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Identifying the Value Points within the Corporation. 1 Hour Workshop Alliance for Corporate Wealth Conference www.corporatewealth.info Presented by: Matt H. Evans, CPA, CMA, CFM January 21, 2005 Orlando, Florida. Workshop Agenda. Introduction Common Value Points Emerging Value Points

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Identifying the value points within the corporation l.jpg
Identifying the Value Pointswithin the Corporation

1 Hour Workshop

Alliance for Corporate Wealth Conference

www.corporatewealth.info

Presented by:

Matt H. Evans, CPA, CMA, CFM

January 21, 2005

Orlando, Florida


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Workshop Agenda

  • Introduction

  • Common Value Points

  • Emerging Value Points

  • The LPI Model

  • Value Dynamics Framework Model

  • Denison Cultural Model

  • The Creativity Model

  • Closing Comments

  • Additional Information


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Introduction

  • Purpose of this workshop:

    - Outline some good focal points for creating higher value

    within the corporation

    - Provide some practical tools and techniques that

    everyone can start to use immediately

    - Help frame the knowledge base for the Alliance for

    Corporate Wealth


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Common

Value

Points


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Common Value Points – Four Good Sources

  • Value Based Finance

  • Balanced Scorecard Enablers

  • Human Resource Capital Scorecard

  • Strategic Business Analysis = Competitive Intelligence


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Value Based Finance – From Accounting to Real Finance

Traditional Accounting

Value Added Finance


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Benefits of Value Based Finance

  • By focusing on non-financial measurements, the finance function pulls in other functional areas into the value management process.

  • Finance is the main proponent of value – educating others on how value is created.

  • Finance adds value through major projects:

    - Define Organizational Performance

    - Leads Initiatives on process improvement

    - Improve out-of-date systems

    - Value Chain Analysis


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Scorecard Enablers – Applying the Generic Drivers

  • Generic Models provide a good starting point for understanding what drives value:

    - Customer Value comes from certain value drivers: Quality,

    Time, Pricing, Image, Reputation, Innovative features, etc.

    - Process Value comes from three phases in process

    delivery: Pre Delivery (meet customer demands in a pro-

    active way), Delivery (Rapid turnaround times), and Post

    Delivery (After sale service)

    - Organizational Value comes from employee results,

    system results, and organizational culture.


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Human Resource Capital Scorecard

  • The value created by people is often intangible – knowledge, leadership, collaboration, etc.

  • Standard financial measurements are usually inappropriate for measuring human resource capital.

  • Sources of value other than people are potential sources until human interaction takes place.

  • How people are managed has profound implications on organizational performance and value.

  • The HR (Human Resource) Capital Scorecard measures the management activities associated with Human Resource Capital.


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HR Capital Scorecard Framework –Built Around Four Basic HR Activities

Traditional Financial Metrics such as Cost per Hire vs. Value Added Metrics such as Satisfaction with Hire

ACQUIRE– Hiring practices, Recruitment, Fill Rates, Quality of New Hires, etc.

MAINTAIN– Compensation, Benefits Administration, etc.

RETAIN– Identify top talent, retention programs, motivation, etc.

HR Strategic

Plan

DEVELOP– Coaching, Training, Supervision, Job Rotation, etc.

Source: The ROI of Human Capital by Jac Fitz-enz


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Strategic Business Analysis through Competitive Intelligence

  • Strategic Planning is dynamic through Competitive Intelligence (CI)

  • Competitive Intelligence is required to protect your competitive advantages in the marketplace

  • Risk Management is too internal and CI brings an external dimension to risk management

  • Senior Management is too inward in their thinking and you need CI as a reality check


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Emerging

Value

Points


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Emerging Trends for Understanding Value Points Going Forward

  • The discipline of management will give way to the discipline of leadership

  • Complex adaptive systems will help advance the concept of the Learning Organization

  • Organize around processes as opposed to functional silos for increased flexibility and innovation

  • Processes will become more simple, self serve, and more collaborative.

  • Technology has and will continue to be an important component of value – especially emerging technologies such as Nano-Technology.



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Measuring Leadership using the LPI Model

  • Leadership Practices Inventory (LPI) Model was developed by James M. Kouzes and Barry Z. Posner.

  • Based on 20 years of research and supported by case studies with 10,000 leaders and 50,000 constituents.

