"Just once doesn’t count."
Andreas Zinke, Head of Corporate Function Controlling, Accounting & Risk (CAR) and member of the Executive Committee (ExCom), talks about sustainability and measurability of performance, acceptance of responsibility, and his motto “No excuse!”.
Felicia Mutterer: Welcome to a new edition of the thyssenkrupp audiogram. So far in this series there have been some big names on the guest list: CEO Martina Merz was my guest in the first editions, followed by Dr. Klaus Keysberg and Oliver Burkhard, and last time Martin Stillger, CEO of Materials Services, answered key questions about the coronavirus situation. Today we can add another top manager to the list: Andreas Zinker is Head of Corporate Function Controlling, Accounting and Risk. He is responsible for overall performance management at thyssenkrupp.
Hello Mr. Zinke.
Andreas Zinke: Hello Ms. Mutterer.
Felicia Mutterer: I’ll be honest – the term “performance management” means relatively little to me. What exactly does it involve? I mean, what does a performance manager do, what do you do?
Andreas Zinke: A performance manager is responsible for supporting the functioning of performance in an organization, and that means creating methodological or procedural conditions that facilitate performance and of course to a certain extent make performance measurable and controllable.
Felicia Mutterer: As part of my thorough preparations for this interview, I consulted Wikipedia. And under performance it says risk management, and “also means measures for the risk/return ratio of a capital investment”. So does that mean performance is when the figures add up and in the end a lot of money comes in?
Andreas Zinke: Yes, that’s the ideal. If you want to say in a nutshell what company performance means, you could put it like that. But I think ultimately that definition falls a bit short and is hard to grasp. It’s true that if in the end a lot of money comes in, that’s clearly a positive measure of performance, even better if in the end a lot of money comes in on a sustainable basis. Just once doesn’t count. And that gets us closer to the matter… If a company achieves positive results and positive cash flow on a sustainable basis, it’s generally the result of good performance in the company. But it’s true to say that performance is always measurable. Sports analogies are useful in this context. Everyone knows that in football the winner is the team that scores the most goals, in tennis it’s the player that wins the most sets, in running it’s the first competitor to cross the line. And there are lots of other sports in which results are measured even though they’re not as clearly and easily measurable, such as figure skating or boxing, where judges award points and that decides which performance is better.
Felicia Mutterer: Mr. Zinke, that makes sense to me in sports. But how can I relate that to the company?
Andreas Zinke: Well we can take a look at Wikipedia to get some idea. I have a definition or idea of performance in my head which I think explains it pretty well: Performance basically means delivering promised outputs on a sustained basis. In all companies of course this starts with the individual, regardless of whether you work in research and development, in production, sales or administration. Everyone who works at thyssenkrupp commits to deliver a certain performance, and to deliver it day by day. It’s a kind of baseline module. And of course there’s also the possibility of increasing the performance commitment by developing and implementing new processes to become faster or more effective or efficient in other ways. I like to compare this with a runner who regularly runs 5 km and then thinks “I want to try to do my run a bit faster,” or “I can run 5 km now, I’ll try 10 km”.
And for managers the baseline process starts where you permanently challenge your own performance and that of your team and then agree that you can commit to new performance targets.
In turn you can compare this with sports coaches, who see themselves as part of their team and challenge the team’s performance. For instance in football when you’ve been playing the 4-4-2 system successfully for a long time but then find other teams have adjusted to the way you play, it’s up to the coach to switch to a different system. And that doesn’t just happen on its own, you have to make sure each member of the team understands and learns their new role and as a coach it’s my job to help them. In really good teams of course the players also help each other in reaching their goals.
Felicia Mutterer: And I’d say as the boss of a club/sports director you can also work to help coaches/managers improve the performance of their teams. What can have a positive influence here?
Andreas Zinke: Well in my view it’s really important that you feel responsible for performance and accept this responsibility. There are always “good reasons” why something doesn’t go to plan – I think we’ve all experienced this and of course it does sometimes happen – but in good teams these reasons don’t always exist and certainly don’t come up repeatedly. The motto “no excuse”, i.e. accepting responsibility, is also a key prerequisite for the measurability of performance. Because in the end performance is always measured. In sport it’s who scores more goals, in tennis who wins more sets, in running who is fastest…. I have to be able to make performance measurable and it’s only measurable if I accept a measure and don’t relativize it.
When we in Controlling measure performance for stakeholders and want to make it comparable, we can’t take account of any relativizing aspects because that would be much too complex. And an ambitious athlete has no excuses. There are good golfers who consistently deliver top performances in wind and weather, and football teams that are unbeatable not just in summer. You can see it like this: there’s a ranking list and it applies no matter the weather, and I have to measure myself against it and ensure that I become resilient to outside influences. You can do that in a company too, by adjusting in good time to changing circumstances and taking the entire organization with you so that it becomes more resilient to outside influences. No excuse!
