Detecon Study Management Reporting: A Study by Detecon (Switzerland) AG in Cooperation With The University of St. Gallen

> Study
Management Reporting
A study by Detecon (Switzerland) AG in cooperation with the
Institute for Accounting, Controlling, and Auditing of the University of St. Gallen.
www.detecon.com/ch/
Management Reporting Study <
Management Reporting
A study by Detecon (Switzerland) AG in cooperation

with the Institute for Accounting, Controlling, and Auditing
of the University of St. Gallen
December 2008
In cooperation with:
> Study Management Reporting
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of Detecon (Switzerland ) AG.
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2 © Detecon (Switzerland) AG
Table of Contents
1. Executive Summary 5
2. Background and Procedure 7

2.1 Management Reporting as a Success Factor of Effective Corporate Management 7
2.2 Methodology and Study Demographics 8
3. The Major Features of Excellent Management Reporting 10

3.1 Major Properties of Management Reporting in the Category Concept 10
3.1.1 The Excellence Criterion of “Relevance“ 11
3.1.2 The Excellence Criterion of “Stringency“ 15
3.1.3 The Excellence Criterion of “Consistency“ 16
3.1.4 Ranking and other Excellence Criteria 18
3.2 The Major Properties of Management Reporting 19

in the Category Processes/IT Support
3.2.1 The Excellence Criterion of “Data Quality“ 19
3.2.2 The Excellence Criterion of “Transparency and Reproducibility“ 20
3.2.3 The Excellence Criterion of “Efficiency“ 21
3.2.4 The Excellence Criterion of “Up-to-Dateness“ 22
3.3 The Major Properties of Management Reporting 24

in the Category Personnel and Organization
3.3.1 The Excellence Criterion of “Personnel Efficiency“ 24
3.3.2 The Excellence Criterion of “Organizational Efficiency“ 25
3.3.3 The Excellence Criterion of “Stability“ 25
4. Major Fields of Action and Design Recommendations for Excellent 28

Management-Reporting
4.1 Fields of Action and Design Recommendations with Respect to Concept 28
4.2 Fields of Action and Design Recommendations with Respect to 33
Processes and IT Support
4.3 Fields of Action and Design Recommendations with Respect to 40
Personnel and Organization
5. Final Thoughts and Outlook 41
6. The Authors 42
7. The Publishers 43
8. Participating Companies 43
9. Bibliography 44
© Detecon (Switzerland) AG 3
Table of Figures
Figure 1: Number of participating companies according to origin 9

Figure 2: Study participants according to position and area of responsibility 9
Figure 3: Overview of Excellence Criteria 10
Figure 4: Combined Ratios of Swiss Insurance Companies from 2000 to 2007 12
Figure 5: Excellence Criterion Relevance: Importance and Satisfaction 13
Figure 6: Effects of Performance Indicator Systems on Conduct 15
Figure 7: Excellence Criterion Stringency: Importance and Satisfaction 16
Figure 8: Excellence Criterion Consistency: Importance and Satisfaction 17
Figure 9: Ranking According to Importance of each Excellence Criterion 18
of the Dimension Concept
Figure 10: Other and Specific Excellence Criteria in the Dimension Concept 18
Figure 11: Excellence Criterion Data Quality: Importance and Satisfaction 20
Figure 12: Excellence Criterion Transparency and Reproducibility: 21
Importance and Satisfaction
Figure 13: Excellence Criterion Efficiency: Importance and Satisfaction 21
Figure 14: Excellence Criterion Efficiency: Up-to-dateness 22
Figure 15: Ranking According to Importance of Each Excellence Criterion 23
of the Dimension Processes/IT Support
Figure 16: Other and Specific Excellence Criteria in the Dimension Processes/IT 23
Figure 17: Excellence Criterion Personnel Efficiency: Importance and Satisfaction 24
Figure 18: Excellence Criterion Organizational Efficiency: Importance and Satisfaction 25
Figure 19: Excellence Criterion of Stability: Importance and Satisfaction 26
Figure 20: Ranking According to Importance of Each Excellence Criterion 26
Related to Personnel and Organization
Figure 21: Other Excellence Criteria Personnel/Organization 27
Figure 22: Objectives of Management Reporting 28
Figure 23: Report Pyramid of Volkswagen AG 31
Figure 24: Implementation of Performance Indicators 31
Figure 25: Most Important Performance Indicators 32
Figure 26: Total Expenditures Process Steps 33
Figure 27: Critical Interfaces 34
Figure 28: Basic Principle of Process Orientation 35
Figure 29: Comments 38
Figure 30: Integration of the Controlling Department 39
Figure 31: Presentation and Distribution of the Reporting Contents 39
Figure 32: Further Training of the Staff 40
1. Executive Summary
Excellence in management reporting is a major factor in achieving sustained, successful corpo-
rate management. It raises the quality of business decisions by providing all relevant data for
decision-making and by describing the effects of these decisions, both financial and non-financial.
Management reporting must not be taken lightly, since it is an important channel for the internal
communication of goals and responsibilities, as well as a driver for the successful implementation
of strategies. Moreover, management reporting supports external communications by providing
leading indicators based on value drivers, satisfying the increased demand for information from
analysts, lenders and similar groups. In actual practice, however, very few management reporting
systems support these functions adequately.
In view of these circumstances, this study was undertaken to identify critical success factors
through a structured analysis of the fields of activity in management reporting. The results are
used as a basis for recommendations how to design the system, taking into consideration three
categories: Concept, Processes/IT, and Personnel/Organization.
A total of ten critical success factors was identified in each of these categories. Their significance
is considered to be very high or high by the overwhelming majority of people surveyed. This has
made it possible to identify the crucial success factors in management reporting. They are as
follows:
Excellence Criteria in the Category Concept

• Relevance
• Stringency
• Consistency
Excellence Criteria in the Category Processes/IT Support

• Data quality
• Transparency and reproducibility
• Efficiency
• Up-to-dateness
Excellence Criteria in the Category of Personnel/Organization

• Personnel efficiency
• Organizational efficiency
• Stability
Furthermore, individual satisfaction with the specific weighting of these criteria was defined and
the current situation with respect to management reporting was analyzed in further detail during
discussions with respondents. The most important problem areas in management reporting were
derived from this analysis and recommendations for a new design were submitted:
Design Recommendations in the Category Concept

• Define reporting contents based on value driver logic
• Introduce coordinated mechanisms for the evaluation of information requirements
• Implement reporting pyramids
• Reduce complexity of management reporting by restricting it to essential elements
Design Recommendations in the Category Processes/IT Support

• Design a consistent system architecture
• Reduce manual interfaces
• Designate people responsible for the process
• Define a standard report layout and guidelines for a user-oriented presentation of report
contents
• Expand the understanding of the controller’s role as a way of substantiating comments
• Implement reporting tools
Design Recommendations in the Category of Personnel/Organization

• Define roles and areas of responsibility clearly
• Develop a concept for the role of the management reporting team as in-house consultants
• Conduct HR development measures to improve analytical and communication skills
Implementing these design recommendations leads to quality improvements in both business

analysis and corporate decision-making, as well as to an increase in efficiency in generating the
management reports themselves. As a result, management reporting can contribute substantially
to the overall success of corporate management.
This study was conducted as a cooperative project between Detecon (Switzerland) AG and the
Institute for Accounting, Controlling, and Auditing at the University of St. Gallen.
2. Background and Procedure
2.1 Management Reporting as a Success Factor of Effective

