ESTABLISHING THE NESTL MALAYSIA WAR-ROOM

In 2004, Stphane Alby was appointed CFO at Nestl MalaysiaSingapore. Within a month of starting in his new position, Alby received a 50-page management report from corporate controlling covering the past months. It was the middle of the third week of the month. He flipped through it, then gave it to his secretary to shred, since it was too difficult to use the data it contained to make any business decisions.

Alby called the corporate controller and asked her to stop producing this report.

He told her: I would like a document that I can review in two hours with the management committee reflecting five to seven KPIs for each of the thirteen business units, seven functions, Singapore and one region.

The importance of such indicators was clear to Alby. He needed the data in order to create transparency, solidarity, cooperation and stronger goal alignment. He wanted a new dashboard that provided not only key information but also material for discussion among top management. Data needed to be presented in such a way that it could be turned into actionable management information on the measures that mattered in order to make business decisions and win in the marketplace.

Where should he start with the creation of this dashboard? What should it focus on? What should be the level of granularity of the information? What would constitute a good dashboard design?

Background

Nestl had a long history in Malaysia, having started its operations in 1912. In 2005, it had 3,500 employees, 7 factories and 13 business units. It manufactured and distributed the entire Nestl product portfolio apart from bottled water, which was imported in rather small quantities for Premium brands. Twelve of its business units were focused on domestic sales and the other dealt with exports. Its product volume was about 400,000 tons per year; 20% of its product was sold to foreign sister companies. Around 20% of its sales were made up of imported products, manufactured by sister companies. It had six sales offices: two in East Malaysia and four in West Malaysia. Malaysia was Nestls 16th biggest market worldwide, with 28.5 million consumers. It was a dominant player in the food and beverage market in Malaysia. Its products made up 11% of the shopping basket, and it was one of Nestls top three markets in per capita consumption. Its 2006 sales were MYR 3.3 billion (around 720 million).

Nestl operated as a public company in Malaysia one of the few markets where this was the case. It had 28% minority shareholders (at the time, the government pension plan was the biggest shareholder with around 8%), and the remainder was held by Nestl SA. It therefore had an audit committee, a board of directors and publicly published quarterly reports in a consolidated form. As such, it had a high degree of public visibility.

Nestl Malaysias products were sold in 90,000 outlets across Malaysia. Hypermarkets had not existed in Malaysia 20 years earlier; in 2005 they made up 25% of the food and beverage retail business, and this share was growing. Nestl had 50 long-term partnerships with more traditional retailers, most of which had worked with Nestl for three generations. These partners worked practically on an exclusive basis in a given territory. There were also 30 foodservice distributors (now Nestl Professional)

Since around 65% of the population was Muslim, all of Nestl Malaysias products were halal . 2 This meant that all parts of the supply chain, including all factories and the distribution system, followed the strict rules of the Malaysian Halal authorities. The PURINA line of petfood products, not certified Halal but certified Suci (pork free), had to be dealt with in a totally separate supply chain structure. Nestl Malaysia had become Nestls Halal center of expertise for Nestl worldwide in terms of products and manufacturing best practices. It was an increasingly important segment for Nestl worldwide.

The War Room

Alby was a young Nestl veteran who had started out as an auditor at Nestl France 15 years earlier, then posted in several countries around the world. He had most recently worked as corporate controller for two strategic business units at Nestl S.A in Vevey. He considered the different types of information needed to be able to implement the corporate strategy of accelerating economic growth in Nestl Malaysia and decided that the following were critical:

*The Process perspective, e.g. cost of goods sold, industrial efficiency and purchasing efficiency (reporting to him) *The Customer and Consumer perspective, which included drivers of market share, such as pricing and consumer preference *The Growth and Learning perspective, i.e. data that would shed light on new product development, product quality, common recipes, etc. *The Financial perspective, i.e. how to maximize profitable sales and accelerate economic profit and free cash flow growth.

Alby wanted a new dashboard that would provide not only key information in order to improve profitable growth but also material for discussion among top management, that is, to improve the business decision making process.

Assignment Questions

Given the complexity of the business, what would you use to create focus? What should the dashboard look like? How would you implement such a dashboard?