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THE JOURNEY SO FAR 1 2009 Large budget variances CFO initated a Rolling Forecast project CPA looked into options Stumpled upon Beynd Budgeting 2010 Presented the vision to the executive management team Created a cross functional implementation team and formalized a plan Not good understanding of the BB principles within the team and in some cases opposition to the change Did not manage to implement RF process before budget season kicked in Decided to do a budget for 2011 and pick up the RF project by start of 2011 BEYOND BUDGETING AT ÖSSUR LESS Conference Tallinn November 2012 Axel Úlfarsson

Implementing the Beyond Budgeting Principles in Össur

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Page 1: Implementing the Beyond Budgeting Principles in Össur

THE JOURNEY SO FAR

1

2009Large budget variances

CFO initated a Rolling Forecast project

CPA looked into options

Stumpled upon Beynd Budgeting

2010Presented the vision to the executive management team

Created a cross functional implementation team and formalized a plan

Not good understanding of the BB principles within the team and in some cases opposition to the change

Did not manage to implement RF process before budget season kicked in

Decided to do a budget for 2011 and pick up the RF project by start of 2011

BEYOND BUDGETINGAT ÖSSUR

LESS ConferenceTallinn November 2012Axel Úlfarsson

Page 2: Implementing the Beyond Budgeting Principles in Össur

ABOUT ÖSSUR

Page 3: Implementing the Beyond Budgeting Principles in Össur

ABOUT ÖSSUR

HeadquartersReykjavik,

Iceland

Össur Asia Shanghai,China

Össur Americas

California, USA

Össur EMEAEindhoven, Netherlands

• A global orthopaedic company

• Headquarters in Iceland

• Founded in 1971 by Mr. Össur Kristinsson

• Develop, produce and sell non-invasive

orthopaedics

• Listed on the OMX Copenhagen stock

exchange

• 15 Locations

• 1850 employees

• 400 million USD annual turnover

Page 4: Implementing the Beyond Budgeting Principles in Össur

OUR BEYOND BUDGETING JOURNEY

BEFORE BEYOND BUDGETING

• Long and painful budget process

• Every department with detailed budgets

• Complex planning system

• Started preparation in May

• Heavy process during autumn

• Ended in December with a report for BOD and Executive team

• Value in the report not balanced with the effort in creating it

• Focus on actual vs. budget

Page 5: Implementing the Beyond Budgeting Principles in Össur

OUR BEYOND BUDGETING JOURNEY

HOW IT STARTED

• CFO initiated Rolling Forecast project

• Searched for improved ways to do financial forecasts

• Did some research

• Introduced to Beyond Budgeting

• BBRT conferences

• Presented the vision in 2010

Page 6: Implementing the Beyond Budgeting Principles in Össur

OUR BEYOND BUDGETING JOURNEY

IMPLEMENTING

• Simplified the budget process

• Pull tactic

• Shifted focus from budget to YoY improvements

• Spread the BB “gospel”

• The pull came in 2011

• First high level, 5 quarter rolling forecast in February 2012

• Cost control now with relative KPIs and trend lines

• CEO decides to abandon the budget by 2013

Page 7: Implementing the Beyond Budgeting Principles in Össur

OUR BEYOND BUDGETING JOURNEY

2013…..

• Evaluate and improve

• Target setting processes

• Cost control

• Planning process

• Align the organization on Beyond Budgeting

Page 8: Implementing the Beyond Budgeting Principles in Össur

WHAT HAS CHANGED

2009

2012

Page 9: Implementing the Beyond Budgeting Principles in Össur

WHAT HAS CHANGED

FOCUS ON THE FUTURE

• More trend lines vs. static view

• Planning process on a higher level with

focus on main KPIs

• Shifting management´s focus from the past

and to the future

• Cost control with relative KPIs and trend

lines

19.3%

21.0% 21.0%

20.0%

21.0%

20.0%

19.0%

20.0%

18.0%

19.0%

18.0%

19%

21%

15.0%

16.0%

17.0%

18.0%

19.0%

20.0%

21.0%

22.0%

Q1 ´11 Q2 ´11 Q3 ´11 Q4 ´11 Q1 ´12 Q2 ´12 Q3 ´12 Q4 ´12 Q1 ´13 Q2 ´13 Q3 ´13 Q4 ´13 Goal

Adj. EBITDA %

Adj. EBITDA margin 12M Average

5.0% 5.0%

4.0%

3.0% 3.0%

4.0%

3.0% 3.0% 3.0%

4.0%

3.0%

4.0%

5.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Q1 ´11 Q2 ´11 Q3 ´11 Q4 ´11 Q1 ´12 Q2 ´12 Q3 ´12 Q4 ´12 Q1 ´13 Q2 ´13 Q3 ´13 Q4 ´13 Goal

Organic Sales Growth

Organic Sales Growth 12M Average

Page 10: Implementing the Beyond Budgeting Principles in Össur

CURRENT FORECAST PROCESS

• Used to support decision making

• Consolidated high level forecast

• Down to main locations

• Supporting tools variable based on each location´s needs

• 5 Quarter view

• Updated quarterly with exceptions if needed

• Ownership of numbers with local management (MDs and

department heads)

• Ownership of process with financial controllers

Page 11: Implementing the Beyond Budgeting Principles in Össur

TIME WELL SPENT

• Executive sponsorship

• Communication

• Face to face meetings

• Workshops

• Training

• BBRT

Page 12: Implementing the Beyond Budgeting Principles in Össur

CHALLENGES

• Rewards/Bonus structure

• Target setting

• Braking old habbits

• Forecast reliability

• Information on external peers

Page 13: Implementing the Beyond Budgeting Principles in Össur

Thank you