Identifying the Value Points within the Corporation

1
Identifying the Value Pointswithin the
Corporation

• 1 Hour Workshop
• Alliance for Corporate Wealth Conference
• www.corporatewealth.info
• Presented by
• Matt H. Evans, CPA, CMA, CFM
• January 21, 2005
• Orlando, Florida

2
Workshop Agenda

• Introduction
• Common Value Points
• Emerging Value Points
• The LPI Model
• Value Dynamics Framework Model
• Denison Cultural Model
• The Creativity Model
• Closing Comments
• Additional Information

3
Introduction

• Purpose of this workshop
• - Outline some good focal points for creating
  higher value
• within the corporation
• - Provide some practical tools and techniques
  that
• everyone can start to use immediately
• - Help frame the knowledge base for the Alliance
  for
• Corporate Wealth

4

• Common
• Value
• Points

5
Common Value Points Four Good Sources

• Value Based Finance
• Balanced Scorecard Enablers
• Human Resource Capital Scorecard
• Strategic Business Analysis Competitive
  Intelligence

6
Value Based Finance From Accounting to Real
Finance
Traditional Accounting
Value Added Finance
7
Benefits of Value Based Finance

• By focusing on non-financial measurements, the
  finance function pulls in other functional areas
  into the value management process.
• Finance is the main proponent of value
  educating others on how value is created.
• Finance adds value through major projects
• - Define Organizational Performance
• - Leads Initiatives on process improvement
• - Improve out-of-date systems
• - Value Chain Analysis

8
Scorecard Enablers Applying the Generic
Drivers

• Generic Models provide a good starting point for
  understanding what drives value
• - Customer Value comes from certain value
  drivers Quality,
• Time, Pricing, Image, Reputation,
  Innovative features, etc.
• - Process Value comes from three phases in
  process
• delivery Pre Delivery (meet customer
  demands in a pro-
• active way), Delivery (Rapid turnaround
  times), and Post
• Delivery (After sale service)
• - Organizational Value comes from employee
  results,
• system results, and organizational
  culture.

9
Human Resource Capital Scorecard

• The value created by people is often intangible
  knowledge, leadership, collaboration, etc.
• Standard financial measurements are usually
  inappropriate for measuring human resource
  capital.
• Sources of value other than people are potential
  sources until human interaction takes place.
• How people are managed has profound implications
  on organizational performance and value.
• The HR (Human Resource) Capital Scorecard
  measures the management activities associated
  with Human Resource Capital.

10
HR Capital Scorecard Framework Built Around
Four Basic HR Activities
Traditional Financial Metrics such as Cost per
Hire vs. Value Added Metrics such as Satisfaction
with Hire
ACQUIRE Hiring practices, Recruitment, Fill
Rates, Quality of New Hires, etc.
MAINTAIN Compensation, Benefits Administration,
etc.
RETAIN Identify top talent, retention programs,
motivation, etc.
HR Strategic Plan
DEVELOP Coaching, Training, Supervision, Job
Rotation, etc.
Source The ROI of Human Capital by Jac Fitz-enz
11
Strategic Business Analysis through Competitive
Intelligence

• Strategic Planning is dynamic through Competitive
  Intelligence (CI)
• Competitive Intelligence is required to protect
  your competitive advantages in the marketplace
• Risk Management is too internal and CI brings an
  external dimension to risk management
• Senior Management is too inward in their thinking
  and you need CI as a reality check

12

• Emerging
• Value
• Points

13
Emerging Trends for Understanding Value Points
Going Forward

• The discipline of management will give way to the
  discipline of leadership
• Complex adaptive systems will help advance the
  concept of the Learning Organization
• Organize around processes as opposed to
  functional silos for increased flexibility and
  innovation
• Processes will become more simple, self serve,
  and more collaborative.
• Technology has and will continue to be an
  important component of value especially
  emerging technologies such as Nano-Technology.

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• Leadership Practices Inventory (LPI) Model

15
Measuring Leadership using the LPI Model

• Leadership Practices Inventory (LPI) Model was
  developed by James M. Kouzes and Barry Z. Posner.
  
• Based on 20 years of research and supported by
  case studies with 10,000 leaders and 50,000
  constituents.
• Recognizes that leadership is a measurable
  behavior that people can observe.
• Uses assessment surveys from both the leader and
  observers of leaders. Creates greater awareness
  of how to improve leadership competencies.