Corporate Management
Management reporting is decisive for the quality of corporate decisions and for effective internal
and external communication. It represents a major factor for sustained, successful corporate
management.
In this sense, the term “management reporting” is understood to mean a standardized internal
reporting to the top-level management of a company on a regular basis. The primary task of ma-
nagement reporting is to provide information critical for the company’s success, but it also serves
as an aid in the decision-making process and in controlling. Moreover, a well-designed manage-
ment reporting system can offer support for external communications, making it easier to satisfy
the increased information needs of stakeholders such as analysts, lenders, etc.
If management reporting is to perform these functions properly, there must be general assurance
that the major drivers for corporate success are included in it. The information critical for success
must reach the appropriate recipients in secured quality, logically structured, and as timely as
possible. The realization of these general requirements within the framework of financial manage-
ment confronts the responsible people with the following challenges in daily practice:
• Keeping pace with concept requirements. Owing to the accelerating dynamics of the market
and to changes in the company, report contents must be adapted in shorter and shorter
cycles.
• Maintenance and expansion of functional capabilities of the reporting system. At the same
time, money, time, and human resources are scarce and must not be overstretched.
• Reduce complexity. This is a consequence of the rising number of reports as well as of
their increase in scope. This reduction is also a prerequisite for creating the required trans-
parency with respect to costs and actual utilization of resources for management reporting.
• Timely provision of report contents appropriate for specific recipients.
• High quality standards. For example, it is important to avoid inconsistent report contents so
that “working with the figures” is facilitated rather than “arguing about the figures”.
• Striking a balance among conflicting targets. The requirements of up-to-dateness and quality,
for example, must be coordinated with each other.
• Active knowledge management. The functional capabilities of management reporting
systems must be secured independently of the expertise of individual employees.
In many cases, these problems are not considered from a holistic perspective, and relevant
target systems and possible leverage points for optimizing management reporting systems
will not be identified. This lack of awareness is aggravated when there is no feedback from the
report recipients concerning contents, presentation, report dates, etc., so that the originators may
implicitly conclude that everyone is statisfied with the current status. There is also a lack of critical
distance which is necessary to determine realistically where the management reporting system
stands. Consequently, the goals for management reporting are formulated inadequately, and exi-
sting leverage points for optimization remain unused. Furthermore, this means that the topic of
management reporting is not always at the top of the agenda with the people responsible, even
though most of the challenges mentioned above affect them as well. Seeing the need to develop
an adequate goal system for management reporting and to analyze the possible leverage points,
Detecon (Switzerland) AG and the Institute for Accounting, Controlling, and Auditing at the
University of St. Gallen decided to conduct a joint empirical study on the topic of management
reporting.
The so-called “excellence criteria” were used to define a goal system which was validated by an
extensive, personal survey of more than 60 decision-makers from the financial and controlling
departments (CFOs, Heads of Controlling) at leading companies in Switzerland, Germany, and
Austria. Criteria for the three areas of Concept, Processes/IT and Personnel/Organization were
defined. They will be presented in detail in the third part of the study, and the results of the survey with
respect to significance and satisfaction of these criteria will be discussed. Moreover, the significant
problem areas of management reporting were analyzed structurally within the framework of the
interviews. An evaluation of this analysis is presented in the fourth section, and recommendations
for action are derived from the results. Supplementary appendices and case studies provide
additional value for readers by expanding on certain aspects and offering thought-provoking
ideas.
2.2 Methodology and Study Demographics
The target group of this study were CFOs and Finance Executives (e.g. CFO, Head of Finance
& Controlling etc.) in leading large corporations in Switzerland, Germany, and Austria. A total of
64 personal interviews were conducted in the spring and summer of 2008. The interviews were
structured on the basis of a questionnaire containing both quantitative and qualitative questions.
Excellence criteria were subdivided into the areas of Concept, Processes/IT Support, and Perso-
nnel/Organization as mentioned above. The significance of these criteria for excellent manage-
ment reporting was validated with the respondents and their satisfaction with each criterion was
determined. In addition, concrete fields of action were discussed in relation to questions about the
status quo of management reporting, and design recommendations were drawn up.
Just under half of the interviews (29) were conducted with Swiss companies. The remaining inter-
views were divided almost equally between Germany (17) and Austria (18).
Origin of the participating companies
29
18
17
Switzerland Austria Germany

Number of companies: 64
Figure 1: Number of participating companies by origin
The majority of study participants (67%) hold the position of Head of Controlling. This means that
most of the people surveyed bear responsibility for management reporting. In addition, these
people are in a position to influence the design of management reporting in their companies.
75% of the respondents held positions which entailed corporate-wide responsibility in this area.
Furthermore, a good mixture of industries among the participating companies was secured (cf.
Chapter 8: Participating Companies).
Study participants by position Study participants by area of responsibility
What position do you hold in your company? For what area(s) are you responsible?
Head of Country/
Management Countries/
Reporting Other
Region(s)
8% 11%
14%
Chief
Financial
Officer Company unit
14%
11%
75%
67%
Head of Controlling
Entire company
Number of companies: 64 Number of companies: 64
Respondents: 72 Respondents: 72
Figure 2: Study participants by position and area of responsibility
3. The Major Features of Excellent Management

Reporting
Major objectives of the study are to identify, validate, and prioritize major criteria which
characterize high-quality management reporting (so-called “excellence criteria”). The
criteria describe the standards expected of excellent management reporting as observed in
practice, so they can serve as target dimensions for the design of management reporting systems
and for an individual assessment of a current situation. Based on consultants’ experience at
Detecon (Switzerland) AG and on the practice-oriented teaching at the University of St. Gallen,
ten criteria in the categories of Concept, Processes/IT, and Personnel/Organization were pre-
defined and validated in the course of the interviews. These criteria represent generally appli-
cable attributes of management reporting (see Figure 3). Additional criteria were discussed and
identified which, in the opinion of the respondents, were as characteristic of excellent manage-
ment reporting as the proposed criteria. These attributes are specific to the companies, e.g., they
included the competitive environment, industry, or corporate culture.
Excellence Criteria
Generally Applicable Excellence Generally Applicable Excellence Generally Applicable Excellence

Criteria Concept Criteria Processes/IT Criteria Personnel/Organization
Related to the content design of the Related to technical aspects of the Related to the organizational structure
management reporting process for the creation of the and the employees who are the basis
management reporting and its technical for the management reporting
� Relevance support by IT
� Personnel efficiency
� Stringency � Data quality
� Organizational efficiency
� Consistency � Transparency and reproducibility
� Stability
� Efficiency
� Up-to-dateness
Specific Criteria Specific Criteria Specific Criteria
Figure 3: Overview of Excellence Criteria
3.1 Major Properties of Management Reporting in the Category

of Concept
The major properties in terms of concept are related to the content design of a reporting system.
A distinction is made in this category between relevance, stringency, and consistency. These
criteria describe guidelines for report contents which ensure that the right performance indicators
are reported. Following these guidelines makes it possible to prevent conceptual problems such
as the perception of reports as “graveyards for figures”.
3.1.1 The Excellence Criterion of “Relevance”
This criterion refers to the significance of individual performance indicators in terms of the support
they provide to decision-making and controlling. In other words, the appropriate performance
indicators are used for corporate management and for controlling the achievement of goals. This
aims to raise the level of rationality in the decision-making processes and to offer an objective
basis for assessing success.
Appendix 1: The Fundamental Functions of Management Accounting: Decision vs.

