Management Report & Annexes | Basic Information About the Group
1.4 Internal Management System
The economic planning and steering for the business units is carried out within a framework laid down by the Board of Management that is refined during the strategic planning process. Operational planning then translates this framework into specific, measurable targets. Continuous monitoring of business developments complements the planning and management process, and key management and performance indicators are regularly updated. This process also involves tracking the implementation of the strategic objectives and adopting countermeasures in the event of deviations from the budget.
One of the prime objectives of the Bayer Group is to steadily increase enterprise value. We use the following steering parameters to plan, steer and monitor the development of our business:
The key performance indicators at the strategic level are cash value added (CVA), which is a value-based steering parameter, and cash flow return on investment (CFROI). These indicators support management in its decision-making, especially in the areas of strategic portfolio optimization and the allocation of resources for acquisitions and capital expenditures. (See Chapter 16.4 “Value Management” for further details.)
The principal economic steering parameters within the Bayer Group at the operational level are sales and earnings figures. With regard to earnings, special attention is paid to EBITDA (earnings before financial result, taxes, depreciation and amortization) before special items. The EBITDA margin before special items, which is the ratio of EBITDA before special items to sales, serves as a relative indicator for the internal and external comparison of operational earning power. (See Chapter 16.2 “Calculation of EBIT(DA) Before Special Items” for further details.)
Targets and performance indicators are defined and established in areas such as supplier management, safety and product stewardship to align the Group toward sustainability. Working closely with the subgroups, Bayer AG has implemented management systems to steer the Group’s sustainable development.