compendium english

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Next Generation Controlling

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Next Generation Controlling

Next G

eneration Controlling Prof.Dr.Edgar Ernst/Hartm

ut Reinhard/Dr.Hendrik Vater

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Contents

1. The Controlling department of Deutsche Post World Net

is taking up the current challenges 4

2. The Next Generation Controlling approach 7

3. Key points of the status quo analysis 10

4. Six levels for optimizing Controlling 14

4.1. Controlling Mission, Role and Tasks 14

4.2. Key Controlling Processes 15

4.3. Controlling Systems and Tools 17

4.4. Methodological Aspects 18

4.5. Governance and Organization 19

4.6. “Soft Factors” 20

5. IMPACT – The Controlling organization of Deutsche Post World Net

on its way to becoming an “Advanced Navigator” 22

5.1. Initiative 1: Capability and Role Building 22

5.2. Initiative 2: SLA Methodologies and Processes 23

5.3. Initiative 3: Investment and Project Controlling 24

5.4. Initiative 4: Reporting to Business Needs 24

5.5. Initiative 5: Planning/Forecasting Process and Tool 25

5.6. Initiative 6: NFO Calibration 26

5.7. Initiative 7: Functional Planning and Monitoring vs. Controlling 26

5.8. Initiative 8: Costing Capabilities and Capacity Management 27

5.9. Initiative 9: Freight Controlling 27

5.10. Initiative 10: Aviation Costing and Transfer Pricing 27

5.11. Initiative 11: IT Controlling 27

6. Outlook 29

Impact_engl_endfassung_pg_28.08..qxp 28.08.2006 14:47 Seite 3

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The speed of innovation of products and services has con-

tinually increased in recent years. In this environment,

Controlling must also adapt in a very versatile and dynam-

ic manner. The pressure to adapt and change is intensified

by legislative developments, such as the internationaliza-

tion of reporting standards (IFRS), the Sarbanes-Oxley Act

and first-time establishment of an enforcement organiza-

tion for auditing. In addition, the increasing professionali-

zation of analysts and investors requires various changes in

the internal control of companies with value-based

management. Primarily, it is the large, listed, multinational

companies that must rise to these challenges.

Furthermore, the pressure is increasing on the part of capi-

tal markets, which today evaluate not only the reports of

achieved results, but also corporate strategies. For that

purpose they require a forward-looking description of the

business segments. This must take place by including a

multitude of different internal and external influencing

factors such as future areas of activity, customer groups,

geographical market expansion and technical possibilities.

Investors need information that permits them to draw

conclusions about the future success of a company.

In the past, the core task of controlling was primarily to

“monitor the achievement of objectives,” but today more

than ever an “early warning function” or “navigator func-

tion” for management is in the foreground. This change

determines the general conditions for the future orienta-

tion of controlling in particular, and of finance and

accounting in general. Active and timely provision of this

information on current results as well as on the medium-

term and long-term strategy or corporate development is

vital. In addition, this entails the necessity to link internal

planning, control and monitoring data with financial and

accounting indicators to be provided externally.

Deutsche Post World Net has already made these describ-

ed changes: The most visible adaptation was the intro-

duction of the New Finance Organization (NFO) in

November 2003, which ensured overall responsibility for

the Chief Financial Officer. For greater transparency and

faster decision-making, the financial organizations of the

MAIL, EXPRESS, LOGISTICS and FINANCIAL SER-

VICES Corporate Divisions were linked directly to the

Chief Financial Officer. In addition to the launch of the

NFO, other reference projects are worth highlighting:

CREST (Common REporting SysTem), which intro-

duced a globally uniform system for the reporting of

financial indicators

DASHboard, which standardizes systems and

methods for accounting

The Cost of Finance (CoF) project, which aims to

sustainably reduce costs in the financial area

Figure 1 shows the background from Deutsche Post

World Net’s view: In the past few years, the evolution to

a leading global service provider for LOGISTICS was

driven last but not least by acquisitions, whose integra-

tion posed a huge challenge for Controlling (in particular

the “3D integration” of Danzas, DHL and Deutsche Post

Euro Express in Europe). Now that the financial integra-

tion, various reorganizations and Group-wide harmoni-

zation of Controlling have been largely completed, new

challenges are arising for the future. In addition to sup-

porting further operational growth, the focus in the fu-

ture will be on increasing efficiency and on strengthening

Controlling’s orientation toward operational business.

This is where the Next Generation Controlling project

started, to further spur the development of Controlling.

This document describes the Next Generation Control-

ling project (Section 2), whose goal was to reorient Con-

trolling based on a methodically solid analysis of current

performance (Section 3). This project also took into

1. The Controlling department of Deutsche Post World Net is taking up the current challenges


account the aforementioned adaptation of the financial

organization and of the finance projects. Based on the

results, potential for optimization was identified in six

key areas of controlling (Section 4). These were used as a

foundation for the IMPACT program in 2006 (Section

5), which is intended to help improve Controlling based

on eleven dedicated initiatives.

The IMPACT program aims to achieve visible improve-

ments in Controlling already in 2006, and intends to

demonstrate the achievements at the Second Annual

Finance Conference of Deutsche Post World Net in

November 2006. Subsequently, further steps in develop-

ment for Controlling shall be stimulated. IMPACT is

assigned as part of the overall responsibility of the

Group CFO (Chief Financial Officer) and is directed by a

steering committee made up of all heads of corporate

departments and divisional board members of the Finance

Board Department. Program progress is coordinated and

controlled operationally by a dedicated program office.

All in all, it can be noted that the Controlling of Deutsche

Post World Net has risen up to the challenge to change,

coming from legislative, capital market and internal

requirements, but also further changes are necessary.

First and foremost, the understanding of the Controllers’

role should change: While Controllers have viewed them-

selves more as “number crunchers,” administrators or

overseers and have also been viewed in this way by their

Users and Peers, both sides want a changed perceptual

image and higher acceptance from the business in the

future (see also Figure 2):

5

Integration and sophistication

of Division-specific Controlling

systems, methods, etc.

