From this time, we will talk about reform of the business management system (system of business planning and execution evaluation that helps management decision making and performance improvement).
What is Business Management System Reform?
At the 65th “Management Reform from the Management Side,” I explained the reform of the business management system as follows.
- Make sure that the system from the establishment of the management plan to the evaluation of execution functions to help the management decision making and the improvement of business performance.
- Work on reforms from both the management plan formulation system and the management execution evaluation system
- To make the business management system a high-performance system that functions as a foundation and place for management reforms to formulate and evaluate corporate strategies and business strategies.
- Utilize a management accounting system that helps improve business performance and makes decisions so that the business management system can function effectively.
The business management system is “a management system that turns PDCA of management”, but I think that the reform is to work from the three perspectives of the organization, system, and people mentioned in BPR. When it comes to business management systems, we tend to think of numbers-based systems and information systems, but please note that this also includes reforms regarding “business management organization” and “business management capabilities of top management and middle managers”. The above figure shows the framework of business management system reform.
Problems Found in Business Management Systems
Many companies operate a business management system, which is a system for evaluating execution from business plans. However, companies experiencing the following problems need to reform their business management systems to help them make better business decisions and improve business performance.
1. Planning System Problems
- The theme of the medium-term plan is comprehensive, the emphasis is not clear, and management resource allocation is dispersed
- Since the strategic option proposals for responding to changes in the business environment have not been considered at the planning stage, decision-making to respond to changes in the business environment will be delayed (following).
- Since the medium-term plan (strategy) and the annual plan (measures) are not linked well, the strategy is not dropped into measures and is not materialized
- The use of priority theme action plans is formalized, and the link between management results and on-site results is weak
- Numerical focus is on formulating management plans, and there is insufficient consideration of strategies and measures
- It takes too much time to formulate a management plan, there is no sense of speed, and the planning cost is high.
2. Performance Evaluation System Issues
- Understanding of management results and site results is not linked to analysis and countermeasures
- Plans will be developed over time, but the verification mechanism associated with execution will be weak, and the next step will continue with inadequacy.
- There is no mechanism to connect the on-site results to the management results, and it is not enough to improve the sense of accomplishment on-site.
- A monitoring system for achieving on-site results has been introduced, but there is no system for evaluating the degree of execution of on-site measures.
- Because there are not enough systems to support future outlook and advanced prediction, countermeasures will be delayed
- The system does not have a system to see what the mid-term plan has achieved and where it has not.
3. Business Management Problem
- The place of the “Management Meeting” does not function as the “place of management reform” such as the mid-term management evaluation of the entire company and problem business.
- The “business meeting” site is not functioning as a “business reform site” because it is focused on short-term performance reviews.
- The roles and functions of the group head office / headquarters and local headquarters / bases in business management have become ambiguous, causing mutual distrust and coordination work.
- The division of roles between the Corporate Planning Office and the management department is ambiguous, and it takes time for each other’s coordination work.
4. Human problems
- Because the overall image of management reform by top management is not clearly stated in the medium-term management plan, the direction of management reform cannot be conveyed.
- Because there is a lack of ability to formulate effective business strategies and various measures on the business line side, the figures for the mid-term plan and annual plan are weak.
- The annual total lacks a sense of commitment between the top management and each department, which causes each department not to take action early and early.
- Staff have the ability to analyze monthly performance, but have poor prospects and forecasts in the future, and are unable to come up with measures.
5. Management Accounting System Problems
- Cannot make decisions on strategies / measures, because integrated profit / loss by business and profit / loss by customer cannot be seen.
- There is a mechanism to display monthly profit and loss management information, but there is no mechanism to view information on future advanced profit and loss management and upfront funding management.
- It takes a lot of time to grasp the business consolidation management accounting information of the group, and it is inefficient
- The management staff of the business divisions and affiliated companies and the staff at the head office are taking a long time to understand the numbers, and they have not been able to make the original reform proposal.
