Value Framework Elements: Strategy and Objectives
The current report is based on the assessment of the PWC value framework of Skanska. The report will examine the annual report of the company based on the areas of external drivers, strategy, resources and relationships and performance. The report will also provide the in depth of the organizational health along with the current performance of the organization. The report will highlight that performance information forms the vital factors and elements to support the decision making structure of the organization with appropriate accountability.
Report Extract:
Reporting critique:
Reporting characteristics that helps in driving strategic and objective framework elements:
- Clear incorporation of the strategic goals and objectives
- Short term, medium term and long term targets
Skanska strategy is on track of delivering higher performance each year with the objective of business plan by positioning its business for success in the upcoming years. The objective of Skanska can be accessed systematically and it is has been communicated in terms of both qualitative and quantitative approach in the financial statements of 2016 (Skanska.com, 2017).
Furthermore, the chief executive officer of Skanska has provided a detailed analysis of the strategy in page number 3 under the section of CEO strategic review and the strategy of the firm is linked with the strong values and committed people for rendering excellence in the business operations.
The CEO strategic review is associated with the growth strategy, shareholders growth and financial model by reporting in the areas of
- Macro-economic market overview
- Customer value creation
- Continued focus on the working capital
- Operational efficiency
Apart from emphasising on the preceding year performance, the CEO also provides qualitative outlook of the controlled business growth. The CEO also provides systematic environmental management regarding the certifications of the operations to the international management standard.
The annual report of Skanska for the year 2016 evidently provides the descriptions of the organizations strategic goals and objectives through appropriately formatted and straightforwardly understandable reporting. It can be stated that the qualitative and quantitative information provides a correlation with the business objectives and the overall presentation of the information is considered to be good.
Report extract:
The business of the company reflects the method through which it creates value and factors that are interrelated with the construction of revenue and project development (Smith, 2015).
The Skanska business model relating to the performance information is found in one page under the heads of Business Model at the beginning of the 2016 annual report (Skanska.com, 2017). Therefore, the information to the business model can be accessed with the help of the contents under the heads of “Business Model”. The model is clearly formatted with appropriate explanations to the revenue constructions, project development, return on equity, shareholders dividend etc.
Strategy Business Model
The figure above illustrates the performance with circular flow of investment opportunities and internal contracts. This additionally helps in explaining the long term value creation of Skanska business model by linking the strategy with its business objectives.
Overall conclusion:
The business model is briefly defined in one page that makes is easy and comprehensive to understand. The elements are also explained and the overall quality is good.
Report extract:
Report Critique:
The governance structure of Skanska reflects the organizations commitment towards transparency in reporting (Marr, 2012). The governance structure identifies rules regulating the governing of documents, annual general meeting, nominations of the committee and board of director’s policies.
Comprehensiveness:
The structure of corporate governance for Skanska is clearly explained by commencing the structure of nomination committee, compensation committee, audit committee and comprehensively defines the governance structure of the company with corresponding roles.
Skanska applies the below stated governing code of principles;
- The board of directors communicates with the external auditors to participate in the audit committee
- The president and the CEO provides the operational management and internal control responsibilities of day to day management of company’s state of affairs
- The board of directors monitors and evaluate the information provided to the senior executive teams
The governance structure of Skanska provides audit committee report and the nomination committee report that comprises of the qualitative information regarding the composition and activities of each of the committee (Skanska.com, 2017).
Overall conclusion:
The structure corporate governance of Skanska provides detailed descriptions of the numerous governance reports and evidently demonstrates the commitment of the board of directors towards the transparent flow of information through higher commitment and regulatory policies. Thus, the overall quality of presentations is good.
Report Extract:
Report Critique:
The elements of the risk management comprises of identification of the risk and opportunity along with the process used in the administration of the organizations risk (Weygandt et al., 2015).
Skanska has a three-page section called Risk and opportunity management that lay down the performance information concerning the organizations approach towards risk management (Skanska.com, 2017). The section can be located easily with the help of contents and can be easily identified under the heads of “Skanska’s Main Risk”.
The organization provides a detailed descriptions of the main risk by conductive survey with over 200 top level managers so that the group can understand the main risk surrounding its business. Skanska for each of the main risk identifies adopts comprehensive management and mitigation measures to mitigate its risk. The annual report contains a two page detailed report describing the potential risk faced by the business and the process adopted to monitor.
Skanska group dedicates a detailed discussion and explanation of the their strategies to manage risk. The section of the risk report is clearly formatted with the help of headings and graphs that makes it easy to understand and allows the readers to understand the transparency of the report. The quality is overall very good.
Strategic Governance
Report Extract:
Report critique:
The remuneration report of Skanska provides the method of rewarding and remunerating the employees and the senior executives of the organization (Warren et al., 2013).
Accessibility:
The remuneration plans and objectives are communicated to the remuneration committee with reference to the remuneration committee report that can easily accessed through the contents of the annual report (Skanska.com, 2017).
