1. FitzGerald Associates www.ManagementConsultants.com University of Chicago GSB Consultants Roundtable

2. Corporate Profitability Performance Prediction FitzGerald Associates www.ManagementConsultants.com

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

9. Sells no Papers Good News

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

12. Meet Tom Horne

13. YearObservables 1- 9 Internal Symptoms Only (Drivers) 10Delivery Problems (KPI) 11Customer Complaints (KPI) 12First Signs of Financial Trouble 15Mkt. Share Drops by 33% 17 Bank Involvement 20Guernsey Dell Sold Time Line

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

16. PhasesMeasures I HiddenDrivers II SubtleKPI’s + Drivers III OvertFinancials + KPI’s + Drivers Phases and Measures Summary

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

18. Entirely controlled by management They can be measured / quantified They Can Be Changed Drivers of Performance

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

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

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

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

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

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

25. OK - You Know! Cost Containment

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

27. Performance Management Talent Management Cost Containment Three Critical Functions

28. All Companies Have These Functions Their Effectiveness Is the Question (Their Volatility Is the Issue) Critical Functions

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

30. Corporate Decisiveness Acknowledgement of Work Accountability Examples Three Generators

31. Complacency Need for Consensus Distrust Examples Three Blockers

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

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

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

35. 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 ) The Critical Functions Provide

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

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

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

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

40. A Critical Function “Question” We attract and retain the best people Sr. Team: (5) (4) (3) Neutral (2) (1) 4 2 1 2 1 2 2 1

41. A Generator “Question” Our managers hold each other accountable Sr. Team: (5) (4) (3) Neutral (2) (1) 4 2 1 2 2 2 1 2

42. A Blocker “Question” Our managers are reluctant to speak their minds Sr. Team: 2 4 4 4 5 4 2 5 (5) (4) (3) Neutral (2) (1)

43. 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) Measurement of Drivers

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

45. Wrap Up

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

48. 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 Wrap Up II

49. Long before Disaster strikes... the signs appear: First in the Drivers (The smart CEO/CFO knows to look) Last in the Financials Wrap Up III

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

51. YearObservables 1- 9 Internal Symptoms Only (Drivers) 10Delivery Problems (KPI) 11Customer Complaints (KPI) 12First Signs of Financial Trouble 15Mkt. Share Drops by 33% 17 Bank Involvement 20Guernsey Dell Sold Time Line

52. The Cost of Full Restoration Increases Exponentially With the Depth of Decline Wrap Up V

53. Measuring Drivers is quick The cost is low The ROI is GREAT Wrap Up VI

54. An improvement of 20% in three Critical Functions results in a 40% increase in financial returns (LSE/McKinsey) Wrap Up VII

55. You don’t have to be in trouble to get your 40% Wrap Up VIII

56. What would it mean... If your company... Increased profits by ONLY 20%? QUESTION

57. URLS www.ManagementConsultants.com Then click on “Webinar Links” FitzGerald Associates