Felicia Mutterer: We note: “No excuse” is extremely important for performance. Now you've just mentioned ranking lists, so how do you measure performance at thyssenkrupp?
Andreas Zinke: Performance at thyssenkrupp is ultimately measured by the share price, so to speak from the outside, and the share price in turn is a mix of key performance indicators perceived by the market, such as EBIT, free cash flow before M&A and tk value added. These are all well-known output factors that reflect the performance of the tk group, warts and all – but only when the result has been achieved, i.e. when the season is over as it were... and now together with the respective businesses we have come up with a system to better identify where we are headed on our way to the end-of-season result, but also why we are headed in that direction. It enables us to make any necessary course corrections more quickly or to emphasize a successful path and make it even more successful.
The system is based on so-called value levers, which vary depending on business model and the concrete situation of the company. However, they have one thing in common, i.e. 5-8 themes on which the company has to focus on the way to the end of the season and beyond in order to ultimately achieve an appropriate performance measure. The value levers are currently being defined for each business and will be agreed as sustainable reference points for performance development in the lever dialogues between the businesses and our executive board at the beginning of August. This development will then be monitored in so-called “performance discussions” in the course of the fiscal year.
Felicia Mutterer: You mention units of measure, I’d like to go into that now. What is an “appropriate” performance measure and what examples are there of value levers?
Andreas Zinke: tk’s businesses operate in very different markets and of course also differ in their respective business models – each business is engaged in its own sport, so to speak, and has its own competition. Appropriateness is therefore specific to each market and business unit. We determine an ambition level or “to-be status” for example from industry comparisons – for example how good are the respective best competitors in terms of their earnings power, for example EBIT margin? We make these comparisons within an industry so we’re not comparing say a golfer with a figure skater.
Felicia Mutterer: Different sports are of course one thing, but you also have to contend with the fact that the businesses are starting from different levels?
Andreas Zinke: Precisely. That’s exactly right. Our businesses are at different starting points on the road to their ambition levels. Some businesses already have a successful leading market position and based on their value levers are thinking about expansion and growth, for example through greater automation to increase capacity or developing new market regions with already successful products. Or they’re thinking about expanding sales via digital channels. Other businesses have a strong market position in terms of size, but may have insufficient earning power – here it’s all about process efficiency in administration and production, possibly also about achieving purchasing or pricing improvements and translating these accordingly into value levers. In addition, of course, we have some businesses that are currently in a very difficult situation because the markets have changed significantly recently – not only because of the coronavirus, by the way, but also for other reasons – and now they have to find and develop the right operating point – which often means that reorganization is the most important value lever. So it is actually quite different for the individual businesses, depending on industry but also on each business’s particular starting point.
Felicia Mutterer: Okay Mr. Zinke, so we note: reorganization as the most important value lever. But how does that ultimately lead to success for thyssenkrupp?
Andreas Zinke: We’re talking about things that contribute to being successful. There are many other factors that have not been mentioned here. But what you can say is that with a mindset like I described earlier, i.e. a performance culture with a commitment to performance that is constantly challenged and improved, for which you as a manager and team are responsible and whose measurability is accepted under all circumstances, coupled with the process I described of measuring and constantly communicating performance and its development, a consistent and sustainable performance management system can be created. This is an important contribution to the absolutely vital future success of the tk group.
Felicia Mutterer: Mr. Zinke, you’ve provided so many examples from the world of sport, how would you feel about a job as head coach?
Andreas Zinke: Thank you for the question, I’d find a job as head coach totally challenging. To be quite honest I see my function here partly the same way. I sit down with my team and we ask ourselves what we can do better. I actively encourage feedback and am encouraged to give feedback myself. What happens then is exactly like I said before: by challenging what you are doing in a positive way you come to a point where you say let’s do things a bit differently and often differently it works. That’s how I see the role of head coach here in the team and I like it very much.
Felicia Mutterer: Fine. And now you can encourage all your team colleagues to listen, so the performance of this audiogram is right. Thank you very much Andreas Zinke, Head of Corporate Function Controlling, Accounting and Risk and responsible for performance at thyssenkrupp. It was good to have you with us.
Andreas Zinke: Thank you, Ms. Mutterer.
Felicia Mutterer: Our next audiogram will be our tenth and I’ll be talking with the head of the steel division Bernhard Osburg on the subject of “green steel”. thyssenkrupp has a very clear goal in mind here: climate-neutral steel production by the year 2050. That's a great forward-looking mission for everyone. I’ll be asking Mr. Osburg above all what the strategy for this is. My name is Felicia Mutterer. Thank you very much for listening and see you next time.