I think there are many other issues as well, but please make sure that the business management system is functioning effectively and efficiently so that it can improve business performance and make decisions.
Expansion of Business Management System
Group management has advanced, and in addition to the business management of individual companies, we have entered the age of group business management. It can also be said that the era of global business management has come along with the globalization of management.
Business management systems are expanding into systems that help management decision-making and business performance at the group and global level, but Japanese companies are facing new challenges. One of the current challenges is the utilization of IT to quickly aggregate and analyze business management figures on a consolidated business basis. Since the consolidated company and the parent company or holding company are spending time collecting and analyzing business management figures, we are trying to utilize IT to streamline business management operations.
The essential issue is the establishment of a business management system on a consolidated business basis. For this purpose, it is necessary to introduce and utilize a business consolidation management accounting system. Improving the ability of business managers and business staff to formulate business plans and evaluate business execution on a business-consolidated basis is essential.
It is often said that Japanese companies are lagging behind in the utilization of IT as a business management platform, but the major challenge is to introduce a business consolidation management accounting system as early as possible and improve its utilization.
Every day, managers have to make a lot of information and make decisions such as budgeting, budget management, financial management and business planning. There are a wide variety of things that managers have to think about, such as setting goals for companies and effective use of resources that they can have. It can be said that the management’s job is to constantly make the right decisions in order to improve business performance.
Therefore, the business management system is a reliable source. A tool that manages data is indispensable in comparing the budget prepared in advance with actual results, analyzing the cause of the difference, and devising a countermeasure.
This time, I will explain what business management is all about, how to effectively use the business management system, and the importance of leadership.
What is Business Management?
First of all, what is business management? Though the way of thinking and the mechanism varies from company to company, it generally means to manage the resources (people, goods, money, information) of a company in an integrated manner in order to operate the company efficiently.
And the term “management” here means the following PDCA cycle.
- Plan for realizing management goals and visions
- Activities of each department and department (Do)
- Understanding and evaluation of activity contents (Check)
- Improvement (Act) based on the evaluation results
This PDCA is indispensable for the direction that companies should take and for strategic planning. And many companies have introduced a business management system in order to carry out PDCA efficiently.
How to Effectively Use the Business Management System
Businesses introduce a business management system because the business management work has to process a large amount of data, which is a heavy load. However, if a system is introduced, business management does not go well. If a system for turning PDCA is not in place, introducing a business management system will not be useful for business decisions.
Then, what kind of points should we pay attention to so that we can effectively use the business management system? Let’s look at the main points.
- Clarify the medium-term plan
- Link mid-term and long-term plans
- Do not formalize the execution plan by closely coordinating with the field
- Enrich plans and measures, not numbers
- Clarify your goals
- Repeat the evaluation of execution in a short period of time and use it for analysis and countermeasures.
- Create a mechanism for on-site performance evaluation
It is important to remember that a business management system is just a “tool”. If the PDCA cycle mechanism described above is not in place, it cannot be used for management decision making.
Leadership Required to Utilize the Business Management System
A business management system is a tool, which means that it cannot decide on its own. It’s yours to decide what medium-term plans and long-term goals you will use the information derived from the system.
What you need is your own “leadership”. It is important to correctly convey the meaning of collecting data to the company and to guide the direction to proceed based on the collected information. In other words, the business management system is used as a “tool for taking control”.
Even if you make a mistake, don’t make a business management system a “tool for monitoring employees and companies.” If you decide only “what you should not do” from data and numbers, employees may be shrunk and may not want to upload data properly.
Based on the information obtained from the business management system, we will continue to improve in order to unite all employees toward the company’s goal. We need strong leadership to achieve this.
Many companies have already begun to consider introducing a business management system in order to carry out business management more effectively and quickly. The important thing to remember here is that a business management system is a “tool”. And what you need to manage your business is not your “tools” but your “leadership.”
In order for companies to carry out stable and healthy social activities, let’s put in place a mechanism for PDCA to operate properly and utilize the business management system.