The Post Acquisition Due-Diligence

When all is said and done, the fundamental driver business performance is not its finance nor its strategies nor its operations; these together are responsible for less than 20%.

The real driver is something else.  It is its Operating Dynamic©, its Will to Compete.  That complex of organizational and human factors that drive/impel behavior, generate performance and are finally responsible for success or failure.

No investor would enter into an acquisition without an in-depth financial and operational due-diligence audit. Yet, with almost every acquisition, decisions are made - and have to be made - in almost complete ignorance of that which is responsible for 80% or more of performance.  Guesswork and hunches are the order of the day.

Investors make their acquisition decisions on the best information available and then wait... And wait... And hope... Because understanding what the operating dynamic really is and the impact it has on performance takes time.  Lots of time.

Until now it has been thought that that was the way it had to be. It was felt that the technology to open the soul of a company to its new owners did not exist.

Happily, this is no longer true.

A Post-Acquisition Due Diligence© is now possible. A due diligence that will expose to the light of day the real and often hidden drivers of performance, and do so for the company as a whole and for each of its units.

The cost is affordable, the effort required by the acquired company is minimal, the time to do it extremely short.

And the potential ROI remarkable.

For information on the Post Acquisition Due Diligence, contact Tom FitzGerald at 847-599-9960 or fitz @ managementconsultants.com

For information on FitzGerald Associates and background on the diagnostic instruments visit their web, www.ManagementConsultants.com.

Tom FitzGerald (Author: Fire in the Corporate Belly)
FitzGerald Associates, Est. 1976    www.ManagementConsultants.com     
Blog     http://fitzgeraldassociates.blogspot.com
Lake Forest, Illinois - Phone  847-599-9960

The Foundations of Recovery III

When insightful  managers look at the causes of performance they are immediately struck with the overwhelming influence that just a few critical functions have to determine the success or failure of the company.

As long as they as a whole are positive, the company is improving.  But when they turn negative the corporate trajectory is downward and, if they stay that way, the organization is destroyed - utterly and inevitably.

Every experienced manager knows these functions exist.  Yet for most they remain invisible, mysterious; business schools never teach how to measure them, how to grapple with them, how to transform them.  They remain something mystical that they are expected to know intuitively how to control.  It is why more than 50% of all new executives are gone in eighteen months - even in good times.

Professional managers have at their fingertips all the numbers that deal with the past, like the financials or the KPI's.  Yet, about the causes of performance, which are laying down the future, they must GUESS.

Since 1980 the root causes of performance have been known precisely and documented in great detail.  Since 1985 the technology to trigger changes in them has existed and has been used in more than 200 organizations.

Our book Fire in the Corporate Belly, now in its second, expanded edition, describes the causes, how to measure them and how to change them.

Papers, by us and about us, have appeared in more than 40 business publications around the world, from American Banker to Fast Company.  A current article can be found here.  Two other articles on this subject will appear in Corporate Finance Review and Strategic Finance in October.  If you would like to receive previews, please Contact us.
 
One of the drivers of performance, obscure, but of extraordinary importance, is Acknowledgement of Work - generator number two.

Tom FitzGerald (Author: Fire in the Corporate Belly)
FitzGerald Associates, Est. 1976    www.ManagementConsultants.com     
Blog     http://fitzgeraldassociates.blogspot.com
Lake Forest, Illinois - Phone  847-599-9960

Why 70% of Acquisitions Fail

For  forty years or more it has been known that 60% of acquisitions fail; some put the failure rate as high as 80%.  The problem does not lie with the due diligence.  By and large they are carefully and professionally done.  

Rather, it resides in what the due diligence does not address at all: The root cause, the origin, the driver, of  all performance and results, the Operating Dynamic of the company, its very Will to Compete.  This is the stuff success (or failure) is made of; the stuff on which an acquisition should be based; the stuff with which a merger should be carried out.  Yet is it almost never measured.

Why this is so, is simple enough:  It is widely believed that the operating dynamic is something not measurable, something mystical, something almost spiritual; perhaps also because looking at the exposed soul of a company might be embarrassing.

But the operating dynamic is measurable - in great detail.  And its measures PREDICT performance long before that shows in the financials.  An article on this, first published in the CEO Refresher, may be found at The Corporate Polygraph.  Another article, The Black Hole in the Due Diligence Audit, will appear in the October 2009 edition of Corporate Finance Review - CFR.  

If you do not subscribe to CFR and would like to see the article please let us know.

 

 

EMAILING FOR THE GREATER GOOD Join me

The Foundations of Recovery - I

There are just six critical functions that determine corporate performance.   They constitute a company's Operating Dynamic ..   They encompass its inherent Will to Compete ..   They are entirely within the control of management.  

Improving them by a mere 20% increases the bottom line by 40%*, something no cutback, no strategy can do.

During the intense 1980-82 recession we created a process that:

1. Provides hard measures for these critical functions and presents them as a Balance Sheet and P&L;   this was never before possible.
2. Enables CEO's to trigger serious improvements in them - and on their companies' bottom lines.

It has worked in every downturn (and upturn) since, in large companies and small, in for-profits, and not-for-profits, even government. It is fast.   It is economical.   It is non-intrusive.

It is true corporate mobilization.   It leaves your company, not only more profitable, but stronger, more aggressive, ready for the recovery.

I would like to tell you about this.   Would it be possible for your assistant to arrange a time for us to talk? In this recession there is probably nothing you can do that will bring greater or faster results.

Tom FitzGerald (Author: Fire in the Corporate Belly)
FitzGerald Associates, Est. 1976    www.ManagementConsultants.com     
Blog     http://fitzgeraldassociates.blogspot.com
Lake Forest, Illinois - Phone  847-599-9960

The CEO and the Great Recession

When a great CEO mobilizes a company to face a great challenge, he does not just focus on costs or on revenues, on strategies or tactics, or even all of those. He focuses on evoking the very spirit of the organization and on transforming it, knowing that this spirit will do the rest. Great battlefield generals do this also.

