FitzGerald Associates Tom Horne & Tom FitzGerald

FitzGerald Associateswww.ManagementConsultants.com

Tom Horne & Tom FitzGerald

Coaching To The Bottom Line

Mobilizing In the

Face of Recession

Oct. 13, 2008

FitzGerald Associateswww.ManagementConsultants.comSince 1976

Introductions

Investors, Managers, Coaches, Consultants

Objectives

1. How to increase profits NOW2. How to increase competitiveness NOW -

and for the long term

Our Objectives

Have Fun Answer Lots of Questions

Longitudinal studies by The London School of Economics (LSE)

and McKinsey & Co.

A 20% Improvement In 3 Critical Functions

Generates a 42% Increase in Financial Returns

(High performers as well as low)

(Reverse also true )

Results

Equivalent to

Increase of 5% in ROCE 25% increase in workforce Going from 10 plants to 17 Increasing capital investment by 70%

Results

The Concepts

Will to Compete The Operating Dynamic ManageMENT Vs Managers Intrinsic Trajectory The company as living entity

Business Processes

Management Systems

Corporate Will

Origins of Performance

Corporate Culture

Corporate Will

Will to Combat

Corporate Drive

Business Motivation

Corporate Energy

Corporate Psychology

Will to Compete(AKA The Operating Dynamic)

Root CauseOf All Business Performance

If strong, company succeedsIf weak, the company falters

Corporate Will

That complex of organizational and human factors that underlie, cause

and impel all corporate performance

(~100)

(Entirely within the control of management)

Corporate Will

Origins of Performance Cost of Change

Business Processes

Management Systems

Corporate Will

The ROI In changing Corporate Will

Can be extraordinary

(The McKinsey/LSE Studies)

Why Transform Corporate Will Ambition (the 40%) Recession (the 40%) On-boarding New sr. execs have an 18 month, 50% retention rate

$1M per failure M&A (pre- or post-acquisition)

70% failure rate Only 30% of reengineering programs work

placebo effect and luck Mobilizing the company Other

Where the Results Come From1. Systemic Efficiencies

2. New Tactics

3. New Strategies

4. Reengineering

Corporate Will

6 Critical Functions9 Generators

A small change In three Critical Functions

Generates a large change in

Financial Returns

These Drivers

Are entirely within

The control of

Management!

Critical Functions are changed by changing the

Generators

1 PERFORMANCE MANAGEMENT

The 6 Critical Functions

6 Innovation / Creativity

5 Customer Orientation

4 Profitable Growth Orientation

3 LEAN OPERATIONS

2 TALENT MANAGEMENT

The 9 Generators

1. CORPORATE DECISIVENESS

2. ACKNOWLEDGEMENT OF WORK3. ACCOUNTABILITY4. CORPORATE ASSERTIVENESS, ENERGY5. COMMITMENT OF MANAGE-MENT6. OPENESS OF MANAGE-MENT7. ADAPTABILITY8. EFFECTIVENESS9. COOPERATION

The Transformation Process

1. Measure the 15 drivers (Functions and Generators) of performance and their subsidiary functions – a profile of the causes of performance

2. Determine the desired profile – item by item

3. Cause the individual managers to commit to specific action steps, with dates, to fix or improve key drivers and subs

4. Cause the individuals to execute the action steps

Measurement+

How we do it

FitzGerald Associateswww.ManagementConsultants.comSince 1976

Coding Convention

All line items can have a + or – value

A, B, C, D are positive descending

E, F, G are negative

Consolidated Statements of Operating DynamicGamma, Inc.