Responsibility Accounting
The term of “managerial accounting” used in the Anglo-Saxon world is essentially the same as the
concept of internal accounting from German-language literature concerning controlling. A distinction
is made between two fundamental functions within managerial accounting: “decision accounting”
and “responsibility accounting”.
The goal of decision accounting is to support the decision-making process by providing the relevant
performance indicators and analyzing the potential effects of a decision on the company’s success.
In each case it will depend on the assumptions underlying the decision-making situation which
performance indicators are required.
In contrast, the primary goal of responsibility accounting is delegating and controlling of responsi-
bilities. So-called “responsibility centers” (cost, revenue, profit, or investment centers) serve as a
reference framework. Responsibilities are generally delegated by means of plans (budgets) which
are checked at regular intervals to ensure compliance with them. As a rule the performance evaluation
of responsible people is directly influenced by the extent to which they have achieved their goals. A
prerequisite for the functioning of responsibility accounting systems is “controllability”, i.e., the extent
to which assessment values can be influenced by the responsible person in each case.
In actual practice, management reporting has both functions in many companies. It is frequently
designed as a tool to support decision-making as well as to measure success. However, this dual
nature can lead to conceptual difficulties being overlooked because not all of the performance
indicators relevant for the decision can be controlled by the responsible people and not all of the
performance indicators which can be controlled are relevant for the decision.
Source: Cf. A. Bhimani, C. T. Horngren, S. M. Datar, G. Foster, 2008, p. 488
The continuous review of performance indicators in the reports with respect to “relevance” is one
of the key tasks within the framework of financial management, as an example from the insurance
business shows.
Appendix 2: The Significance of the Criteria “Relevance” and “Stringency” using the Perfor-
mance Indicator “Combined Ratio” as an Example in the Insurance Business
In addition to their operational business, insurance companies play a role on financial markets
because they invest revenues from premiums in various investment classes, usually over a longer
period of time. During the late 1990s, the companies realized extraordinary returns on the stock
markets. The income from this investment business was used to compensate or to overcompensate
combined ratios from the operational insurance business. The poor performance in the operational
insurance business as expressed by the performance indicator “combined ratio” was largely ignored.
Consequently, this performance indicator was not regarded as relevant for the management of the
business. But combined ratios of more than 100% could be accepted only as long as the losses
for the core business could be compensated by the comparatively high yields from investments.
This combination of neglecting the core business and concentrating on the investment business
led to an extremely disadvantageous risk position. The corrections on the stock markets after the
implosion of the dotcom bubble, the terror attacks of 9/11, and natural disasters made this position
glaringly evident and plunged the industry into a crisis. The key importance, i.e., relevance, of the
performance indicator “combined ratio” for the insurance industry was not acknowledged until this
shakeup occurred.
Combined Ratios of Swiss Insurance Companies from 2000 to 2007
%
118 Swiss Insurance Company A
116 Swiss Insurance Company B
114 Swiss Insurance Company C
110,9 110,9
112
110
106,5 111,5
108
106 107,4 104,6
104,5
104 102,0
102 104,2 103,2 100,8
99,2
100 101,4
99,9
98 100,0
95,1
98,4
96 97,5 94,0 95,6
94 94,1
94,0 94,5
92 93,9
90
2000 2001 2002 2003 2004 2005 2006 2007
Source: Detecon, own research
Figure 4: Combined Ratios of Swiss Insurance Companies from 2000 to 2007
Source: Own research
The necessity of balanced reporting is also reflected in the criterion of “relevance”. Financial per-
formance indicators do not suffice for a comprehensive assessment of a company’s position and
for the support of decision-making processes because they frequently only describe the past and
take into account only one goal dimension of the company. Integrating leading and non-financial
performance indicators is essential for a greater emphasis on relevance in management repor-
ting.
“Relevance” was given a “very high” (54 respondents) or “high” (10 respondents) significance
rating by all respondents. With respect to satisfaction as far as “relevance” is concerned, the
dissatisfaction with the non-financial performance indicators as well as with the external perfor-
mance indicators turned out to be relatively high while there was high satisfaction with the finan-
cial performance indicators.
Importance Satisfaction
How high do you assess the general significance of How satisfied are you with your performance
“relevance” for the performance indicators in your indicators with respect to their relevance?
management reporting?
54 3%
Financial 42% 44%
11%
Number of responses
Non-financial 27% 34% 29% 10%
10
0 0
External 27% 30% 33% 10%
Very low Low High Very high
Significance of the criterion Satisfaction with the criterion
Very satisfied Satisfied Less satisfied Not satisfied
Usable responses: 64 Usable responses: 64
Figure 5: Excellence Criterion Relevance: Importance and Satisfaction
It must be noted here that many of the respondents see the focus of their work in the reporting
of financial performance indicators. They often express the opinion that the non-financial and
external performance indicators play only a subordinate role for top-level management. It is only
in very few companies that non-financial and external indicators are integrated into manage-
ment reporting consistently and all the way through to the very top managers. All the profound
discussions about Balanced Scorecards appear to have had little effect on this point in practice.
If reports include information about non-financial and external factors, they come from the depart-
ments themselves. This one-sided focus on the reporting of financial performance indicators is
contrary to the controller’s self-image as an in-house consultant to the business departments as
described by the International Group of Controlling (IGC).
Appendix 3: The Controller Model of the IGC
Controllers design and accompany the management process of defining goals, planning, and
controlling and thus have a joint responsibility with the management to reach objectives.
This means:
• Controllers ensure the transparency of business results, finance, processes, and strategy and thus
contribute to higher economic effectiveness.
• Controllers co-ordinate sub-targets and the related plans in a holistic way and organize a repor-
ting system which is future-oriented and covers the enterprise as a whole.
• Controllers moderate and design the controlling process of defining goals, planning, and mana-
gement control so that every decision-maker can act in accordance with agreed objectives.
• Controllers provide managers with all relevant controlling information.
• Controllers develop and maintain controlling systems.
Source: http://www.igc-controlling.org/DE/_leitbild.php
Moreover, the focus on financial performance indicators also gives rise to questions about the
implementation of strategies. After all, performance indicators draw attention to the parameters
on which they are based. If top managers give little consideration to non-financial, leading per-
formance indicators, there is a risk that the lower ranks will not pay the necessary attention to
these leverage points either, even though they are necessary for a sustainable development of
the company.
Appendix 4: Effects of Performance Indicator Systems on Conduct
Managing a value driver is not possible unless the influence that employees have on it is made
visible to them and they receive feedback about their performance. But this in turn requires making
the value driver measurable (“What counts gets measured”).
However, simply defining a performance indicator is not adequate because a mere calculation does
not trigger any changes. The employees must also realize the measures appropriate for achieving
their goals. The employees’ motivation to achieve goals can be further increased by rewards.
Ultimately, the performance indicators must be integrated into the employees’ reward system (“What
gets rewarded really counts”). The consequence is that the things that employees primarily do are
also rewarded (“What gets done gets rewarded”).
Thus the employees know where they stand and what is expected from them. This necessary
operationalization of target values leads to a better understanding of their causes and the degree to
which they can be influenced. “If you can’t measure it, you can’t manage it.” (Kaplan, Norton 1997, p.
20). But the opposite is also true: if certain aspects are not measured, they appear to be unimportant
to employees (if something is not important enough to be measured, it is not important enough to get
done) and will not be done (“What gets measured gets done”).
Effects of Performance Indicator Systems on Conduct
What gets rewarded

really counts
What counts, What gets done,

Strategy
gets measured gets rewarded
What gets measured,

gets done
Source: Robert N. Anthony, Vijay Govindarajan, 2003, p. 494
Figure 6: Effects of Performance Indicator Systems on Conduct
3.1.2 The Excellence Criterion of “Stringency”
The excellence criterion of “stringency” describes the conformity between collected performance
indicators and corporate strategy. It is mandatory that report contents be based on the strategy.
Yet it must also be noted that different business models require different report contents or focal
points in the reporting. Effectively communicating, anchoring, and thus implementing the strategy
in the company are only possible if report contents are strictly in accordance with it.
The significance of this criterion is clearly illustrated by the following quote from Robert Kaplan,
thought leader in management and controlling theory: “The strategy itself is not really so impor-
tant, that is, whether a company is positioned as a low-cost provider or an innovation leader in
its industry; nor is it essential that a company succeeds in finding impressive wording to describe
its strategy. The decisive point is whether companies find the ways and means to realize strate-
gies consistently and measurably. This is what is missing time and time again.” (Interview with
R. Kaplan; Handelsblatt of 09/02/20007, source: http://www.handelsblatt.com/unternehmen/stra-
tegie/viele-kennen-die-strategie-nicht-mal;1217796)
The assessment of “stringency” with respect to significance and satisfaction revealed a picture
similar to that of “relevance” for the respondents. Once again, the significance of the criterion was
ranked by everyone as “high” or “very high”, and the greatest shortcoming with regard to satisf-
action was expressed for the non-financial and external performance indicators. Consequently,
there is a deficit in the translation of the strategy into non-financial performance indicators and
their reflection in management reporting.
“stringency” for the performance indicators of your indicators with respect to their stringency?
47
Financial 45% 34% 16% 5%

Number of responses
Non-financial 31% 43% 20% 6%

13
4
0 External 32% 32% 34% 3%
Significance of the criterion Significance of the criterion
Figure 7: Excellence Criterion Stringency: Importance and Satisfaction
3.1.3 The Excellence Criterion of “Consistency”
This criterion describes the comparability of performance indicators over the course of time and
in aggregate form without any contradictions. Performance indicators which are reported for the
entire enterprise must be generated on the basis of standardized definitions and aggregation
rules. Meaningful comparisons can only be made if the data which are to be compared have been
determined according to the same logic over the course of time. This is essential for the decision-
making process when it is a question of weighing possible alternatives for action on the basis of
reported performance indicators. In addition, consistency is a prerequisite for being able to eva-
luate performance in varying dimensions (company units, products, markets, customers, etc.) so
that any needs for action can be identified and measures can be prioritized.
It turns out in practice that harmonizing internal and external reporting represents a major driver
for maintaining consistency. So progress in harmonization is already far advanced in the majority
of companies surveyed. There are isolated cases in which separate reporting chains are pursu-
ed – in these cases precise transfer rules are used to secure their consistency. There is a risk
here that performance indicators will be doubted rather than accepted, or ignored. There will be
“arguing about the figures” rather than “working with the figures”. This is a development which
controlling must prevent, not least in its own interest.
“Consistency” was given “high” importance throughout and most respondents were satisfied
with it.
“consistency” for the performance indicators of your indicators with respect to their consistency?
management reporting? 44
2%
Financial 45% 44%
10%
Number of responses
18 2%
Non-financial 57% 31%
10%
0 1 3%
External 55% 31%
10%
Figure 8: Excellence Criterion Consistency: Importance and Satisfaction
When interpreting satisfaction, one must keep in mind that creating consistency in reporting is
one of the fundamental tasks of controlling, so it is the object of intense scrutiny.
3.1.4 Ranking and other Excellence Criteria
“Relevance” was mentioned most frequently as the most important criterion while “stringency”
and “consistency” were mentioned almost equally as the second-most important criterion.
Ranking According to Importance of Each Excellence Criterion of the Dimension Concept
Can you rank the previous criteria according to their significance?
Relevance Stringency Consistency