While all professional managers know that every company has a unique, motive spirit that generates all its performance - from development of vision to final execution - most are not aware of what exactly it consists of, or how to tap into it, or how to change it.   This is not taught in B schools.

Since 1980, however, the make-up of this corporate spirit (call it Operating Dynamic) has been known and documented.   In 1985 the technology to trigger changes in it was developed.   It has since been used in more than 200 organizations to transform them even to their intrinsic Will to Compete.   No longer is it necessary to be a "Great Leader" to do so.

Our book Fire in the Corporate Belly, now in its second, expanded edition, describes both the makeup of the corporate spirit and the methodology of changing it.  The introduction can be accessed here.  Summaries of the chapters can be accessed at Fire in the Corporate Belly.

Tom FitzGerald (Author: Fire in the Corporate Belly)
FitzGerald Associates, Est. 1976    www.ManagementConsultants.com     
Blog     http://fitzgeraldassociates.blogspot.com
Lake Forest, Illinois - Phone  847-599-9960

What is a Post-Acquisition Due Diligence?

When all is said and done, the fundamental driver of any business is not its finance nor its strategies nor its operations. These together are responsible for no more than 20% of performance.

The real driver of corporate performance is something else. It is its Operating Dynamic. That complex of organizational and human factors that drives/impels behavior, generates performance and is finally responsible for success or failure.

No investor would enter into an acquisition without an in-depth financial and operational analysis. Yet, with almost every acquisition, decisions are made - and have to be made - in almost complete ignorance of that which will be responsible for 80% of performance. Investors must make their acquisition decisions on the best information available and then wait... And wait... And hope... Because understanding what the operating dynamic really is, and the impact it is having on performance takes time.

Until now it has been thought that that was the way it had to be. It was felt that the technology to open the soul of a company to its new owners did not exist. Happily, this is no longer true.

A Post-Acquisition Due Diligence is now possible. A due diligence that will expose to the light of day the real and often hidden drivers of performance, and do so for the company as a whole and for each of its units.

The cost is affordable, the effort required by the acquired company is minimal, the time to do it extremely short. And the ROI remarkable.

Tom FitzGerald (Author: Fire in the Corporate Belly)
FitzGerald Associates, Est. 1976   www.ManagementConsultants.com    
Blog     http://fitzgeraldassociates.blogspot.com
Lake Forest, Illinois - Phone 847-599-9960

A Fighting Response to Recession

A Fighting Response to Recession

Imagine . . . .   All your people aggressively thinking, planning, working together - not just for the company's survival, but for its success.   The least would be an immediate surge in profits.   But less than 20% of people's goals are congruent with their company's.   And that shows in its Will to Compete.   Even in good times, this operates at less than 30% of its potential.   If it is improved by just 20%, the bottom line improves by 40%. But how? First, measure it in detail.   Once you know, transforming is profoundly simple, the ROI extraordinary. What it is, how it can be measured and transformed, is addressed in our book Fire in the Corporate Belly.  The book and individual articles can be purchased at  Whales Tale Press.

Thriving in Recession III - Mobilizing the Will to Compete

The fundamental driver, the root cause, of all business performance is Corporate Will©. Not strategy, tactics, operations, or anything else that is measured in an audit or due-diligence. It costs virtually nothing to change and a small change triggers large improvements in corporate competitiveness and profits.

Corporate Will is that complex of organizational and human factors that underlie, drive and predict all corporate performance. It consists of fifteen* major organizational attributes - drivers and blockers - that generate and determine how the company performs. All are entirely within the control of management.

If they are identified and quantified, changing them is easy and virtually cost free. And changing them has been proven to have an extraordinary and magnifying impact on the bottom line. The Corporate 360° is a unique web-based diagnostic instrument. It creates an in-depth analysis of an organization's critical Will to Compete, and presents it in terms of a Balance Sheet and a P&L. This has never before been possible.

It is non intrusive; it is economical. Within days (or hours) the information can be in the hands of management. With that information, true and lasting mobilization is possible.

* The Attributes: All the factors we measure are to be found in our book, Fire in the Corporate Belly, see below. Additional attributes will appear in subsequent emails. Stay Tuned! Attribute No. 2 can be found at Corporate Commitment. Attribute No. 1, Acknowledgement of Work, may be accessed through the 2nd posting on our blog.

Thriving in Recession Part II - The Forgotten Gold in Every Company

Within every company there is a source of competitiveness, of performance, of profits waiting to be tapped.

It is entirely within the control of management; it costs virtually nothing to change; and, if improved by just 25%, it generates a 40%+ improvement in financial returns*. Something no retrenchment, no reengineering, no tactic, no strategy, can provide. Finding it, mining it, is the first and most effective response to recession.

At some level, everyone knows it exists. It is acknowledged that it fundamentally generates all corporate performance and competitiveness. Yet few companies can clearly define it, manage it, or change it. It remains in the realm of guesswork and "the leadership thing."

But it can be defined, it can be managed, and it certainly can be changed. It is called the Operating Dynamic© of the company. Uncovering it, making it responsive to management is easy.

Since 1980 we have been measuring and helping companies trigger changes in this hidden profit center. One of the tools we use is at The Corporate 360°. It is quick, it is non intrusive, it is economical.

It has some fifteen major components. One component is Acknowledgement of Work.

For additional information, please contact us at:
847-599-9960 or DianeN@ManagementConsultants.com.

For some tactical and operational guidance from our archives and the last recession, see How To Manage In A Downturn.

Thriving in Recession - Part I

The first line of defense in any business downturn lies in the company's Will to Compete. If that is strong, the company thrives. If it is weak, the company falters.

A company's Will to Compete is not just the fighting spirit of the CEO, though that is important, nor the sum of the individual managers' commitments to survive. It is the resultant leadership available to the company after all dissonance and misdirection are accounted for. Some people refer to this as the Spirit of the company. But another, more neutral term might be the Operating Dynamic©.

The Operating Dynamic is in fact the root cause and driver of all corporate performance.