  • Recognizes that leadership is a measurable behavior that people can observe.

  • Uses assessment surveys from both the leader and observers of leaders. Creates greater awareness of how to improve leadership competencies.


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Inspire a Shared Vision

Challenge the Process

Enable Others to Act

Encourage the Heart

Model the Way

LPI Model Components

The LPI Model is built around five leadership practices and ten leadership commitments:

  • Find Your Voice

  • Set the Example

  • Envision the Future

  • Enlist Others

  • Search for Opportunities

  • Experiment and Take Risks

  • Recognize Contributions

  • Celebrate the Values and Victories

  • Foster Collaboration

  • Strengthen Others


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LPI Model – Annual Survey from Observers of Leaders

Rating Scale: 1 – Almost Never | 2 – Rarely | 3 – Seldom | 4 – Once in a While | 5 – Occasionally | 6 – Sometimes

7 – Fairly Often | 8 – Usually | 9 – Very Frequently | 10 – Almost Always


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Resources on the LPI Model

  • Very inexpensive and practical model - $ 65.00 for complete CD and Surveys – Facilitator’s Guide:

  • Visit www.leadershipchallenge.com for more information.


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Value

Dynamics

Framework


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Value Dynamics Framework Model

  • Based on a three-year study of 10,000 companies by Arthur Andersen.

  • Used to determine how well a corporation is taking advantage of its asset capabilities.

  • Rates the contribution of assets and helps corporations leverage all assets for driving higher value.

  • Distinguishes the relationships of how assets add value in combination with one another.

  • Recognizes that assets are not fully controlled by the corporation – customers, suppliers, partners, etc.

  • Uses a much broader definition of assets (beyond the accounting model) for creating value.


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Basic Principle behind Value Dynamics Framework

  • Assets have inbound and outbound relationships; customer assets are outbound whereas employee assets are inbound (convert resources into products and services)

  • All assets have outputs – Organizational assets (systems, information, etc.), Financial Assets (cash flow, etc.)

By understanding these

relationships, we

“crack the value code”


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Critical Concept – From Tangible to Intangible Assets

In the old manufacturing economy, Balance Sheet assets in the accounting model were the critical value points.

Increasingly, value points are coming from the Intangibles, outside of the traditional accounting model.


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Creating the Overall Model

  • Identify and classify your assets into the five categories.

  • Understand the relationship of assets and how they are used within the business.

  • Front End Survey Work: Determine qualified people who can confirm how assets are used and what value they contribute to the business.

  • Conduct Value Dynamics Survey for all five asset categories.

  • Back End Survey Work: Reach consensus on final data through workshops, peer exchanges, and other forums.

  • Align your business model around those assets that add the most value. How should we use our assets going forward?


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Survey Questions – How well is your company using employee assets?

Second Pass on Survey – More precision

Best Very Above Below Very Worst Don’t

Practice Good Good Average Average Average Poor Poor Practice Know

For employee recruiting process?

For employee training program?

For employee satisfaction data?

First Pass on Survey – Basic Feel for How Data is Breaking

Needs Does the Best Don’t

Work Job Practices Know

For resources to improve employee quality of life?

For information technology to leverage employee knowledge?

If you are getting a lot of Don’t Knows, then you need to conduct some educational workshops with survey candidates before you continue with the survey and development of the Model

For collaborations or joint ventures to start new businesses?


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Resources on the Value Dynamics Framework

The Value Dynamics Framework is completely documented in

the book: Cracking the Value Code by Richard E.S. Boulton,

Barry D. Libert, and Steve M. Samek.

“Organizations are creating value in totally new ways, using assets and combination of assets heretofore unrecognized under traditional accounting systems – and certainly unmeasured. In such a milieu, old methods of managing and measuring are simply not up to the task. To ignore the significance of the changes afoot in business today is to ignore reality itself as the page turns on a new millennium. And what organization can thrive, or even survive, in a world of illusion? None.”

- Cracking the Value Code


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Denison

Cultural

Model


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Denison Model - Introduction

  • The culture of an organization, whether explicit or implicit, is fundamental to the execution of strategy and high performance.

  • The Denison Model was developed by Daniel Denison and William S. Neale based on 15 years of research with 1,000 companies.

  • The Denison Model describes organizational culture around four traits consisting of twelve management practices.

  • Very business oriented – directly linked to the bottom line.