Comprehensiveness:
The remuneration report of Skanks is in compliance with the value of the PWC remuneration criteria. The remuneration report comprise of the following;
- Description of salary and the yearly process of review
- Benefits provided in the form of insurance, such as social insurance contributions
- Pension plans
- Plans relating to share
The annual report of Skanska contains a well titled page named as remuneration report at page number 133 that clearly explains with the help of tables the remuneration structure of Skanska (Skanska.com, 2017). On evaluating the remuneration report of the Skanska it can be stated that the remuneration plans are communicated precisely in the remuneration committee. The report also provides the remunerations provided to the employee in terms of the performance.
Conclusion:
The remuneration structure of the report provides complete transparency concerning the method adopted in rewarding their employee, senior management etc. The report provides the figures that has been published exactly and this makes it to be a good element.
Report Extract:
Report critique:
The elements of the financial assets comprises of the followings;
- Disclosure of the assets book values
- Past and present asset values
- Asset efficiency and effectiveness
The evaluation of the company performance relating to the relevant asset is easy to discover and it provides a one page tabular depictions of figure under the notes section. Comprehensiveness:
The tabular depiction of figures provides a brief explanation of the present and past values of the assets that are recognized in accordance with the company’s policies. These comprises of the followings;
- Financial investments
- Financial receivables and interest bearings
- Total carrying amount of the financial assets.
In addition to this, the section provides the figures of hedge accounts derivatives and the carrying value to the balance sheet.
Conclusion:
There is a good measurement of the Skanska current asset as well as the non-current assets with figures from previous and current year reported in the tabular form, which forms an element of good decision-making. Therefore, the overall quality of the report is good.
Report Extract:
Report Critique:
The resource and relationship performance of Skanska aims to create a health number of efficient customers for the revenue they bring to the company (Needles et al., 2013).
Skanska annual report of 2016 comprises of the strategy to develop a customer centric property so that the company can create a long lasting relationship with the customers (Skanska.com, 2017). There is a clear description of the customer’s values creation and performance targets can be noticed in the heads of commercial property development.
Strategy: Risk management
Skanska has listed the strategies that are in line with understanding the preference of the customers with the objective of improving the relations with customers. There is a quantitative data provides the percentage of revenue derived from the segments of the market. From the above stated extracts, it is noticed that the company has provided qualitative data about improving the customer’s relationship (Skanska.com, 2017). On page 47, a graphical representation of customer value creation is provided that represent the performance of the organization.
The annual report of Skanska provides the percentage of revenue derived from the customers and the overall quality of the report is good.
An organization aims to have highly motivated and competent workforce to engage in their jobs by retaining highest quality people to preserve the culture of the company (Braun et al., 2013).
Accessibility:
Skanska annual report provides one full page regarding the significance of strong company culture and values by driving employees towards organization success. The information is easily located and the page is formatted with photos to focus on the concept.
Comprehensiveness:
Skanska is able to retain the employees with best employment policy (Skanska.com, 2017). The annual report provides a quantitative statistics of number of male and female employed by the organization.
Conclusion:
Skanska group provides a vivid and clear explanation of the organization cultural policy and the overall reporting quality is good.
Innovations forms an important element in creating value through new and improved quality products (Butler & Ghosh, 2015).
Accessibility:
The annual report of Skanska contains a section that provides the overview regarding the innovation and research that are directed towards new ideas of business. Readers can easily locate it as it is titled under the heads of Research and development.
Comprehensiveness:
In the annual report of 2016 on page number 64 Skanska defines the innovative functions of the company, which is directed towards the use of new technology (Skanska.com, 2017). Qualitative information provides that the company has focussed on new business plans by the year 2020.
Overall conclusion:
The annual report provides a detailed focus on the research and development adopted by the company and the quality of the reporting is good.
The brands and intellectual assets emphasis on the reputations of the organization.
Accessibility:
There is no information regarding the brands of the company in annual report.
Comprehensiveness:
An organization good reputation will enable better recognition among the customers. As this ensure that shareholders invest in the company having better reputations.
Overall conclusion
Overall conclusion:
There is neither qualitative nor quantitative information about the brand therefore; the quality of the reporting is ugly.
Supply chain helps in identifying the performance trends as well as the internal process of the organization (Marshall, 2016).
Accessibility:
The annual report provides insufficient information regarding the supply chain and internal procedure on page 67. Only qualitative information is provided relating to the strategic goals with no tabular presentation of information.
Comprehensiveness:
The report does not provides any aforementioned charter illustrating the positive impact of sustainability (Skanska.com, 2017). The report only provides brief explanation of collaboration with customers and suppliers towards long-term sustainability such as carbon, energy and materials.
Overall conclusion:
The company does not provides any specific internal process or improvements therefore the quality of the reporting is bad.