As long as this remains invisible, it negatively impacts performance. But once brought into the open it can be changed, improved, put to work strengthening the company.

The nice thing about the Operating Dynamic is that it's entirely within the control of management, so improving it costs virtually nothing. And a small improvement there has been shown to cause a huge improvement in both competitiveness and the bottom line.

The first step is to measure it.

For information on the Operating Dynamic and its components click here.

Predicting and Transforming Corporate Performance

The Corporate 360°®

A Balance Sheet & P&L

for the

Operating Dynamic of Your Company

-------------------------------------------------------------------------------------------------

BACKGROUND

All Corporate Performance is fundamentally driven by the Operating Dynamic© of the company. It is more important than strategy, tactics, processes, finance, or "culture". It is the root cause of success or failure. A healthy operating dynamic results in high performance; a poor or sick one causes decline or failure.

The operating dynamic is entirely within the control of management; it costs almost nothing to change. Improving it by even a little results in a large increase in financial returns - irrespective of initial performance.

It can be measured; it can be changed; yet it almost never is.

Knowing it in detail, and measuring it in terms of a Balance Sheet and P&L, allows companies to:

· Trigger significant, and sometimes remarkable, profit increases

· Predict future performance - far ahead of the financials or the KPI's

The Balance Sheet provides the current value of the operating dynamic: how it is working; what it is laying down for the future of the company – good or bad. The P&L shows the trend line on the value. Together, they provide the Innate Trajectory of the company. (Nothing can predict a result further ahead than its cause.)

DESCRIPTION

The Corporate 360° surveys provide a full-spectrum, in-depth analysis of the company's innate health. They are MANAGEMENT TEAM instruments only. They are web-based, simple and easy to respond to: the smallest takes less than five minutes to complete; the largest about thirty. Commentary can also be input and provides for a deeper level of diagnosis.

The surveys provide a 360° appraisal of the company and each of its units, from the inside, through the eyes and perspective of its managers – those who will have to change it if that is necessary. The surveys put hard numbers on factors that cause, predict, drive and also block performance. They work for large companies and for small.

The instruments are a distillation of the turnaround and profit improvement work that FitzGerald Associates have engaged in since 1976. They have been proven in more than 200 organizations - low performing as well as high.

Survey responses and commentary are evaluated by our senior diagnosticians, not by computer programs. Findings are explored in-depth with the CEO's and management teams using our unique facilitation process.

BENEFITS

Profitability

· Quantifies the key management functions proven to directly impact profitability. Even our smallest survey addresses all major factors. Our largest allows CEO's to actively trigger changes.

· Presents the key functions in terms of a Balance Sheet and Income Statement together with their underlying drivers and blockers.

· Focuses management on priority issues and areas which will provide maximum return for effort.

Competitiveness

· Evaluates a company's Corporate Will^© (innate will to compete) and identifies action steps to improve it.

Performance Prediction

• Predicts future corporate performance long before it shows in the financials or the KPI's.
• Focuses attention on dangerous situations not yet visible to accounting or due-diligence audits.

Leadership / Management

· Creates immediately understandable measures of the CAUSES of corporate behavior and their direct impact on profits, productivity and performance.

· Measures the effectiveness of ManageMENT: i.e. the resultant leadership and administration available to the company after all dissonance is accounted for.

Hitting-the-Ground-Running

· Provides immediate, in-depth analysis of the operating dynamic for an incoming manager.

· Facilitates inherited managers imprinting on the new CEO.

· Shows where improvements need to be made.

· Identifies areas of maximum return on effort.

M&A / Due Diligence

· Provides the hard numbers needed to predict future performance: something no traditional due-diligence can do.

· Identifies what needs immediate change - and how to do it.

· Guides and helps manage successful mergers.

Turnaround / Renewal

· Enables Preemptive Turnaround.

· Measures core motivations needed for a sustained turnaround – company wide and unit by unit.

· Indicates the readiness of a company to make serious change or undertake a new enterprise.

· Identifies what needs to change - and how to do it.

Case Studies and Testimonials

Available on Web

The Corporate 360°

The Corporate 360° Surveys provide a full-spectrum, in-depth analysis of the company's innate health. They are web-based, simple and easy to respond to: the smallest takes less than five minutes to complete; the largest about thirty. Commentary can also be input and provides for a deeper level of diagnosis.

The surveys provide a 360° appraisal of the company and each of its units, from the inside, through the eyes and perspective of its managers and supervisors, those most responsible for its condition. They put hard numbers on corporate attributes that used to be thought of as "soft issues", the attributes that cause, predict, drive and also block performance. The surveys work for large companies and small.

The instruments are a distillation of the Preemptive Turnaround and Profit/Performance Improvement work that FitzGerald Associates have engaged in since 1976. They have been proven in more than 200 organizations, low performing as well as high.

Survey responses and commentary are evaluated by senior diagnosticians, not by computer programs. Findings are explored in-depth with the CEO's and management teams using a unique facilitation process created and utilized by FitzGerald Associates since 1980.

Information can be obtained by contacting DianeN@ManagementConsultants.com or 847-599-9960.

The Cash Cow in Every Company - A Webinar

Within any company there are just six critical functions, entirely within the control of management, that have a profound and determining effect on the bottom line.

Date: Wed Oct 3, 2007 Time: 9:00 AM, USA Pacific Duration: 1 Hour Contact: kim@e2c.com

Description

A Master Session with Tom FitzGerald

Within any company there are just six critical functions, entirely within the control of management, that have a profound and determining effect on the bottom line. A small change to them generates a huge change in performance.

This works for high performing companies as well as troubled. Together they constitute a Cash Cow that is always available to any managing officer.

FitzGerald Associates discovered this in 1980 from their turnaround and reengineering work. They also discovered how to trigger changes in them; something just as important. Because this knowledge provided them with a competitive edge, they did not publish it.

A few months back, however, London School of Economics and McKinsey issued the report of a joint eight year study of one hundred companies. It showed that a 25% improvement in just three (of the six) Critical Functions results in a 42% improvement in financial returns*, something no strategy or tactic can generate. This study has since been supported by at least two other studies of 700 and 300 companies respectively. FitzGerald Associates therefore decided to make their intellectual property known.