Balance Sheet06/2008 Score % Level

% of Max (Min) A - GPERFORMANCE MANAGEMENT

Vision of Future 21.429 DGoal Definition 42.857 CAction Plans 7.143 DPlans Communicated (14.286) EUnderstanding Personal Contribution 64.286 BDecisions Implemented 7.143 DDecisions Followed Up 7.143 DPlanning/Envisioning Capability 85.714 AAppropriate KPI's Measured 0.000 D Performance Management Balance 19.841 D

TALENT MANAGEMENTAttracting / Hiring 7.143 DLeadership Development 35.714 CRetention 71.429 BOut-Placement 28.571 CLeadership Skills 28.571 CIndividual Development Plans 0.000 DTalent Management Balance 35.714 C

LEAN OPERATIONSCompetitive Information 50.000 CEfficiency Improvement Efforts 42.857 CImplementation of Improvements 50.000 CLean Operations Balance 47.024 C

PROFITABILITY/GROWTHGrowth (14.286) EProfitable Growth Focus 28.571 CProfitability / Growth Balance 20.000 D

CUSTOMER ORIENTATIONCustomer Communication 21.429 DEnhancement of Customer Service 57.143 BCustomer Experience 42.857 CKnowledge of Customer Wants 42.857 CCustomer Orientation Balance 47.321 C

INNOVATIONInnovation Encouraged 35.714 CPurposeful Innovation 21.429 DInnovation Balance 28.571 C

Total Assets (Liabilities) 29.993 C

Balance Sheet

06/2008

Score % LevelPERFORMANCE MANAGEMENT % of Max (Min) A – G

Vision of Future 21.429 DGoal Definition 42.857 CAction Plans 7.143 DPlans Communicated (14.286) EUnderstanding Personal Contribution 64.286 BDecisions Implemented 7.143 DDecisions Followed Up 7.143 DPlanning/Envisioning Capability 85.714 AAppropriate KPI's Measured 0.000 D

Performance Management Balance 19.841 D

Profit (Loss)

Score Level % of Max (Min) A – G

CORPORATE DECISIVENESS Need for Consensus 21.429 D Move to Decision 0.000 D Move to Action 28.571 C Manager Confidence 71.429 BNet Corporate Decisiveness 27.679 C

ACKNOWLEDGEMENT OF WORK Communication Re Work 21.429 D

Quality of Evaluations 64.286 B Appreciation 50.000 CNet Acknowledgement of Work 44.048 C

ACCOUNTABILITY Peer Accountability 35.714 C Frequency of Reporting 64.286 B Deadline Enforcement 21.429 DNet Accountability 38.571 C

CORPORATE ASSERTIVENESS, ENERGY Manager Assertiveness 7.143 D Manager Enthusiasm 7.143 D Manager Competitiveness 57.143 BNet Corporate Assertiveness, Energy 27.976 C

COMMITMENT OF MANAGEMENT Manager Commitment 64.286 B Peer Commitment 28.571 CNet Commitment of Management 46.429 C

OPENESS OF MANAGEMENT Worker Trust 42.857 C Worker Empowerment 57.143 BNet Openness of Management 50.000 C

ADAPTABILITY Speed of Adaptation 0.000 D Willingness to Change 35.714 CNet Adaptability 17.857 D

EFFECTIVENESS Success Momentum 0.000 D Schedule Consistency 14.286 D Focus on Issues (28.571) FNet Effectiveness ( 4.762) E

COOPERATION / INTERNAL COMPETITION Manager Cooperation 42.857 C

Conflict Resolution 50.000 CNet Cooperation / Internal Competition 47.321 C

Net Gain (Loss) 34.841 C

Consolidated Statements of Operating DynamicGamma, Inc.Gain (Loss)

06/2008

Score % LevelCORPORATE DECISIVENESS % of Max (Min) A – G

Need for Consensus 21.429 DMove to Decision 0.000 DMove to Action 28.571 CManager Confidence 71.429 B

Net Corporate Decisiveness 27.679 C

Consolidated Statements of Operating DynamicAlpha DetectorBalance Sheet

06/2008 Score % Level % of Max (Min) A - G

PERFORMANCE MANAGEMENTVision of Future (33.336) FGoal Definition (41.669) FAction Plans (50.000) FPlans Communicated (54.169) GUnderstanding Personal Contribution 33.333 CDecisions Implemented (20.838) EDecisions Followed Up (62.500) GPlanning/Envisioning Capability 20.825 DAppropriate KPI's Measured (62.500) G Performance Management Balance (35.928) F