3D Integration

Various reorganizations

New finance systems

Group view –

Controlling harmonization

Further large-scale

acquisition(s) (e.g. Exel)

Cost of Finance

Controlling effectiveness

ControllingEvolution Levels

timeLaunch Next

Generation Controlling

Figure 1: Next Generation Controlling comes at the right time


6

In this sense, Controllers should be perceived as partners, consultants, as well as challengers and support-

ers of the company’s activities. This vision can best be described with the metaphor of the

“Advanced Navigator” who stands at management’s side in a supportive role, operates in a forward-

looking manner and is also aware of the external environment. Results-orientation and integrity and last

but not least compentency in understanding the processes of the operational business are additional keys

Supportive

Forward Looking

Externally Aware

Results Focused

With Integrity

Competent

Figure 2: “Advanced Navigator” as the vision of Controlling

At least …

… and ideally

Be the “right hand” of the ship’s captain (e.g. helping the company to succeed)

Identify “icebergs” and opportunities early(e.g. projected customer losses/gains,price erosion/increase) …

Put the ship’s position into perspective (e.g. comparison with competitors)

Provide options to direct the ship (e.g. reduce “waste” to concentrate on key business issues)

Discuss “icebergs” openly (e.g. performance issues or opportunities)

Not only know “navigation” but also the ship and the waters it is operating in (e.g. know the business and industry)

Controller as ”Advanced Navigator”


7

To transform the Controlling organization of Deutsche

Post World Net into an “Advanced Navigator”, a compre-

hensive improvement program called “Next Generation

Controlling” was set up (cf. Figure 3). In the first phase,

which was launched in 2005, the current performance of

Controlling was thoroughly analyzed in the context of an

extensive investigation and, based on the results, detailed

improvement options were identified. Subsequently, the

IMPACT program was started in the second phase. In the

course of this program, concrete initiatives were defined

that pursue the identified potential improvements in

order to advance further development efficiently.

The goal of the extensive investigation of Controlling

performance in 2005 was to create a solid starting basis

for target-oriented improvements. For this reason, the

scope deliberately included not only employees, but also

Users and Peers of Controlling. After all, Controlling is

understood as a management support function and must

therefore allow itself to be measured by management. All

regions were included in the investigation, above all to

discover the need for changes in the countries and not

just the status quo at headquarters.

Figure 4 shows the extensive basis of the investigation. At

first, 38 interviews were conducted with top managers of

the Groups as well as 65 interviews with other stakehold-

ers from all Corporate Divisions across all regions.

In addition, the opinions of 436 people were ascertained

in a Web survey using a detailed questionnaire. Figure 5

clearly shows that the survey represents a broad spec-

trum. A total of 268 Controllers and 168 Users and Peers

of Controlling participated, representing all Corporate

Divisions, geographical regions and organizational levels.

2. The Next Generation Controlling approach

Figure 3: Two phases of the Next Generation Controlling project

PHASE 1 PHASE 2

Analysis of Status Quo Levels of Improvement IMPACT

Controlling Mission, Role, Tasks

Key Controlling Processes

Controlling Systems and Tools

Methodologies

Governance and Organization

“Soft Factors”

ControllingPerformance

Achievements

Controlling Self-Assessment

Customer Satisfaction

Gap Analysis

Initiative 1

Initiative 2

Initiative ...

Initiative 11


8

In addition to the interviews and the survey, internation-

al benchmarks were also examined, whereby both lead-

ing competitors and companies outside the industry

were included. Supplementally, the current trends in

Controlling from an academic view were included.

The goal of the study in the first step was to survey the

general satisfaction with the performance of Controlling.

The results show that regardless of all successes and qual-

ities, satisfaction does not meet internal requirements in

all areas. These findings are explained in detail in Section 3.

Based on the results of the survey, six key levels for

improving Controlling were worked out in the second

stage. These are described in detail in Section 4:

The area of Controlling Mission, Role and Tasks

refers to the basic way Controlling sees itself.

Key Controlling Processes deals specifically with

process-oriented aspects, above all in the areas of

reporting, planning/forecasting as well as investment,

project and risk Controlling.

In the category of Controlling Systems and Tools,

the comprehensive CREST reporting system recently

introduced successfully throughout the Group is

especially in the foreground.

The area of Methodologies refers to important indi-

vidual topics of Controlling such as product costing,

freight controlling, service level agreements, air net-

work transfer pricing and IT controlling.

In the category of Governance and Organization, the

focus is on aspects of the New Finance Organization,

which among other things has significantly strength-

ened the role and independence of Controllers by

means of direct reporting lines.

Figure 4: Basis of the investigation

… with top management

38 interviews

– 5 with Group Board Members

– 15 with Controllers

– 18 with other top mgt.

stakeholders

… and with key stakeholders in countries

65 interviews in 13 countries across all regions

– Cross-functional

– Cross Divisional

Web Survey

436 responses

– 268 Controllers

– 168 Users/Peers

– Covering 5 continents

and all Divisions

Selected Benchmarks

Competitors Other

(outside-in) Multinationals

Interviews


9

Figure 5: Representativeness of the survey

Position of Respondents Divisions

Geography Organizational Level

Controllers 268 (61%)

Not Available47 (11%)

Europe144 (33%)

Germany 150 (34%)

Asia/Pacific 45 (10%)

Americas 41 (9%)

EMA 9 (2%)

ControllingUsers and Peers

168 (39%) Corporate CenterServices

106 (24%)

Below country42 (10%)

Regional/Business Unit

80 (18%)

Divisional/Global

88 (20%)

Corporate 83 (19%)

Country/Cluster

143 (33%)

Others25 (6%)

MAIL47 (11%)

EXPRESS159 (37%)

LOGISTICS80 (18%)

FINANCIALSERVICES19 (4%)

Σ 436

Σ 436

Σ 436

Σ 436

The last category of Soft Factors deals with the devel-

opment aspects of Controllers, in particular the satis-

faction with their work and the perceived opportuni-

ties for development.

The IMPACT program was launched in 2006 to actively

address the improvement needs. For this purpose, eleven

different initiatives were worked out in the six identified

levels of optimization. Some deal with cross-divisional

topics, others focus on important individual topics with-

in a specific area. The goal of IMPACT is to clearly

improve the efficiency and effectiveness of the Control-

ling organization even in 2006. The initiatives are

described in more detail in Section 5.


Figure 6: Level of satisfaction with the performance of Controlling

As viewed by Controllers

Controlling Overall

Corporate Controlling

Divisional Controlling

Regional/BU Controlling

Country/Cluster Controlling

As viewed by Controlling Users/Peers

Very satisfied Satisfied Neither/nor Dissatisfied Very dissatisfied

40% 32% 22% 5% 23% 37% 29% 9%2%

27% 37% 24% 10%2%

43% 28%

44% 35% 15%

44% 32% 15%7%

25% 4%

22% 28% 35% 13%

27% 32%

37% 31% 23% 7%

32% 31% 23% 7%7%

28% 9%

Σ 268 Σ 168

How satisfied are you with the performance of Controlling at the following levels?

10

The Controlling organization of Deutsche Post World

Net has successfully mastered the challenges in recent

years. The Controllers and top managers have explicitly

acknowledged and shown their appreciation in the sur-

vey; Controlling and Business work particularly well

together in the countries. Accordingly, Controlling not

only accompanied the enormous growth of Deutsche

Post World Net due in part to the roughly 120 acquisi-

tions, but also actively participated. For example, the

establishment of a powerful global finance organization,

the support of Postbank’s IPO and the roll-out of new

financial systems (e.g., CREST) are worth mentioning.

Nevertheless, the Controlling organization has not yet

fully reached its goal. As the survey shows (Figure 6), the

level of satisfaction with the performance of Controlling

still does not meet expectations. The satisfaction was

ascertained both in general and at the Corporate, Corpo-

rate Division, Regional and Country levels.