These six Critical Functions can be measured in great detail. And so can the factors that drive them – the factors that constitute a company's Will to Compete. Once measured, they can be transformed. And being transformed, they transform the performance of the company. Charisma is not required.

Tom FitzGerald, CEO of FitzGerald Associates, will discuss these Critical Functions, how they impact bottom-line results, how they relate to a company's will to compete and, of course, how to turn them into profits.

Data from real (but anonymous) companies will be shown.

Click here to register

The Profile of a Healthy Company - Part 1

All executives know the importance of monitoring the underlying health of their companies. And of taking action to improve it.

However, they seldom get around to doing it. Probably because they do not know the huge and proven impact the attributes of a healthy (or unhealthy) company have on the bottom line. Perhaps because they believe the attributes are unknowable. Or think they cannot be measured. Or that doing so is difficult. Or, in despair, that nothing can be done about them anyway.

These beliefs are very wrong. The attributes of corporate health have been known and understood for decades; they can be quantified in great detail; they can be presented as a Balance Sheet and a P & L. Changing them is extraordinarily easy. Changing them transforms the bottom line.

The first step is knowing what they are.

In Parts 2 and 3 we will identify some of the more important attributes that constitute the Balance Sheet and P&L.

Tom FitzGerald (Author: Fire in the Corporate Belly)
FitzGerald Associates, Est. 1976   www.ManagementConsultants.com    
Blog     http://fitzgeraldassociates.blogspot.com
Lake Forest, Illinois - Phone 847-599-9960

Facing Corporate Reality - Mirror, Mirror, on the Wall!

Within a company, no great change can happen, no substantial performance increase can be achieved unless and until that company faces clearly and fearlessly what it really is.

Yet, the real drivers, causes, of corporate performance are mostly ignored. Partly because they are not known, partly because managers are afraid to look.

Less than 10% of the factors that drive the success of the company appear in traditional analyses. And these are often more result than cause, more ephemeral than enduring.

The other 90% of corporate drivers are not addressed. Most of these exist within the hidden emotional life of the company.

At some level, all successful leaders are aware of these drivers and cause them to change, to transform. For example, in successful turnaround situations, new CEOs intuitively change the entire dynamics of the company as part of the transformation. Inspired new CEOs do this too.

But neither desperation nor inspiration are needed. Companies can be transformed. And the first step is to identify the motive forces, the real drivers of success.

From hands-on experience with scores of organizations the writer describes some of the more important of these drivers and their effects on performance.

For access to the entire article, contact us at DianeN@ManagementConsultants.com with a subject line of Mirror Mirror!

If you needed to generate within a year a 20% improvement on the bottom line, which do you think would be more effective?

• Changing strategy
• Changing tactics
• Changing processses (reengineering)
• Changing the drivers of performance

Let us know what you think. Click "comments" just below on the right.

The Stages and Measures of Corporate Decline

Here is the illustration showing the phases, stages and the different measures of the decline process, excerpted from our e-book. Brief descriptions follow underneath the illustration.

Click here to view full screen from our website.



When a company falters and eventually dies, it goes through three distinct phases of decline.

Phase I, the Hidden Phase, can not be seen from outside the company. It is also frequently, and needlessly, missed from within. However in this phase fully one third of the competitive value is lost. Recovery from this phase is termed Preemptive Turnaround.

Phase II Decline, the Subtle Phase, is visible from outside, to those who know what to look for. This is measured in professional due diligence audits. Another third of the competitive value is lost in this phase. Recovery from Phase II is termed Business Correction.

Phase III Decline, the Overt Phase, can be seen by all. Recovery from here is classic Turnaround.

Each phase has its unique attributes and unique measures. Working backwards:

• The Overt Phase is measured by the Financials - though the other measures are ringing alarms very loudly.

• The Subtle Phase is measured by the Parametrics. The Financials show nothing - though the Drivers loudly proclaim problems.

• The Hidden Phase is measurable only by the Drivers of Performance - here, the other measures show nothing.

The Rebirth of a Company

We are often asked why our work causes such significant shifts in systemic performance: Quite simply, we have a technology that allows managing officers to focus powerfully the energies of the management teams on the core drivers of performance. And transform them.

But when the question turns to HOW it works, it becomes much harder to explain. You see, the drivers - there are about a hundred of them - lie within the Operating Dynamic of the company. (Think of this if you like as the Corporate Will.) These drivers comprise the emotional life of the company. And can only be transformed emotionally.

We have created a way to do this. Through laughter.



Artwork by Anne FitzGerald, creator of the "Dear God Kids"

Please click "Comment" below to leave your comments, ideas, or thoughts.

Tom FitzGerald (Author: Fire in the Corporate Belly)
FitzGerald Associates, Est. 1976 www.ManagementConsultants.com
Blog http://fitzgeraldassociates.blogspot.com
Lake Forest, Illinois - Phone 847-599-9960

My Company's Future - To Guess...? or To Measure...?

No CEO, however busy, would risk his company's future without measuring its financials - frequently. Knowing that to use the financials alone to judge future performance is like driving a car using only the rear-view mirror.

The smarter CEO measures the KPI's (key performance indicators) as well. Knowing that using these - still trailing but earlier expressions - is no better than driving by looking out the side window. (Many believe this is as good as it gets.)

However, the wise and prudent CEO measures the root causes, the drivers of performance. They predict the future at the very time they are creating it.

• They can be identified. Easily.
• They can be measured. Quickly.
• They can be transformed. Readily.

The Exec Report of the Illinois State Chamber of Commerce, carries a review of an article on the subject of performance prediction. (Click on icon below.) The full article was the lead in the May 2005 edition of The CEO Refresher.



To read the review, click here.



Another article on a similar subject appeared in the journal of the Turnaround Management Association. Titled
The Preemptive Turnaround it was written as a kind of prequel (?) to the Refresher article.