35 35 35
32
30 30 30
25 25 25
22
20
20 20 19 20 19
15 15 15
12 12
10 8 10 10 9
5 5 5
0 0 0
Legend: Most important Second-most important Third-most important
Number of companies: 64 No ranking possible = 6 Usable responses: 57
Figure 9: Ranking According to Importance of each Excellence Criterion of the Dimension Concept
Moreover it was “Simplicity and Understandability” which were mentioned most frequently as
Concept Criteria. This reveals a desire for quantitative limitations and for a reduction of the degree
of abstraction in report contents.
Other and Specific Excellence Criteria
In your opinion, what other excellence criteria in the area of concept are decisive for excellent management
reporting?
11
9
Number of responses
3
2 2
Simple, understandable Harmonization of the Inclusion of the outside Customer/Recipient Other

performance indicators accounting perspective, balanced orientation
performance indicators
Number of responses: 27
Figure 10: Other and Specific Excellence Criteria in the Dimension Concept
3.2 The Major Properties of Management Reporting in the Category

of Processes/IT Support
The criteria described below are related to technical aspects of the process of creating manage-
ment reports and to its technical support by IT. The range of the process starts with capturing
data from pre-systems (e.g., billing systems) and extends to the providing and presenting report
contents offline (e.g., print-outs of the report) or online using IT-supported applications (e.g., Web
portal, management cockpit). In the IT/process perspective, a distinction is made between data
quality, transparency/reproducibility, efficiency, and up-to-dateness as excellence criteria. Excel-
lent management reporting is characterized by being generated efficiently and by high quality
standards for data correctness and up-to-dateness. Moreover, the process should be designed to
be transparent so that it is also understandable for third parties. This ensures an optimal utilization
of available resources.
3.2.1 The Excellence Criterion of “Data Quality”
”Data Quality” as used in this context refers to the standardized definition and error-free collection
and further processing of performance indicators. Data quality is a decisive factor when the aim
is to provide meaningful management information and is a prerequisite for the acceptance of the
calculated parameters. The following example from NASA impressively demonstrates the drastic
consequences that can result from poor data quality.
Appendix 6: Effects of Poor Data Quality as shown by the Example of the Loss of the Space
Probe “Climate Orbiter” by NASA
The topic of data quality is of key importance because erroneous, incomplete, or false data can
result in enormous financial losses. The crash of NASA’s Climate Orbiter illustrates the losses which
can be caused by the defective processing of data. NASA launched a rocket on its way to Mars on
11 December 1998. It was carrying the Climate Orbiter, a satellite which was supposed to orbit the
“Red Planet” and study the Martian atmosphere. The launch went smoothly, but on 23 September
Climate Orbiter fell apart or vaporized in the Martian atmosphere. A fatal error in the conversion of
flight data from American measurements to the metric system led to the incorrect programming of
the satellite and to its crash. Some of the data required to calculate the orbit used in the American
measurement unit “pounds of force” instead of in the metric unit “Newton”, indicating that the crash
was the result of human error and not of a technical breakdown. The space experiment with a price
tag of $125 million was a total failure.
Source: http://www.handelsblatt.com/technologie/produkte-trends/die-pflege-von-firmendaten-verhindert-
teureflops;872152
The high significance “Data Quality” was confirmed by the results of this study as expected. Ten
of the surveyed companies reported that the data material on which their management reporting
was based was not of satisfactory quality. The two most common causes:
• Decentralized data entry and data storage due to heterogeneous and non-integrated system
landscapes
• Incorrect data entry - unintentional or possibly even intentional
But in addition to the possible adverse effects on the validity of performance indicators, poor data
quality is a high risk with respect to compliance. If they do not have security and control measures
such as an authorization system to limit data manipulation, companies are at risk in this respect.
How high do you assess the general significance of How satisfied are you with the processes for
“data quality” for the performance indicators of your generation of the management reporting with regard
management reporting? to the criterion “data quality"?
56
Number of responses
Data quality 37% 48% 8% 8%

6
0 2
Figure 11: Excellence Criterion of Data Quality: Importance and Satisfaction
3.2.2 The Excellence Criterion of “Transparency and Reproducibility”
This criterion describes the possibility to analyze and reproduce data with respect to their origins
by means of systematic and technical backups. The aim here is to be able to reproduce where the
data in a report come from and what transformations have been carried out. Transparency and
reproducibility imply a robust reporting process which ensures that the same data transformations
always lead to the same results.
The criterion of “Transparency and Reproducibility” also proves to be highly significant. Only one
company evaluated transparency and reproducibility of performance indicators as minor.
How high do you assess the general significance of How satisfied are you with the processes for generation
“transparency and reproducibility” for the performance of the management reporting with regard to the criterion
indicators of your management reporting? “transparency and reproducibility"?
41
Number of responses
21
Transparency/ 5%
48% 39%
Reproducibility 8%
1 0
Figure 12: Excellence Criterion of Transparency and Reproducibility: Importance and Satisfaction
3.2.3 The Excellence Criterion of “Efficiency”
“Efficiency” is understood as a reasonable cost-benefit ratio in terms of the utilization of labor and
technology.
This criterion played more of a subordinate role for some of the surveyed companies. Especially
reports to the very top level of management frequently emphasize the idea of service, leading in
extreme cases to a mentality of “no matter what it costs” in the area of management reporting.
This is reinforced by the common situation that there is a lack of transparency concerning the true
costs and the actual utilization of resources for management reporting.
How high do you assess the general significance of How satisfied are you with your management reporting
“efficiency” for the performance indicators of your processes with regard to „efficiency“?
31
23
Number of responses
8 5%
Efficiency 48% 39%
2 8%
Figure 13: Excellence Criterion of Efficiency: Importance and Satisfaction
3.2.4 The Excellence Criterion of “Up-to-Dateness”
“Up-to-dateness” is measured by the time difference between the end of an accounting period
and the availability of the core management figures.
The study results show that efforts to achieve up-to-dateness vary greatly among the different
industries. For example, a high level of tangible assets means that the decision-making period is
relatively long, so that the criterion of up-to-dateness tends to have less weight for companies in
these industries. Moreover, it must be noted that, as a rule, an improvement in up-to-dateness in-
volves an increase in manual work, substantial investments in IT, and/or a lowering of data quality.
So some of the initiatives in this direction must be regarded with a critical eye when considered
from a rational viewpoint. The view of Jürgen Weber that the fastest possible preparation of the
report is mandatory in every case to gain the acceptance and satisfaction of the managers is not
shared in this aspect. (cf. T. Lührmann, J. Weber, R. Malz, 2008, p. 48)
How high do you assess the general significance of How satisfied are you with the management
“up-to-dateness” for the performance indicators of reporting processes with regard to
your management reporting? „up-to-dateness“?
35
Number of responses
21
7 Up-to-
37% 43% 15% 5%
dateness
0
Figure 14: Excellence Criterion of Efficiency: Up-to-dateness
The criterion of “Data Quality” was mentioned far more often than any others as the most impor-
tant criterion. There were contrary opinions with respect to importance - these were reflected in
the evaluation for the excellence criterion of “Efficiency”.
Ranking According to Importance of Each Excellence Criterion of regarding Processes/IT Support
Transparency and
Data quality Efficiency Up-to-dateness
reproducibility
45
45 45 45 45
40 40 40 40
35 35 35 35
30 30 28 30 28 30
25 25 25 24 25
20 20 19 20 20 17 16
15 15 15 15 13
10
10 8 10 8 10 10
5 4 5 5 4 5
1 2 1
0 0 0 0
Legend: Most important Second-most important Third-most important The fourth most important
Figure 15: Ranking According to Importance of Each Excellence Criterion regarding Processes/IT Support
From the IT and process perspective, the most frequently mentioned additional criteria were “Fle-
xibility” and “High Level of Automation”. High systems flexibility is necessary so that the reporting
can be adapted to changes in the market and in corporate conditions. A basic prerequisite it is the
standardization of processes and data, but in practice there is frequently a lack of diligence in this
area. “High level of automation” was also often mentioned as an additional excellence criterion.
But a high level of automation is not the goal per se; it is merely the means to an end, the achie-
vement of data quality, up-to-dateness, and efficiency. “Process Orientation” was also mentioned
as another excellence criterion and a major success factor for the achievement of quality, trans-
parency, up-to-dateness, and efficiency targets.
In your opinion, what other excellence criteria in the area of processes and IT support are decisive for
excellent management reporting?
11
Number of responses
3 3
2
Flexibility High level of automation Presentation Other (each mentioned

only once)
Figure 16: Other and Specific Excellence Criteria in the Dimension Processes/IT
3.3 The Major Properties of Management Reporting in the Category

