Barbara Blog Interview – Controlling
What does a vintage bus have to do with controlling and MICE crisis management?
Not a thing-at least at first glance. But it was thanks to a vintage bus that Barbara Zimmermann and I met in Latvia in 2018. Her amazing vintage bus (http://oldtimerbus-mieten.eu) was impossible to miss! And our paths continued to cross throughout the trip. We saw one another at tourist attractions, where we’d give each other a quick nod or hello. Then we went our separate ways. Later, on the ferry from Liepaja to Travemünde, we actually got to know one another, quickly realizing how much we had in common, including the fact that we’re both systemic business coaches! And we’ve been corresponding regularly since then.
I’m thrilled to welcome Barbara Zimmermann to MICE crisis management meets, where she’ll focus on the topic of controlling.
You’ve been working with Fresenius Medical Care as a partner and financial controller since 2002. You are also trained as a systemic coach. What’s the connection between systemic coaching and controlling?
Let’s start with coaching. In my opinion we can divide systemic coaching into two groups. In group A, we have people who want to change something about themselves: their behavior, their leadership capabilities, their conflict management skills, or their ability to present themselves with confidence. There’s no concrete goal. Instead, the people in this group want to learn how to help themselves. They want to be asked the right questions and to learn from experience so they can react and intervene effectively.
Meanwhile, the people in group B want a sparring partner to help them reach their goals. They’re looking for tips and information, and of course someone who listens to them. These people have a goal and want honest feedback in order to build confidence in their decision-making skills. And when we talk about goals, planning, and decision-making, we’re getting close to the responsibilities of a controller.
In the past, controllers were responsible delivered numbers. These days, and going forward, the expectation is for controllers to act as business partners, on par with management. Controllers deliver information in the form of KPIs, propose solutions to problems, and help business leadership reach their target goals. Both coaching and controlling always involve a task or a goal. Many business decisions often involve political or psychological factors-there again we have aspects that relate to coaching. Modern-day controllers also have to be facilitators. In other words, they have to ask the right questions and play a key role in shaping the path to success.
I associate the term controlling with the world of finance or business administration. What exactly is controlling and where does it apply?
Controlling is a fundamental part of business administration. It helps leadership and management steer and direct the company or the business unit.
Perhaps we can also categorize some controlling tools as precautionary measures. If I’m aware of my processes, my costs, my profitable products or even my loss-generating projects, then I can react quickly and make effective decisions as an entrepreneur.
For me, taking precautionary measures means paying attention to early warning signs, such as out-of-control costs, or employees who are frustrated or contribute little to the company.
If we ignore these early warning signs and there’s a shift in the market-for example, if a new competitor appears on the scene and offers the same product or service-then as entrepreneurs we need to have a handle on our numbers, processes, and profit margins.
In this day and age, controlling isn’t just about short-term tasks like putting together monthly financial figures, or issuing monthly financial statements as a tax accountant would. Besides being responsible for operational issues in the short-term, controllers also take on strategic tasks that have a long-term (3 to 10 year) impact. This is why the literature divides controlling into two categories: strategic and operational. Let me explain the difference…
Yes, what do you mean by the idea that controlling can be divided into strategic and operational categories?
There are even more categories, but these two are the best known. Strategic controlling, as the word suggests, is oriented towards the future development of the company. Where does the company want to be in 3 to 5 years, what new products and services do they want to add, where do they want to expand or cut back? How is the company positioning itself in the market? Where does it stand in relation to its competitors? What are the company’s strengths? Why are they offering this particular product or service, and how is it useful for customers? Are they acquiring new customers, and/or how can they increase satisfaction among their existing customers? What are the risks in the market, and in the company? What opportunities does the company’s leadership see? These are the types of questions involved in strategic controlling, which is all about ensuring the company’s long-standing survival.
