fitzgerald associates university of chicago gsb consultants roundtable
TRANSCRIPT
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FitzGerald Associateswww.ManagementConsultants.com
University of ChicagoGSB
Consultants Roundtable
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Corporate Profitability
Performance Prediction
FitzGerald Associateswww.ManagementConsultants.com
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Objective I
To Identify
The Root Causes
The Drivers of Performance
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Objective II
To identify 3 Critical Functions which,
if improved by 20%,
will increase profits by 40%
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Objective III
To identify 3 Generators that
positively effect the
Critical Functions
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Objective IV
To identify 3 key factors
that BLOCK the Critical Functions
(Blockers)
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Objective V
To learn how to quantify the
Drivers of Performance
Critical Functions
Generators
Blockers
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Sells no Papers
Good News
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The (20 year)
Decline and Fall of
Guernsey Dell
The Long GoodbyeA True Story
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Meet
Tom Horne
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Year Observables
1- 9 Internal Symptoms Only (Drivers)10 Delivery Problems (KPI)11 Customer Complaints (KPI)12 First Signs of Financial Trouble15 Mkt. Share Drops by 33%17 Bank Involvement20 Guernsey Dell Sold
Time Line
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A Little Theory
The Phases and Measures of Corporate Decline
(More bad News)
From the Specific to the General……and Back
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Phases Measures
I Hidden DriversII Subtle KPI’s + DriversIII Overt Financials + KPI’s + Drivers
Phases and Measures Summary
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The Organizational and Human Factors that Underlie, Drive, and Impel Performance
The Root Causes of PerformanceThe Predictors of Performance
Drivers of Performance
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Entirely controlled by management
They can be measured / quantified
They Can Be Changed
Drivers of Performance
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Critical Functions ~ 6
Generators ~ 9
(Now for the bad news)
Blockers > 100
Drivers of PerformanceConsist of
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Where the least change
exerts
the greatest result
Critical Functions(A Definition)
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The Accelerator on a Car
The Brake on a Locomotive
Analogy
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Function (Guernsey)
Performance Management(Virtually None)
Talent Management(Virtually None)
Cost Containment(Lip Service)
Three Critical Functions
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Goal Setting
Rigorous Follow Up
Rewards Based on Performance
+ ?????
Performance Management
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Purposeful Recruitment
Serious Management Development
Purposeful Turnover
+????
Talent Management
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OK - You Know!
Cost Containment
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A 20% improvement
In the three Critical Functions
Generates
A 40% improvement in the bottom line
LSE/McKinsey Study
Take-Away
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Performance Management
Talent Management
Cost Containment
Three Critical Functions
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All Companies Have These Functions
Their Effectiveness Is the Question
(Their Volatility Is the Issue)
Critical Functions
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A POSITIVE function (ƒ) of Generators
A NEGATIVE function (ƒ) of the Blockers
Effectiveness of
Critical Functions
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Corporate Decisiveness
Acknowledgement of Work
Accountability
Examples
Three Generators
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Complacency
Need for Consensus
Distrust
Examples
Three Blockers
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DriversBlockers GeneratorsCritical Functions
KPI’s
Financials
Linkage
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Complacency(Blocker)
Acknowledgement of Work (Generator)
Poor Cost Containment (Critical Function)
Loss of Clients (KPI)
Reduced Revenues/Profits (Financial)
Linkage ExampleI
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Distrust(Blocker)
Reduced Decisiveness (Generator)
Poor Performance Mgmt. (Critical Function)
Loss of Quality (KPI)
Reduced Profits (Financial)
Linkage ExampleII
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A Single Number analogous to the Bottom Line
for the current state of the
Operating Dynamic
(As that is today – so goes tomorrow’s financials )
The Critical Functions Provide
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A Single Number
for the Trajectory of Operating Dynamic
The Generators Provide
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The Reasons WHY
And the HOW to correct them
The Blockers Provide
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For All DriversPerception is Reality
Objective Reality (if any) is Unimportant
Reliability of Drivers
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Use a questionnaire (Anonymity)
Get responses of management (by team)
From CEO to Supervisors (key staff too)
Measurement of Drivers
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A Critical Function “Question”
We attract and retain the best peopleSr. Team:(5)
(4)
(3)
Neutral
(2)
(1)
4 2 1 2 1 2 2 1
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A Generator “Question”
Our managers hold each other accountableSr. Team:(5)
(4)
(3)
Neutral
(2)
(1)
4 2 1 2 2 2 1 2
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A Blocker “Question”
Our managers are reluctant to speak their minds
Sr. Team:
2 4 4 4 5 4 2 5
(5)
(4)
(3)
Neutral
(2)
(1)
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Results in Knowledge of: What to Fix,
What to AugmentWhat to Transform
And, Incidentally, a Profile of the Operating Dynamic of the Company
and Each of its Units (if surveyed)
Measurement of Drivers
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Where Does the 40% Profit Improvement
Come From?
Q & A
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Wrap Up
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DriversBlockers Generators Critical Functions
KPI’s
Financials
Wrap Up I
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By end of Phase I Decline (Hidden)Fully one third the competitive value is lost
By End of Phase II Decline (Subtle)Two thirds the competitive value is lost
Only in Phase III (Overt)Do the financials show a problem
Wrap Up II
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Long before Disaster strikes. . . the signs appear:
First in the Drivers(The smart CEO/CFO knows to look)
Last in the Financials
Wrap Up III
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Long before Success shows. . .the signs are there:
First in the Drivers(The smart investor knows to look)
Wrap Up IV
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Year Observables
1- 9 Internal Symptoms Only (Drivers)10 Delivery Problems (KPI)11 Customer Complaints (KPI)12 First Signs of Financial Trouble15 Mkt. Share Drops by 33%17 Bank Involvement20 Guernsey Dell Sold
Time Line
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The Cost of Full Restoration
Increases Exponentially
With the Depth of Decline
Wrap Up V
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Measuring Drivers is quick
The cost is low
The ROI is GREAT
Wrap Up VI
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An improvement of 20% in three Critical Functions
results in
a 40% increase in financial returns (LSE/McKinsey)
Wrap Up VII
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You don’t have to be in trouble
to get your 40%
Wrap Up VIII
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What would it mean. . .
If your company. . .
Increased profits by ONLY 20%?
QUESTION
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URLS
www.ManagementConsultants.com
Then click on “Webinar Links”
FitzGerald Associates
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