 

Please click "Comment" below to leave your comments, ideas, or thoughts.

The Cause of Corporate Growth

Before sustained corporate growth is possible
Before that growth can show in the financials

Even before implementation is begun
Or the financing arranged
Or the planning done

There must be a preparedness, a readiness
In the operating dynamic of the company.

Without it, nothing will happen.
Except the squandering of human and financial resources.

With it, the likelihood of success is multiplied.

On ways to measure the preparedness of your company
See article Mirror,Mirror, on the Wall . . .


For information on how to create (or renew) this preparedness
See article Fire In The Corporate Belly

 

 

Your Company's Trajectory: Up, Down, or Sideways?

At all times, in all companies, irrespective of size or industry, there is an Innate Trajectory(C) to their performance and viability that is independent of the economy, of the competition, of the current bottom line.

As that trajectory points - up or down - so will the company go. As the angle of the trajectory slopes, so will the company move: Quickly or slowly; up or down.

The Innate Trajectory(C) is not detected in the financials or even the KPI's; these are historic, retrospective measures. Their ability to show trends is very limited, even with the most sophisticated of models.

The Innate Trajectory is detected (and measured) by using the causes of it: The Drivers of Performance. (Nothing can show a trajectory better - or further ahead - than its causes.) They show both direction and intensity, at the very time they are creating the future. The Drivers, in fact, predict.

They can be identified - easily. They can be measured - simply. They can be changed - readily. As they change, they change the future.

Your thoughts are welcome. You can input your opinions and read those of others at the Comments button below.

The Cost and Return (ROI) of Corporate Development

Of the roads to corporate development/improvement, three great avenues stand out:

• One is through the change of strategy, of tactics.
• Another is through the reengineering of process.
• The third, is through the transformation of the Operating Dynamic of the company.

Strategic/tactical change takes time to implement; is always disruptive; then takes time to prove - the success rate is seldom encouraging. And it is always expensive. The ROI (if any) is measured in percents per annum.

Reengineerig also takes time to implement; is even more disruptive; then takes time to prove that it works - the success rate here is little better than 30% (Hammer & Champy). It is of course expensive. And the ROI (if any) is still measured in percents per annum.

The third, improving the operating dynamic, is quick. It focuses and mobilizes the company. It costs little. It shows on the bottom line immediately - systemic improvements always do. And this provides the funds for further development.

The ROI is measured in multiples. A first year ROI of 10:1 is the least to be expected.

To transform the operating dynamic of the company requires just three things:

• The ability to identify and measure its elements;
• The techniques of triggering change; and
• A manager with the courage to look deep into the soul of the company - and not flinch from what is seen.

For information on diagnosis, see article Mirror,Mirror, on the Wall . . .

For Information on triggering corporate change, see article: Fire In The Corporate Belly

Business Insights - For CEO's and Owners

 

 

• If you want to know how your company did yesterday,
      look to its Financials.
  
• If you want to know how your company is doing today,
      look to its Parametrics.
  
• If you want to know how your company will do tomorrow,
      look to its Operating Dynamic.

The Operating Dynamic is that complex of organizational and human factors that drive, impel, and therefore predict performance; they act independently of the economy and the competition.

They can be identified. 

      They can be measured. 

            They can be transformed. 

For CEO's - A Subject of Profound Significance

We wrote the paper in June and offered it to just four publications: Corporate Finance Review (CFR), The CEO Refresher, Strategic Finance, and the Journal of the CEO Institute. Within two days, all four had accepted. CFR is running it as the lead in a special issue: The changing role of the CFO; The editors deemed the subject matter to be that important.

Since publication, we have been

• Commissioned to write two additional papers on the subject that would lay out our technology in detail - one is to be titled The Cash Cow in Every Company.
• Hired to speak before CEO peer groups.
• Asked for reprint permissions; we will be published at least six more times before the end of the year.
• Requested to conduct a webinar.
• Approached about speaking at an annual trade conference.
• Our book goes into a second edition.

As you will see, the article has been written from the CFO's point of view. However, the person responsible for taking action on the information is the CEO.

Please feel free to print it, email it to your boss, board, and associates and/or forward it to your business association. We would appreciate your comments on this article - its substance, its style, its graphics. The "comment" link is just below.

*Tom FitzGerald has personally consulted with more than two hundred organizations, his articles have appeared more than a hundred times in magazines around the world. His company's web is at www.ManagementConsultants.com

Our Workforce Is Our Greatest Asset. . . Really?

Our Workforce Is Our Greatest Asset. . . Really?

We have all heard it countless times, from CEO's and managing officers: "Our People Are Our Greatest Asset." And they seem to believe it. After all, it stands to reason: if there were no workforce - i.e. management and workers - there would be no company; if that workforce were in poor shape, the company would fail. It makes sense at every level. But there is something about that claim that doesn't gibe with reality. Let's look: Traditionally, the value of a company is defined as its assets, its liabilities, and its capital. (See! no people.) And because of their importance we put numbers on them, we measure their improvements and declines. And we do so unit by unit, profit center by profit center, and for the company as a whole. Also, we audit them, very carefully, at considerable expense; such is their importance. And because we have measures for them, we can manage them. Now let us look at our Greatest Asset: There are no measures. No numbers. Nothing to show its current value. Nothing to show its trajectory. Nothing that is the equivalent of the balance sheet and income statement. It seems we have no measures. We guess about our greatest asset. If our people are all that important, why don't we have measures like the balance sheet and P&L? Why don't CEO's and corporate boards insist? But there is help. Since the early 1980's, FitzGerald Associates have been providing CEO's and CFO's with the ability to measure the value and trajectory of their workforce - management and workers. Now, CEO's have a reliable tool that puts a numeric value on the workforce and its trajectory. And, because the performance of todays workforce - management and workers - determines tomorrow's bottom-line, CEO's can predict how the company will perform tomorrow. So, let us ask again: If your workforce is your greatest asset, how are you measuring it? How are you managing it? If you would like information on this technology, please contact us at info@ManagementConsultants.com or 847-599-9960. There is no obligation, we know that this is not for everyone.