The results clearly show not only that further improve-

ments must be made, but also that the “self perception” of

the Controllers is apparently better than the “outside

perception” of the Users and Peers of Controlling.

Although at least 41% of the surveyed Controllers

(of 268) are very satisfied to satisfied with the perfor-

mance of Controlling, “only” 25% of the surveyed

Users and Peers (of 168) indicated the same levels of

satisfaction.

Clearly, the level of dissatisfaction with the Controlling

areas increases – both among the Controllers and among

the Users and Peers – the higher these areas are located in

the corporate hierarchy, or the further away from the

3. Key points of the status quo analysis

1%

2%

4% 3%

3%

2%

4%

2%


operative business they sit. While Controlling achieves

relatively high satisfaction values at the Country level, the

level of dissatisfaction with Corporate Controlling is par-

ticularly high. Therefore, further optimization is neces-

sary in particular on the Corporate and Divisional levels.

If the level of satisfaction with Controlling is considered

for each individual Corporate Division, the results show

that reorganizations and integration tasks have clearly

negatively influenced the performance of Controlling.

In the context of satisfaction, however, the survey also

asked the respondents how the different levels of Con-

trolling evaluate each other internally (see Figure 7).

These results support the finding of the “impaired” con-

nection between Corporate and the hierarchically subor-

dinated divisions: While 53% of the Corporate Control-

lers are very satisfied to satisfied with the work of Corpo-

rate Controlling, only 12% (Regions/Business Units),

27% (Countries) and 28% (Divisions) of the subordina-

ted units gave the same evaluation.

An analysis of the root causes of dissatisfaction among

Users and Peers (Figure 8) shows that only 39% of the

respondents agreed that Controlling provides service and

support that meets their expectations. In particular,

respondents felt there is room for improvement in the

challenging of plans and decisions of management in the

sense of a “challenger”, thus a sort of experienced “spar-

ring partner.” Over half of Users and Peers feel that the

necessary conditions for this are not yet adequate: Con-

trollers’ understanding of operative business and its suc-

cess factors. In view of this background, 32% of the

respondents felt that Controlling was more a burden

than a support.

11

Figure 7: Satisfaction of the different levels of Controlling with each other

n The largest discrepancies exist between corporate and regional/BU controlling

n Countries are critical of corporate and Business Unit controlling

n Adequate satisfaction on regional/Business Area level and below

with

Satisfaction

Corporate Controller

Business Unitcontroller

Regional/ Business Areacontroller

Country/ Country-Clustercontroller

Corporate Controlling

Business Unitcontroller

Regional/ Business Area

controller

Country/ Country-Clustercontroller

53% 36% 22% 31%

28% 49% 49% 42%

12% 41% 59% 52%

27% 37% 46% 58%

Percentage of answers “satisfied” or “very satisfied”

How satisfied are you with the controlling performance?


12

If Controlling does not succeed in developing a clear

understanding of the business so that it can really sup-

port management adequately as an “Advanced Naviga-

tor,” there is a danger that the business will establish

“shadow Controlling.” The various Business Units will

then install shadow Controllers who deliver what the

Units, Regions or even Divisions need to do their work

from their own point of view. These shadow Controllers

emerge especially from the classical budget coordinators

or operation controllers.

In the end, this process threatens to marginalize the offi-

cial Controlling department, because it is not involved in

key business decisions. As a result, its understanding of

the business decreases further. Ultimately, such Control-

ling is even less able to offer the kind of support that

management expects and needs – a classic vicious

circle (Figure 9)!

The fatal aspect of such a vicious circle is that in this way,

two sets of figures or data sources ultimately come into

existence. The Business Units then frequently use the

Controlling department that is closer to the business –

normally the set of figures that is created by “their”

shadow Controllers.

Figure 8: Desired support by Controlling as viewed by Users and Peers

… is more of a support than a burden to management

… provides management with the service and support they expect

… has a clear understanding of the business and its underlying drivers/success factors

… helps management to understand the root causes of performance gaps

… adequately challenges the business/management

n A key element in being able to challenge the management is first to have a clear understanding of the business

n However, almost 50% of Users do not agree that Controllers currently have this business know-how

As viewed by Controlling Users/Peers

Strongly agree Agree Neither/nor Disagree Strongly disagree

24% 31% 28% 4%13%

33% 18% 34% 11%

37% 22%

31% 14% 30% 17%8%

26% 28% 34% 10%

28% 11%

Σ 168

Controlling ...

2%

5%

3%


13

Figure 9: Vicious circle of shadow Controlling

Controlling does notprovide the support thatbusiness expects Business builds up

“shadow staff” to fill thevacuum of information/support

“Shadow staff” imple-ments its own Controllingsystems, tools and informa-tion channelsControlling becomes more

marginalized and left out ofkey management decisions

Controlling does notgain the insight andbusiness know-howrequired


14

The general analysis of the satisfaction with the perfor-

mance of Controlling has clearly shown that despite all

successes achieved, there is still need to optimize. Numer-

ous starting points can be derived from the detailed anal-

ysis of the survey results, and they can be assigned to six

levels for optimizing Controlling (Figure 10). These are

described briefly below.

4.1. Controlling Mission, Role and Tasks

The first level for optimizing “Controlling mission, role

and tasks,” provides the thrust for further development of

Controlling. The role of the “Advanced Navigator” forms

the general model (to a certain extent).

Figure 11 illustrates the current and future understand-

ing of the role as viewed by Controllers (left side) and as

viewed by Users and Peers of Controlling (right side).

Today, both groups classify Controllers as “number crunch-

ers”, administrators or police officers. In contrast, they

view the future role of Controlling as one of a sparring

partner or consultant. This means that both the Control-

lers and their Users and Peers perceive a significantly

more sophisticated functional description for Control-

ling in the future.

The future expanded function of Controlling can be

accurately described using the vision of a “navigator”,

who is a partner and consultant to management. The

image of the navigator from sailors’ jargon figuratively

reflects the requirements and challenges for the Control-

lers (see also Figure 2).

On a ship, the captain is responsible for selecting the cour-

se correctly, i.e., avoiding icebergs or storms if necessary

and heading directly toward sunny profitable goals. For the

captain to perform this task optimally, he works closely

with his navigator, who draws his attention to possible

decisions and also to the associated consequences.

4. Six levels for optimizing Controlling

Figure 10: Six levels for optimizing Controlling

n Clearly define and articulate Controlling ambition level and development directionn Become “advanced navigators” to the “captains” of the “Deutsche Post World Net“ ship(s)n Get the basics right but move to more value-adding tasks

n Especially in Budgeting/Forecasting and Reportingn “Less is more” to allow more focus on the business issuesn Improve investment, risk, and project Controlling

n Incrementally improve the existing systems (e.g. quality, business support)n Move from a financially focused group perspective …n … to providing vital cross-functional steering information for the operative management

n Fix/improve where the lack of doing so would lead to wrong business decisionsn e.g. IT, Network transfer pricing, Freight Controlling, Express product costing, SLAs

n Take selective corrective actions, e.g. NFO CFO role, balance Division vs. Corporaten Improve governance/role splits (Corporate vs. Divisions and by organization level)n Prepare for upcoming challenges, e.g. Exel integration

n Fine-tune career development and capability-building to support the role vision n Gauge staff job satisfaction quarterly to allow corrective action earlier on

Controlling Mission,Role, Tasks


Controlling Systemsand Tools

Methodologies

Governance andOrganization

“Soft Factors”


As the understanding of the role goes beyond a purely

observational, reactive navigator function, the image is

completed by speaking of an “Advanced Navigator.”

