Planning and Controlling Levels

Planning

• Planning is the systematic anticipation of actions needed to achieve set goals
• Planning is a central instrument of corporate management

Requirements for a Comprehensive Controlling System

• Defining goals and deriving measures to achieve them are key
• Goals and measures should be quantified into a consistent planning system
• Analyzing this planning system and the degree of target achievement is important
• Continuously control target achievement

The Model of Controlling Levels

• Planning and control should occur at all levels with interconnected levels
• There are three levels in the controlling model

Normative level

• Deals with fundamental values such as sustainability, and commandments
• Defines the company's mission and vision
• Guides the vision and mission to the strategic level

Strategic level

• Focuses on developing and implementing corporate strategy, considering the long term
• Controls whether the vision and mission are realistic and attempts to convert everything into financial metrics

Operative level

• Engages in the company's short-term actions and its immediate economic success (profit/loss) or survival
• This level is responsible for daily business
• Successful corporate management means shaping all three levels equally and bringing them into harmony

Two Basic Goals of Controlling

• Securing the financial stability of the company, where corporate liquidity plays a central role

Securing economic success

• Usually entails a sufficiently high profit
• Both basic goals are closely related

Phases in a Planning Process

• Analysis of the current situation and problem identification
• Analysis and evaluation of feasible options (scenarios)
• Determine the most promising alternative
• Controlling loop is never complete

Approaches to Classifying Corporate Planning

• Planning horizon distinguishes between long-term, medium-term, and short-term planning

Planning operationality

• Distinguishes between strategic and operative corporate planning
• Tactical corporate planning can act as a link between the two

Differences Between Functional and Divisional Plans

• Functional plans are recommended for process-oriented organizational structures
• Partial plans are created for the individual steps in the value creation process
• Divisional plans are recommended for object-oriented organizational structures
• Divisional plans are more common in large companies

Control Variables of Controlling

• Ensuring the company's value which is a comprehensive measure of the total value of a company
• An example is securing shareholder value
• Securing the company's value in controlling involves ensuring that the various aspects influencing the company's value are optimized and protected
• Increase the return on investment for shareholders to secure the company's value, while simultaneously ensuring the satisfaction of shareholders

Securing Financial Reserves

• Financial reserves refer to the financial resources a company keeps for unforeseen events or opportunities
• Measured by equity or operating income
• Securing financial reserves in controlling aims to ensure the company has sufficient financial buffers to overcome financial challenges or exploit strategic opportunities
• Managing budgets and monitoring financial metrics are used

Securing liquidity

• Liquidity refers to a company's ability to meet short-term financial obligations like paying debts and bills
• Securing liquidity in controlling focuses on ensuring the company has enough liquid funds to meet its current obligations without facing financial difficulties
• Requires a precise monitoring of cash flows

Income Statement (GuV)

• Consists of several components like revenues, cost of materials, personnel expenses, and depreciation which determine the operating result or success
• Includes income from investments, securities, interest income, and interest expenses to calculate the financial result or success
• Results in earnings before taxes including or excluding extraordinary items, taxes, and leading to the annual surplus or deficit
• May include balance sheet reclassifications

Total Cost vs. Cost of Sales Method

• Total cost method lists revenues, changes in inventory, capitalized own work, other operating income, material costs, personnel expenses, depreciation, and other operating expenses
• Cost of sales method lists revenues, cost of goods sold, gross profit from sales, other operating income, sales costs, administrative costs, and other operating expenses

Better, Advanced, and Beyond Budgeting

• Better Budgeting is a concept that does question classical budgeting

Goal of better budgeting

The goal is to optimize individual areas of corporate planning

• It attempts to improve the quality through specific adjustments like simplifying and focusing on key processes
• It attempts to strengthen the consideration of strategic content in operative planning

Advanced Budgeting

• Classical budgeting is pushed back in advanced budgeting with the goal of optimizing the entire planning system-
• The quality should increase, but the planning effort should decrease, such as through considering non-monetary metrics
• Focusing on key processes which utilizes instruments like the balanced scorecard

