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Value Management, Corporate Management and Control - Designing Processes Purposefully |
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- Changes in Management Board Responsibilities
- Focus on Improvement of Company Value
- Improvement of Management by Means of a Management System
Since we restructured and reorganized the Group on a functional basis a few years back, we have continuously further refined the corporate organizational structure and its operating structure, orienting it to added-value processes. At the same time, we developed a comprehensive management approach that takes the interests of all the Company’s stakeholders into account. On July 1, 2008 the new breakdown of the areas of responsibility will come into effect. Bernhard Schreier will focus on Heidelberg’s strategic development as well as acquisitions, communications, and compliance. He will continue in his function as Human Resources Director. Responsibility for sales, which had previously been assigned to Mr. Schreier, will be shifted to Dr. Jürgen Rautert in the future, who will additionally continue to be responsible for customers and market-related activities, product management and marketing, and will also be in charge of expanding the service and consumables business. Stephan Plenz has been newly assigned by the Supervisory Board as the Management Board Member responsible for Technology; he assumes responsibility for research and development as well as production and purchasing; in this latter capacity, he will accelerate both the expansion of the production capacity in China and international purchasing. No structural changes have been made in the area of Finance; the measures that have been planned to increase efficiency and reduce working capital are in the area of responsibility of the CFO, Dirk Kaliebe. You can find the detailed description of the organizational structure
here.
Goals: Increase Corporate Value and Further Strengthen the Strategic Factors for Success
Our shareholders as well as our customers and employees benefit in the long term from any sustainable increase in the Company's value. A significant goal for us, therefore, is to further expand our strategic competitive advantages and factors for success, which we described in the previous section, thereby further strengthening the 'Heidelberg' brand name, our most important intangible asset.
Our financial goals are an integral part of the Group's strategic planning and are thus included as target figures for corporate management, specifically: return on capital employed (ROCE), value contribution, and free cash flow. To identify the return on capital employed, we analyze the relationship of earnings before interest and taxes (EBIT) to average operating assets. We calculate the cost of capital based on the weighted cost of capital.
Heidelberg Leadership & Management System (HLMS):
Mandatory Performance Targets and Procedures at Every Level
To ensure that all of Heidelberg's units work together to achieve the key corporate goals, in principle the entire Group - from the top all the way down to every unit of production, administration, and sales - is managed on the basis of target agreements, a principle that we also apply to relationships with our suppliers.
To measure and improve the quality of management, we launched the Heidelberg Leadership & Management System worldwide during the previous year. As the illustration on the right shows, HLMS applies to all levels. It establishes the framework within which Heidelberg's organization, strategy, and management quality are continually examined and further developed. It determines in advance the procedure for breaking down the Company's main goals into concrete targets for the coming years.
Analysis of the Development of Major Factors
The HLMS also undertakes measures to counter the hazard present in functional organizational structures, that individual areas might concentrate excessively on only reaching their own goals. The system requires periodic meetings of cross-divisional management bodies, thereby promoting an intensive Company-wide dialog. A so-called Extended Management Board comprises the core of the body, which is composed of the responsible individuals from key areas. Heidelberg's controlling operation continuously generates up-to-date quantitative and monetary- based information from internal sources. Ongoing comparisons of targets vs. actual performance of all developments of significance for the business development are generated. The controlling unit also prepares data sourced from the corporate environment, records best practice and benchmark data, and draws up business plans for investments in new markets, products and areas of business. The management of risks and opportunities is a solidly integrated component of strategic planning and strategic controlling.
Close Links among Value Management, Risk Management and Opportunity Management
To be in a position to increase the value of the Company on a long-term basis as comprehensively as possible, risks must be recognized and realistically assessed early on, so that we immediately effect countermeasures. Opportunities should also be recognized and systematically exploited as early as possible. We ensure this by making both our risk management as well as our opportunity management systems integrated components of our value-oriented control system, each with a different focus. How does this work? On the one hand, concrete risks and opportunities are recorded, quantified, collected, and reported further directly and on-the-spot. On the other hand, however, we believe it is of equal importance in all management bodies and meetings at all management levels to frankly and proactively deal with risks and opportunities, even when they are only 'perceived' ones.
On the one hand, our guidelines and organizational directives therefore stipulate a strictly formal process, with whose help we systematically record both individual risks and the overall risk of the Group and record, assess, and quantify opportunities. In addition, all cross-sector units are expected to regularly shed light on risks and opportunities - even removed from the formal process - from all points of view. This enhances Heidelberg's reaction time for these management bodies to undertake extensive decisions in favor of appropriate measures that are feasible in all areas.
Our risk- and opportunity management are integral components of the annual controlling and reporting processes as well as our five-year planning process.
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As at: July 2008
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