16
LPI Model Components
The LPI Model is built around five leadership
practices and ten leadership commitments

• Find Your Voice
• Set the Example

• Envision the Future
• Enlist Others

• Search for Opportunities
• Experiment and Take Risks

• Recognize Contributions
• Celebrate the Values and Victories

• Foster Collaboration
• Strengthen Others

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LPI Model Annual Survey from Observers of
Leaders
Rating Scale 1 Almost Never 2 Rarely
3 Seldom 4 Once in a While 5
Occasionally 6 Sometimes
7 Fairly Often 8 Usually 9 Very
Frequently 10 Almost Always
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Resources on the LPI Model

• Very inexpensive and practical model - 65.00
  for complete CD and Surveys Facilitators
  Guide
• Visit www.leadershipchallenge.com for more
  information.

19

• Value
• Dynamics
• Framework

20
Value Dynamics Framework Model

• Based on a three-year study of 10,000 companies
  by Arthur Andersen.
• Used to determine how well a corporation is
  taking advantage of its asset capabilities.
• Rates the contribution of assets and helps
  corporations leverage all assets for driving
  higher value.
• Distinguishes the relationships of how assets add
  value in combination with one another.
• Recognizes that assets are not fully controlled
  by the corporation customers, suppliers,
  partners, etc.
• Uses a much broader definition of assets (beyond
  the accounting model) for creating value.

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Basic Principle behind Value Dynamics Framework

• Assets have inbound and outbound relationships
  customer assets are outbound whereas employee
  assets are inbound (convert resources into
  products and services)
• All assets have outputs Organizational assets
  (systems, information, etc.), Financial Assets
  (cash flow, etc.)

By understanding these relationships, we crack
the value code
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Critical Concept From Tangible to Intangible
Assets
Increasingly, value points are coming from the
Intangibles, outside of the traditional
accounting model.
In the old manufacturing economy, Balance Sheet
assets in the accounting model were the critical
value points.
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Creating the Overall Model

• Identify and classify your assets into the five
  categories.
• Understand the relationship of assets and how
  they are used within the business.
• Front End Survey Work Determine qualified people
  who can confirm how assets are used and what
  value they contribute to the business.
• Conduct Value Dynamics Survey for all five asset
  categories.
• Back End Survey Work Reach consensus on final
  data through workshops, peer exchanges, and other
  forums.
• Align your business model around those assets
  that add the most value. How should we use our
  assets going forward?

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Survey Questions How well is your company using
employee assets?
Second Pass on Survey More precision
Best Very Above
Below Very
Worst Dont Practice Good Good
Average Average Average Poor Poor
Practice Know
For employee recruiting process?
For employee training program?
For employee satisfaction data?
First Pass on Survey Basic Feel for How Data is
Breaking
Needs Does the Best
Dont Work Job
Practices Know
For resources to improve employee quality of
life?
For information technology to leverage employee
knowledge?
If you are getting a lot of Dont Knows, then you
need to conduct some educational workshops with
survey candidates before you continue with the
survey and development of the Model
For collaborations or joint ventures to start new
businesses?
25
Resources on the Value Dynamics Framework
The Value Dynamics Framework is completely
documented in the book Cracking the Value Code
by Richard E.S. Boulton, Barry D. Libert, and
Steve M. Samek.
Organizations are creating value in totally new
ways, using assets and combination of assets
heretofore unrecognized under traditional
accounting systems and certainly unmeasured. In
such a milieu, old methods of managing and
measuring are simply not up to the task. To
ignore the significance of the changes afoot in
business today is to ignore reality itself as the
page turns on a new millennium. And what
organization can thrive, or even survive, in a
world of illusion? None. - Cracking the Value
Code
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• Denison
• Cultural
• Model

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Denison Model - Introduction

• The culture of an organization, whether explicit
  or implicit, is fundamental to the execution of
  strategy and high performance.
• The Denison Model was developed by Daniel Denison
  and William S. Neale based on 15 years of
  research with 1,000 companies.
• The Denison Model describes organizational
  culture around four traits consisting of twelve
  management practices.
• Very business oriented directly linked to the
  bottom line.