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Denison Model Framework

Degree to which the organization clearly understands the needs and requirements of customers, responds and adjusts to meet those needs

Degree to which the organization is clear about its vision, goals, objectives and strategic direction

Degree to which the organization has values, systems, and processes that support the vision, goals, objectives, and strategy

Degree to which everyone is engaged and involved in helping move the organization forward


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Three Critical Management Practices of the Consistency Trait

Coordination and Integration - Different functions and units of the organization are able to work together well to achieve common goals. Organizational boundaries do not interfere with getting work done.

Agreement - The organization is able to reach agreement on critical issues. This includes both the underlying level of agreement and the ability to reconcile differences when they occur.

Core Values - Members of the organization share a set of values which create a sense of identity and a clear set of expectations.



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How to use the Denison Model

  • Do you have cultural issues?

  • Propose solutions to address your issues.

  • Set targets and take action steps to change your culture.

  • Understand the benefits – How do the action steps close the gaps?

  • Determine the risks of not taking action to close your cultural gaps.

  • Due Diligence - Compatibility issues prior to a merger.

  • Benchmark against other companies from the Denison Database.


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High and Low Performers – Denison Model

High Performing Companies

Low Performing Companies

Composite of companies that had an ROI of 9%

Composite of companies that had an ROI of 30%


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Resources on Cultural Assessments

For more information, visit www.denisonculture.com

Facilitator’s Guide for Cultural Compass - $ 98.00. Visit www.newtrainingideas.com


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Creativity

Model


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Important Concepts behind the Creativity Model

  • Creativity Model is based on the highly respected research of Carl Jung, Katherine Briggs, and Isabel Myers.

  • Breaks long-standing myths about creativity:

    - Creativity is NOT about ideas, it’s about the range of outcomes that are available to the organization.

    - Creativity is NOT about certain talents (art, music, etc.), it is about using the eight creative talents that are found in everyone.

    - Creativity is NOT about being different, but more about articulating results that no-one else recognizes.

  • Creativity is critical to problem solving because of increased complexity, the need for innovation, and increased competition.


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Creativity Model Framework –Eight Creative Talents

Adventurer

Quick to Act, Self Expressive, Aggressive Problem Solver, Fun

Navigator

Very Open, Good Source of Ideas, Energetic, Pursues New Things

Explorer

Deliberate, Observant, Thorough, Grasp’s Details, Helps Clarify

Visionary

Great sense of Future, Big Picture, Comprehends Complexity

Pilot

Organizing, Planning, Team Leader, Systems Thinker, Sets Goals

Inventor

Very Precise, Highly Focused, Analytical, Curious, Systematic

Harmonizer

Social, Helpful, Good People Skills, Seeks Consensus, Flexible

Poet

High Values, Tolerant, Quietly Curious, Supportive, Skilled Writer


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Key Points about the Eight Creative Talents

  • All eight talents have equalvalue.

  • All eight talents work differently.

  • You need access to all eight talents for creating different results – cover all the bases.

  • Since people have different creative talents, a team environment helps leverage all eight creative talents.

  • If you can consistently apply all eight creative talents, then your organization will have more control over its destiny.

  • Understanding and using the Myers-Briggs Type Indicator will help explain how you can apply all eight creative talents.


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Myers Briggs Types aligned around the Eight Creative Talents

Adventurer

Navigator

Explorer

Visionary

  • ESTP

  • ESFP

  • ISTJ

  • ISFJ

  • ENTP

  • ENFP

  • INTJ

  • INFJ

Pilot

Inventor

Harmonizer

Poet

  • ESTJ

  • ENTJ

  • ISTP

  • INTP

  • ESFJ

  • ENFJ

  • ISFP

  • INFP

Extroverts – Sociable, people oriented, works well in groups, interacts, engaging.

Introverts – Intense, works through ideas, reflects, reserved, few relationships.

Sensing – Practical, responsive, realistic, factual, accurate, detail oriented.

Intuitive – Insightful, innovative, forward thinking, strategic, learning, inspires.

Thinking – Logical, objective, reasoning, consistent, analytical, information user.

Feeling – Personal, cooperative, values, relates to others, persuades, humane.

Judging – Decision maker, planning, goal oriented, fast to act, hard working.

Perceiving – Flexible, adaptive, casual, goes with the flow, improvise.


