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Home > Performance Management Viewpoints > Balancing Control with Dynamic Flexibility in Large Multinationals—The View from the Finance Function

Performance Management Viewpoints

Balancing Control with Dynamic Flexibility in Large Multinationals—The View from the Finance Function

by Toby Willson

Introduction

Toby Willson was appointed finance director of Microsoft UK in July 2008. In this role he is responsible for all finance and accounting operations in Microsoft’s UK subsidiary and is a member of the subsidiary leadership team. He has performed a number of finance roles within Microsoft UK, including those of financial controller and manager of the business control team. During the previous three years he has been based in Amsterdam performing the role of finance director Netherlands, and most recently he has spent six months as acting controller Western Europe. Prior to joining Microsoft he worked for Xerox and Centerprise International. Wilson has an economics degree and is a member of the Chartered Institute of Management Accountants.

How is it possible for a financial director of a large global company such as Microsoft, with a very diverse range of products, to keep control of all the elements required to deliver a balanced view of the risks and opportunities facing the organization? Particularly when the field in which you operate is so dynamic and so susceptible to new, game-changing technologies.

That is a question with a very broad reach, so let’s take it in parts. There are three key operating principles in Microsoft that we all work with. The first of these is the scorecard. This is a set of 25 metrics that are essential both for Microsoft at a global level and for each particular subsidiary.

Before we go into the detail here, it is important to state that these metrics are not fixed for all time. They can be reset by the board each year, with some metrics being dropped and others added, as experience and the changing dynamic of the business dictate. What is key, though, is that there are never more than 25 metrics. If some new metric is added, another has to be dropped. The metrics range from key revenue drivers for this financial year, through customer and partner loyalty statistics, innovation, how we are perceived in the media, to internal people metrics.

Next, we have a shared “dashboard” with just eight core metrics. This lets us see at a glance how we are performing in the market against our key competitors in our mainstream product areas. It shows where we need to maintain or earn additional market share. These are quite broad-brush metrics, generating basic numbers such as the volume of Windows server licenses shipped versus the total shipment figures for the server market. This kind of figure shows us instantly if we are holding our own in that space.

By comparison, the 25 metrics on the first scorecard are more targeted and refined for certain incubation projects and for aspects of emerging technology, such as cloud computing. You mentioned game-changing innovation. Cloud computing certainly fits into that category. It is expected to take off this year, 2010, and to become an increasingly large part of Microsoft’s business in 2011. For this reason we are keeping a very close eye on the total number of cloud computing seats that customers are buying. It is a targeted metric that is quite crucial for the future success of our company. Other examples of technology metrics that are crucial for us are search engine revenues and the growth in usage of search engines.

Apart from this, we have the usual metrics that are common to all organizations, such as revenue and profit and loss, and these constitute the third operating principle, or axis, for us.

So, to recap, the three core operating principles are defined by the scorecard, the shared dashboard, and the standard financial metrics. The idea is to ensure that you are getting a green light on all three of these core operating dimensions. If you are not, then you need to work out with your leadership team the actions that are necessary to get you back into the green!

In a nutshell, that is how we stay tightly focused. Microsoft is an incredibly complex company, with many different revenue streams. However, if we take the consumer space for example, with our Xbox console and Kinect shipments I have this as a separate breakout metric because the consumer space is a vital component of our strategy. Kinect, I should explain, is Microsoft’s new controller-free technology that allows the viewer to interact directly with the game and the Xbox.

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Further reading

Books:

  • Bossidy, Larry, and Ram Charan. Execution: The Discipline of Getting Things Done. New York: Crown Business, 2002.
  • Buckingham, Marcus, and Curt Coffman. First, Break All the Rules: What the World’s Greatest Managers Do Differently. New York: Simon & Schuster, 1999.
  • Hope, Jeremy. Reinventing the CFO: How Financial Managers Can Transform Their Roles and Add Greater Value. Boston, MA: Harvard Business School Publishing, 2006.
  • Semler, Ricardo. The Seven-Day Weekend: Changing the Way Work Works. London: Century, 2003.

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