FitzGerald Associates University of Chicago GSB Consultants Roundtable.
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Transcript of FitzGerald Associates University of Chicago GSB Consultants Roundtable.
FitzGerald Associateswww.ManagementConsultants.com
University of ChicagoGSB
Consultants Roundtable
Corporate Profitability
Performance Prediction
FitzGerald Associateswww.ManagementConsultants.com
Objective I
To Identify
The Root Causes
The Drivers of Performance
Objective II
To identify 3 Critical Functions which,
if improved by 20%,
will increase profits by 40%
Objective III
To identify 3 Generators that
positively effect the
Critical Functions
Objective IV
To identify 3 key factors
that BLOCK the Critical Functions
(Blockers)
Objective V
To learn how to quantify the
Drivers of Performance
Critical Functions
Generators
Blockers
Sells no Papers
Good News
The (20 year)
Decline and Fall of
Guernsey Dell
The Long GoodbyeA True Story
Meet
Tom Horne
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
A Little Theory
The Phases and Measures of Corporate Decline
(More bad News)
From the Specific to the General……and Back
Phases Measures
I Hidden DriversII Subtle KPI’s + DriversIII Overt Financials + KPI’s + Drivers
Phases and Measures Summary
The Organizational and Human Factors that Underlie, Drive, and Impel Performance
The Root Causes of PerformanceThe Predictors of Performance
Drivers of Performance
Entirely controlled by management
They can be measured / quantified
They Can Be Changed
Drivers of Performance
Critical Functions ~ 6
Generators ~ 9
(Now for the bad news)
Blockers > 100
Drivers of PerformanceConsist of
Where the least change
exerts
the greatest result
Critical Functions(A Definition)
The Accelerator on a Car
The Brake on a Locomotive
Analogy
Function (Guernsey)
Performance Management(Virtually None)
Talent Management(Virtually None)
Cost Containment(Lip Service)
Three Critical Functions
Goal Setting
Rigorous Follow Up
Rewards Based on Performance
+ ?????
Performance Management
Purposeful Recruitment
Serious Management Development
Purposeful Turnover
+????
Talent Management
OK - You Know!
Cost Containment
A 20% improvement
In the three Critical Functions
Generates
A 40% improvement in the bottom line
LSE/McKinsey Study
Take-Away
Performance Management
Talent Management
Cost Containment
Three Critical Functions
All Companies Have These Functions
Their Effectiveness Is the Question
(Their Volatility Is the Issue)
Critical Functions
A POSITIVE function (ƒ) of Generators
A NEGATIVE function (ƒ) of the Blockers
Effectiveness of
Critical Functions
Corporate Decisiveness
Acknowledgement of Work
Accountability
Examples
Three Generators
Complacency
Need for Consensus
Distrust
Examples
Three Blockers
DriversBlockers GeneratorsCritical Functions
KPI’s
Financials
Linkage
Complacency(Blocker)
Acknowledgement of Work (Generator)
Poor Cost Containment (Critical Function)
Loss of Clients (KPI)
Reduced Revenues/Profits (Financial)
Linkage ExampleI
Distrust(Blocker)
Reduced Decisiveness (Generator)
Poor Performance Mgmt. (Critical Function)
Loss of Quality (KPI)
Reduced Profits (Financial)
Linkage ExampleII
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
A Single Number
for the Trajectory of Operating Dynamic
The Generators Provide
The Reasons WHY
And the HOW to correct them
The Blockers Provide
For All DriversPerception is Reality
Objective Reality (if any) is Unimportant
Reliability of Drivers
Use a questionnaire (Anonymity)
Get responses of management (by team)
From CEO to Supervisors (key staff too)
Measurement of Drivers
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
A Generator “Question”
Our managers hold each other accountableSr. Team:(5)
(4)
(3)
Neutral
(2)
(1)
4 2 1 2 2 2 1 2
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)
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
Where Does the 40% Profit Improvement
Come From?
Q & A
Wrap Up
DriversBlockers Generators Critical Functions
KPI’s
Financials
Wrap Up I
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
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
Long before Success shows. . .the signs are there:
First in the Drivers(The smart investor knows to look)
Wrap Up IV
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
The Cost of Full Restoration
Increases Exponentially
With the Depth of Decline
Wrap Up V
Measuring Drivers is quick
The cost is low
The ROI is GREAT
Wrap Up VI
An improvement of 20% in three Critical Functions
results in
a 40% increase in financial returns (LSE/McKinsey)
Wrap Up VII
You don’t have to be in trouble
to get your 40%
Wrap Up VIII
What would it mean. . .
If your company. . .
Increased profits by ONLY 20%?
QUESTION
URLS
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