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FitzGerald Associates www.ManagementConsultants.com. University of Chicago GSB Consultants Roundtable. FitzGerald Associates www.ManagementConsultants.com. Corporate Profitability Performance Prediction. Objective I . To Identify The Root Causes

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fitzgerald associates www managementconsultants com

FitzGerald Associateswww.ManagementConsultants.com

University of Chicago

GSB

Consultants Roundtable

slide2

FitzGerald Associateswww.ManagementConsultants.com

Corporate Profitability

Performance Prediction

objective i
Objective I

To Identify

The Root Causes

The Drivers of Performance

objective ii
Objective II

To identify 3 Critical Functions which,

if improved by 20%,

will increase profits by 40%

objective iii
Objective III

To identify 3 Generators that

positively effect the

Critical Functions

objective iv
Objective IV

To identify 3 key factors

that BLOCK the Critical Functions

(Blockers)

objective v
Objective V

To learn how to quantify the

Drivers of Performance

Critical Functions

Generators

Blockers

slide9

Good News

Sells no Papers

slide11

The Long Goodbye

A True Story

The

(20 year)

Decline and Fall of

Guernsey Dell

slide12
Meet

Tom Horne

slide13

Time Line

Year Observables

1- 9 Internal Symptoms Only (Drivers)

10 Delivery Problems (KPI)

11 Customer Complaints (KPI)

12 First Signs of Financial Trouble

15 Mkt. Share Drops by 33%

17Bank Involvement

20 Guernsey Dell Sold

slide14

From the Specific to the General…

…and Back

A Little Theory

The Phases and Measures of

Corporate Decline

(More bad News)

slide16

Phases and Measures Summary

Phases Measures

I Hidden Drivers

II Subtle KPI’s + Drivers

III Overt Financials + KPI’s + Drivers

slide17

Drivers of Performance

The Organizational and Human Factors that Underlie, Drive, and Impel Performance

The Root Causes of Performance

The Predictorsof Performance

slide18

Drivers of Performance

Entirely controlled by management

They can be measured / quantified

They Can BeChanged

slide19

Drivers of Performance

Consist of

Critical Functions ~ 6

Generators ~ 9

(Now for the bad news)

Blockers > 100

slide20

Critical Functions

(A Definition)

Where the least change

exerts

the greatest result

slide21

Analogy

The Accelerator on a Car

The Brake on a Locomotive

slide22

Three Critical Functions

Function (Guernsey)

Performance Management

(Virtually None)

Talent Management

(Virtually None)

Cost Containment

(Lip Service)

slide23

Performance Management

Goal Setting

Rigorous Follow Up

Rewards Based on Performance

+ ?????

slide24

Talent Management

Purposeful Recruitment

Serious Management Development

Purposeful Turnover

+????

slide25

Cost Containment

OK - You Know!

slide26

LSE/McKinsey Study

Take-Away

A 20% improvement

In the three Critical Functions

Generates

A 40% improvement in the bottom line

slide27

Three Critical Functions

Performance Management

Talent Management

Cost Containment

slide28

Critical Functions

All Companies Have These Functions

Their EffectivenessIs the Question

(Their VolatilityIs the Issue)

slide29

Effectiveness of

Critical Functions

A POSITIVE function (ƒ) of Generators

A NEGATIVE function (ƒ) of the Blockers

slide30

Examples

Three Generators

Corporate Decisiveness

Acknowledgement of Work

Accountability

slide31

Examples

Three Blockers

Complacency

Need for Consensus

Distrust

slide32

Linkage

Drivers

Blockers

Generators

Critical Functions

KPI’s

Financials

slide33

Linkage Example

I

Complacency

(Blocker)

Acknowledgement of Work

(Generator)

Poor Cost Containment

(Critical Function)

Loss of Clients

(KPI)

Reduced Revenues/Profits

(Financial)

slide34

Linkage Example

II

Distrust

(Blocker)

Reduced Decisiveness

(Generator)

Poor Performance Mgmt.

(Critical Function)

Loss of Quality

(KPI)

Reduced Profits

(Financial)

slide35

The Critical Functions

Provide

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 )

slide36

The Generators

Provide

A Single Number

for the Trajectory of Operating Dynamic

slide37

The Blockers

Provide

The Reasons WHY

And the HOW to correct them

slide38

Reliability of Drivers

For All Drivers

Perception is Reality

Objective Reality (if any)

is Unimportant

slide39

Measurement of Drivers

Use a questionnaire (Anonymity)

Get responses of management(by team)

From CEO to Supervisors (key staff too)

slide40

A Critical Function “Question”

We attract and retain the best people

Sr. Team:

4 2 1 2 1 2 2 1

slide41

A Generator “Question”

Our managers hold each other accountable

Sr. Team:

4 2 1 2 2 2 1 2

slide42

A Blocker “Question”

Our managers are reluctant to speak their minds

Sr. Team:

2 4 4 4 5 4 2 5

slide43

Measurement of Drivers

Results in Knowledge of:

What to Fix,

What to Augment

What to Transform

And, Incidentally,

a Profile of the Operating Dynamic of the Company

and Each of its Units (if surveyed)

slide44

Q & A

Where Does the

40% Profit Improvement

Come From?

slide47

Wrap Up I

Drivers

Blockers

Generators

Critical Functions

KPI’s

Financials

slide48

Wrap Up II

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

slide49

Wrap Up III

Long before Disaster strikes. . .

the signs appear:

First in the Drivers

(The smart CEO/CFO knows to look)

Last in the Financials

slide50

Wrap Up IV

Long before Success shows. . .

the signs are there:

First in the Drivers

(The smart investor knows to look)

slide51

Time Line

Year Observables

1- 9 Internal Symptoms Only (Drivers)

10 Delivery Problems (KPI)

11 Customer Complaints (KPI)

12 First Signs of Financial Trouble

15 Mkt. Share Drops by 33%

17Bank Involvement

20 Guernsey Dell Sold

slide52

Wrap Up V

The Cost of Full Restoration

Increases Exponentially

With the Depth of Decline

slide53

Wrap Up VI

Measuring Drivers is quick

The cost is low

The ROI is GREAT

slide54

Wrap Up VII

An improvement of 20% in three Critical Functions

results in

a 40% increase in financial returns (LSE/McKinsey)

slide55

Wrap Up VIII

You don’t have to be in trouble

to get your 40%

slide56

QUESTION

What would it mean. . .

If your company. . .

Increased profits by ONLY 20%?

slide57
URLS

www.ManagementConsultants.com

Then click on

“Webinar Links”

FitzGerald Associates