All tagged controlling

To begin with, this is a rather technical post and not an easy read. So you should only go through it if you came across the problem and have a need to solve it. OK, let’s get to it.

Say you have a total margin of 40% and last year that was 30%. You want to show to which elements the +10% change is attributable to by breaking down the variance into effects. The challenge here is the complexity coming from having changes in absolute and margin %, changes in product mix and changes in revenue all baked into the margin % variance.

Say you want to achieve a certain output, like controlling your weight, for example. Then you would like to know what kind of actions and inputs are needed to get there. The output can be either a target, like losing 10 kg, could be controlling variability, like keeping your weight variation within certain boundaries, or maybe trying to understand where your weight will be given future changes in your environment. To make things easy, let's assume you want to lose 10 kg.

Good reporting means providing business information that can be acted upon at the time when it is needed. In other words, a report that is value-adding should collect a series of facts that help answer a question.

In my case, the question was this: what do we need to know to control the achievement of our monthly sales targets? 

We tend to believe that the more we know, the more we will understand. We want more facts, more details, more numbers, more of whatever that would make us smarter. But what really makes us smarter is thinking and thinking is hard. Seeking data is easier than thinking, so we tend to go that way.

I used to be a big supporter of the idea that the more information I have at hand, the better I will understand how things come together. And so I dig in, get the data and figure out how that number became what it became. At this point I have already the first issue.

It was one year after grad school when I got an assignment as a business controller. The company was starting a major project and I was going to witness how a business case comes alive. When I practiced business cases in school, the story always ended once the investment decision was made. I never knew what comes afterwards, but now I was about to find out.

So, I got a job description to help me through...