If management reporting is to be assessed from a holistic perspective, the structural organization

and the employees must be considered as well as conceptual aspects and those of process and
IT. We distinguish between personnel and organizational efficiency as well as stability as excel-
lence criteria. It is just as true for management reporting as for anything else that employees are
the most important resource. If they are to utilize their skills fully, it is decisive that, first of all, their
skills are rigorously developed further and that, second, they are not hindered in the performance
of their duties by the structural organization. Management reporting depends on effective team-
work; this requires a team which is functioning together smoothly, and this is in turn possible only
if a certain degree of consistency is maintained on the team.
3.3.1 The Excellence Criterion of “Personnel Efficiency”
“Personnel Efficiency” signifies the qualitative factor related to staff members on the reporting
team, not the quantitative one. This includes, among other considerations, knowledge potential
with respect to requirement profiles, motivation, and personal levels of performance (work speed
and quality). The significance of this criterion was rated as very high by all of the respondents.
Satisfaction was also assessed as very high. Despite a high level of Personnel efficiency, most of
the respondents definitely see further potential for development, especially in the areas of analy-
tical and communication skills.
How high do you assess the general significance of How satisfied are you with regard to the management
“personnel efficiency” for the performance indicators of reporting team regarding “personnel efficiency"?
your management reporting?
49
Number of responses
13 Personnel
38% 52% 10%
efficiency
0 1
Figure 17: Excellence Criterion of Personnel Efficiency: Importance and Satisfaction
3.3.2 The Excellence Criterion of “Organizational Efficiency”
“Organizational efficiency” is understood in this context as a meaningful design of the structural

organization and as a clear definition and communication of roles and responsibilities. Most re-
spondents attributed high to very high importance to this criterion. About 12% of the companies
showed that they were dissatisfied with it.
How high do you assess the general significance of How satisfied are you with the organizational model of
“organizational efficiency” for the performance indicators your reporting with respect to „organizational
of your management reporting? efficiency"?
28 28
Number of responses
Organizational 2%
6 44% 45%
efficiency 10%
1
Figure 18: Excellence Criterion Organizational Efficiency: Importance and Satisfaction
3.3.3 The Excellence Criterion of “Stability”
Stability is understood in this context to include both organizational consistency and low staff tur-
nover rates within the reporting team. A continuous knowledge transfer both inside the team and
to newcomers is also a factor here. There is quite a controversial discussion about this criterion
with respect to its significance. About 14 companies attributed slight or very slight significance to
this criterion. In most cases, natural turnover was given as the reason behind this assessment.
In some cases, the centralized Controlling function was regarded as a stepping stone for a later
advancement into a senior management function. These companies specifically accept a certain
amount of turnover as a way of promoting both development of their employees and of their net-
working. The respondents who attributed high significance to this criterion emphasized the risk of
knowledge losses. Other companies even went so far as to say that a “certain amount of unrest”
was highly desirable because it could trigger change processes.
How high do you assess the general significance of How satisfied are you with the organization of your
“stability” for the performance indicators of your reporting with respect to „stability“?
24 24
Number of responses
12
Stability 33% 49% 16% 2%

2
Figure 19: Excellence Criterion of Stability: Importance and Satisfaction
Personnel efficiency tends to be weighted higher than organizational efficiency. As mentioned

above, there was a broad range of assessments with respect to the criterion of “Stability”.
Ranking According to Importance of Each Excellence Criterion in the Dimension of Personnel/Organization
Personnel efficiency Organizational efficiency Stability

35 35 35 33
30 30 30
25 25 25
22
21
20 18 20 20
17
16
15 15 14 15
10 10 10
7
5 3 5 5
0 0 0
Legend: Most important Second-most important Third-most important
Figure 20: Ranking According to Importance of Each Excellence Criterion Related to Personnel and Organization
Other excellence criteria most frequently mentioned were the “Professional Competence of the
Employees” and “Communication Skills”. This clearly reflects the change in the understanding of
a controller’s role as an in-house consultant, which has already been mentioned several times.
In your opinion, what other excellence criteria in the area of organization and personnel are decisive for
excellent management reporting?
5 5
Number of responses
3 3
Professional competence Communication skills Corporate culture Efficient knowledge Other (each mentioned
of the employees management only once)
Figure 21: Other Excellence Criteria for Personnel/Organization
4. Major Fields of Action and Design R

ecommenda-
tions for Excellent Management Reporting
After confirming the significance of the excellence criteria, a status quo of management reporting
in actual practice is determined on the basis of the study results. Design recommendations are
given for the fields of action which were identified.
4.1 Fields of Action and Design Recommendations with Respect to

Concept
Based on the analysis of the excellence criteria of “Relevance”, “Stringency”, and “Consistency”,
fields of action are identified and design recommendations are given in the following sections.
Most of the respondents (52.4%) designated “Support for Decision Making” as the primary objec-
tive of management reporting. However, a notable 42.8% of the respondents gave ex-post control
as the primary objective of management reporting. In this question, respondents’ answers varied
little between functions (CFO, Head of Controlling). Only 4.8% of respondents considered the
primary objective of management reporting to be documenting the past course of business.
Objectives According to Head of Controlling/

Objectives According to CFO
Group Controlling
23
21
Number of responses
5
Number of responses
For support of For ex-post

decision making control For support of For ex-post
decision making control
Number of responses: 9 Number of responses: 44
Figure 22: Objectives of Management Reporting
The high proportion of companies for whom controlling was the main objective of management
reporting gives rise to the question as to whether it is possible that the “right” performance indica-
tors are not reported in these companies, so that there is no effective support for decision-making.
Focusing strongly on financial performance indicators can be evidence for this, because financial
performance indicators frequently model the past, and findings derived from them are as a rule
not adequate for decisions concerning the future.
For this reason, the heavy emphasis on controlling can be interpreted to mean that in these com-
panies there is a deficit in the relevance and stringency of the report contents. There is a need
for action here, and processes should be initiated to increase the relevance and stringency of
reported performance indicators. The steps described in the next appendix can be taken as an
orientation aid.
Appendix 7: Procedure for the Derivation of stringent and relevant Performance Indicators
The inherent risk in managing a company solely on the basis of financial performance indicators
is that emphasis will be placed on considerations aimed at short-term financial optimization, and
investments in future potential will be neglected. If stringency with respect to strategy is to be
achieved, it is necessary to start by establishing the strategic framework. The starting points for
this are a company’s mission and vision. The mission statement describes the areas of activities,
capabilities, and competencies. It indicates how a company intends to create value for its customers.
In the Vision a future image of a company is designed on the basis of its plans. Positioning in the
competitive environment is another major component.
Starting from this foundation, an answer must be found to the question as to how mission and vision
are to be realized. This involves deriving so-called strategic goals or value drivers from mission
and vision. Kaplan/Norton propose so-called strategy maps as an instrument for the implementing
a strategy. They should visualize cause and effect relationships directly, illustrating the effect of the
value drivers on corporate value and vision. At the beginning, the causal relationships are based
mostly on logical assumptions, intuition, and management’s knowledge from experience; later,
uncertain contexts can be examined by applying correlation analyses.
If value drivers are to be managed, they must be made measurable. First, one or two performance
indicators for measuring goal achievements must be defined for each value driver. The measurement
variables should be objective and in line with the goals, i.e., they can be calculated clearly and are not
influenced by other factors. Possible sources include benchmarks, market research, or legacy data.
The performance indicators are then allocated to target specifications and given a time reference.
Finally, any remaining uncertainties are reviewed by using sensitivity and correlation analyses.
In the final step, a value driver analysis is required to make sure only the major performance indicators
are taken into consideration and to prevent foundering in a sea of data. First, each goal must be
reviewed as to its relevance to a company’s value. The achievement of the goal must offer a decisive
competitive advantage, or failure to achieve it entail a risk of suffering a competitive disadvantage.
Ultimately, value relevance indicates whether a goal is capable of increasing corporate value by a
significant degree. Second, each goal must be assessed as to its relevance to corporate action. A
goal has high action relevance if the company is below its planned goal achievement level and if the
goal can also be influenced by the company.
This procedure ensures that all performance indicators are related to a company’s strategy, and will
also have a significant effect on it .
In order to maintain the relevance of reported performance indicators over time and in order to
ensure that the recipients’ information requirements are given due consideration in all manage-
ment reporting, it is important to institutionalize specific coordinating processes. Thresholds or
criteria must be defined which will trigger a review of current performance indicators, enabling a
systematic determination of whether current report contents correspond to the requirements of
individual business departments. This can be the result of a formal feedback process, e.g., within
the scope of regular reporting reviews between the report originator and its recipients, or it can be
done ad hoc. The decisive point is that the contents are given critical consideration on a regular
basis. The surveys bring this necessity to light: Just under half of the surveyed companies have
not set up a process of this kind.
Appendix 8: Determination of the Information Requirements: Subjective vs. Objective Information

Requirements
Management’s actual information requirements cannot be defined objectively or according to gener-

ally applicable principles; they must be deducted on the basis of circumstantial evidence. The first
indication is the so-called “objective information requirement”. This covers the information which a
qualified manager needs in order to solve “well-structured” and “well-defined” tasks. Frequently,
however, the problems with which management is confronted are new in nature and poorly struc-
tured. In these cases, finding a solution involves a strong intuitive component which entails a higher
demand for subjective information. Moreover, the following should be considered: “The demand for
information as formulated by management is characterized by being highly subjective because the
controlling preferences of management differ broadly (e.g., controlling with cost and profit perform-
ance indicators or with performance indicators oriented to cash flow) and because not absolutely
necessary information (so-called nice-to-have information) is also requested out of a sense of pres-
tige or security.” The demand for subjective information is therefore the second indicator of actual
information requirements.
Source: W. Gladen, 2005, p. 4 ; T. Joos-Sachse, 2001, pp. 287-28
In addition, it must be taken into account that information needs vary from one management
level to another and that the aggregate level must be adapted accordingly. A so-called “Report
Pyramid” is the best tool to achieve this. A hierarchy of this type has already been implemented
at about two-thirds of the surveyed companies. Virtually all of the companies without a report
pyramid intend to implement one. A report pyramid with the structure shown below has been im-
plemented at Volkswagen AG.
Report Pyramid
Major Recipients: Major Contents:
Financial analysis:
Deliveries to customers,
Supervisory and Management Boards VW Group sales, production, staff, turnover,
results, returns, investments,
financing, net cash flow, liquidity
As above, but additionally:

Factory costs, productivity,
Management Board, Management Subgroups and Subsidiaries reach duration, compliance with
delivery agreements, marketing
costs, purchasing services, etc.
Quality, presence:
Plant Manager, Plants, business units, people responsible overtime, costs dependent
Cost Center Director for processes, products, and cost centers on personnel, materials,
and investments,
costs per unit, capacity
Figure 23: Report Pyramid of Volkswagen AG
Besides the low concrete benefits frequently determined, i.e., relevance and stringency of the
reported performance indicators, their large number is also a wide-spread problem. New perfor-
mance indicators are integrated or cascaded further, but existing performance indicators are very
rarely actually eliminated as a result of a systematic review. So it was seen among the surveyed
companies that in many cases they were seeking to implement new financial performance indi-
cators, although their management reporting was already dominated by such figures. Moreover,
the respondents mentioned most frequently the classical financial values such as profit (EBIT,
EBITDA) and turnover as the most important performance indicators in management reporting.
Integration of New Performance Indicators Integration of New Performance Indicators
Are there any plans to integrate new performance Yes, the following performance indicators:
indicators in your management reporting in the
short or middle term (about 18 months)?
No External Internal
performance financial
31% indicators performance
22% indicators
38%
69%
40%
Yes
Internal non-financial
performance indicators
Usable responses: 64 Usable responses: 64 Usable answers: 50
Figure 24: Implementation of Performance Indicators
In practice, companies can counter this problem by implementing new performance indicators
only if the same number of current performance indicators is eliminated. The criteria of stringency,
relevance, and consistency described in the sections above can be selected as guidelines for this
evaluation. A new performance indicator should be included in management reporting only if it
satisfies these criteria better than the current one.
The three most important Performance Indicators in Management Reporting
What are the three most important performance indicators in your management reporting, or which of these
three indicators do you look at first when you are interested in how good business was in the previous
reporting period?
44
Number of responses
18
12
Profit performance indicators Sales Value-oriented performance

(e.g., EBIT, EBITDA) indicators
Figure 25: Most important Performance Indicators

Processes and IT Support
Companies allocate substantial resources to the preparation of their management reporting. The
major cost factors in generating management reporting are IT and labor. Efficient utilization of
resources means that the greater part of available funds goes into non-repetitive activities which
offer added value beyond the simple provision of data. If Controlling or the Finance department
acts as a “guardian of efficiency” in the company, the same standards must apply to its own work
as to the rest of the organization.
All too often, however, we find a disparity between the resources used for generating the reports
and the resources used for activities generating added value, such as analyzing performance
indicators and drafting recommendations. Among the surveyed companies, a ratio of about 50:50
between repetitive and non-repetitive activities is revealed across the board. At first glance, this
might seem acceptable – but quite a few of the surveyed companies are relatively far removed
from the best practice ratio of 20:80. Nevertheless, at almost one-third of the surveyed companies
less than 30% of total expenditures go to the simple generation of management reporting.
However, it must be taken into account that there was a certain amount of uncertainty among
interview partners at “Group” or “Holding” level with regard to expenditures in individual units.
It must be assumed that in particularly decentralized organizations a large part of the expenses
for generating of management reports is often performed by subordinate units beforehand and
therefore never becomes transparent at headquarters.
Total Expenditures Process Steps
What is the percentage breakdown of the total expenditures for reporting with respect to own report
generation, analysis, evaluation, and comments?
15
Number of responses
9
8
6
5 5 5
3
2
1
<10% 10-19% 20-29% 30-39% 40-49% 50-59% 60-69% 70-79% 80-89% >89%
Own share “report generation” in total expenditures of the reporting process in %
Usable answers: 59
Figure 26: Total Expenditures Process Steps
Manual interfaces in the management reporting process are a frequent cause for excessive labor
deployment; this in turn is frequently caused by the lack of links within the heterogeneous system
landscape.
Critical Interfaces and Procedures with Adverse Impact
When you think about the process for the generation of the management report: Are there any critical
interfaces or manual procedures which impair the process quality and the workflow?
36
Number of responses
13
11
9
4 4
2
1
None Critical system Integration of Heterogeneous Manual Susceptibility of Interface NA

transfer points new systems/ system procedures/ the systems to between internal
(e.g., ERP-DWH) entities landscape human error errors caused by and external
technology reporting
Figure 27: Critical Interfaces
A solution to this problem is a consistent system architecture and a high level of automation of the
systems and their interfaces. Moreover, designating people responsible for the processes is an
effective means for countering this problem. A distinction must be made here between defining
the responsibility for the correctness of the report contents and the responsibility for the actual
process, which is characterized, among other features, by the authority to intervene in decentra-
lized units and in pre-systems. Process orientation was mentioned as an additional excellence
criterion because it is vital for the excellence criteria of data quality, up-to-dateness, and cost
transparency or efficiency.
Appendix 10: “The Process Ownership Concept”
Process orientation means the alignment of company procedures with the underlying processes.
The emphasis is not on functions, but on the customers with their requirements and wishes. In a
process-oriented structural organization, responsibilities for processes are defined as well as
responsibilities for functions. The former are shown across functions, as in a matrix organization.
Traditional View: Process-oriented View:

Functions Cross-function Processes
(Research and Development, Purchasing,
Production – shown as boxes...)
Management
D P S
Development Production Sales
e.g., innovation process
e.g., order processing process
Figure 28: Basic Principle of Process Orientation
The process as a whole as well as each of its sub-processes are transferred to a so-called process
owner and his/her responsibility; this person holds the decision-making authority and resources
(e.g., funding, staff) required for the fulfillment of his/her duties. The person in this position is the
primary contact when weaknesses in the process require intervention in the system and with the
parties involved.
As a rule, the process owner has the following duties and responsibilities:
• Planning and implementation of the process, training of the process users
• Complete and correct documentation of the process
• Definition of the process limits with other process owners (demarcation of the process)
• Managing all interfaces with neighboring process owners
• Managing the staff responsible in the process and leadership the teams who design and
develop the process
• Assuring achievement of the process goal
• Monitoring and auditing of the process using appropriate parameters
(performance indicators)
• Continuous process improvement (CIP, Six Sigma, etc.)
• Planning and seeking approval for the budgets and resources required to perform duties
The primary advantage is a heightened orientation to the customers, whose requirements can be
taken into account during the conduct of the entire process. “Customers” in this case includes in-
house departments as well as external parties. All of this means that questions and coordination
problems can be handled much more quickly and effectively by the process owner as the key contact,
which also leads to a shortening of the process run times (as a consequence of fewer time delays
and queries to the interfaces). When a process-oriented structural organization is in place, breaches
and error sources in the process relevant to reporting can be corrected quickly and efficiently.
Sources: M. Hammer, J. Champy, 1994; A. Picot, E. Frank, 1995; A. Picot, H. Dietl, E. Frank, 2002
Another problem area during the generation of management reporting is the presentation or pre-
paration of the report contents. For example, it is frequently seen in practice that standardized re-
port templates have been defined, but they are not used consistently. The need for action appears
to have been recognized here – virtually all of the surveyed companies who do not have defined
report templates stated that they wanted to implement such templates in the middle term.
Appendix 11: Presentation of Report Contents
The primary elements in presentations are tables, charts, and text elements. Charts and texts in
particular should create added value going beyond the simple presentation of facts and figures.
They should help recipients to grasp and interpret the contents quickly. The decisive point is that
these fundamentals have been communicated in the company and are strictly applied.
A. General Recommendations:
1. When structuring a presentation, the “Pyramid Principle”® should be used. This is a well-proven
system for a clear structure in any text or presentation. Statements and arguments are structured
strictly hierarchically in the shape of a pyramid, with key messages and broader concepts on top,
and all statements serving to support a core argument or key message grouped beneath it.
The decisive point here is that the full statement is found at every level, but in increasingly
greater degrees of abstraction. There must be a clear separation between the overview level
and the detailed information supporting it. Overviews and details must be clearly structured in the
presentation. The advantage for the recipient of the message is that the key statement is clear
right from the beginning of the text.
The subsequent information then provides the details which can immediately be understood
within the framework of the overall context. The key statement of a text is at the beginning and
represents the peak of a series of arguments which are supported by details (reasons, meas-
ures, results, or benefits). Lists and structures should contain similar elements at every level, the
elements should not overlap, and the structure should be exhaustive, i.e., a primary topic should
be fully explained by the points following itt.
2. Compression of information. To avoid losing sight of the big picture, every consideration should
focus on the question of what should be reported. In other words, strict standardization and re-
duction to the essentials is of great importance. This requires compressed information. High in-
formation density is decisive for a logical analysis.
3. Communicating the message. No matter what the form of the presentation, the first step is to
define the statement being made and then to undertake its graphic conversion. The message
must be visible from every object in the report, be that charts, tables, or diagrams. These objects
do help to present a message clearly, but they must be carefully selected to achieve the desired
effect.
4. The same contents should always be presented in the same way. Decorative and meaningless
design elements should not appear in a report. A clear line in the layout makes any report easier
to read. Forms must be defined and their arrangement should remain the same throughout the
report. The same rule applies to shapes, patterns, borders, fonts, paragraphs, and similarly, to
typical style elements: all elements with a similar appearance should carry the same meaning. 3-D
charts should be avoided because they cause distortion and reduce the force of a statement.
5. Colors should be used sparingly and only if they have a clear purpose inindividual case (e.g., red
and green only for negative/positive). Using colors for decorative purposes as well substantially
reduces their effectiveness.
B. A few recommendations for Graphics Design
A graphic representation should be comprehensive, comparisons should be visible, causal connec-