The economic performance provides explanation to the profit and cash flows contributing to the success of the company (Needles & Crosson, 2013).
Accessibility:
The economic performance of the company can be easily located under the heads of the market overview, which provides graphical representations of the GDP growth and GDP percentage growth to measure the financial performance of the organization.
Comprehensiveness:
On page 26 under the market Overview there is graphical elements that provides statistical view of the performance to analyse the transparency of the economic performance (Skanska.com, 2017). The information clearly helps in understanding the construction investment in terms of the GDP growth.
Conclusion:
The inclusion of graphical information provides clear transparency of reporting. Hence the quality of the information is good.
The operational performance comprises of the quality of the goods and service along with the information on cost and customer satisfaction (Crosson & Needles, 2013).
Accessibility:
Skanska possess the portfolio of commercial properties of high quality and the company is not manufacturing goods in terms of the product or unit cost (Skanska.com, 2017). The annual report provides the information on the customer satisfaction and trends that impact the market performance.
Comprehensiveness:
Skanska makes the use of quantitative data with the help of graph to represents improved customers satisfaction. The company makes the use of bar graph to represents dividends distribution to ensure that provide best returns.
Overall conclusion:
In spite of not providing information on unit cost the company has provided the graphical representations of the information. The overall quality of reporting is good.
The social framework provides the company’s contribution to the society (Reider, 2016).
Accessibility:
In the page 21 of the annual report of Skanska, it describes the overall engagement with the community. The above stated extracts provides a clear and well formatted descriptions of the images.
Comprehensiveness:
The method of community programmes, contributions to the society and future targets are effectively incorporated in the annual report of Skanska.
Overall conclusion:
The community section provides a description of the company commitment towards improving the social performance of the organization. Therefore, the quality of the information is good.
The environmental performance helps in providing explanation to the value creation through environmental performance (Datar & Rajan, 2014).
Accessibility:
The objective of the company is to create long-term creation of value through systematic environmental management. The annual report of the company provides a section where a detailed discussion of the environmental performance is listed.
Comprehensiveness:
The annual report of the Skanska comprises of the detailed metrics relating to the following areas;
- Positive energy building
- Reduced carbon emission
- Extensive use of construction materials
- Climatic leadership identification
Overall conclusion:
The annual report of Skanska provided an in depth value framework of environmental performance with clearly explained metrics and parameters. The quality of the reporting is good.
An organization segregate their performance in numerous segments in order to obtain better view of the business units (Wild & Shaw, 2013).
Accessibility:
Skanska, annual report provides the information relating to the segments of the organization that can be easily located in the notes section of the accounts. The segments provides the in depth details of the company performance.
Comprehensiveness:
Skanska list down the necessary data in terms of the revenue generated, operating income, income after financial items and profit after tax (Skanska.com, 2017). The information is stated in tables with each segment performance is incorporated.
The segment performance of the Skanska is very detail and provides clear understanding of last five years performance. Therefore, the overall quality of reporting is good.
Conclusion:
The report can be concluded by stating that the analysis has been performed in the areas of external drivers, strategy, resources and relationships and performance. There have been majorly good quality of reporting by Skanska as the annual report presented is comprehensive and easily accessible to the users. The information can be gained by gauging at the relevant heads and through the contents table. However, there are few areas such as branding and intellectual assets that falls under the heads of ugly presentations. It is recommended that Skanska should improve such areas for better understanding of the readers.
Reference List:
Braun, K. W., Tietz, W. M., Harrison, W. T., Bamber, L. S., & Horngren, C. T. (2014). Managerial accounting. Pearson.
Butler, S. A., & Ghosh, D. (2015). Individual differences in managerial accounting judgments and decision making. The British Accounting Review, 47(1), 33-45.
Crosson, S. V., & Needles, B. E. (2013). Managerial accounting. Cengage Learning.
Datar, S. M., & Rajan, M. V. (2014). Managerial Accounting: Making decisions and motivating performance. Pearson Education.
Langfield-Smith, K. (2015), Management Accounting. McGraw Hill
Marr, B. (2012). Key Performance Indicators, Prentice Hall, London
Marshall, D. (2016). Accounting: What the numbers mean. McGraw-Hill Higher Education.
Needles, B. E., & Crosson, S. V. (2013). Managerial accounting. Nelson Education.
Needles, B., Powers, M., & Crosson, S. (2013). Financial and managerial accounting. Nelson Education.
Reider, B. P. (2016). ACTG 202.02: Principles of Managerial Accounting.
Skanska.com. (2017). Skanska Corporate Portal. Retrieved 28 September 2017, from https://www.skanska.com/
Warren, C. S., Reeve, J. M., & Duchac, J. (2013). Financial & managerial accounting. Cengage Learning.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & Managerial Accounting. John Wiley & Sons.
Wild, J., & Shaw, K. (2013). Managerial accounting. McGraw-Hill Higher Education.
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