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Denison Model Framework
Degree to which the organization clearly
understands the needs and requirements of
customers, responds and adjusts to meet those
needs
Degree to which the organization is clear about
its vision, goals, objectives and strategic
direction
Degree to which the organization has values,
systems, and processes that support the vision,
goals, objectives, and strategy
Degree to which everyone is engaged and involved
in helping move the organization forward
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Three Critical Management Practices of the
Consistency Trait
Coordination and Integration - Different
functions and units of the organization are able
to work together well to achieve common goals.
Organizational boundaries do not interfere with
getting work done.
Agreement - The organization is able to reach
agreement on critical issues. This includes both
the underlying level of agreement and the ability
to reconcile differences when they occur.
Core Values - Members of the organization share a
set of values which create a sense of identity
and a clear set of expectations.
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Survey Question Examples Consistency Trait
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How to use the Denison Model

• Do you have cultural issues?
• Propose solutions to address your issues.
• Set targets and take action steps to change your
  culture.
• Understand the benefits How do the action steps
  close the gaps?
• Determine the risks of not taking action to close
  your cultural gaps.
• Due Diligence - Compatibility issues prior to a
  merger.
• Benchmark against other companies from the
  Denison Database.

32
High and Low Performers Denison Model
High Performing Companies
Low Performing Companies
Composite of companies that had an ROI of 9
Composite of companies that had an ROI of 30
33
Resources on Cultural Assessments
For more information, visit www.denisonculture.com
Facilitators Guide for Cultural Compass -
98.00. Visit www.newtrainingideas.com
34

• Creativity
• Model

35
Important Concepts behind the Creativity Model

• Creativity Model is based on the highly respected
  research of Carl Jung, Katherine Briggs, and
  Isabel Myers.
• Breaks long-standing myths about creativity
• - Creativity is NOT about ideas, its about the
  range of outcomes that are available to the
  organization.
• - Creativity is NOT about certain talents (art,
  music, etc.), it is about using the eight
  creative talents that are found in everyone.
• - Creativity is NOT about being different, but
  more about articulating results that no-one else
  recognizes.
• Creativity is critical to problem solving because
  of increased complexity, the need for innovation,
  and increased competition.

36
Creativity Model Framework Eight Creative
Talents
Adventurer
Quick to Act, Self Expressive, Aggressive Problem
Solver, Fun
Navigator
Very Open, Good Source of Ideas, Energetic,
Pursues New Things
Explorer
Deliberate, Observant, Thorough, Grasps Details,
Helps Clarify
Visionary
Great sense of Future, Big Picture, Comprehends
Complexity
Pilot
Organizing, Planning, Team Leader, Systems
Thinker, Sets Goals
Inventor
Very Precise, Highly Focused, Analytical,
Curious, Systematic
Harmonizer
Social, Helpful, Good People Skills, Seeks
Consensus, Flexible
Poet
High Values, Tolerant, Quietly Curious,
Supportive, Skilled Writer
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Key Points about the Eight Creative Talents

• All eight talents have equal value.
• All eight talents work differently.
• You need access to all eight talents for creating
  different results cover all the bases.
• Since people have different creative talents, a
  team environment helps leverage all eight
  creative talents.
• If you can consistently apply all eight creative
  talents, then your organization will have more
  control over its destiny.
• Understanding and using the Myers-Briggs Type
  Indicator will help explain how you can apply all
  eight creative talents.

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Myers Briggs Types aligned around the Eight
Creative Talents
Adventurer
Navigator
Explorer
Visionary

• INTJ
• INFJ

• ISTJ
• ISFJ

• ESTP
• ESFP

• ENTP
• ENFP

Pilot
Harmonizer
Inventor
Poet

• ISTP
• INTP

• ESTJ
• ENTJ

• ISFP
• INFP

• ESFJ
• ENFJ

Extroverts Sociable, people oriented, works
well in groups, interacts, engaging. Introverts
Intense, works through ideas, reflects, reserved,
few relationships. Sensing Practical,
responsive, realistic, factual, accurate, detail
oriented. Intuitive Insightful, innovative,
forward thinking, strategic, learning,
inspires. Thinking Logical, objective,
reasoning, consistent, analytical, information
user. Feeling Personal, cooperative, values,
relates to others, persuades, humane. Judging
Decision maker, planning, goal oriented, fast to
act, hard working. Perceiving Flexible,
adaptive, casual, goes with the flow, improvise.
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Resources on the Creativity Model