Such a Controller helps “his captain” not only to travel

around icebergs, but also to discover opportunities early

on so that he can try to steer the ship in a promising direction.

The transformed understanding of the Controller’s role

as an “Advanced Navigator” is also clearly confirmed by

scholars and CFOs of benchmark companies from the

logistics industry and beyond (see Figure 12).

In order for a Controller to perform such a function at

all, a regular and intensive exchange with management

and with the internal and external environment is cru-

cial (Figure 13). The acceptance of the business for this is

indispensable. So far, this has not taken place internally

or externally to a sufficient degree according to the opin-

ion of the respondents: While Controllers exchange

information several times a week with 88% of their col-

leagues within the department, this figure drops to 61%

and 64% respectively with other Controllers and col-

leagues from other financial areas, and to only 42% and

52% with business managers and representatives from

other functional areas.

4.2. Key Controlling Processes

A prerequisite for the navigational function of Control-

ling is an optimal definition of the key processes repor-

ting, planning/forecast as well as investment, project and

risk controlling. According to the survey, 100% of the

expectations of Users and Peers are not yet fulfilled in

these areas.

Today, 68% of the Users of Controlling reports outside

of finance feel they are not sufficiently involved in the

15

Controlling Staff

Number Cruncher

Administrator

Policeman

Partner

Challenger

Consultant

Architect

Interventionist

Activist

Other

0 50 100 150 200 250

Controlling Users and Peers

0 50 100 150 200

Figure 11: Current and future understanding of the Controlling role

Which of the following phrases best describes the primary role of Controlling in Deutsche Post World Net?

Σ 268Today Future Σ 168


16

Figure 12: Statements on the changed role of the Controller

“On any given team, I want the

Finance person to know more about the big

picture – what’s going on outside of FedEx and

elsewhere within FedEx – so they can bring in

that needed knowledge and perspective”

“The accountants thought

the job was done when the numbers were put

together. But once that is done, the real work

begins. So every month we analyze the data.

It requires interaction and a critical distance

from the operating units”

“I consciously think of myself

as wearing two hats. I am responsible for

traditional issues: cash flow, capital and cost

structures. But my role is increasingly linked

with strategy and operations”

“When we look for a candi-

date for CFO, one attribute is customer focus.

To what extent does one understand the basis

of competition? Another one is teamwork,

which is critical as the most important task

is collaboration with other parts of J&J”

Prof. Dr. Weber: “Enterprise

growth can lead to complex governance struc-

tures. These face increasing pressures to

change… Controllers appear in this context as

innovators and management consultants, and

no longer have much in common with a tradi-

tional bean-counter”

Prof. Dr. Berken: “Increased

focus, simplification and waste reduction (elimi-

nation of non value adding time) can bring

about an enormous increase in process speed

and quality. To achieve this, enterprises need to

navigate with a simple operational value driver

hierarchy and very few KPIs“

“The key recurring question a CFO

should be asking himself is, “What is the right

business decision?” The technical tail should

never wag the strategic dog”

“I look at the Finance function

as an aider and abettor of making change hap-

pen. You have to have the Finance function sup-

porting the vision of leadership”

“The model from day one in GE is that

the CFO is broadly involved in the business.

That does not mean that you are running

the operations, but you are opining on them,

involved in them at every stage, and monitoring

the execution”

definition of reporting and therefore feel their require-

ments are not fully taken into account (Figure 14). The

Business Units partly criticize that they do not receive all

data relevant to planning, monitoring and control. The

level of detail is rated differently; some would like more

details, others fewer details. In addition, some feel the

quality of the commentary could be expanded: Instead

of a report and summary of the numbers, Controlling

should provide a more in-depth analysis of the root causes

of deviations from the plan. Furthermore, some Users

and Peers of Controlling wish for a greater frequency, so

that the reports can be used optimally to steer the busi-

ness locally. In that context, it has to be clarified if provid-

ing certain data on a daily or weekly basis is really a

Controlling task, or whether this should be conducted by

operations, marketing or sales instead.

With regard to planning and forecasting, the respon-

dents largely agree that the level of detail and the quality

of the data are satisfactory. What is criticized is the pro-

cess, which is judged as too complex and time-consum-

ing at this time. Better coordination and a shortening of

the planning process could remedy this.

Improvements are also expected in investment, project

and risk controlling. While the processes leading up to

the approval of a project or investment are clearly defined,

too little importance is currently attached to the processes

after approval. For example, investment controlling could

be optimized with respect to sanction mechanisms for

exceeding expenditure, for missing previously defined per-

formance goals or a specified time period.


17

Figure 13: Exchange between Controllers and other areas

Other Controllers in your department

Controllers in other departments/entities/countries

With other Finance staff

With heads of the business

With representatives from other functions

External stakeholders

As viewed by Controllers

Several times a day

About oncea day

Several times a week

About oncea week

About once every 2 weeks

About once a month

Less often or never

69% 7%

1% 1%

5%

Σ 268

How often do you speak with the following individuals?

12%

20% 13% 6%12%16% 4%28%

26% 12% 6%7%16% 7%26%

12% 13% 26%10%16% 5%17%

17% 10% 14%10%18% 6%25%

67%11%7%7%2%

Once a week or less

Similar statements were also made about pure project

controlling. While a project may remain within the bud-

get, various qualitative and/or quantitative target values

are missed without it being mandatory to make this up.

In this context, the question arises whether project con-

trolling should be carried out by the actual project manag-

er and his team and/or by an independent Controller.

Risk controlling is positioned very well with regard to

the financial risks at Deutsche Post World Net. However,

other aspects such as operational risks or environmental

risks could be considered in a more integrated manner –

especially in the context of a stronger linkage of risk con-

trolling with the periodic forecast and medium-term

planning.

4.3. Controlling Systems and Tools

At the level of “Controlling Systems and Tools,” the

CREST (Common REporting SysTem) system recently

introduced globally, was given particular attention. The

respondents appreciate that a uniform database and

language for financial indicators were created through

CREST and thus the foundation for internal and external

reporting and management reviews. The system has

made enormous progress with respect to the transparen-

cy and consistency of the data, especially across the vari-

ous reporting levels.

