CFO San Francisco 2012

1. How To Balance
Long-term Strategic Goals
With
Immediate Operating Concerns?

2. 2

3. Balancing Short and Long Term Goals
Most companies do not realistically set
goals - at all
Most of those that do are either good at
setting their long term goals, or their short
term goals – but not both
A successful organization knows where it is
going in the short-term - but with an eye
towards long term goals 3

4. Balancing Short and Long Term Goals
 Companies who do set goals frequently
fall into one of two categories:
1. Long term goals are defined and in
place, but short term goals are almost
non-existent
2. Short term goals exist, but there are no
well-defined long term aims
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5. Long Term Goals,
But No Short Term Aims
The problem is:
Long term goals are so far off, they
rarely get worked on
Procrastination, ―analysis-paralysis‖,
―business as usual‖ become dominant
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6. Short Term Goals,
but No Long Term Aims
This type of organization is busy with action:
Likely achieving short-term targets
consistently.
But little or no thought on where the
organization is heading
Never quite makes the leap to the next
level
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7. Gresham’s Law For Management
Discussions about bad operations drive out
discussions about good strategy
implementation
Companies can get
trapped in a vicious cycle
Making or closely missing
numbers each quarter
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8. Gresham’s Law For Management
Companies then fail to examine how to
modify their strategy to:
 Generate better growth opportunities
 Break the pattern of short-term financial
shortfalls
Analysts, investors, and board members
start to question management’s
imagination and commitment
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9. Causes of Underperformance
Breakdowns in a company’s management
system cause underperformance
 Not managers’ lack of ability or effort
Failure to balance tensions between
strategy and operations is pervasive
 60% to 80% of companies fall short of the
success predicted from their new strategies
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10. Successful Strategy Execution:
Two Basic Rules To Follow
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1. Understand the management cycle that links
strategy and operations, and
2. Know what tools to apply at each stage of the
cycle

11. If employees
understand the
company’s goals,
then they will
generally make
the right
operating
decisions
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Disseminating Company Strategic Goals
Drives Better Organizational Decisions

12.  Management system ≡ integrated set of
processes and tools for a company to:
 A good system is an information ―Loop‖
A Management ―Loop‖
Provides A Management System
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1. Develop its strategy,
2. Translate it into operational actions,
3. Improve key processes, align resources &
budgets
4. Monitor operational progress & review strategy
5. Test & adapt the strategy

13. Avoid Shortfalls By Creating a Loop
 Develop a strategy statement
 With specific objectives and initiatives of
a strategic plan
 With time frames for achievement of
significant milestones
 Map out operational plans and
resources needed to achieve objectives
 Use the strategic plan as a guide
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15. Maintain The Loop
As managers execute the strategic and
operational plans, continually monitor for
results to see if strategy is working
Review internal results
Watch data on competitors and the business
environment
Periodically reassess the strategy
Update it if underlying assumptions are out-
of-date or faulty
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16. Stage 1: Develop the Strategy
Define mission, vision, and values
Conduct strategic analysis
Formulate strategy
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17. Define Mission, Vision, Values
 Which customers or markets will we target?
 What is the value proposition that distinguishes us?
 What key processes give us competitive advantage?
 What are the HR capabilities required to excel at these
key processes?
 What are the technology enablers of the strategy?
 What are the organizational enablers required for the
strategy?
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18. Examples of Mission Statements
Make People
Happy
Explore the
Universe and
Search for Life
and to Inspire the
Next Generation
of Explorers
NASA
Walt Disney
Expresses the core values of
the organization.
Conveys unique qualities about
the organization.
Simple, clear and
understandable to everyone.
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19. Define Mission, Vision, Values
What business are we in - and why?
Agree on the company’s:
 purpose (mission),
 its aspiration for future results (vision), and
 the internal compass that will guide its actions
(values)
What are the key issues we face in our
business?
 Strategic analysis of the company’s external and
internal situation
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20. 20

21. Conduct Strategic Analysis
Assess the company’s internal capabilities
and performance.
identify the distinctive resources and capabilities
that give the firm a competitive advantage.
Summarize the conclusions from the external
and internal analyses in a classic SWOT
matrix
Assess how internal attributes and external
factors help or hinder the company
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22. SWOT Analysis
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Internal
Factors
External
Factors

23. Conduct Strategic Analysis
SWOT
External Assessment:
Marketplace, competitor’s, social
trends, technology, regulatory
environment, economic cycles .
Internal Assessment: Organizational
assets, resources, people, culture,
systems, partnerships, suppliers, . . .
• Easy to Understand
• Can apply at any
organizational level
• Needs to be:
Analytical and
Specific
• Be honest about
your weaknesses
Good Points Possible Pitfalls
SWOT SWOT
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24. Conduct Strategic Analysis
 Ensure that strategy leverages internal strengths
to pursue external opportunities,
counter weaknesses and threats (internal and
external factors that undermine successful strategy
execution)
 This analysis will reveal issues that the strategy
must address:
the best role for new products and services;
whether new partners need to be acquired;
what new market segments the company might enter;
which customer segments are contracting
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25. Formulate Strategy
Decide on a course of action of how best to compete. The
strategy must respond to the following questions:
Which customers or markets will we target?
What is the value proposition that distinguishes us?
What key processes give us competitive advantage?
What are the human capital capabilities required to
excel at these key processes?
What are the technology enablers of the strategy?
 What are the organizational enablers required for the
strategy?
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26. Management Loop
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27. Stage 2: Translate the Strategy
Target Setting:
Define strategic objectives and themes
Select strategic initiatives
Select measures and targets
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28. Define Strategic Objectives
 Simplify the structure and use of a
strategy map by chunking it into
3 - 5 strategic themes
 A strategic theme ≡ distinct set of related
strategic objectives
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29. 29
Select Strategic Initiatives