tions should be highlighted, and texts as well as captions should be integrated into the graphics.
Different analytical approaches should be visualized by different types of graphics. Format and ap-
pearance of all graphics must remain the same. Graphics are intended for viewing and should con-
vey a specific message at a single glance. The wrong scaling can often cause graphics to be misun-
derstood. Examples of such errors are cut-off axes and different scalings for the same factual
contents.
C. A few recommendations for Designing Tables
As a rule, tables do not have a message except in cases in which a specific aspect is emphasized and
commented on. The layout of each table should be structured uniformly and contain the appropriate
headers. The header line should contain all of the important information such as category (e.g.,
turnover), reference values (e.g., country, department, or time period), or unit (e.g., euros).
D. A few recommendations for Texts
Texts related to the report objects should be used to provide explanations and recommendations,
and should therefore not be repeated in the table or diagram itself. A glossary showing terms in long
and short forms, abbreviations, definitions, and, if necessary, with translations, should be used and
strictly followed in the composition of texts. Footnotes can be used for background information as
needed to make contents more understandable. There should not be any ambiguity about the points
to which comments refer. Insignificant points must be left out and information should not be repeated
unnecessarily.
Source: http://www.hichert.com; J. Weber, S. Schaier, O. Strangfeld, 2005, pp. 24-26
The topic of comments was also identified during the interviews as a field requiring urgent action.
The shortcomings here are related both to quantity and quality of the comments.
Comments
Which of the following statements related to the comments in your top management reports do you agree
with most?
24
22
Number of responses
10
Number not satisfactory Quality not satisfactory Number and quality not Number and quality satisfactory
satisfactory
Figure 29: Comments
One frequent criticism is that the comments do nothing more than summarize the meaning of
the performance indicators in words, without going into the cause and effect relationships. One
common cause for this qualitative shortcoming is the lack of time, which results from the fact that
the mere generation of performance indicators, including relevant measures for quality assu-
rance, takes up most of the available time. As has already been described above, it is the level of
automation and process responsibilities which are key to a more efficient design of the process.
Moreover, improving the analytical and communication skills of employees by means of the ap-
propriate HR development measures is decisive for the quality of the comments.
In addition, the number of comments is frequently unsatisfactory – either there are too many of
them, or they are too comprehensive, or there are too few. If an appropriate quantity and quality
of comments is to be secured, it is important that Controlling will work proactively with business
departments and become involved during the later use of any performance indicators. This is the
only way to achieve a close meshing between business departments and Controlling which will
become evident in a better quality and a more appropriate quantity of the comments.
Integration of the Controlling Department
Is the controlling department – besides giving comments – actively involved by the business department
during the interpretation of the results/reports?
60%
26%
14%
Yes, regularly Yes, sometimes No
Figure 30: Integration of the Controlling Department
The study results also show that reporting tools such as “cockpits” tend to play rather a subordina-
te role in the distribution of report contents. This is above all true for reports to top management,
where, as a rule, printed reports are expressly requested for reasons of practicality.
Presentation and Distribution of the Reporting Contents
How are the reporting contents presented and distributed (e.g., Excel tables, dashboards, cockpit) ?
Number of responses Number of responses
Sent as PDF 19
Delivered as
26
hardcopy
Sent as Excel 18
Sent as Word Access via Intranet 22

11
or PowerPoint
Excel with
3
drill-down function
Sent by e-mail 19
Cockpit with
13
analysis function
Usable answers: 63 (multiple answers possible)
Figure 31: Presentation and Distribution of Reporting Contents

Where organization and staffing are concerned, it is striking that while many of the surveyed
companies place a very high value on high labor efficiency (i.e., the qualitative factor with respect
to staff), they nevertheless tend to place a lower priority on the stability of their staff and organiza-
tional structures. While organizational inefficiency can to some degree be compensated by good
staff, a high turnover rate may put a heavy burden on the functional capability of a controlling
department and should therefore, in view of the people in charge, be avoided as far as possible.
However, some of the respondents confirmed that a certain turnover cannot be avoided and is
even desirable. The Controller’s position, especially at the corporate level, often provides ideal
preparation for a management role in another area, and the internal networking effect it entails
secures a certain proximity and bonding of this position with business departments and corporate
units. But the prerequisite for this is that knowledge be externalized (documentation, manuals,
etc.) and that turnover be handled pro-actively (well-ordered transfer, adequate orientation for
new staff, etc.).
Another important aspect with respect to staffing and organization is a clear documentation and
communication of rules and responsibilities (e.g., by means of the “RACI” methods). Process
orientation with the appropriate responsibilities is to be recommended here. In particular, it should
be clear who in the company is responsible for the databases (variable and master data) for all
core management parameters and who is to clean up incorrect data according to what proce-
dures. In most cases, these responsibilities will be documented in manuals. But the decisive point
is that the rules are communicated and that compliance with the rules is monitored.
Further Training of the Staff
In what topic areas do you think the management reporting team needs further training?
26
17
Number of responses
11
Conceptual topics Process and IT topics Improvement of

analytical competence
Number of companies: 63 Usable responses: 54
Figure 32: Further Training for Staff
Controlling must not neglect this task for various reasons, not the least of which is compliance.
Furthermore, the study results indicate that rising demands on employees in the controlling func-
tion have resulted in the need for a broader understanding of their roles and a corresponding
improvement of their skills in the areas of analysis and communication. This shows that analytical
and communication skills are turning more and more into core competencies of the controlling
function and that expectations in this area can only be met over the mid- term by making neces-
sary investments.
5. Final Thoughts and Outlook

These study results represent a holistic, structured overview on the topic of management repor-
ting. They show the criteria in the categories of Concept, Processes/IT Support, and Personnel/
Organization which are key to excellence in management reporting. Taking these results as a
starting point, an evaluation framework has been defined which can be used to assess the perfor-
mance of management reporting systems. Moreover, satisfaction with the criteria and an analysis
of current situations were used as guideposts to identify major fields of action and to formulate
corresponding recommendations.
People in responsible positions will increasingly have to assume an active role in enhancing
management reporting in the three described categories, using a holistic approach. It is the only
way for them to live up to their future role as in-house consultants and to develop management
reporting into a success factor for corporate management. As its value as a success factor is re-
cognized, enhancing management reporting is a joint responsibility which must not be neglected
by originators and recipients alike. If there are one-sided efforts only, standards and reality will
inevitably drift apart, and this is to be avoided at all costs.
When implementing the results of this study, it must be noted that it is mainly based on the
statements of respondents who were responsible management reporting in their companies.
Consequently, the question arises as to whether the recipients of these reports would confirm the
findings discussed here or whether other criteria are decisive for excellent management reporting
from their perspective. There should definitely be a discussion on the possible divergence of the-
se two viewpoints. The study results are a suitable foundation for just such a discussion.
6. The Authors
Robin Euler is Managing Partner and member of the Executive Board of Detecon International.
He has been head of the Industry Practice “Telecommunications” since 2008. Robin Euler is
therefore responsible for the national and international business relationships of Detecon to Deut-
sche Telekom. He was previously a partner at Detecon (Switzerland) AG, where he had worldwide
responsibility for the topic of financial management.
Contact: +49 228 700 1400, Robin.Euler@detecon.com
Christian Layr is a Consultant at Detecon (Switzerland) AG an member of the Global Compe-