In operational controlling the focus is on whether the company is making a profit, what’s going on with respect to liquidity, how much revenue each product/service generates, and what goals the company wants to achieve in the next 1 to 3 years. Traditionally, the company and each of its departments set goals, analyze discrepancies, and take action to get the company back on track or adjust estimates for the future. Generally speaking, the company prepares an overall 1 to 3-year budget that also includes subsidiary plans. However, every company is unique and has a different focus. Sometimes the focus is on liquidity. Other times, it’s about whether to contract out for a service or create it in-house, whether to develop new products, whether to expand and open new locations, or whether to set up cooperation agreements with other companies. The range of responsibilities is as extensive as it is exciting, and I believe companies should start to implement controlling measures from day one.
The idea that controlling can be used in areas like marketing is exciting to me. Can you describe how to apply a controlling process in a marketing context?
Depending on its size, a company can use controlling processes in all areas of operation (HR, sales, IT, purchasing, etc.). As I mentioned above, it’s about goals, actions and ultimately assessing whether the company reaches its targets and what corrective measures they want to take. In a marketing context, controlling traditionally centers around so-called sales promotion methods, such as advertising, customer care, market surveys, etc.
So we can measure things like the effectiveness of advertising campaigns, and whether new customers like new products or prefer those of the company’s competitors. We can use tools like customer surveys and offer new sales channels, such as online consultations. Marketing and sales are closely interrelated. In the best cases, companies periodically review their KPIs (which are self-defined) in the form of regular reports, and marketing teams develop action plans based on those key performance indicators.
Controlling also uses tools from crisis management. Do you use the term crisis management in controlling, or does it have another name, like process review?
Before a crisis occurs, there are usually a number of early warning indicators. If a company keeps these indicators on its radar, it can react before the situation reaches a crisis point. Larger companies have their own crisis management teams. They create codes of conduct for employees in the event of a crisis (e.g. a pandemic), drawing them up in advance and testing them regularly. Ideally, there’s a crisis team in place that can steer the company safely through a crisis.
But a pandemic doesn’t necessarily have to constitute a crisis for a company. There are other early warning indicators that can signal an impending crisis within a company.
Many of the risks companies face are predictable. They develop slowly and gradually.
According to a survey by the BDU (The Federal Association of German Management Consultants), these are some of the most common early warning indicators in the following areas of business operations:
- Finance: cash flow, liquidity, billing periods, return on sales
- Corporate strategy: dependence on customers, suppliers, employees, and capital investors; how knowledge is secured; how transfers of know-how are structured, how new products are developed
- Market, environment, industry: sales growth, customer payment habits, pricing compared to competitors, customer structure, changes in the social climate (e.g. shifts in values, climate protection)
- Performance management: acquisition and order processing, incoming orders, procurement
- Human resources management: sick leave rates, fluctuation rates, employee suggestions for improvement, age and gender structures
- IT: data protection, availability of IT systems
- Compliance: adherence to legal requirements as well as internal company regulations
- Security: prevention measures against cyberattacks
What does an early warning system look like in a controlling context? Is there a particular monitoring tool you use? Can you explain it using marketing controlling as an example?
It’s really difficult to name a specific tool in this case. My specialty is in production controlling, not marketing controlling. In general, we can say that early warning systems are designed to deal with the future. In marketing, we talk about the 4 Ps: Product, Place, Price, Promotion-in other words, communication. And here’s where companies need to assess whether they’re communicating correctly-that is, whether they’re communicating through the right channels (Facebook, newsletter,…) with the right customers. They need to look at their competitors’ prices, which trade shows they should attend, whether they can offer their products in online formats, sell online, etc., etc. The Pestel method (https://de.wikipedia.org/wiki/STEP-Analyse) might be a useful tool here, though I’ve never used it myself.
Is there an early warning system for each phase of controlling?
Of course.