TALENT MANAGEMENTAttracting / Hiring (66.667) GLeadership Development (58.338) GRetention (41.667) FOut-Placement (29.167) FLeadership Skills (33.350) FIndividual Development Plans (50.000) FTalent Management Balance (46.414) F

LEAN OPERATIONSCompetitive Information (25.000) EEfficiency Improvement Efforts ( 4.170) EImplementation of Improvements (16.662) ELean Operations Balance (13.542) E

PROFITABILITY/GROWTHGrowth (58.350) GProfitable Growth Focus (20.838) EProfitability / Growth Balance (28.340) F

CUSTOMER ORIENTATIONCustomer Communication (37.500) FEnhancement of Customer Service 4.167 DCustomer Experience (45.829) FKnowledge of Customer Wants (25.000) ECustomer Orientation Balance (18.054) E

INNOVATIONInnovation Encouraged (20.833) EPurposeful Innovation (37.500) FInnovation Balance (29.167) F

Total Assets (Liabilities) (31.633) F

The Discovery Process

Feet to the Fire

Consolidated Statements of Operating DynamicBeta Food Company

Gain (Loss)

Score Level % of Max (Min) A – G

CORPORATE DECISIVENESS Need for Consensus 16.670 D C Move to Decision 25.000 D CMove to Action 33.335 C BManager Confidence 41.670 C BNet Corporate Decisiveness 29.168 C B

ACKNOWLEDGEMENT OF WORK Communication Re Work 33.337 C B

Quality of Evaluations 58.333 B CAppreciation 50.000 C BNet Acknowledgement of Work 46.529 C B

ACCOUNTABILITY Peer Accountability 41.666 C BFrequency of Reporting 0.000 D BDeadline Enforcement 83.333 A A

Net Accountability 44.443 C B

Net Gain (Loss) 40.093 C B

The Discovery

Process&

Action Plans

1) PERFORMANCE MANAGEMENT

The most important of the six Critical Functions. It is a complex function, comprised of more than twenty elements, ranging from strategic vision to action plan development to follow up. In this survey we address nine. This Function is driven primarily by the Corporate Decisiveness component (generator) of the Gain and Loss statement (G&L). It has a possible range of 90.000 +/-.The Overall score for this Critical Function is 17.857 This indicates a weak positive pressure on the business.Level D 19.841% CEO:

6/25/08 . - Create with senior managers a “business blueprint”. Issue to all management ranks for discussion.7/24/08 - Rank order all immediate reports (and theirs) and review with board in special session. Make hire and outplace decisions and implement.

COO – Incompetence is tolerated too long.7/24/08 - Rank order all immediate reports.

CMO 7/24/08 - Rank order all immediate reports.CFO

7/01/08 – review report against financials and financial model and reconsider forecasts. Review with CEO and team.7/24/08 - Rank order all immediate reports

Vision of Future: As acknowledged and bought into by managers and supervisors. It has a possible range of 11.000 +/-. The score for this element is 2.357.

LEVEL D 21.429%

CEO 7/15/08 With team, create a business blueprint and action steps and

discuss in detail with subordinates. Obtain their input and make changes as appropriate.

Questions?

Wrap Up

The 6 CFs constitute the Balance Sheet The 9 Generators constitute the G&L Negatives are where you find the motivation to

change

Wrap Up I

The Balance Sheet and P&L Show

The Trajectory of the Company The root causes of performance What needs to be changed Where to get the greatest return on effort

Wrap Up II

The RewardsAn improvement of 25% in three Critical Functionsresults in a 40% increase in financial returns.

(LSE/McKinsey)

(High Performers as well as troubled)

The cost is virtually ZEROThe FIRST YEAR ROI extraordinary

Wrap Up III

What would it mean to you

If your company /client

Increased profits by only 10%?

Question

Since 1976

FitzGerald Associates Tom Horne & Tom FitzGerald

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