• The Creativity Model is completely documented in
  the
• book Breakthrough Creativity by Lynne C.
  Levesque.
• For more information, visit www.lynnelevesque.com
  

Creativity drives growth, and creative people
drive every great enterprise. Its not too trite
to say that. These days, were all too easily
caught up in the tactics of competition. We can
forget that sustainable advantage is ultimately a
function of a companys ability to consistently
generate, develop, and sell valuable ideas. Which
is to say, creativity is at the heart of work and
business. - John A. Byrne, Editor Fast Company
Magazine, December 2004
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Overall Framework for applying these tools and
techniques (Big Picture)
Value Dynamics Framework
Dennison Cultural Survey
Identify Major Value Related Issues
Determine how these value related issues align to
various layers within your Organizational
Framework
Apply specific techniques to close the value gaps
within your Organizational Framework
Vision Goals
Organization Framework (IBM Model)
Competencies
Strategies, planning, and budgeting
Communication and Management Systems
Products - Services - Processes
LPI Model
Competitive Intelligence
Creativity Model
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Closing Comments

• Most value points are easy to recognize and
  conceptually, they are easy to comprehend.
• However, getting management value-focused is
  not easy and therefore, most corporations have
  significant points of value that need further
  development.
• Ironically, getting the plane off the runway
  seems to be the biggest challenge . . . .
• And if corporations would just start with a
  modest understanding of where value comes from
  (leadership, culture, etc.), the corporation
  could realize enormous increases in value.

42
Additional Information

• Download presentation and reference files from
• www.exinfm.com/workshop.html
• Workshop Slides (powerpoint)
• Building HR Capital
• Aligning Human Capital with Business Strategy
• Value Dynamics Presentation
• Five Ways to Develop Corporate Culture
• Organizational Cultures that Get Financial
  Results
• Applications of the Denison Cultural Model

43
Questions and Comments

• Matt H. Evans, CPA, CMA, CFM
• Email matt_at_exinfm.com
• Phone [phone]

44

• Back Up
• Slides

45
Survey Questions How well is your company using
physical assets?
Value Dynamics Model
Best Very Above
Below Very
Worst Dont Practice Good Good
Average Average Average Poor Poor
Practice Know
Real estate / land for productive use or
investment?
Buildings and facilities?
Existing equipment or newly acquired equipment?
Inventory management to minimize risk of not
delivering?
Information technology infrastructure?
Supply chain management to optimize the use of
and need for physical assets?
46
Survey Questions How well is your company using
financial assets?
Value Dynamics Model
Best Very Above
Below Very
Worst Dont Practice Good Good
Average Average Average Poor Poor
Practice Know
Cash reserves?
Receivables in minimizing the cash-conversion
cycle?
Investment strategies in order to increase
profitability?
Debt strategy to manage or eliminate debt?
Equity to further business expansion?
Information technology to enable financial
management?
47
Survey Questions How well is your company using
customer assets?
Value Dynamics Model
Best Very Above
Below Very
Worst Dont Practice Good Good
Average Average Average Poor Poor
Practice Know
Customer satisfaction information?
Current customer information to expand customer
base?
To develop customer loyalty?
Collaborative relationships to better serve
customers?
Information technology to enable web-security?
Supply chain management to increase customer
satisfaction?
48
Survey Questions How well is your company using
organizational assets?
Value Dynamics Model
Best Very Above
Below Very
Worst Dont Practice Good Good
Average Average Average Poor Poor
Practice Know
Leadership to drive innovation and passion?
Business strategy ?
Structure to delegate the responsibilities?
Processes to identify business opportunities?
Culture to foster honesty and respect?
Branding in the marketplace?
Knowledge in product development and marketing?
Intellectual property?
49
Value Dynamics Survey Process
Value Dynamics Model
Surveys Received
Level of awareness acceptable?
Conduct Workshops
Reassess
N
Y
Level of agreement acceptable?
Likely possibility that BUs have independent
assets?
Facilitated Peer Exchange (Gartner Best Practice)
Reassess
N
N
Y
Y
Y
Develop standard Value Dynamics data
representation
Develop alternative model for Value Dynamics
data representation
50
Run survey data through quality control matrix
for refining the data
Value Dynamics Model
Low
High number of Dont Knows Low level of
agreement
Low number of Dont Knows Low level of
agreement
Level of agreement
Low number of Dont Knows High level of
agreement
High number of Dont Knows High level of
agreement
High
Level of awareness ( of respondents answering
Dont Know)
51
Value Dynamic Recommendations Within the
Business Model
ISSUE Management does not believe they have the
competencies necessary to meet customers needs,
nor do they feel empowered to use the
competencies they do have.

