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FitzGerald Associates ManagementConsultants

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 ManagementConsultants

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  1. FitzGerald Associateswww.ManagementConsultants.com University of Chicago GSB Consultants Roundtable

  2. FitzGerald Associateswww.ManagementConsultants.com Corporate Profitability Performance Prediction

  3. Objective I To Identify The Root Causes The Drivers of Performance

  4. Objective II To identify 3 Critical Functions which, if improved by 20%, will increase profits by 40%

  5. Objective III To identify 3 Generators that positively effect the Critical Functions

  6. Objective IV To identify 3 key factors that BLOCK the Critical Functions (Blockers)

  7. Objective V To learn how to quantify the Drivers of Performance Critical Functions Generators Blockers

  8. Good News Sells no Papers

  9. The Long Goodbye A True Story The (20 year) Decline and Fall of Guernsey Dell

  10. Meet Tom Horne

  11. 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

  12. From the Specific to the General… …and Back A Little Theory The Phases and Measures of Corporate Decline (More bad News)

  13. Phases and Measures Summary Phases Measures I Hidden Drivers II Subtle KPI’s + Drivers III Overt Financials + KPI’s + Drivers

  14. Drivers of Performance The Organizational and Human Factors that Underlie, Drive, and Impel Performance The Root Causes of Performance The Predictorsof Performance

  15. Drivers of Performance Entirely controlled by management They can be measured / quantified They Can BeChanged

  16. Drivers of Performance Consist of Critical Functions ~ 6 Generators ~ 9 (Now for the bad news) Blockers > 100

  17. Critical Functions (A Definition) Where the least change exerts the greatest result

  18. Analogy The Accelerator on a Car The Brake on a Locomotive

  19. Three Critical Functions Function (Guernsey) Performance Management (Virtually None) Talent Management (Virtually None) Cost Containment (Lip Service)

  20. Performance Management Goal Setting Rigorous Follow Up Rewards Based on Performance + ?????

  21. Talent Management Purposeful Recruitment Serious Management Development Purposeful Turnover +????

  22. Cost Containment OK - You Know!

  23. LSE/McKinsey Study Take-Away A 20% improvement In the three Critical Functions Generates A 40% improvement in the bottom line

  24. Three Critical Functions Performance Management Talent Management Cost Containment

  25. Critical Functions All Companies Have These Functions Their EffectivenessIs the Question (Their VolatilityIs the Issue)

  26. Effectiveness of Critical Functions A POSITIVE function (ƒ) of Generators A NEGATIVE function (ƒ) of the Blockers

  27. Examples Three Generators Corporate Decisiveness Acknowledgement of Work Accountability

  28. Examples Three Blockers Complacency Need for Consensus Distrust

  29. Linkage Drivers Blockers Generators Critical Functions KPI’s Financials

  30. Linkage Example I Complacency (Blocker) Acknowledgement of Work (Generator) Poor Cost Containment (Critical Function) Loss of Clients (KPI) Reduced Revenues/Profits (Financial)

  31. Linkage Example II Distrust (Blocker) Reduced Decisiveness (Generator) Poor Performance Mgmt. (Critical Function) Loss of Quality (KPI) Reduced Profits (Financial)

  32. 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 )

  33. The Generators Provide A Single Number for the Trajectory of Operating Dynamic

  34. The Blockers Provide The Reasons WHY And the HOW to correct them

  35. Reliability of Drivers For All Drivers Perception is Reality Objective Reality (if any) is Unimportant

  36. Measurement of Drivers Use a questionnaire (Anonymity) Get responses of management(by team) From CEO to Supervisors (key staff too)

  37. A Critical Function “Question” We attract and retain the best people Sr. Team: 4 2 1 2 1 2 2 1

  38. A Generator “Question” Our managers hold each other accountable Sr. Team: 4 2 1 2 2 2 1 2

  39. A Blocker “Question” Our managers are reluctant to speak their minds Sr. Team: 2 4 4 4 5 4 2 5

  40. 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)

  41. Q & A Where Does the 40% Profit Improvement Come From?

  42. Wrap Up

  43. Wrap Up I Drivers Blockers Generators Critical Functions KPI’s Financials

  44. 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

  45. 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

  46. Wrap Up IV Long before Success shows. . . the signs are there: First in the Drivers (The smart investor knows to look)

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