tence Team Financial Management and was responsible project leader for this study. Christian
Layr has been working at Detecon since 2005. His consulting work focuses on the areas con-
trolling, in particular steering logic, reporting, management information systems, and financial
analysis and modeling.
Contact: +41 43 888 65 32, Christian.Layr@detecon.com
Thomas Deuser is a Managing Consultant at Detecon (Switzerland) AG. He is Group Head and
director of the Global Competence Team Financial Management. His consulting work focuses on
the areas finances, controlling, and compliance.
Contact: +41 43 888 65 03, Thomas.Deuser@detecon.com
Dr. Dirk Schäfer is Vice-Director at the Institute for Accounting, Controlling, and Auditing (ACA-
HSG) and associate professor for financial management at the University of St. Gallen. He is in
charge of the program for the Master’s in Accounting and Finance (MAccFin) and heads consul-
ting and further training projects at the Institute. In addition, he is active as the general manager
of a midsize company and as a coach.
Contact: +41 71 224 74 15, Dirk.Schaefer@unisg.ch
Prof. Dr. Peter Leibfried is executive director of the Institute for Accounting, Controlling, and
Auditing (ACA-HSG) at the University of St. Gallen. Moreover, he is the co-founder and one of the
managers of the consultancy FAS AG / Academy for International Accounting and a member of
a number of supervisory boards (including the long-established Swiss company Malbuner). As a
qualified certified public accountant (CPA), he is a member and advisor to numerous professional
committees and associations.
Contact: +41 71 220 39 91, Peter.Leibfried@unisg.ch
7. The Publishers
Detecon (Switzerland) AG, headquartered in Zurich, is a subsidiary of Detecon International

GmbH, whose 700 consultants make it one of the world’s leading consulting companies for inte-
grated management and technology consulting. Detecon (Switzerland) AG bundles the compe-
tencies of financial and ICT management. The international array of services ranges from analytic
and strategic themes to organizational and process consulting to support in the planning and
establishment of technical infrastructures. The consultants are represented on virtually every con-
tinent by additional international offices as well as project offices.
Institute für Accounting, Controlling und Auditing (ACA-HSG)
The Institute for Accounting, Controlling, and Auditing of the University of St. Gallen (ACA-HSG)
sees itself as a competence and transfer center for the common benefit of academics, research,
and practice. Its focus is on the sustained financial management of companies as concretized
in its teaching program leading to a Master of Arts in Finance and Accounting (MAccFin) and in
various programs for executive education, its activities as assessors, or consulting projects for
private companies and public institutions.
8. Participating Companies
Alcatel-Lucent Austria AG Energie AG RHI AG
Allianz Group Austria Flughafen Wien Richemont
Axel Springer Fraport AG Salzgitter
Bank Austria - Creditanstalt Freudenberg SBB Konzern
BASF SE Helvetia Gruppe Schindler Aufzüge AG
BAWAG P.S.K. Holcim (Schweiz) AG Siemens Schweiz AG
Böhler-Uddeholm AG HUK-Coburg Swiss Reinsurance Company
Brau Union AG Institut Straumann AG Swisscom AG
Bühler AG JetAviation Tele 2 Telecommunication GmbH
bwin Interactive Entertainment AG KOMAX AG Telekom Austria Group
Cargill International Kühne + Nagel Thyssen Krupp
Casinos Austria AG Leica Geosystems AG T-Mobile International AG
Credit Suisse Lindt & Sprüngli AG T-Systems
Daimler Maus Frères SA Valiant Holding
Deutsche Lufthansa AG Münchner Rück Valora Holding AG
DHL Express (Schweiz) AG o2 Germany Volksbank AG
Die Mobiliar ÖBB Holding AG Volkswagen
Die Post Palfinger Wacker Chmie AG
DKSH Management AG Porsche Holding AG Wiener Städtische
Dresdner Bank AG Rehau GmbH Xstrata
E.ON AG Reichle & De-Massari AG Zurich Financial Services
9. Bibliography
Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar, George Foster:
Management and Cost Accounting 2008, Prentice Hall International, 4th edition
Robert S. Kaplan, Mark S. Young, Anthony A. Atkinson:

Management Accounting 2004, Prentice Hall International, 4th edition
Robert N. Anthony, Vijay Govindarajan:

Management Control Systems 2003, McGraw-Hill Professional
Robert S. Kaplan, David P. Norton:

The Balanced Scorecard 1997: Translating Strategy Into Action, McGraw-Hill Professional
Thomas Lührmann, Jürgen Weber, Regina Malz:

Management Reporting Excellence 2008: Transparenz für die Unternehmenssteuerung, Wiley-
VCH Verlag, 1st edition, 2008
Jürgen Weber, Sven Schaier, Oliver Strangfeld:

Berichte für das Top-Management 2005: Ergebnisse einer Benchmarking-Studie, Wiley-VCH;
edition: 1, 2005
Werner Gladen:
Performance Measurement 2005, Controlling mit Kennzahlen, Gabler, 3rd edition
Thomas Joos-Sachse:
Controlling, Kostenrechnung und Kostenmanagement 2002, Gabler, 2nd edition
Arnold Picot, Egon Frank:

Prozessorganisation: eine Bewertung der neuen Ansätze aus Sicht der Organisationslehre
1995, Freiberg, Techn. Univ., Faculty of Economics and Business Administration
Michael Hammer, James Champy:

Business reengineering: die Radikalkur für das Unternehmen 1994, Campus-Verlag
Michael Nippa, Arnold Picot:

Zum Stand der prozessorientierten Unternehmensgestaltung in Deutschland 1995 in: Prozessma-
nagement und Reengineering: Die Praxis im deutschsprachigen Raum, Campus, pp. 227-247
Arnold Picot, Helmut Dietl, Egon Frank:

Organisation – Eine ökonomische Perspektive, Schäffer-Poeschel 2002, 3rd edition
Löwenstrasse 1
CH-8001 Zurich
Switzerland
info-switzerland@detecon.com
www.detecon.com/ch/

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2. Background and Procedure 7

3. The Major Features of Excellent Management Reporting 10

3.2 The Major Properties of Management Reporting 19

3.3 The Major Properties of Management Reporting 24

4. Major Fields of Action and Design Recommendations for Excellent 28

5. Final Thoughts and Outlook 41

Figure 1: Number of participating companies according to origin 9

Excellence Criteria in the Category Concept

Excellence Criteria in the Category Processes/IT Support

Excellence Criteria in the Category of Personnel/Organization

Design Recommendations in the Category Concept

Design Recommendations in the Category Processes/IT Support

Design Recommendations in the Category of Personnel/Organization

Implementing these design recommendations leads to quality improvements in both business

2. Background and Procedure

2.1 Management Reporting as a Success Factor of Effective

2.2 Methodology and Study Demographics

Origin of the participating companies

Switzerland Austria Germany

Figure 1: Number of participating companies by origin

Study participants by position Study participants by area of responsibility

Figure 2: Study participants by position and area of responsibility

3. The Major Features of Excellent Management

Generally Applicable Excellence Generally Applicable Excellence Generally Applicable Excellence

Specific Criteria Specific Criteria Specific Criteria

Figure 3: Overview of Excellence Criteria

3.1 Major Properties of Management Reporting in the Category

3.1.1 The Excellence Criterion of “Relevance”

Appendix 1: The Fundamental Functions of Management Accounting: Decision vs.

Source: Cf. A. Bhimani, C. T. Horngren, S. M. Datar, G. Foster, 2008, p. 488

Combined Ratios of Swiss Insurance Companies from 2000 to 2007

Source: Detecon, own research

Figure 4: Combined Ratios of Swiss Insurance Companies from 2000 to 2007

Source: Own research

Non-financial 27% 34% 29% 10%

Significance of the criterion Satisfaction with the criterion

Very satisfied Satisfied Less satisfied Not satisfied

Usable responses: 64 Usable responses: 64

Figure 5: Excellence Criterion Relevance: Importance and Satisfaction

Appendix 3: The Controller Model of the IGC

Appendix 4: Effects of Performance Indicator Systems on Conduct

Effects of Performance Indicator Systems on Conduct

What gets rewarded

What counts, What gets done,

What gets measured,

Source: Robert N. Anthony, Vijay Govindarajan, 2003, p. 494

Figure 6: Effects of Performance Indicator Systems on Conduct

3.1.2 The Excellence Criterion of “Stringency”

Financial 45% 34% 16% 5%

Non-financial 31% 43% 20% 6%

Significance of the criterion Significance of the criterion

Very satisfied Satisfied Less satisfied Not satisfied

Usable responses: 64 Usable responses: 64

Figure 7: Excellence Criterion Stringency: Importance and Satisfaction

3.1.3 The Excellence Criterion of “Consistency”

Significance of the criterion Satisfaction with the criterion

Very satisfied Satisfied Less satisfied Not satisfied

Usable responses: 63 Usable responses: 63

Figure 8: Excellence Criterion Consistency: Importance and Satisfaction

3.1.4 Ranking and other Excellence Criteria

Ranking According to Importance of Each Excellence Criterion of the Dimension Concept