The Controlling Concept. Horváth & Partners Management Consultants

the existing companies is intense or if it becomes more intense due to new entrants or substitute products, corporate management must think about expanding or changing their portfolio (entirety of all products and services) or about changing the technologies they use (equipment, procedures and methods for producing the goods and services).

      Here, the impacts of the portfolio on Controlling are manifold: Controlling must design the concept for information supply and reporting which enables the company to take decisions on streamlining or expanding their products and services. The broader and deeper the portfolio is, the more complex this task becomes.

      For their part, the technologies used affect above all the cost estimation procedure and reporting. Additionally, the controller must use investment appraisal and planned earnings analyses to provide the basis for taking decisions on technology changes.

      •Bargaining power of customers:

      The customer is defined as all current and potential buyers of a company’s products and services (portfolio). The bargaining power of customers also influences the competitive situation on the marketplace. Customers with high bargaining power can have a strong influence on the price and sales conditions.

      If the customer is a critical success factor for the company, this should be reflected in the Controlling system. In such a case, the reporting system in particular should have a strong market focus and contain the most important market-related information and KPIs (e. g. market share, sales figures, customer structure, customer satisfaction). Additionally, this has a strong impact on the calculation of (short-term) lower price limits for setting negotiation parameters.

      •Bargaining power of suppliers:

      The bargaining power of suppliers is another competition force. It determines how much influence suppliers have on prices and other sales conditions.

      Due to the big lever of lower purchasing prices, the Controlling system must also include procurement Controlling. Above all, the aim here is to support supplier selection. In terms of procurement management, it is important to manage supplier relations and identify problems as early as possible.

1.7What comes next

      Now that we have described the principles of an effective Controlling system, the rest of this book will breathe life into the “House of Controlling”, i. e. we will present the individual building blocks. To do so, we will identify the most important features and characteristics and use real-world examples to illustrate them.

1.8Design checklist for managers and controllers

	Create clarity about your company’s business model!
	Develop a controller mission statement together with job and competence descriptions for your controllers and your controlling function which are tailored to your company’s specific situation!
	Define the building blocks of the “House of Controlling” in your company with a brief description for each one!
	Clarify which strategic and operative challenges exist for your company and think about how the controlling function can help you overcome them.

Further reading

      If you would like to find out more about the tasks of Controlling and the role and competences of the controller, we recommend the following publications:

      Gleich, R. (Ed.) (2015), Moderne Controllingkonzepte, Zukünftige Anforderungen erkennen und integrieren, Freiburg/Munich 2015.

      or

      IGC International Group of Controlling (2015), Controller-Kompetenzmodell, Leitfaden für die moderne Controller-Entwicklung mit Muster-Kompetenzprofilen, Freiburg/Munich 2015.