Demand has collapsed in many markets as a result of the COVID-19 crisis; in many cases, work in the plants has been reduced to an absolute minimum and every single cost is being carefully reviewed. Operational business of many companies is suffering from this. Earnings are falling away, while fixed costs remain and at the same time there is no way to adjust variable costs to the same degree. This not only results in a significant deterioration in earnings, but often also in a very tight liquidity situation. One response to this problem is the Lean Management approach, which can help you as a member of top management to improve your operational KPIs and with it your company’s earnings and liquidity long-term.
Lean management – a stranger at the table, however…
More than likely, you are already familiar with the methods of Lean management and you have heard of Lean thinking. You may have also already gathered some initial experience, for example by introducing Shop Floor Management to your company, or you may have even already celebrated some initial success (e.g. by optimizing OEE, increasing productivity, reducing setup times, etc.).
But, is the Lean concept in fact firmly anchored in your direct and indirect activities and also in your essential corporate processes? Are you familiar with all of the Lean levers and KPIs that have a sustained positive impact on earnings and liquidity? You will learn more about this in the following blog article.
1. Systematically identify and influence potential levers and value drivers
One of the first steps involves creating transparency with respect to the most important value drivers of your specific company. What is of particular importance here is to be able to identify the right potential levers and to derive the relevant KPIs in order to be able to monitor and guide the improvements. Setting up a KPI cockpit as a central leadership tool for top management can help you to determine daily how your company is doing and whether the desired optimizations are being driven forward with the necessary amount of stringency or whether you need to use deviation management to counteract them. The KPI cockpit is always an integral key performance indicator system, because if management only focuses on singular key performance indicators, this may have a dramatic impact on the success of the company. In addition, the metrics for tracking the improvement programs and measures must be clearly defined with Controlling and communicated to the executive board and the teams in order to bring about a common understanding. Lean measures allow you to positively impact almost all of the quantitative and qualitative value drivers of your company and the key indicators of the value-based corporate management associated with them long-term.
2. The role of Controlling for long-term company success
In the context of an integrated corporate controlling, the controller should assume an integrating function in the future, assuming the role of an interface and with an integral understanding of the relationships between operational processes and financial key indicators. By integrating controlling across all departments on a shop floor level, you can already identify deviations in key operating indicators and address them early on; otherwise they would not be shown until after a time lag in the profit and loss statement, balance sheet and cash flow statements. With these changes to the role, the controller can now start to play an essential part in directing the value stream and in standard operational communication. The traditional function of the financial controller is now expanded to handle parts of the information, management and planning processes in line with the Lean Management concept. It is also a predestined candidate for project management of results improvement programs, because it makes the effects of operational changes of a Lean transformation on business key indicators transparent, thus developing a more effective basis for decision-making in your daily business practice.
3. Basic prerequisites for long-term company success
Just how the COVID-19 pandemic will impact the global economy over the next few months is still very unclear. Adding to the already enormous challenges of this uncertain situation is the advancing digital transformation and a growing pressure to innovate. So, for companies in all industries what is critical is that they align their business models and processes (early) for the future. We also refer to this as “Predictive Restructuring“.
Basic prerequisites for long-term success within your company are therefore the ability to secure liquidity as well as to stabilize or rather optimize the earnings situation. What matters here, in addition to an integrated cost optimization or earnings improvement, is to develop all of the processes within your company as efficiently and with as little waste as possible. For this purpose, the top-down / bottom-up approach was developed as a combined model made up of operational expertise and a superordinate financial perspective on processes in each of the departments (operational excellence).
This requires leadership and corporate structures that promote the ability and willingness to change at all levels. So, you as the leader have the ability to establish confidence, which is necessary in order to convert the employees’ fear of an uncertain future into clear-cut objectives and action steps.
In our seminar, you can learn more about which of the value drivers have a long-term positive impact on Lean management, how performance controlling can be used to make project successes from the Lean transformation more transparently measurable and earnings improvement programs more manageable, and you can also learn how you can implement and realize cascaded corporate management using performance controlling in the business day-to-day.
Christian Sprenger | Partner | Staufen AG
After completing his course of studies in business administration at the Universities of Tübingen and Mannheim, majoring in corporate finance and management, Sprenger worked at Wintergerst Societät für Unternehmer-Beratung for four years. In the position as Project Manager there, he was responsible for a variety of reorganization, restructuring, growth and realignment projects as well as M&A processes. Sprenger assumed a position at Staufen AG in 2017, where he works in the Performance Improvement (Finance) division, and, as a Project Manager, in addition to being responsible for reorganization and restructuring projects, he is also in charge of integrated earnings improvement programs. Since December 2020 he is Partner at Staufen AG.
Christian Möllers | Partner | Staufen AG
Christian Möllers completed his course of studies in business administration at Johann Wolfgang Goethe-University in Frankfurt/Main, where he majored in finance, accounting and taxes. He was then employed at PWC AG WPC, where most recently he held the position as Senior Consultant, in charge of a variety of auditing and consulting projects. Subsequently, he made the change to BK-Partners Asset Management in Mexico, where in the Business Development division, he was responsible for several different due diligence projects, for which he performed financial and strategic analyses of a variety of international investment opportunities. Möllers has been employed at Staufen AG as a consultant since 2013.
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