4%

2% 4%


18

Figure 14: The main issues with reporting

n Close to 41% of the business managers believe the quality of

the commentary needs to improven They expect an analysis of the root causes of the problems,

not a summary of the numbers

n Parts of the business (esp. Freight, Marketing & Sales) do not

get the data they need …n … so managers spend time on preparing their own reports or

give these tasks to the “Shadow Controllers”

n Only 20–30% of respondents are satisfied with the amount of detailn Yet there is no clear tendency regarding the level of detail –

nearly the same amount of people requested less or more

detailed analyses

n To steer the business locally, managers need data more frequently

than just monthly reportsn Managers at country level through all Divisions request weekly or

even daily information on a defined set of KPIs

Commentary

Relevance of the data

Level of detail

Frequency of reports

Main Issues with Management Reports

68% of Non-Finance reporting Users rarely or never get involved in the definition of reporting requirements/ methodologies

It should not be overlooked, however, that CREST is a

reporting instrument rather for Corporate, and less an

instrument for local management. However, CREST is not

supposed to perform this function anyway, since this acti-

vity is covered by the detailed local systems and instru-

ments. The survey (result) also shows that CREST is not a

substitute for a local budgeting tool. With its main functi-

on as a data collection and consolidation tool, it cannot

meet the demands for simulating scenarios.

4.4. Methodological Aspects

In the context of the “Controlling methodologies” level, five

key areas were identified where the respondents see poten-

tial for improvement:

Costing at EXPRESS in Europe can be methodically

refined, especially with respect to product, customer or

trade lane analyses (cost unit analysis of trade routes

between several locations). Even more detailed contri-

bution analyses could support management in decisi-

on-making. Refinements are also possible in the context

of international business.

In the area of Freight Controlling, it is noted that the

significance of this business unit would justify the

expansion of an independent Controlling organization

as well as of BU-specific reporting and analyses.


19

The area of Service Level Agreements (SLA) (agree-

ment between performer and demander of the ser-

vices about product, quantity, price and quality) has

gained special attention since the creation of the new

Corporate Division SERVICES as of January 1st 2006,

which includes amongst others Global Business

Services. Hence, there is interest in further differen-

tiated transparency with respect to the cause and allo-

cation of the costs for internal service providers and

horizontal functions. In addition, more opportunities

for influencing service quality are desired.

In the area of Aviation/Network Transfer Pricing,

the methods for standardized costing could be

improved further by updating transfer prices as soon

as possible and allocating costs more fairly based on

causation.

Finally, in IT Controlling, the Controlling organiza-

tion must understand the restructuring of IT in the

sense of a separate supply (IT supply) and demand

side (IT demand). The IT budget process and the

transparency of the allocated actual costs can be

improved on the whole.

4.5. Governance and Organization

The Deutsche Post World Net’s finance organization has

recently gone through two significant organizational

changes. Firstly, from now on the Controllers of the Divi-

sions report directly within the financial organization,

which significantly increases standardization and super-

vision. Secondly, the accounting and Controlling areas

are clearly distinguished from each other to separate the

more process-oriented and centralizable part of account-

ing from Controlling “in the broader sense” and to

achieve efficiency gains in the future by setting up Shared

Figure 15: Roles and responsibilities of Controlling and Accounting

Responsibilities and tasks are clearly defined between Accounting and Controlling

Responsibilities are clearly defined between Corporate, Division,BU/Regional and Country level

n Even 60% of Accountants lackclear differentiation between Controlling and Accounting

n Responsibilities between organizational levels are not clear for nearly half of Controllers at Corporate level (48%) and Regional/BU level (46%)

As viewed by all respondents Additional comments

Strongly agree Agree Neither/nor Disagree Strongly disagree

29% 15% 31% 17%8%

33% 21% 27% 15%

Σ 436

Please state your level of agreement with the following statements.

}

48%

42%Interviews indicate this

confusion has led to a decrease inquality and an increase in costs

}

4%


20

Service Centers. The internal recharging between these

Shared Service Centers and the several Divisions is con-

ducted by predefined SLAs.

The survey shows that both Controllers and the Users

and Peers clearly welcome the new reporting lines. About

60% of the respondents confirm improved implementa-

tion of standards, and 53% think that application across

the entire Group has been increased. According to 48%,

the role of Controlling vis-à-vis management has been

strengthened.

However, some Controllers and Users feel that the divi-

sion of responsibilities between Accounting and Control-

ling has not yet been implemented clearly in all details

after the reorganization, as the survey results shown in

Figure 15 illustrate.

Nearly half of the respondents do not yet perceive a clear

division of tasks and of responsibilities between Account-

ing and Controlling. Interestingly, 60% of all surveyed

Accountants even indicate that a precise differentiation

between Controlling and Accounting does not exist. A

similar problem arises in the division of responsibilities

between the Corporate Division, Business Unit, Region

and Country levels. In this case, over 40% of the respond-

ents (even over 46% of Controllers) feel that a clear

differentiation is lacking.

The unsatisfactory results can probably be ascribed to the

fact that the survey took place at a time when the New

Finance Organization had just been rolled out. At this

time, not all structures had been converted yet, and the

relevant information was not yet fully disseminated; the

results show the typical insecurities in the course of a

change process. In the interim, however, implementation

has been successfully completed. Because the transactional

accounting department has been transferred to the new

Global Business Services Corporate Division, there is

now a need to calibrate with respect to the New Finance

Organization.

4.6. “Soft Factors”

The Soft Factors level deals with personal satisfaction

and development prospects for Controlling employees.

After all, only satisfied employees can perform optimally.

In addition, for a vision of Controlling as an “Advanced

Navigator” it is crucial that an exchange take place be-

tween the Business Units and Controlling to strengthen

mutual understanding.

The survey focused particularly on job satisfaction: Over

two-thirds of the surveyed Controllers are satisfied with

their jobs in Controlling. However, in this regard there

are also differences, since the satisfaction is highest at the

Country level and lowest at the regional level. Likewise,

two-thirds of the respondents are proud to work at

Deutsche Post World Net. All in all, employees have a

positive attitude toward their own work.

A key factor for satisfaction is the career development

opportunities. As Figure 16 shows, over 50% of Control-

ling employees perceive good opportunities to further

develop to the management level even outside of Financ-

e. Interestingly, the Users and Peers of Controlling are

currently actively searching for candidates with business

and Controlling experience for management functions in

their area. The results show that 73% of Controllers are

also particularly interested in job rotation to gain expe-

rience in other areas and to return later to their original

area. This is supported by centrally directed personnel

development, since the Controllers’ business understand-

ing is improved in this way.