Plan -> Actual values -> Deviations
Deviations are always analyzed and assessed in terms of whether they are “sustainable,” whether they will correct themselves in the coming days/weeks-or whether they’ve already been corrected.
https://rsw.beck.de/cms/?toc=BC.940&docid=81621
When it comes to controlling, what types of factors do we need to pay attention to in order to ensure success?
Well, I think controlling systems need to fit the company-not too big, not too small. In a small company with 2-5 employees, I would start with what I call “controlling light,” focusing on factors like solvency and liquidity, and minimizing dependencies on customers, suppliers, and employees.
If a company intends to grow, its controlling systems need to grow along with it. At some point companies develop their own functional areas, and this is when controlling can become very complex-especially when it comes to calculations around products and services. An important factor that contributes to success is to know your processes and document them from the beginning; it’s also important to pay close attention to the quality of original data when using an ERP system. The better the database, the better and more accurate the reports, and the easier it is to evaluate the data. Management aren’t the only ones who require this information-banks, investors, and/or large customers do as well.
Can you describe any helpful tools you use for problem solving?
The problem-solving tree is a great tool. With this method, problems or issues are described as causes and placed at the root level. The effects of the problems appear in the tree’s branches. By laying out the issues, the causes, and the effects this way, we can easily clarify problems, explore possible solutions, and make quick decisions to resolve them.
The problem-solving tree helps minimize discussion time and finger-pointing and enable people to focus on addressing problems in a more productive way.
What comes to mind when you hear the terms KPIs (key performance indicators) and controlling?
“What you can’t measure you can’t manage.” I think this quote from the great management expert Peter Drucker is the best way to sum up the importance of KPIs.
KPI’s are key performance indicators, i.e. ratios, and they are a very important tool in controlling.
Are there any other valuable tips you‘d like to share with readers?
For me, controlling needs to be part of a company from day one. When it comes to solopreneurs or small business owners, I recommend starting with “controlling light.” I think you should check your financials at least once a week, and preferably do a bit of marketing, too. The larger the company, the more important those financial figures become, since they reflect both the financial and overall health of the company.
Depending on the nature of the business, these financial figures could include sales figures, the number of website clicks per day, production volumes, customer satisfaction, clinical trial results, etc., etc.
Here’s an example of how helpful it can be to apply the principles of controlling to everyday life: An acquaintance of mine regularly takes advantage of the preventive medical checkups offered by his doctor. After each check-up, he has his test results printed out and compares them with the previous year’s numbers. The last time he was doing this comparison, he noticed something in his bloodwork: though some values were still in the “green zone,” they had been steadily increasing. Concerned, he approached his doctor, who hadn’t noticed the change. As it turned out, this was an early-stage indicator of cancer, which they were able to treat before it became life-threatening.
“In my opinion, prevention is better than aftercare, in life and in controlling.”
These are your words, and I think they’re a great way to conclude our MICE crisis management meets blog today. Thank you very much for your excellent insights on the topic of controlling.
Here are my lessons learned for MICE crisis management from my conversation with Barbara Zimmermann:
- Controlling isn’t just a tool for business management structures. We can apply it in many other contexts, too.
- Early warning systems are and remain essential in controlling as well as crisis management. Prevention is always better than aftercare!
The problem-solving tree is a great tool for finding solutions and making decisions. In MICE crisis management, I would use this tool in the preparation phase, assessing the risks and then working out scenarios based on the information gleaned from the problem-solving tree. In the acute phase of a crisis, however, I’d prefer to work with FORDEC.
About Barbara Zimmermann
Barbara Zimmermann has 30 years of professional experience as a controller, business partner, tax expert, systemic coach and HR trainer.
She has been a business partner in the controlling department of a DAX-30 company for nearly 20 years. Every day, she applies her coaching and training expertise to perform at the highest levels in an ever-changing international environment. She enjoys communicating with people, supporting them, and finding ways to combine psychology with the world of numbers.
Her ambitious goals extend to her private life, too. As a multiple marathon runner, her motto is: “there is only one proof of ability: action.”
