Business activity monitoring and controlling

Impact of business activity monitoring and controlling system on your startup performance

Economic research reveals that business activity monitoring and controlling systems have a positive impact on turnover and employee growth as well as on the level of financing. Tracking and monitoring the right operational metrics and KPIs sets the right incentives in your team and aligns your entire organisation with your key objectives. Periodic reporting helps you to identify bottlenecks early on so that you can take corrective actions before a situation deteriorates, as shown in the chart beside. We will reveal to you here how this can be done.

Create an efficient business activity monitoring and controlling system in three steps

The main goal of a business activity monitoring and controlling system is to bundle your company's resources towards your main objective. You can create and implement such a system in three consecutive steps listed below.

  1. Prepare prerequisites and framework
  2. Set performance benchmarks and rewards
  3. Monitor and control performance

In the following sections we will guide you through the individual steps.

How to implement an efficient business activity monitoring and controlling system?

1. Prepare prerequisites and framework

First we need to define the strategic objectives of your business and divide them into weekly or monthly parts. The reason for this procedure is to make big and almost impossible goals appear much smaller and thus make them achievable on a weekly or monthly basis. It also gives your team more opportunities to win, which strengthens team morale. The graphic below provides you with an example.

Secondly, we define and list the key functions and processes that work towards these strategic goals before assigning them, along with the relevant KPIs, to a single responsible person in your team. The aim of this approach is to create clear responsibilities in your startup. 

Functions and processes vary depending on the type and size of an organisation. Typical functions are leadership, marketing, research and development, sales and operations. Examples of processes include generating leads, negotiating prices, closing deals, invoicing and collecting payments, and hiring and training new employees. The graphic below shows you the basic structure.

Thirdly, we design the reporting template that enables us to track and monitor the company's activity and performance in a timely and efficient manner. The objective of the template is to enable an efficient reporting process that reflects the following elements.

  1. Sourcing and inserting raw data
  2. Calculating operational metrics and KPIs on a periodic basis such as daily, weekly and monthly
  3. Generating reports in a scoreboard format that highlights deviations from the defined benchmarks.

The result of the reporting template should look like a scoreboard highlighting positive and negative deviations from the set benchmarks and targets. The aim is to motivate each individual team member to achieve or even exceed their targets, but also to let the management know where the bottlenecks are and where support is needed. The following table serves as an example.

2. Set performance benchmarks and rewards with accountable team member

In this step you explain the activity monitoring and control system to the team members assigned to at least one function or process. The aim is to reach a common agreement on specific and measurable benchmarks and to establish a reward that motivates the individual team member or department. Follow the process below to increase acceptance and understanding of the business monitoring and controlling system inside of your organisation.
  1. Explain how the function or process contributes to the startup's main objective
  2. Set and agree on ambitious but achievable benchmarks and objectives

3. Monitor and control performance periodically

Periodical reporting enables you to assess whether you are on track with your strategic objectives. Whenever a KPI deviates significantly from the previously defined benchmark, you have six options as a corrective reaction. We recommend checking these options individually in the sequence listed beside.
  1. Improve execution of process
  2. Refine or change process
  3. Provide additional resources
  4. Refine or change strategy
  5. Adjust benchmark
  6. Rotate the responsible person

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Business activity monitoring and controlling has a significant positive effect on overall performance of a business

  1. A management study with Swiss startups disclosed that an implemented management controlling system (MCS) has a positive effect on the overall performance of a startup related to revenue growth, employee growth as well as the amount of funding (Ploss, 2017, p. 08)

  2. Business monitoring assists startups in timely measuring whether their performance is in line with their strategic objectives (Kljuno & Gureeva, 2017, p. 24)

  3. Startups require an efficient decision-making process and strong strategic focus towards business objectives which can be obtained by implementing a proper business monitoring system (Haustein et al., 2014, p. 23)

  4. Management controlling systems assist startups to estimate budgets and funding requirements for scaling their business more reliably (Haustein et al., 2014, p. 23). Periodic reports provide the relevant business intelligence and track KPIs such as customer lifetime value (CLV), customer acquisition costs (CAC), sales cycles, time for service implementation, expenses for research and development, etc.

  5. Business activity monitoring enables growing startups to track and measure employees' performance individually. It allows the management to set the right incentives and reward the best employees. Rewarding the best performing employees significantly increases team motivation and morale (Kljuno & Gureeva, 2017, p. 18)

  6. Management controlling system is an important tool because it helps to establish organized internal and external processes. It supports the successful interaction with your key stakeholders such as board members and investors. As a consequence, it increases trust among them (Davila & Foster, 2007, p. 16)

Literature list

Davila, A. & Foster, G. (2007). Management Control Systems in Early-Stage Startup Companies.

Haustein, E., Luther, R. & Schuster, P. (2014). Management control systems in innovation companies: a literature based framework.

Kljuno, A. & Gureeva, I. (2017) Management Control Systems in innovative startups - A multi case study of Swedish R&D startup companies.

Ploss, R. (2017) Management Control Systems in Startups: Performance Impact, Configurations of Control, and Stakeholders’ Influence.