Short Business Articles

 

 

Short Business Articles   Following are links to two short business articles (with onward links to full papers) by business-catalyst, speaker and writer, Tom FitzGerald*. They deal with a unique, ground breaking, and powerful technology of corporate performance improvement. Please feel free (with the usual credits of course) to publish them, post the articles to your website, email them to your managers, and clients, and/or forward them to your business association. If you publish them, please let us know; we like to keep track. The Preemptive Turnaround Long before a crisis hits, before the financial pain is felt, it can be seen, predicted, and reversed. Interview With a CEO A Corporate Renewal Experience A third party interview with a CEO on his experience with the Corporate Renewal Process and its results. For information on how this process might work for you, please contact Tom FitzGerald at fitz@ManagementConsultants.com or call 847-599-9960. *Tom FitzGerald has personally consulted with more than two hundred organizations, his articles have appeared more than a hundred times in magazines around the world. His company's web is at www.ManagementConsultants.com

Business Articles

 

Business Articles   Following are links to two business articles by business-catalyst, speaker and writer, Tom FitzGerald*. They deal with a unique, ground breaking, and powerful technology of corporate performance improvement. Please feel free (with the usual credits of course) to republish them, post the articles to your website, email them to your clients, customers and associates and/or forward them to your business association. If you publish them, please let us know; we like to keep track. Simplify the Politics! When surplus, needless politics are stripped away, energy for corporate achievement is released. Hitting the Ground Running As the New CEO "In just two days, the process took two years off my learning curve." For information on how this process might work for you, please contact Tom FitzGerald at fitz@ManagementConsultants.com or call 847-599-9960. *Tom FitzGerald has personally consulted with more than two hundred organizations, his articles have appeared more than a hundred times in magazines around the world. His company's web is at www.ManagementConsultants.com

When a CFO Becomes the Prophet of Doom

 

 

When a CFO Becomes the Prophet of Doom As CFO you have probably experienced the pain of bearing the bad news to the CEO. And being asked (an understatement surely) why you did not tell him sooner. The truth that the numbers did not exist sooner is never accepted. Following is a link to a short summary of an article titled "The CFO as Corporate Prophet" - see below. It deals with a unique technology of corporate performance prediction that a CFO can utilize. The technology has been proven time after time on the bottom lines of companies you will know. So powerful is this technology, that the article will appear in multiple business magazines in the next couple of months including, Corporate Finance Review, Management Accounting, CEO Refresher and CEOOnLine. Others have already requested permission. The Article was authored by John Collins, a CFO who has used the technology a number of times, and Tom FitzGerald who created it in 1980. The CFO as Corporate Prophet A summary. For information on how this process might work for you, please contact Tom FitzGerald at fitz@ManagementConsultants.com or call 847-599-9960.

We Don't Do Reengineering...Not Anymore...

We Don't Do Reengineering . . . Not Anymore . . .

When we were founded 1976, one of the services we offered was reengineering. With our years of IE, IT, and OD experience we were good at it. Proud of our work. In the early eighties though, we read a study which showed that only a third of reengineering projects might be deemed "successful". And if success were defined as a first-year profit improvement of 10% or more, it was much lower. We did however find some companies where the improvements were significant. So we researched. We found that in every case, something had changed apart from the business processes being reengineered. That something was the Operating Dynamic*. So we added the capability to trigger those changes and our client ROI's became large. However, by 1985, we realized that changing just the operating dynamic alone, could achieve remarkable profit improvements, and at a fraction of the cost. With that, the ROI's became great; 10:1 the first year was to be expected. That is what we specialize in now. But before we go further, some third party validation: Last year McKinsey and London School of Economics (LSE) issued a report on their multi-year study of 100 companies, chosen at random. We have excerpted them, with onward links, at: Companies Increase Financial Returns. If you would like to know how it works, please contact Tom FitzGerald at info@managementconsultants.com or 847-599-9960. We will be happy to speak with you; no strings. We know this is not for everyone. Information can be accessed on our web at Publications. Each paper has been published in multiple magazines.

 

Bad News for M&A

Acquisitions - Only 30% Will Be Successful

For every 100 acquisitions made, only 30 will be successful. (P.F. Drucker) These are not new numbers; they have been quoted for at least the past forty years. And rarely, maybe never, are they seriously challenged; they seem to be the common experience. Much is talked (afterwards) about what was done or not done. But the root cause is rarely addressed. The real reason why so many acquisitions fail, lies in what due diligence audits omit: They do not look at the most important part of the company - its Operating Dynamic; that which drives and impels future performance; no matter what the acquirer wants. You know what the Operating Dynamic is of course, though you may not put that name to it. But, because you believe it is not measurable, not quantifiable, you must cross your fingers, and GUESS at its value. And your guess is always rosier than the truth. You would NOT guess about the financials or the KPI's; these you would measure. But you do guess about the Operating Dynamic. And this means you pay more than you would if you knew - really knew - what it was. This is no longer necessary. Since 1985 we have been measuring the Operating Dynamic of companies - in depth and in detail. And helping CEO's trigger profound changes in them.

Articles

The Post-Acquisition Due Diligence The Corporate Polygraph

 

A Time of Renewal

A Time of Renewal

This is the time of rebirth: For all of nature, in the physical sense. For our spirit also, a time for new beginning. But in this work, we mostly forget the renewal of our most precious gift: Our company's way of living. And these companies are - just as we are - living, breathing, entities, with a spirit of their own. Able to transform. Willing to transform. If we but ask. We hard-headed business men and women seldom speak of corporate spirit, or acknowledge its existence. Perhaps we are embarrassed - or afraid. Though every single working day we feel that spirit, and bear the burden of it. Leaders, especially great leaders, know that this spirit exists. Know that it is the foundation and source of corporate success - and failure. And know that they can renew it.

