FitzGerald Associates Tom FitzGerald Thriving in Recession University Of Chicago GSB Nov. 10, 2008

FitzGerald Associates Since Introductions

FitzGerald Associates Objectives 1. How to increase profits NOW 2. How to increase competitiveness NOW - and for the long term

FitzGerald Associates Our Objectives Have Fun Answer Lots of Questions

A Little History

Longitudinal studies by The London School of Economics (LSE) and McKinsey & Co. Study

A 20% Improvement In 3 Critical Functions Generates a 42% Increase in Financial Returns (High performers as well as low) (Reverse also true t.f.) Results

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

FitzGerald Associates The Concepts ManageMENT Vs Managers The Operating Dynamic / Will to Compete Intrinsic Trajectory The Company: a 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 Cause Of All Business Performance If strong, company succeeds If 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

FitzGerald Associates 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 70% failure rate Only 30% of reengineering programs work placebo effect and luck Mobilizing the company Other FitzGerald Associates

Where the Results Come From 1. Systemic Efficiencies 2. Process Improvements 3. New Tactics 4. New Strategies FitzGerald Associates

Corporate Will 6 Critical Functions 9 Generators FitzGerald Associates

A small change In three Critical Functions Generates a large change in Financial Returns FitzGerald Associates

These Drivers Are entirely within The control of Management!

Critical Functions are changed by changing the Generators FitzGerald Associates

I 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 WORK 3. ACCOUNTABILITY 4. CORPORATE ASSERTIVENESS, ENERGY 5. COMMITMENT OF MANAGE-MENT 6. OPENESS OF MANAGE-MENT 7. ADAPTABILITY 8. EFFECTIVENESS 9. COOPERATION

FitzGerald Associates 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

FitzGerald Associates Measurement + How we do it

FitzGerald Associates Since Coding Convention All line items can have a + or – value A, B, C, D are positive (descending) E, F, G are negative (descending)

Consolidated Statements of Operating Dynamic Gamma, Inc. Balance Sheet 06/2008 Score %Level % of Max (Min)A - G PERFORMANCE MANAGEMENT Vision of Future D Goal Definition C Action Plans D Plans Communicated(14.286) E Understanding Personal Contribution B Decisions Implemented D Decisions Followed Up D Planning/Envisioning Capability A Appropriate KPI's Measured D Performance Management Balance D TALENT MANAGEMENT Attracting / Hiring D Leadership Development C Retention B Out-Placement C Leadership Skills C Individual Development Plans D Talent Management Balance C LEAN OPERATIONS Competitive Information C Efficiency Improvement Efforts C Implementation of Improvements C Lean Operations Balance C PROFITABILITY/GROWTH Growth(14.286) E Profitable Growth Focus C Profitability / Growth Balance D CUSTOMER ORIENTATION Customer Communication D Enhancement of Customer Service B Customer Experience C Knowledge of Customer Wants C Customer Orientation Balance C INNOVATION Innovation Encouraged C Purposeful Innovation D Innovation Balance C Total Assets (Liabilities) C

Consolidated Statements of Operating Dynamic Gamma, Inc. Balance Sheet 06/2008 Score %Level PERFORMANCE MANAGEMENT % of Max (Min)A – G Vision of Future D Goal Definition C Action Plans D Plans Communicated (14.286) E Understanding Personal Contribution B Decisions Implemented D Decisions Followed Up D Planning/Envisioning Capability A Appropriate KPI's Measured D Performance Management Balance D