Beyond Budgeting

• Aims to abolish classical operative corporate planning

Goal

• Optimizing the entire management system
• Corporate management should be improved by way of focusing on rolling non-monetary metrics, as well as integrated operative and strategic planning, and decentralizing corporate planning

Ways to achieve Beyond Budgeting

• The concerns of employees must be incorporated into the target formulation
• Corporate processes must be changed to transfer responsibility to employees
• Employees who accept and live the new system should be promoted to drive cultural change through leaders
• Executives must rethink their role, transitioning from planning and control to a coaching and inspiration function
• Executives and employees must be shown that rewards are linked not only to individual performance but also to the overall success of the company

Assessing the Plausibility of Planning Calculations

• Every corporate planning must be subjected to a plausibility assessment
• Are the numbers arithmetically correct? Are the goals realistic?

Approaches to Plausibility Assessment

• Formative and material approaches
• The assessment is a first step in formative principles

Formal approach

• If there are basic errors, one does not even have to start with the material test
• The first step is consistency between planning balance sheet, planning income statement, and planning cash flow
• The second step is arithmetical correctness by checking for typos or formula errors

The third step

• The orderly planning process and if the planning process of the company adhered to is adhered to
• How does the planning process proceed (top-down, bottom-up?)"

Material Approach

• Material correctness should be checked after the formal assessment
• Whether the values can withstand a critical comparison with reference values must now also be checked
• Time series comparison happens
• Values can be obtained internally, for example, actual values from the last three to five years
• The danger is to assume that only plan values are plausible that are a continuation of the past
• A business comparison tends to be more relevant where the company is compared with another company and its actual and planned values

Macroeconomic Factors

• Planned values and their underlying assumptions are compared with macroeconomic indicators
• For example, if a market is expected to shrink but sales in the company are supposed to grow
• GDP and market developments such as concentration trends are used

Two Perspectives on Sustainability Issues in the Context of Companies

• Double materiality forms the basis of perspectives

Outside-In Perspective

• Sustainability aspects that can influence the course of business, results, or situation of the company
• Influenced by corporate relevance

Inside-Out Perspective

• Business activities, business relationships, products, and services of the company that have or are likely to have a positive and negative impact on sustainability aspects
• Influenced by sustainability relevance

Forecast

• A forecast is planning that starts from an actual value up to the end of the original planning period
• Three essential steps are the analysis of actual values, as well as derivation of expected values and reporting not only numerically but also with concrete assumptions

Three Basic Approaches to Designing Forecasts

• Actual values + remaining planned values where the actual values up to the reporting date are added to the planned values for the planning period
• Over the course of the period, the planned values are replaced by actual values to know continuously where one stands at the end of the year, if the remaining year progresses as planned
• Approach 2 involves actual values + trend-adjusted remaining planned values
• Planned values are not accepted
• The deviation of the actual values from the plan is analyzed
• Trends are derived from this and projected onto the rest of the period
• Approach 3 involves actual values + newly determined planned values, which is very elaborate, since newly determined planned values are added, i.e., renewed mid-year corporate planning takes place

Sinnhaftigkeit

Three Key Benchmarks for Performance Analysis

• Analyze advantages and disadvantages as well as connections
• Soll-Ist-Vergleich (Target-Actual Comparison)
• The evaluation of a company based on target values

Advantages

• Enables evaluation of the achieved results
• Allows the setting of countermeasures

Disadvantage

• How to derive a meaningful target value?
• 2.) der Zeitreihenvergleich (Time Series Comparison), which looks at the company over a meaningful period

Advantages

• Representativeness of the data, elimination of "outliers" Automatisierungder data
• Aufzeigen von (extrapolierbaren) Entwicklungstendenzen.
• Showing (extrapolable) development trends

Disadvantages

• The future is not included
• Danger of comparing "Schlendrian mit Schlendrian"
• Danger of structural breaks in too long time series vs. missing statement in too short time series
• (Betriebsvergleich) is the comparison of several companies

Advantages

• Sets reference framework for the achieved results of the object under consideration
• Further developable for companies as a comparison to the best companies in an industry
• ("Benchmarking")

Disadvantages:

• High effort to reliably determine comparative objects
• Often do not find valid objects of comparison
• Visualization of the Soll-Ist analysis and of Plan-Wird analysis