Links to Abstracts

For those who are not afraid to think about the spirit of their companies, more can be learned at: The Company: A Living Entity. For those who would like to know how to renew, revitalize the spirit of their organizations, see: Fire in the Corporate Belly. And for those who, ever practical, want to know what’s in it for them, in cash, the answer is here: Companies Increase Financial Returns by 40%.

An Ode to Spring :-)

Spring is sprung The grass is riz I wonder where the Boidies is It's said the boid is on the wing But, think I, The wing is on the boid. Attributed to Dylan Thomas upon his first encounter with the Bronx in springtime. He has always denied this.

We Don't Do Strategy...Not Anymore

We Don't Do Strategy . . . Not Anymore . . .

We don't do traditional strategic planning these days; not because we don't like it or are not good at it; but because it is virtually useless as a way to trigger significantly higher (10%+) profits. We don't do tactics either. Or IT systems, or process reengineering, or any of the other programs - for much the same reason. Though their impact on the bottom line can be better. However, even the best of these, business process reengineering, is deemed "successful" in only about 30% of companies. (If you think about it, 30% is just about the placebo effect.) All of these, (and all the other "improvement" programs too, all the way back to MBO,) require something else to make them really work. For example, a study by LSE/McKinsey of 100 companies showed that new IT investments (without that extra something) generated just a 2% improvement in total factor productivity; but with that extra something, generated a 20% improvement. See McKinsey article When IT Lifts Productivity. As we are in the business of profit / performance improvement, we specialize in that extra something that really produces results, leaving the rest for others. The ROI generated can be extraordinary: a first year ROI of 10:1 is the least to be expected. We have been doing this work since 1980. If you would like information on what we do and how we do it, please contact us at 847-599-9960 or info@ManagementConsultants.com. No strings attached.

 

We Don't Do IT . . . Not Anymore . . .

We Don't Do IT . . . Not Anymore . . .

In the early years of our company, we specialized in information technology. We were actually quite good at it. And proud of our work. But one day, back in 1978 I think, we had a rude wakening. We read a study which showed that installing IT systems produced only negligible ROI's and marginal improvements (about 3 or 4%) in client profits. While those findings were for the industry as a whole, we did not want to be guilty of the same thing. Low ROI's are embarrassing. So we researched. We found that there was a small minority of companies who experienced something very different, a 30% to 40% increase in profits. Something had enabled them to leverage the capabilities of their IT systems to huge effect. And that something was NOT in the IT systems. It was something that had happened separately within the Operating Dynamic of the companies themselves. So we added the capability to trigger those changes. (We had to create it from scratch.) And then we realized that the changes could achieve huge ROI's and remarkable profit improvements all on their own. ROI's of ten and twenty to one are to be expected. Sometimes they are truly remarkable. So that is what we specialize in now. Last year McKinsey and London School of Economics (LSE) issued a report on their multi-year study of 100 companies, chosen at random: What we discovered more than twenty years ago, they now validate. The bottom-line rewards of changing key elements of the operating dynamic are (academically) buried within the report. However, we have excerpted them for you here: Companies Increase Financial Returns. How we do this work is very different from traditional approaches. And consequently difficult to communicate clearly in writing; it really has to be seen. So if you would like to know how this might benefit your company , please contact us at info@managementconsultants.com or call 847-599-9960. We will be happy to speak with you. No strings; we know this is not for everyone. Of course we have tried to describe our process in writing: Articles on it can be accessed on our web at Publications.

For CEO's and CFO's - Workforce Performance Improvement Tools

Workforce Performance Improvement - the challenge for CEO's and CFO's Since the beginnings of modern business, CEO's have complained that tools for predicting and improving the bottom-line performance of their workforces did not exist. For many years they were right. (But no longer - see below.) The reason for the lack of tools lies in the myopic and narrow focus the human capital (HR) industry has had on the individual as unit of measure. And the past as predictor of future performance. However, work outside the HR industry has generated both research and tools: for CEO's to use as instruments of improvement; for CFO's to measure and predict by. Research and Articles Research on 100 companies by McKinsey and London School of Economics (LSE) has recently been published that shows the powerful impact changing the Operating Dynamic of the workforce has on profits and performance. (The Operating Dynamic is an attribute of the company - not the individual.) The study showed that improving the operating dynamic by 20% is the (total factor productivity) equivalent of increasing the workforce by 25%. Other startling findings also. Every ambitious CEO should know about this. And every CFO, whose role is that of diagnostician and forecaster. The research is summarized at Companies Increase Financial Returns by 40%. (A link to the full McKinsey / LSE paper is provided there.) Two articles on using the Operating Dynamic (the organization as unit of measure) as both a predictive (CFO) and a transformative (CEO) tool can be accessed below. These were based on empirical observation of more than 200 organizations over twenty years - independent of McKinsey/LSE study. The first paper appeared in Corporate Finance Review, the second in American Banker. Article on - Predicting Corporate Performance (The Impact of HR behavior change on the Bottom- Line) Article on - The Company as Living Entity (On the Behavior of Corporate Units) Action Step CEO's and CFO's who are interested in triggering a significant (10%+) surge in bottom-line performance, and are not afraid to look at the operating dynamic of their companies, should contact Tom FitzGerald at tom@managementconsultants.com. There is, of course, no obligation; we know this is not for everyone.

What No CEO Should Do . . . without

 CEO's are required to play guessing games about a measure that is more significant than either the financials or the KPI's.

No CEO would attempt to run a company without a careful eye on its financials. If there were the slightest question, they would be looked at again and again.

No managing officer would take responsibility for the success of an organization without staying on top of its KPI's and process metrics.

In any professionally run company, these measures are prepared regularly. No board would permit the company to be without. No manager would guess at them or take someone else's word for them. Or even his own "gut feel." They would be measured; they would be analyzed. The company's survival is on the line.

However, there is a measure of even greater importance that is missing. It is the Operating Dynamic Index - The ODI. It is almost never made available. Yet it is the measure that allows managers to:
Trigger significant bottom line improvements*
Predict future performance **

The Operating Dynamic is that complex of organizational and human factors that underlies, drives and impels performance - present and future. The Index is the full organizational analog of the balance sheet or P&L.