21

Figure 16: Perceived career prospects of the Controllers

Career Opportunities

Controlling prepares for

a good career path

… in the Finance community

… in functions outside

Finance

Controllers can become

business leaders in

Deutsche Post World Net

More than half of all respondents are sure that Con-

trollers can become business leaders in Deutsche Post

World Net

Interviews revealed that Managing Directors actively

look for candidates with business and Controlling

experience for jobs in their area of responsibility

Career Development – Job Rotation

Controllers that would

be interested to rotate …

… outside Finance

and come back

at a later stage

… to another country

and come back at

a later stage

There is an overwhelming interest in career models

involving job rotation to an assignment outside

Finance – especially to

1. General Management,

2. Other Finance

3. Marketing & Sales, Accounting, Operations

Commitment to work abroad of over 2/3 in all Divisi-

ons, except for MAIL – here, only 42% would do so

73%

69%

Stronglyagree Agree Disagree Strongly

disagreeNeither/ Nor

Staff

User


22

The previous sections described how Controlling of

Deutsche Post World Net has successfully mastered the

huge challenges in the past and the areas in which there

is still potential for further optimization. The IMPACT

program, whose eleven individual initiatives are to

implement the identified potential improvements by the

next Finance Conference in November 2006, was started

in view of this background. In this respect, the IMPACT

program is about implementing the vision defined by the

Next Generation Controlling project.

Figure 17 shows the eleven initiatives of IMPACT in con-

text. While over half are cross-divisional projects, five of the

eleven projects focus on individual Corporate Divisions.

Figure 18 illustrates the connection between the poten-

tial improvements and the individual initiatives.

The global and high claim of the IMPACT program is

emphasized by the program organization shown in Fig-

ure 19. In addition, this ensures that all Corporate Divi-

sions involved are represented to a sufficient degree and

that results can be implemented quickly in the areas con-

cerned.

In addition, coordinateds intensive communication en-

sures that the entire Controlling community and other

interested parties are informed promptly and completely.

A broad range of communications tools are used for this

purpose, such as a special IMPACT video, articles in

various company newspapers and brochures, as well as

presentations at conferences. In addition, a separate

IMPACT Bulletin is published every month. This electronic

information is sent regularly to over 2,500 employees of

Deutsche Post World Net and informs them about the

progress of the program and individual initiatives. To

emphasize the common framework, all communications

take place under the umbrella of a logo developed

specially for IMPACT.

The following sections will briefly describe each of the

eleven IMPACT initiatives.

5.1. Initiative 1: Capability and Role Building

The interviews have shown that the understanding of

the Controller’s role must be stated more precisely and

communicated, and that the capabilities of the Control-

lers with regard to their business expertise can be im-

proved. These subjects are handled by the first IMPACT

initiative, “Capability and Role Building“

The understanding of the role is clarified by the vision of

the “Advanced Navigator” in principle. To ensure that a

better understanding of the role emerges both within

Finance and for the Users of Controlling, it will be stated

even more precisely, and a strategy for communication

will be developed.

Two sub-projects are distinguished with respect to the

training and continuing education of Controllers and

their capabilities, referred to as capability building.

On the one hand, this concept involves the develop-

ment of a project fair, through which Controllers can

be more closely introduced to business. As long as Con-

trollers, project managers and the current superior of

the respective Controller agree, Controllers can apply

for a temporary part-time or full-time assignment on

business projects that offer them a changed functional

job environment. Controllers can improve their busi-

ness expertise and thus expand their capabilities as

Controllers through such involvement in business

projects. On the other hand, the initiative will work on

a training and continuing education program designed

especially for Controllers (training and education).

These two sub-projects will be implemented in the con-

text of the House of Finance personnel development and

continuing education program started for the Finance

Board Department. The House of Finance program

5. IMPACT – The Controlling organization of Deutsche Post World Neton its way to becoming an “Advanced Navigator”


addresses the continuing education of Controllers on

four different levels: personal skills, specialist subjects of

wide interest in Finance, Corporate Department-specific

and business area-specific subjects, as well as subjects for

managers. The continuing education of Controllers with

a view toward their future role as an “Advanced Navigator”

represents a common element of the Controlling Busi-

ness Units of the House of Finance.

5.2. Initiative 2: SLA Methodologies

and Processes

The second initiative, “SLA Methodologies and Proces-

ses,“ primarily deals with Global Business Services, the

internal services that have been bundled in the new Cor-

porate Division SERVICES as of January 1st 2006. The

initiative supports the definition of Service Level Agree-

ments (SLAs) between the service providers and their

Users so that the performance of exchange can be reflect-

ed properly.

Two goals in particular are worth emphasizing in this

context: first, increasing the transparency with respect to

calculating and allocating costs of internal services based

on prices agreed upon in advance and quantities actually

consumed. Second, reducing costs for internal services

by introducing market-oriented allocation rates. In this

case, market prices per unit of quantity are determined

using external and internal benchmarks. This control via

market mechanisms should ultimately also facilitate the

matching of resources of the service providers to the

actual need.

23

Figure 17: The eleven initiatives of IMPACT

Capability and Role BuildingStep-up Controlling vision and role understanding, careermodels, training, etc.

SLA Methodologies & ProcessesEnable establishing cross-BU Service Level Agreements forinternal services

Investment and Project ControllingEnhance instruments for investment and project monitoringand controlling

Reporting to Business NeedsEstablish customer orientation in reporting

Planning/Forecasting Process & Tool Streamline and improve Planning/Forecasting processes andtool support (incl. risk controlling)

NFO Calibration (Input to NFO Team)Calibrate and finalize New Finance Organization – clarifyCFO role

6

5

4

3

2

1

CROSS-DIVISIONAL PROJECTS

MAIL

Functional Planning andMonitoring vs.Controlling

Clarify interface offunctional businessplanning vs. Controlling(e.g. Marketing & Sales,Operations)

7

EXPRESS

Costing CapabilitiesImprove costing inExpress Network, esp.cross border

Freight ControllingEstablish Controlling forfreight business

Aviation Costing &Transfer PricingUpgrade Aviation/Net-work Controlling

10

9

8

LOGISTICS FINANCIAL SERVICES SERVICES

IT ControllingSupport establish-ing of financialprocesses for thenew IT structure

11

Initiatives in 2006 IMPACT Program(Numbering does not reflect priority)Selected topics based on the improvement potentialidentified by the Next Generation Controlling Project

...


Capa

bilit

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d Ro

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uild

ing

SLA

Met

hodo

logi

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es

Inve

stm

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ontr

ollin

g

Repo

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Plan

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Proc

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& To

ol

(incl

.Ris

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NFO

Cal

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(Inpu

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NFO

Team

)

Func

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.Con

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Cost

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Capa

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g1110987654321

24

Figure 18: Connection between initiatives and optimization areas

The service relationships between the various Business

Units and the internal service providers will be shaped in

three dimensions:

The first dimension is the service orientation of the ser-

vices, whereby the transparency of the service relation-

ships should be established using the definitions of individ-

ual services within a product catalog and the cost allo-

cation based on quantities and unit prices. The second

dimension is the charging method. While today several

different methods are in use, a harmonized charging

system via legal invoices should be applied in the midterm.

The pricing (third dimension) is also carried out in very

different ways today (e.g. by target costs, market prices, or

cost-plus pricing). Accordingly, a harmonized approach

for all services should be developed in the medium term.