Success Factors

• Clear and uniform definition of the considered key figures
• Size of the comparison group
• Homogeneity of the comparison group
• a Soll-Ist analysis is done by comparing with data in a table or other format, and shows where the company and plan are oriented through what's graphically displayed
• a Plan-Wird analysis is done by comparing with prior data, or using a bar/line chart

International Group Of Controlling Definition Of Process

• There are 10 key processes, including strategic planning, operative planning , as well as forecast, and etc "controlling is the entire process of target setting, planning, and management
• Internal/External
• Future results in larger outputs
• Transparency, steer, and control

Various Understandings Of Terms

• The EU Taxonomy role has special value when setting goals for the use of sustainability on all fronts

Different Understandings Of Sustainability

• 1Ökologisches Verständnis- the proper way to use of new resources, the effects of that will determine the success of the program
• 2 soziales Verständnis means that socially developing can make the development of the surrounding social environments more fair and equal, and also help foster relationships between other communities

Relevance

• The role of the key, and is the measurement of future success for the key practices in all organizations- as well as companies

Integration

• Can be applied to areas of environmental, or social structure

The Definition Of The World Sustainable

• The development makes sure to not harm other communities

Social Responsibility

• It's the best way of doing things as a whole- so that the effects of the society can change the world
• The concepts of "triple bottom line" are beneficial as that touches on sectors of the world

Relevance-

The content can make the business more successful

• Using the taxonomy as an approach

Taxonomie VO

• Can classify an assessment
• To classify as sustainable, it must be harmonized to the European standards

Eugen Schmalenbach:

• Learning for the management- is the focus of the future- not to depend solely on the analysis of prior information

Albert Einstein

• Einstein shows and focuses on planning that emphasizes planning as a tool to reduce uncertaints
• Shows that the value is through the planning that's been arranged
• Able to manage the future with the current plans
• Jurgen Wilds shows control without planning

Controlling And The Planning In Organizations

• Planning is like an integral that sets the grounds for the beginning of target completion in a timely matter

Self Chosen Example

• By implementing these in a timely manner, the better it will be for employees
• There can be an increase within the next 3 months/ a year if you do choose to take more people on-board

The Objectives, Performance, and Resources

• When set into action with the market, you gain resources by using extra assistance for marketing campaigns, and develop the areas that are focused on.
• The control is to determine how the results are being placed
• Veranwortlichkeiten- in terms of the organizations structural direction (and also making sure its achievable)

Abgrenzung

• Focus/ and emphasis on the results is to give the task to Management
• Management is responsible for realistic tasks
• Controlling, working together can create realistic things Controller are partners for tasks

MANG

Outlining The Approaches

• (also briefly addressing the proposals created in 2017), and if what has been discussed throughout this
• Courses have contributed to the evaluation process Formell: Closeness, accountability, planning process
• Materially- with time-series analysis, comparable operations, market comparisons

IDW

• Offers theoretical tools for practical application

Intern

• Can be compared with historical experiences

Extern

• Check the figures with external marks
• A sensibility measure is required based on the conditions

With Sensitivity Analysis

• Within the framework or company/ and planning
• What value did it bring to us in terms of reports/ what examples show its function
• Analyzing the KPI, annual results
• What can be taken into account

Energy Providers

• Conditions that matter, price of developing, shares and market value
• What has a company to say about them/how it's success relies on market conditions
• Analysis of KPI, annual results
• sensitively needs to show that complex ideas could be simplified showing the rank of their success

Outline A Sample Company

• Sustainability can show what's the difference when using or not using it
• The model shows more with the company, what they could achieve by managing them
• By saving costs, implementing tech, or the efficiency of costs

Goals

• Increase performance, and the focus for development/ also marketing
• Sustainability and the reduction of environmental risks

Risk-Management

• The manager should update the risk of the analysis and re-valuate the quantitive effects for the risks
• Review is important for the organization and that's what happens yearly

The Overseeing

• Support crisis management
• Name the risks and strengthen the strategies that you've chosen
• The stress analysis needs to be in effect/ on customers and financial numbers
• To see the effect, use the Monte-Carlo technique, will support the aggregation to ensure quality with support/ help.