Data management is required for profitable international growth. This is particularly true when the international growth is sought inorganically through international acquisitions. The One Company programme is a management philosophy in which a global group of different businesses are heading toward the objective of unification. During his long international career Pekka Kuokka has helped several Finnish corporations benefit from an integrated approach to their operations, including at PKC Group, HKScan and KONE.
Central to the One Company programme is an understanding of the business and business processes, which is possible when the data in use is systematically controlled. This requires centrally controlled data management solutions. These processes and solutions are then resolutely transmitted to all of the business units within the group, so progress can be made toward a global corporation, with common processes, purpose and ways of working.
Defining the group’s objectives is the first step. When it comes to characterising exactly what they mean by One Company, each group will have its own definition. What is common for all, however, is that the programme will require the unanimous support of management and the board of directors. Without this universal agreement there lies the potential for conflicts or misinterpretations that may be difficult to resolve.
“It is important to determine what is roughly the right direction. Making a detailed plan for too far into the future is unnecessary as the world can be a very different place five years from now. After deciding upon the first course of action you start the project and then learn, try and clarify the objectives along the way.
According to Kuokka establishing an integrated approach with a global corporation can take years and may encounter strong resistance. The benefits achieved from each phase must be diligently measured and then reported to the directors, the owners and throughout the organisation.
Best practice as a unified mode of operation
A single mode of operation shall be defined in the organisation’s common management processes, principles of financial administration, duties and responsibilities within the organisation, as well as the information systems and data models, which guide operations in the desired direction.
The idea of a unified approach seems simple enough, but in practice is much more complicated. Kuokka raises the issue of financial administration as an example, because it creates a common language and a basis for measurement.
“Principles of financial administration must be outlined through how transactions are calculated, how they are presented in the financial statements, how margins are understood and which accounting charts are used, etc. This is basic stuff, but must be decided upon and documented well so that personnel, managers and executives from outside accounting can also be trained. Numerical management is part of a healthy corporate culture.”
“A decision must also be made on whether the company language, in general, is to be poorly spoken English, or something else. This should then be used in all documentation. This is often a point of contention within organisations. In practice, however, people have demonstrated the ability to learn when the issue is considered important. Language is one of the smaller challenges within the bigger process.”
When acquired by a company with a different corporate culture, which then introduces a new way of operating, documentation is imperative. This should preferably be in a memorable format such as pictures, diagrams and examples, otherwise issues are easily forgotten, and no progress or change is made along the way.
Documentation in the form of a manual, for example, provides a practical tool that can be used daily by the staff of the acquired company, which is why it should be compiled thoughtfully and carefully.
“Accountability should be clearly defined, and each department should provide reports using agreed specifications.”
Kuokka explains the effect of such an approach.
“It is not OK to just give up. It is not an acceptable response to say, “we cannot deliver these figures” or reply “it is serves no purpose”. Or to say, “I don’t know these metrics, but according to my Excel…”
Stairway toward a globally consolidated company
The One Company programme requires perseverance and support at every stage.
When common objectives are in place, focus can be made on addressing business planning and steering challenges and how the acquired company’s figures can be integrated into the group’s reporting. Master data management is thus part of the early stage agenda.
“When the group-level figures deliver transparency it allows management to provide improved numerical planning and to be better able to support the challenges of, and actions for, growth.
The next step is to seek synergy in purchasing and logistics at the group-level. Consolidated data is once again essential.
This is then followed by the organisation of the group, where it is determined how common functions such as IT, accounting and business service centres operate regionally or at the group level, under a single management structure, yet within a business matrix.
“After each stage there must be an analysis of the benefits achieved and what has been learned. The results provide the best argument against opponents of the One Company programme who want to turn the direction back to the past. In addition, any results from the parallel steps of different activities that exceed expectations strengthen the results and raise the group to a new level. KONE is the best example of this.”
Reliable financial data through automation
When making specifications for financial administration and reporting one must think about which data needs to be visible at the group level. For example, what type of financial reporting format is used, what information does it contain and how frequently is the reporting done.
If only the aggregated information from the various companies is available at the group level, it is possible to observe that something has gone wrong, but it is not known where or why it has occurred. It is important to be able to view where this aggregated data comes from, in order that corrective measures can be taken within the right business unit and for the right reasons. Because of this the unified reporting formats – and also therefore the master data definitions – aid management activities through transparency.
The metric logic is also internalised. Kuokka illustrates using an example from the elevator world.
“If it is known at the group level that the failure rate of the elevators is 3.5 p.a. with the standard target being 2.0 p.a., you can certainly calculate how much the additional maintenance is per year and what the related costs will be. However, if the data, coming from the business unit where the failure rate is lower than the target, is not factorized, then there is no recourse for identifying the correct person responsible.”
“When the group’s reporting objectives and KPI’s are clear, data management models can be organised to automate financial administration, so that figures can be obtained quickly and reliably. Without automation, figures can be manipulated and there is room for error,” Kuokka warns.
“If the group’s various business units are a mixed bag of ERP, Excels and other systems, interpreting between them rests on the skill of the controller. The figures available are just as good or bad and fast or slow as the controller is able to reliably generate. This also affects any forecast of which direction the business is heading.
Harmonisation that respects specific competencies
The One Company programme pushes for a harmonised approach throughout the group, but often the acquired companies have valuable and unique knowhow that is different from the parent company, such as the understanding of regional markets, new management practices or other capabilities in a variety of different fields.
“It is not advisable to unjustifiably eliminate productive and effective operational approaches. It is important to learn from acquired companies and to adapt common practices to make them even better.”
Is it profitable to abandon what you know? How do you know then, when to make an exception? Kuokka explains the basic principle:
“Harmonisation is applied when there is not a valid business reason for the local operational processes. This is expected to be analysed by the Group Governance steering model, and thereby the corporation’s executive team.”