5.3. Initiative 3: Investment and

Project Controlling

The third initiative, “Investment and Project Control-

ling,“ serves to improve the instruments and processes

for Controlling large investments and projects. The survey

showed that the instruments and processes are clearly

defined up to the time the investments and projects are

approved, but the subsequent tracking procedure is par-

tially unclear. The main focus of this initiative is thus to

improve the processes and tools for monitoring the tar-

gets, costs, and schedules defined in the approval process.

A core element of the initiative is regular project repor-

ting to decision bodies such as investment committees

during the project lifecycle, enhanced by a review after

project closure. Another element is project monitoring

by means of a uniform IT tool (“Pro Rep”), whereby the

projects of all Corporate Divisions are considered

throughout their entire duration. In addition, the topic

of corporate investment guidelines shall be reviewed. The

initiative does not cover project management as such or

Mergers & Acquisition projects.

5.4. Initiative 4: Reporting to Business Needs

The starting point of the fourth initiative, “Reporting to

Business Needs,“, is that 68% of the Users of Controlling

Controlling Mission, Role, Tasks


Controlling Systems and Tools

Methodologies

Governance and Organization

“Soft Factors”

l Direct Impact l Indirect Impact


25

Figure 19: Structure of the IMPACT program for 2006

indicated in the survey that they are not sufficiently

involved in designing the content of Controlling reports.

Therefore, the initiative aims to improve the quality of

reporting by taking the suggested topics from the Business

Units more strongly into account in the design of reports.

In particular, the subject of accounts receivable manage-

ment was underrepresented in the reporting to date, and

should therefore receive greater emphasis regular monthly

reporting in the future. The Corporate Guidelines on

accounts receivable management should be developed

further. In addition to a uniform definition of the DSO

(Days Sales Outstanding) and their measurement, the

initiative aims to anchor the defined goals and objectives

and follow up on them in the organization.

5.5. Initiative 5: Planning/Forecasting Process

and Tool

The fifth initiative, “Planning/Forecasting Process and

Tool,“, is intended to improve the processes and instru-

ments in the context of budget and midterm planning,

forecasting and strategic planning, as well as to mesh

these processes with each other.

The main focus in the area of budget and midterm plan-

ning is on improving the coordination of the numerous

processes, and on validating the relevance of planning

requirements for the respective management. In particu-

lar, the budget planning of the services, especially the

Global Business Services, needs to be synchronized with

the planning of the business units. In addition, the plan-

1. Capability

CFO EXP EUCFO PB RO

2. SLA

CFO GBSCFO PB RO

10. Aviation

CFO EXP RoWCFO EXP EU

11. IT Contr.

CFO GBS

3. Invest.

CFO EXP DEDir. Corp.Contr.

IMPACT Steering Committee Head: Prof. Dr. Ernst

CFO LOGISTICSCFO EXPRESS EUCFO EXPRESS RoW CFO EXPRESS GERCFO MAILCFO Gl. Busi. Services

CFO Postbank Retail OutletsEVP Corp. Accounting/ Reporting Director Corporate Controlling

4. Reportings

CFO EXP RoW

5. Planning

Dir.Corp.Contr.CFO EXP EUCFO MAIL

6. NFO Cal.

CFO LOGISTICSEVP Corp.Acc.

Program Sponsor

CFO DPWN Prof. Dr. Ernst

IMPACT Program Office

Director Strategy LOGISTICS (Lead)Chief of Staff Finance (Co-Lead)Finance Communication Manager Team Inhouse Consulting

7. Functional

CFO MAIL

8. Costing

CFO EXP EUCFO EXP RoWCFO EXP DE

9. Freight

CFO EXP EUCFO EXP DE

Initiatives report to IMPACT Steering and Development CommitteeEach initiative led by one Divisional/BU Controller and supported by 1–2 othersInitiatives setup program and recruit cross-functional teamTeams to detail specific objectives, scope, approach, deliverables, timelines, milestones, etc.

Program ownerFunding or co-funding for - Selected initiatives- Program Office

Support program set-up andcommunicationsCoordinatorHighlight/manage interdependencies

Top-level milestones/status report of all 11 initiatives in summary

Ultimate decision body for the ProgramTop-level milestone/status review of all 11 initiatives in summaryMore detailed content review of 1-3 initiatives per meeting as requiredDriving development, alignment, content discussion of initiatives


26

ning processes should be shortened, and the communica-

tion of requirements should be improved, e.g. through

targeted planning workshops and a Web-based, modular

planning manual.

In the area of strategic planning, it is important to

improve the validity of the ”financials” that are compiled

in that context. In particular, a better interaction between

business strategy and financial strategic planning in the

course of strategic dialog is intended. In addition, the

business strategy should be completed earlier and conse-

quently before strategic financial planning in the future,

so that the effects of strategies and measures can be

incorporated into the financial planning. Furthermore,

the interfaces between strategic planning and budget and

midterm planning should be reviewed.

In the context of the forecasting process, the forecasting

intervals should be adjusted to the external capital mar-

ket communication as well as the planning processes. In

addition, it is important to align the level of detail and

the requirements of the forecast to the respective recip-

ients or management levels. To increase the data validity

for the forecast, certain instruments should be defined.

Besides, the gearing between forecasting and risk control-

ling should be further optimized.

5.6. Initiative 6: NFO Calibration

The financial organization has gone through two central

organizational changes related to the keyword New

Finance Organization (NFO): On the one hand, Account-

ing and Controlling were clearly separated from each

other, and on the other, the local Controllers now report

directly to the Finance organization. Directly after its

implementation, there were still some uncertainties

about the tasks and definition of Controlling as well as

the task distribution at the regional and national level, as

the Next Generation Controlling survey has shown. The

sixth initiative, “NFO Calibration,“, was started in view of

this background.

The clear definition and the understanding of the roles

and distinctions between Accounting and Controlling

are extremely important in the context of the New

Finance Organization. In addition to the clarification of

individual questions, the role of the Controller at the

country level above all requires sharpened and intensified

communication that emphasizes the continued essential

significance of this function. After all, the Controller is

still the main contact at the country level for all finance-

related questions. Given this background, the introduc-

tion of the designation CFO (Chief Financial Officer) for

Controllers was also proposed. This new management

structure in Finance will be implemented further in 2006.

5.7. Initiative 7: Functional Planning and

Monitoring vs. Controlling

The “Functional Planning and Monitoring vs. Controlling”

initiative is devoted to the issue of shadow Control-

lers: It must be recognized that financial Controlling can-

not efficiently provide all details on indicators that are

needed in different business units. Therefore, this initia-

tive is devoted in particular to structured and complete

task coordination between Controlling and the so-called

operation and sales control, for which the guidelines

should be specified so clearly that there is no room in-

between for shadow Controlling. To what extent can an

individual unit take over planning and control of its pro-

cesses itself in the sense of functional support, and where

does the actual Controlling function start? The answer to

this question of coexistence and of the development of

precisely defined guidelines will be worked out by taking

the MAIL Division as an example. The experiences

gained there should also subsequently benefit other

Divisions.

