahead, it is crucial that companies now check whether their steering model is in order, say PwC's Willem-Jan Dubois and Alexander Staal. Nine critical questions help to quickly know where adjustments to their own model are required.

Steering approach

We recognize three situations when describing COVID-19’s impact on performance and existing business models:

1. Companies with significant (financial) problems that focus on their survival.

2. Companies that are moderately affected but not in acute liquidity distress and focus on adapting to post-pandemic realities.

3. Companies that do not experience any hindrance and focus on exploiting the opportunities related to expansion, mergers and acquisitions.

Depending on the profoundness of business impact, this may lead to adjustments on the level of the business’ strategic objectives, values value drivers or KPI’s. Different actions are needed for each situation, but ultimately companies need to ensure that their business strategies reflect the changed environment and the control model must have the flexibility to do so.

Nine critical questions along the axes focus, priority and target help to quickly know where adjustments are required.

The right focus

The corona crisis is pre-eminently the time to rethink the strategic focus and implementation on the basis of the following three questions:

1. Is the organization’s strategy still relevant?

COVID-19 and its countermeasures will leave a deep and lasting impact on our economic reality. Assess quickly but critically whether the chosen organization’s strategy is still the right path.

2. Is the organization focused on the right drivers?

After the initial sanity check, it is key to know to what extent the translation from strategy to value drivers is still guiding the organization towards realization of the objectives. The goals might be the same but the key value drivers may not. Adjust where necessary

3. Are the right insights available to steer the organization?

Once value drivers are in line with strategy, it is key to have a view on those metrics that are indispensable to know whether the organization is doing the right things and on track towards strategy realization. With the right insights, KPIs, reports and analyses, companies determine which actions and projects to start, continue or stop. A check whether these KPIs and reports are still the right ones is necessary.

The right priority

After checking the strategic focus, the right priorities need to be set, based on the following three questions:

4. Is the project portfolio still in line with strategy?

Based on the (re)confirmed strategy and value drivers, it needs to be clear to what extent projects still contribute to realization of the organization’s strategy, i.e. those that contribute the most to the realisation of the business strategy and require comparatively limited investment. Align the project portfolio with the revised strategy and drivers.

5. Are the underlying business cases still reflecting reality?

Once it is clear which projects still add value to the strategy and should be continued or started, it is imperative to carefully assess and update underlying business cases.

6. Is it clear how to allocate resources and make decisions?

Once projects are categorized into burdens, investments, money makers and pearls, informed decisions can be made on resource allocation (money and people). Adjust targets, plans and budgets to reflect the new reality. Do this by reducing costs in the short term to facilitate achievement of strategic objectives in the long term.

The right target(s)

Once focus and priority have been determined, the following three questions are used to check whether the targets are still realistic:

7. Are targets still realistic?

Make sure targets are still realistic and achievable but ambitious enough to motivate personnel. The performance dialogue, in which strategy execution is continuously assessed, provides the basis for tracking and steering on targets.

8. Are plan, budget and forecasts supporting the latest targets?

Based on the set of realistic targets, it needs to be determined to what extent the plan and budget need to be revisited. Especially in times of crisis, (rolling) forecasts need to be performed and analyzed in a strict rhythm to provide better forward-looking insight.

9. Is there a view on key risks and scenarios that may occur?

To be able to stay on track in volatile times, key risks need to be clear and scenarios need to be prepared. When different scenarios occur, the organization is able to take necessary action to keep steering towards strategy realization.The need for a strong scenario planning capability is more important now than ever.

Contact

For each of the nine questions, a 'no' answer is reason to start working on it immediately. Would you like to discuss these questions and find out more about enterprise performance management, or are you interested in how PwC can help your business? Then please contact Willem-Jan Dubois.

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