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Resources on the Creativity Model

The Creativity Model is completely documented in the

book Breakthrough Creativity by Lynne C. Levesque.

For more information, visit www.lynnelevesque.com

“Creativity drives growth, and creative people drive every great enterprise. It’s not too trite to say that. These days, we’re all too easily caught up in the tactics of competition. We can forget that sustainable advantage is ultimately a function of a company’s ability to consistently generate, develop, and sell valuable ideas. Which is to say, creativity is at the heart of work and business.”

- John A. Byrne, Editor – Fast Company Magazine, December 2004


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Overall Framework for applying these tools and techniques (Big Picture)

Value Dynamics Framework

Dennison Cultural Survey

Identify Major Value Related Issues

Determine how these value related issues align to various layers within your Organizational Framework

Apply specific techniques to close the value gaps within your Organizational Framework

Vision Goals

Organization Framework (IBM Model)

Competencies

Strategies, planning, and budgeting

Communication and Management Systems

Products - Services - Processes

LPI Model

Competitive Intelligence

Creativity Model


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Closing Comments (Big Picture)

  • Most value points are easy to recognize and conceptually, they are easy to comprehend.

  • However, getting management “value-focused” is not easy and therefore, most corporations have significant points of value that need further development.

  • Ironically, getting the plane off the runway seems to be the biggest challenge . . . .

  • And if corporations would just start with a modest understanding of where value comes from (leadership, culture, etc.), the corporation could realize enormous increases in value.


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Additional Information (Big Picture)

Download presentation and reference files from:

www.exinfm.com/workshop.html

  • Workshop Slides (powerpoint)

  • Building HR Capital

  • Aligning Human Capital with Business Strategy

  • Value Dynamics Presentation

  • Five Ways to Develop Corporate Culture

  • Organizational Cultures that Get Financial Results

  • Applications of the Denison Cultural Model


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Questions and Comments (Big Picture)

Matt H. Evans, CPA, CMA, CFM

Email: matt@exinfm.com

Phone: 1-877-689-4097


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Back Up (Big Picture)

Slides


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Value Dynamics Model (Big Picture)

Survey Questions – How well is your company using physical assets?

Best Very Above Below Very Worst Don’t

Practice Good Good Average Average Average Poor Poor Practice Know

Real estate / land for productive use or investment?

Buildings and facilities?

Existing equipment or newly acquired equipment?

Inventory management to minimize risk of not delivering?

Information technology infrastructure?

Supply chain management to optimize the use of and need for physical assets?


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Value Dynamics Model (Big Picture)

Survey Questions – How well is your company using financial assets?

Best Very Above Below Very Worst Don’t

Practice Good Good Average Average Average Poor Poor Practice Know

Cash reserves?

Receivables in minimizing the cash-conversion cycle?

Investment strategies in order to increase profitability?

Debt strategy to manage or eliminate debt?

Equity to further business expansion?

Information technology to enable financial management?


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Value Dynamics Model (Big Picture)

Survey Questions – How well is your company using customer assets?

Best Very Above Below Very Worst Don’t

Practice Good Good Average Average Average Poor Poor Practice Know

Customer satisfaction information?

Current customer information to expand customer base?

To develop customer loyalty?

Collaborative relationships to better serve customers?

Information technology to enable web-security?

Supply chain management to increase customer satisfaction?


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Value Dynamics Model (Big Picture)

Survey Questions – How well is your company using organizational assets?

Best Very Above Below Very Worst Don’t

Practice Good Good Average Average Average Poor Poor Practice Know

Leadership to drive innovation and passion?

Business strategy ?

Structure to delegate the responsibilities?

Processes to identify business opportunities?

Culture to foster honesty and respect?

Branding in the marketplace?

Knowledge in product development and marketing?

Intellectual property?


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Value Dynamics Model (Big Picture)

Value Dynamics – Survey Process

Surveys Received

Level of

awareness

acceptable?

Conduct Workshops

Reassess

N

Y

Level of

agreement

acceptable?

Likely possibility

that BUs have

independent assets?