• Action Items
• Develop a competency model and performance
  management system.

• Benefits
• A competency model will outline the necessary
  knowledge, skills and abilities for each
  position, allowing employees to understand how
  their jobs fit into the goals and values of the
  organization.
• A performance management system will ensure
  employees and functional areas are evaluated
  using standardized performance metrics.

Vision Goals
Competencies
Strategies, Planning Budgeting
Communication Management Systems
52
Three Critical Management Practices of the
Adaptability Trait
Denison Cultural Model
Creating Change - The organization is able to
create adaptive ways to meet changing needs. It
is able to read the business environment, quickly
react to current trends, and anticipate future
changes.
Customer Focus - The organization understands and
reacts to their customer, and anticipates their
future needs. It reflects the degree to which the
organization is driven by a concern to satisfy
their customer.
Organizational Learning - The organization
receives, translates, and interprets signals from
the environment into opportunities for
encouraging innovation, gaining knowledge and
developing capabilities.
53
Three Critical Management Practices of the
Mission Trait
Denison Cultural Model
Strategic Direction and Intent - Clear strategic
intentions convey the organization's purpose,
make it clear how everyone can contribute and
"make their mark" in the industry.
Goals and Objectives - A clear set of goals and
objectives can be linked to the mission, vision,
and strategy, and provide everyone with a clear
direction in their work.
Vision - The organization has a shared view of a
desired future state. It embodies core values and
captures the hearts and minds of the
organization's people, while providing guidance
and direction.
54
Three Critical Management Practices of the
Involvement Trait
Denison Cultural Model
Capability Development - The organization
continually invests in the development of
employees' skills in order to stay competitive
and meet ongoing business needs.
Team Orientation - Value is placed on working
cooperatively toward common goals for which all
employees feel mutually accountable. The
organization relies on team effort to get work
done.
Empowerment - Individuals have the authority,
initiative and ability to manage their own work.
This creates a sense of ownership and
responsibility toward the organization.
55
Example of Action Plan - Denison Cultural Model
Denison Cultural Model
ISSUE Need to better articulate the companys
vision, mission and goals. This will translate
into increased revenue growth, quality, and
employee satisfaction.
Recommendations
Action Plan
Benefits

• If employees understand and can positively
  identify with the Companys vision, mission, and
  goals, there should be a positive impact on
  profitability, sales / revenue growth, market
  share, perceived quality, and employee
  satisfaction.

• Hold strategy articulation sessions to plan for
  the future. Communicate these plans (Vision,
  Mission, Goals) to employees, and ensure they
  know how their jobs fit into the companys goals
• Create a list of criteria that projects must meet
  before they are accepted. Make sure short term
  and long term goals and interests are considered
  when creating criteria
• Determine the best communication vehicle to
  cascade the vision, mission, and goals to all
  levels of the organization

• Give the future the attention it deserves
• Develop a philosophy that long and short-term
  interests can be reconciled
• Make everyone in the organization familiar with
  your vision, mission, and goals

56
Combining the Results Value Dynamics and
Denison Cultural
Value Dynamics and Denison Cultural Model
DENISON
This chart was developed by comparing Denison
survey results to Value Dynamics concepts.
1
Involvement
Adaptability
Consistency
Mission
Organiz-
Strategic
Creating
Customer
Goals
Coordination
Capability
Team
Empower-
ational
Direction
Vision
Agreement
Core Values
Change
Focus
Objectives
Integration
Development
Orientation
ment
Learning
Intent
Physical
B
B
B
Assets
V
A
L
Financial
E
B
B
B
B
B
3
E
U
Assets
E

Customer
D
2
E
B
B
B
B
B
B
B
E
Assets
Y
N
A
Employee/
M
E
E
B
B
B
B
B
B
3
B
B
E
Supplier Assets
I
C
S
Organization
E
E
B
B
B
B
B
B
B
3
B
B
E
Assets
E Enabler B Barrier
Major Cultural Issue impacting value