The Business Units’ requirements for Controlling will be

surveyed via interviews and a questionnaire campaign,

and a common understanding between Business Units

and Controlling will be developed based on the results.

This common understanding should then be implemen-

ted by means of appropriate modifications in the reports

and in the systems. The model is the defined understand-

ing of the “Advanced Navigator’s” role, which should be

activated further by this initiative.


27

5.8. Initiative 8: Costing Capabilities and

Capacity Management

The eighth initiative, “Costing Capabilities and Capacity

Management,“, is closely related to the tenth initiative,

“Aviation Costing and Transfer Pricing.” While the air

network costs as one large block of the cost basis of

EXPRESS are handled separately in initiative ten, initiative

eight deals with the comprehensive costing system for the

global EXPRESS network.

The goal of a functionally structured profit and loss

statement is overall to improve the cost accounting and

contribution margin system, which provides manage-

ment with decision information in a suitable structure.

Contribution margin information should be provided at

any time and with the appropriate level of detail for the

product, customer, trade lane and branch elements,

because ultimately the success of business is influenced

via these dimensions. The main focus will be the devel-

opment of systematized product, trade lane and custo-

mer analyses.

In that context, the cost-related recording and allocation

of all elements of the network should be further opti-

mized. This includes the area of pickup and delivery as

much as the terminals and hubs and land transport.

Complete international standardization cannot suffi-

ciently take the local conditions into account, which is

why a global framework that provides the necessary local

flexibility at the same time should be developed.

5.9. Initiative 9: Freight Controlling

The ninth initiative, “Freight Controlling,“, is devoted to

optimizing the design of Controlling for freight busi-

ness. Freight is a large product line in the EXPRESS Cor-

porate Division, whereas previously it was part of the

LOGISTICS Division. The business models and thus the

controlling contents are different in the network business

(EXPRESS) and the forwarding business (Freight). A

number of steering and controlling instruments must be

geared to these specific requirements.

In the course of this, the organizational setup of Freight

Controlling should also be reviewed. As an example,

dedicated Freight Controlling units as they are in place

today in Germany could also be a viable option for other

European countries. In addition to the structures, this

also includes the responsibilities and interfaces to other

Finance areas, as well as to the Business Units. Further-

more, it should be clarified which data are needed to

direct the Freight business and these must be provided

accordingly by Controlling. Reporting and system

modifications if necessary can then be made based on

these requirements.

5.10.Initiative 10: Aviation Costing and

Transfer Pricing

The tenth initiative, “Aviation Costing and Transfer Pric-

ing”, takes up the costs of the EXPRESS Business Line

that are not covered by the eighth initiative. This portion

of the costs includes the so-called air network costs. Due

to the great complexity of this subject, it was set up as a

separate initiative. The goal is to develop a comprehen-

sive cost allocation model for the air network.

The allocation of the air network costs should be stand-

ardized internationally and follow the same rules to

increase transparency and comparability. Nevertheless,

regional characteristics should also be taken into account.

In addition, the allocation rates should be updated more

frequently. The aim is to optimize control of the business

by breaking down the resulting cost rates by product,

region and/or customer. Regular reports with financial

and performance-related indicators should support this.

5.11. Initiative 11: IT Controlling

The eleventh initiative, “IT Controlling,“ redefines the

incurrence of IT costs and their distribution or alloca-

tion in view of the reorganization of the IT area. The

clear separation of IT supply and demand at the regional

and local levels also determines the universe of action in

this case, and must be incorporated by Controlling,

requiring modifications in systems and processes.


28

The new organizational structure establishes a customer-

contractor relationship in the IT area. Accordingly, Service

Level Agreements (SLAs) should be drawn up and agreed

upon between IT supply and demand. They should clearly

describe the services to be performed in the product cata-

log and specify their prices and quantities. The subsequent

allocation should take place via an issued invoice as with an

external business partner.

This process should also be setup accordingly for budgeting

IT costs. In addition, forecasting of the IT costs should be

reviewed. The initiative is not limited only to the Corporate

level, rather the concept should also be rolled out at the

Country level.


29

In the context of the “Next Generation Controlling” proj-

ect, the Controlling organization has evaluated itself and

allowed itself to be evaluated by outside parties. As a

result, potential improvements were identified at six

levels that will be implemented in the IMPACT program

to be completed by December 2006. The results of

IMPACT will be presented at the Second Annual DPWN

Finance Conference. According to current plans, many of

the initiatives should have been completed successfully

by then and resulted in significant improvements in the

performance of Controlling at Deutsche Post World Net.

Other initiatives will have achieved only some milestones

due to the complexity of their subjects, and will still

require further steps. These initiatives will then be trans-

ferred to the responsibility of the line organization to

continually improve Controlling even beyond 2006. In

this way, the Controlling organization of Deutsche Post

World Net is making progress in transforming itself into

an “Advanced Navigator.”

6. Outlook


Ernst, Edgar, Prof. Dr., studied mathematics and business administration at Cologne

University and earned a doctorate at the RWTH Aachen University. After holding posi-

tions as a management consultant at McKinsey & Company and as director for corpo-

rate development at Gustav Schickedanz KG, he moved to Deutsche Bundespost POST-

DIENST in 1990, where he was appointed to the board of management in 1992. Since

1995 he has been a member of the Board of Management of Deutsche Post AG (CFO).

In addition, Prof. Dr. Ernst is represented on the supervisory boards of well-known

companies. In January 2006 he was appointed as an honorary professor of WHU Otto

Beisheim Graduate School of Management, Vallendar.

Reinhard, Hartmut, studied business administration with a special focus on auditing

and trust (Treuhandwesen), business taxation and tax law at Cologne University. After

positions as management consultant and tax consultant at Dr. Herfort, van Kerkom,

Hower, Streit, as well as Coopers & Lybrandt, he moved as divisional director account-

ing, controlling and IT to the Nedlloyd Districenters GmbH in 1991. In 1998 he took

the divisional control of the Nedlloyd Unitrans GmbH (future Danzas). In 2001 he

moved to the corporate headquarters of Deutsche Post World Net as Department

Manager Logistic Controlling as well as Department Manager Strategy and Controlling

of the Corporate Division MAIL. Since 2005 he has been Director Strategy LOGISTICS.

Vater, Hendrik, Dr., studied business administration with a special focus on auditing

and controlling, the theory of business taxation and business Spanish at the University

of Passau in Germany and the Universidad Complutense de Madrid in Spain. Upon

graduation he transferred to the University of St. Gallen (HSG) as a research associate,

where he earned a doctorate under Prof. Dr. Giorgio Behr, Chair for Accounting & Cor-

porate Finance, with a dissertation on value-based executive incentive compensation.

Upon completion of his doctorate, he began his professional career as an assistant to

the Board of Management in the Finance Board Department of Deutsche Post AG.

Since early 2006 Dr. Vater has managed the staff unit of the Chief Financial Officer of

Deutsche Post AG as a director.

30

The Authors


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