Facilitated Peer Exchange

(Gartner Best Practice)

Reassess

N

N

Y

Y

Y

Develop standard

Value Dynamics

data representation

Develop alternative model

for Value Dynamics

data representation


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Value Dynamics Model (Big Picture)

Run survey data through quality control matrix for refining the data

Low

High number of “Don’t Knows”

&

Low level of agreement

Low number of “Don’t Knows”

&

Low level of agreement

Level of agreement

Low number of “Don’t Knows”

&

High level of agreement

High number of “Don’t Knows”

&

High level of agreement

High

Level of awareness (% of respondents answering “Don’t Know”)


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Value Dynamic Recommendations – (Big Picture)Within the Business Model

ISSUE: Management does not believe they have the competencies necessary to meet customers’ needs, nor do they feel empowered to use the competencies they do have.

  • Action Items

  • Develop a competency model and performance management system.

  • Benefits

  • A competency model will outline the necessary knowledge, skills and abilities for each position, allowing employees to understand how their jobs fit into the goals and values of the organization.

  • A performance management system will ensure employees and functional areas are evaluated using standardized performance metrics.

Vision & Goals

Competencies

Strategies, Planning & Budgeting

Communication & Management Systems


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Denison Cultural Model (Big Picture)

Three Critical Management Practices of the Adaptability Trait

Creating Change - The organization is able to create adaptive ways to meet changing needs. It is able to read the business environment, quickly react to current trends, and anticipate future changes.

Customer Focus - The organization understands and reacts to their customer, and anticipates their future needs. It reflects the degree to which the organization is driven by a concern to satisfy their customer.

Organizational Learning - The organization receives, translates, and interprets signals from the environment into opportunities for encouraging innovation, gaining knowledge and developing capabilities.


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Denison Cultural Model (Big Picture)

Three Critical Management Practices of the Mission Trait

Strategic Direction and Intent - Clear strategic intentions convey the organization's purpose, make it clear how everyone can contribute and "make their mark" in the industry.

Goals and Objectives - A clear set of goals and objectives can be linked to the mission, vision, and strategy, and provide everyone with a clear direction in their work.

Vision - The organization has a shared view of a desired future state. It embodies core values and captures the hearts and minds of the organization's people, while providing guidance and direction.


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Denison Cultural Model (Big Picture)

Three Critical Management Practices of the Involvement Trait

Capability Development - The organization continually invests in the development of employees' skills in order to stay competitive and meet ongoing business needs.

Team Orientation - Value is placed on working cooperatively toward common goals for which all employees feel mutually accountable. The organization relies on team effort to get work done.

Empowerment - Individuals have the authority, initiative and ability to manage their own work. This creates a sense of ownership and responsibility toward the organization.


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Denison Cultural Model (Big Picture)

Example of Action Plan - Denison Cultural Model

ISSUE: Need to better articulate the company’s vision, mission and goals. This will translate into increased revenue growth, quality, and employee satisfaction.

Action Plan

Benefits

Recommendations

  • If employees understand and can positively identify with the Company’s vision, mission, and goals, there should be a positive impact on profitability, sales / revenue growth, market share, perceived quality, and employee satisfaction.

  • Hold strategy articulation sessions to plan for the future. Communicate these plans (Vision, Mission, Goals) to employees, and ensure they know how their jobs fit into the company’s goals

  • Create a list of criteria that projects must meet before they are accepted. Make sure short term and long term goals and interests are considered when creating criteria

  • Determine the best communication vehicle to cascade the vision, mission, and goals to all levels of the organization

  • Give the future the attention it deserves

  • Develop a philosophy that long and short-term interests can be reconciled

  • Make everyone in the organization familiar with your vision, mission, and goals


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Value Dynamics and Denison Cultural Model (Big Picture)

Combining the Results – Value Dynamics and Denison Cultural

DENISON

This chart was developed by comparing Denison survey results to Value Dynamics concepts.

1

Adaptability

Consistency

Involvement

Mission

Organiz-

Strategic

Creating

Customer

Goals &

Coordination

Capability

Team

Empower-

ational

Direction &

Vision

Agreement

Core Values

Change

Focus

Objectives

& Integration

Development

Orientation

ment

Learning

Intent

Physical

B

B

B

Assets

V

A

L

Financial

3

E

B

B

B

B

B

E

U

Assets

E

D

Customer

2

E

B

B

B

B

B

B

B

E

Y

Assets

N

A

Employee/

M

3

E

E

B

B

B

B

B

B

B

B

E

Supplier Assets

I

C

S

Organization

3

E

E

B

B

B

B

B

B

B

B

B

E

Assets

E = Enabler

B = Barrier

Major Cultural Issue impacting value