While the financials and the KPI's both measure the past, the Operating Dynamic is actually, in the moment, creating the future, its measures are predicting the future. And the value of this Operating Dynamic is being GUESSED!!. As if it cannot be measured. As if it is too "soft" for hard numbers.

But this is not the case. It is possible to quantify the Operating Dynamic - with hard numbers - easily, quickly and reliably.

We have been measuring and working with the Operating Dynamic of companies since 1980. Now, with advances in technology, we can offer that service more rapidly and more reasonably than ever.

It is something no manager should be without. As an added bonus, the ROI's are very high*.

For more information, contact us at 847-599- 9960 or by email at info@ManagementConsultants.com. There are, of course, no strings attached.

* For a short piece on this subject see Companies Increase Financial Returns by 40%
** See Predicting and Preempting the Corporate Heart Attack

See also our Home Page and Chapter of the Week

 

The VALUE of Prediction - The REWARDS of Preemption

The Monetary Rewards of Prediction and Preemption

The major value of prediction is that it enables you to dodge a bullet, or avoid a crisis.

 

However, in the world of business, when prediction is turned to preemption, there are monetary rewards that accrue; over and above just avoiding injury.  These rewards appear quickly.  And they are considerable - often expressed as multiples of ROI. 

To explain:  In all companies - all but the perfect in any case - there are trends hidden in the operating dynamic that spell future trouble.  Sometimes large, sometimes small.  And once these trends and their causes are found and brought into the cold light of day, the instinct of all concerned is to not just fix them but transform them.  And the very act of transformation, triggers a surge in systemic performance. 

So, how much can reasonably be expected?  And how soon?

Well, it has been proven (see previous posts) that when just three critical functions of the operating dynamic are improved by 20%, the bottom line shifts upward by 40%.  And that is with just three functions improved; there are other critical functions that have similar, highly leveraged effects on bottom line performance.  And from our experience with more than 200 organizations, we know it can happen very quickly.  Sometimes in a matter of weeks.

For over twenty years our company has specialized in helping managing officers TRIGGER improvements in these three critical functions - the others too.  And time after time we have seen results like those described in the study - sometimes even more remarkable.

The cost of transforming critical functions can be low; the time to do it can be short; the ROI's extraordinarily high.

 

For further information see posts below, or view our web at www.ManagementConsultants.com.  Contact us at info@managementconsultants.com to arrange a personal time to talk. There is, of course, no obligation; we understand that what we do is not for everyone.

A webinar (web seminar) that addresses some of our diagnostic techniques is coming up - Nov. 16, 2005. It is free to our guests, but seating is limited so please, register early.  This webinar is excerpted from a management course at DePaul University.  There is a modest registration fee to DePaul for the on-campus seminar. Seating there is also limited.

We look forward to speaking with you.

Webinar Sponsors

Business Performance Council of Chicago
CEO Refresher
Corporate Finance Review
Encounter Collaborative
Team Management Systems

Companies Increase Financial Returns by 40%

A few weeks ago we wrote about the range of bottom-line performances that a company can produce - for the same strategies, tactics, operations, processes and people - changing only its operating dynamic. This was written from our experience as turnaround and performance improvement practitioners, not as a result of a scientific study. We said that a 20% improvement in the operating dynamic of a company would systemically generate at a 10% increase in profits.

Since then, more than twenty people have asked us if we have PROOF for what we claimed; some antagonistic, some skeptical, some challenging. And some hopeful.

Thanks to Jim Nelson who gave us the lead on our new Blog (comment to the post, Rebirth of a Board), we can now say, Yes We Have! And the sources are impeccable : The London School of Economics and McKinsey & Co.

This is what they said* about their joint study of 100 Companies chosen at random and focusing on just three elements of their operating dynamics:

"A 20% improvement was correlated with a 25% increase in a company's Total Factor Productivity (TFP**). To put this into perspective, such an improvement is . . .

• comparable to increasing the workforce by 25 percent
• comparable to going from 10 manufacturing plants to 17
• correlated with an increase in financial returns of 42%
• comparable to that of raising capital investment by 70%
• correlated with a 5% increase in return on capital employed
• . . .
• high performing companies get the same benefits from these efforts"

It seems we had underestimated the benefits.

This is heartening news for any ambitious managing officer, or any director who wonders where the company is heading. Because the improvement (or dis-improvement) in operating dynamic will result in a performance shift.

What is even more encouraging is the fact that improvements to the operating dynamic, if done properly, cost a lot less than strategic, tactical, operational, procedural, or system changes. And bring results faster and surer. (As a general rule, if a project to change the operating dynamic costs a lot, or takes a lot of time, or generates an ROI of less than 10:1 the first year, it was badly done.)

Of course, what the LSE/McKinsey paper did not explain was HOW a managing officer could:

• Measure where his/her company is in respect to these three elements and their components
• Identify and quantify the other affecting elements (possibly ~90)
• Trigger the changes needed to generate the 42% improvement in financial returns.

That is our work. And we have been doing it since 1976. We know how to identify and measure the drivers that underlie the elements*** identified in the study. We know how to measure the generators and blockers of those elements. We also have identified elements that are even more fundamental to improvements than those identified in the study. Most importantly we know how a CEO can trigger the changes that will generate the results. Quickly, clearly, and very affordably.

We describe these in other blog posts (below) and articles on our web - http://www.managementconsultants.com/.

---

* Full McKinsey Article: http://www.mckinseyquarterly.com/article_abstract.aspx?ar=1477&L2=13&L3=11&srid=63&gp=0 (may require registration)

** TFP Includes both labor and capital productivity
*** Talent Management, Performance Management, Lean Operations

A Serious C-Level Concern - but with a small smile

We received a number of requests to republish a specific chapter; it seems a flurry of new senior level appointments and promotions have taken place recently. Congratulations!

So here it is. Just click on here.

Idealized portrait of author follows below.

Artwork by Anne FitzGerald, creator of the "Dear God Kids"