Essential to the proper functioning of a company, management control must, like most areas of activity, learn lessons from the health context. The impact of the COVID-19 pandemic on businesses is not yet known, but it remains undeniable that a good capacity to adapt equates to survival for many of them. Pierre-Laurent Bescos, expert in performance management, talks to us about management control and its agility needs.
The combination of certain words can be confusing. Indeed, how can we compare the term emergency which, in the current context, refers to the medical, with the management control, which concerns performance management (planning, monitoring of activities and decision-making)?
The health crisis is leading to an avalanche of articles and books on the theme of lessons to be learned from it. And this in all areas, including business management. But to what extent does the health crisis have consequences for management control?
This difficult period has highlighted one word: agility. This was notably used to criticize the action of the French State or that of the European Union. Indeed, these entities would lack responsiveness to resolve problems related to COVID-19. In management, the idea of agility is old and therefore has implications for management control. But what are these implications that are now becoming urgent needs?
Agility and management
If we refer to the common sense, being agile above all means having reactivity. It’s about being quick in decision-making and implementation.
But speed is not the only quality to be mobilized. Defined as a certain skill in body movements, the notion of agility in the business context is similar to flexibility. The most frequent application in business management initially concerned IT projects: this approach is intended to be more flexible and adapted, and places the client's needs at the center of the project's priorities.
In management, it is rather a question of reacting to an economic context qualified as VUCA. This acronym means “volatility, uncertainty, complexity, ambiguity”. This context is complex to understand and the trends are not clear. In short, this context specific to emerging markets has now become generalized across the entire planet.
Many leaders have used the term agility to promote organizational changes more in line with this type of context. For example, Saint-Gobain abandoned its traditional organization around business lines to adopt management of its activities by country in order to be “more agile” and “closer to the markets” (The world from 26/11/2018). More recently, Danone designed a reorganization plan entitled Local First, to move from an organization by profession to an organization by country. In this way, Danone estimates that it will be able to reduce its costs by 700 million euros (The world from 05/18/2021). The key word becomes responsiveness to changing markets.
But how to understand a VUCA context?
- over there volatility markets: this requires greater flexibility, for example by having production capacities capable of reacting more quickly to local variations in demand;
- l'uncertainty : dealing with it involves processing information of all kinds in order to detect trends and key variables explaining demand. This is what justifies in particular the big data and digitalization;
- the complexity : it requires a simplification of organizational structures and processes at all levels for greater responsiveness and efficiency in decisions and their execution.
- ambiguity : can be reduced by experimenting with new solutions and innovating.
How can we also talk about agility for management control?
Agility and management control
Agile management control already exists, having been tested by a few pilot companies. This is mainly the case for the budgetary approach with the beyond budgeting. It is not a question of management without a budget, but rather of an overhaul of the tool which favors frequent modifications of forecasts.
Added to this is:
- reduction in the number of defined objectives;
- greater decentralization of decisions;
- flexibility in allocating resources to business units;
- simplification of performance evaluation.
We also note the need for dashboards more in line with the needs of managers, better consideration of the connection between financial and non-financial objectives or the introduction of indicators on risks and sustainable development. Digitalization is used as an essential means to reduce reporting times. For example, smartphone applications allow managers to see the performance achieved in real time. When it comes to cost analysis, the time variable becomes essential, whether it is monitoring hourly rates, developing new products or optimizing supply or production processes.
Towards change management
Ultimately, a few guidelines make management control more agile in a VUCA environment. The most important is the consistency to be restored, in particular by ensuring better coordination between the different management control tools. Among the other priorities: reducing the time it takes to disseminate key management indicators and using so-called agile tools, more proximity with management control clients... This need for proximity does not only mean being closer geographically to the centers of responsibility but also better understand their driving needs to avoid being time consuming. Under these conditions, management controllers could be considered as business partners or even performance managers.
This requires careful and constant change management because habits are difficult to change. For example, it is common to see management controllers in training who have not yet mastered collaborative work (sharing documents, in particular). The rise of teleworking in the current health context has nevertheless made it possible to reduce the gaps between companies. This means that the differences in taking agility into account in management control are significant depending on the sector of activity, the mode of governance, the size or even according to other contingency factors of which management control is customary.
Bibliographic references
- BENNETT N. and LEMOINE GJ – What a difference a word makes: Understanding threats to performance in a VUCA world. Business Horizons, 2014, vol. 57, no. 3, p. 311-317.
- AGHINA W., DE SMET A. and WEERDA, K. – Agility: It rhymes with stability. McKinsey Quarterly, 2015, vol. 3, p. 58-69.
- Agile Manifesto
- Agile Manifesto Principles