Consolidated Statements of Operating Dynamic Gamma, Inc. Profit (Loss) Score Level % of Max (Min) A – G CORPORATE DECISIVENESS Need for Consensus21.429D Move to Decision 0.000D Move to Action28.571C Manager Confidence71.429B Net Corporate Decisiveness C ACKNOWLEDGEMENT OF WORK Communication Re Work21.429D Quality of Evaluations64.286B Appreciation50.000C Net Acknowledgement of Work C ACCOUNTABILITY Peer Accountability35.714C Frequency of Reporting64.286B Deadline Enforcement21.429D Net Accountability C CORPORATE ASSERTIVENESS, ENERGY Manager Assertiveness 7.143D Manager Enthusiasm 7.143D Manager Competitiveness57.143B Net Corporate Assertiveness, Energy C COMMITMENT OF MANAGEMENT Manager Commitment64.286B Peer Commitment28.571C Net Commitment of Management C OPENESS OF MANAGEMENT Worker Trust42.857C Worker Empowerment57.143B Net Openness of Management C ADAPTABILITY Speed of Adaptation 0.000D Willingness to Change35.714C Net Adaptability D EFFECTIVENESS Success Momentum 0.000D Schedule Consistency D Focus on Issues(28.571) F Net Effectiveness ( 4.762) E COOPERATION / INTERNAL COMPETITION Manager Cooperation42.857C Conflict Resolution50.000C Net Cooperation / Internal Competition C Net Gain (Loss) C

Consolidated Statements of Operating Dynamic Gamma, Inc. Gain (Loss) 06/2008 Score %Level CORPORATE DECISIVENESS % of Max (Min)A – G Need for Consensus D Move to Decision D Move to Action C Manager Confidence B Net Corporate Decisiveness C

Consolidated Statements of Operating Dynamic Alpha Detector Balance Sheet 06/2008 Score % Level % of Max (Min) A - G PERFORMANCE MANAGEMENT Vision of Future(33.336) F Goal Definition(41.669) F Action Plans(50.000) F Plans Communicated(54.169) G Understanding Personal Contribution C Decisions Implemented(20.838) E Decisions Followed Up(62.500) G Planning/Envisioning Capability D Appropriate KPI's Measured(62.500) G Performance Management Balance (35.928) F TALENT MANAGEMENT Attracting / Hiring(66.667) G Leadership Development(58.338) G Retention(41.667) F Out-Placement(29.167) F Leadership Skills(33.350) F Individual Development Plans(50.000) F Talent Management Balance (46.414) F LEAN OPERATIONS Competitive Information(25.000) E Efficiency Improvement Efforts( 4.170) E Implementation of Improvements(16.662) E Lean Operations Balance (13.542) E PROFITABILITY/GROWTH Growth(58.350) G Profitable Growth Focus(20.838) E Profitability / Growth Balance (28.340) F CUSTOMER ORIENTATION Customer Communication(37.500) F Enhancement of Customer Service D Customer Experience(45.829) F Knowledge of Customer Wants(25.000) E Customer Orientation Balance (18.054) E INNOVATION Innovation Encouraged(20.833) E Purposeful Innovation(37.500) F Innovation Balance (29.167) F Total Assets (Liabilities) (31.633) F

Consolidated Statements of Operating Dynamic Beta Food Company Gain (Loss) Score Level % of Max (Min) A – G CORPORATE DECISIVENESS Need for Consensus16.670D CMove to Decision25.000D C Move to Action33.335C B Manager Confidence41.670CB Net Corporate Decisiveness C B ACKNOWLEDGEMENT OF WORK Communication Re Work33.337C B Quality of Evaluations58.333B C Appreciation50.000CB Net Acknowledgement of Work C B ACCOUNTABILITY Peer Accountability41.666C B Frequency of Reporting 0.000D B Deadline Enforcement83.333AA Net Accountability C B Net Gain (Loss) CB

FitzGerald Associates The Discovery Process Feet to the Fire

FitzGerald Associates The Discovery Process & Action Plans

FitzGerald Associates Vision of Future: As acknowledged and bought into by managers and supervisors. It has a possible range of /-. The score for this element is LEVEL D % 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.

FitzGerald Associates 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 /-. The Overall score for this Critical Function is This indicates a weak positive pressure on the business. Level D % 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

Questions?

FitzGerald Associates 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 (the Citical Functions & Drivers) 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 Rewards An improvement of 25% in three Critical Functions results in a 40% increase in financial returns. (LSE/McKinsey) (High Performers as well as troubled) The cost is virtually ZERO The first year ROI is extraordinary Wrap Up III

What would it mean to you If your company / client Increased profits by just 10%? Question

FitzGerald Associates Since 1976