30. Strategic View of Air Traffic Control
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31. 31

32. Translate Strategy to Operating Metrics
With A Balanced Scorecard
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33. Conduct Strategic Analysis
SWOT & BSC Are Different Tools
SWOT is used to define the goal
The Balanced Scorecard is used to:
 design a plan to achieve that goal, and
 measure success.
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34. Stage 3: Plan Operations
Improve key processes
Develop sales plan
Plan resource capacity
Prepare budgets
Monitor & Measure with Scorecards
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35. Operational Plan
After strategic metrics are in place, operational
plan lays out actions
Set priorities for process improvement projects:
Preparing a detailed sales plan
Prepare a resource capacity plan
Create operating and capital budgets
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36. Improve & Align Key Processes
 Identify required resources to implement the plan
Short term projects
Focus on ongoing processes, e.g. responsiveness,
speed, quality and cost
 Biggest bang for the buck comes from focus on
business process management, total quality
management, lean management, Six Sigma, and
reengineering programs on processes and sales
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The Goal
align/link near-term process improvements
with long-term strategic priorities

37. Develop Sales Plan
 Identify realistic revenue goals
 Deconstruct the overall sales target into:
 the expected quantity
 mix
 nature of individual sales orders
 production runs
 transactions
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38. Plan Resource Capacity
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Resource Type Total
Hours
Available
hours/month
per resource
unit
Resource
units
required
Resource
units
supplied
Capacity
utilization
Brokers 27,070 130 208.2 215 97%
Account
Managers
6,540 130 50.3 51 99%
Financial
planners
7,300 130 56.2 59 95%
Principals 4,627 130 35.6 36 99%
Customer
service
representatives
14,654 140 104.7 110 95%
IT consultants 10,321 7,920 69.2 75 98%
Computing MIPS
utilized
548,19
4
7,920 69.2 75 92%

39. Prepare Budgets
Once managers have determined the
required level of resources, the financial
implications become easier to calculate.
Most of the resource capacity represents
personnel costs
included in the OpEx budget.
Increases in equipment resource capacity
reflected in the CapEx budget.
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40. Prepare Budgets
The process quickly and analytically
generates operating and capital budgets
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that grow logically and dynamically out
of the sales and operating plans rather
than being imposed by fiat or through
power negotiations

41. Monitor & Measure
Balanced Scorecard
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42. Customer Quadrant of the
Balanced Scorecard
 What is important to our customers? How do
customers evaluate our timeliness?
 What do customers consider a quality product? Are
there any standards or goals currently set by our
customers?
 How and what do customers currently evaluate our
organization?
 In the financial area, what is important to our
customers?
 What does responsive mean to our customers? Are
any goals or standards set?
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43. Internal Business Quadrant of the Balanced
Scorecard
 How do we define quality—a product with few deficiencies? How do we
define success—a quality product? How we know we’re successful?
 How are process improvement requirements determined? How is their
impact currently measured?
 How is productivity measured? Is it important? Are goals or targets set?
 How do we define and measure ―cycle time?‖ Are improvement goals or
targets set?
 How do you do, and who does, the Quality vs. Schedule vs. Cost
tradeoffs?
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44. Innovation and Learning Quadrant of the
Balanced Scorecard
 What attributes of quality are currently measured?
Are any goals set?
 Are there any ongoing process improvement
activities? Any measurements being taken as to
their impact? Are any targets or goals set?
 Is employee satisfaction currently measured?
 What activities are being modified to improve
responsiveness? 44

45. Financial Quadrant of the Balanced
Scorecard
 How do you know if the organization has effective
financial control?
 What defines success? How do we know if we are
successful?
 How is the cost/performance tradeoff
accomplished?
 Are there any ongoing improvement activities?
Are any targets or goals set? 45

46. Stage 4: Monitor & Learn
Hold strategy reviews
Hold operational reviews
Link the audience for both types of
reviews
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47. Reviews
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Information
requirements
Dashboards for KPI’s;
weekly and monthly
financial summaries
Strategy map and
balanced scorecard
reports
Strategy map, balanced scorecard,
P&L reports, analytic studies or
strategy, external and competitive
analyses
Frequency Daily, twice weekly,
weekly, or monthly
depending
Monthly Annually or quarterly for fast-
moving industries
Attendees Departmental &
functional personnel,
senior managers for
financial reviews
Senior management
team, strategic theme
owners,
Senior management team, strategic
theme owners, functional and
planning specialists, business unit
heads
Focus ID & solve operational
problems (sales declines,
late deliveries, downtime,
supplier problems)
Implement strategy Test & adapt strategy based on
causal analytics, product-line &
channel profitability & new
technology developments
Goal Respond to short-term
problems & promote
continuous improvements
Fine-tune strategy;
make midcourse
adaptations
Incrementally improve strategy; set
strategic & operational plans; &
targets; authorize spending for
strategic initiatives & other major
discretionary expenditures
Operational Review Strategy review Strategy testing and adapting
Meeting Type

48. Operational Reviews
 Frequent review of dashboards on sales, bookings,
and shipments:
Customer complaints
Late deliveries, defective production
Mechanical breakdowns
the extended absence of a key employee
new sales opportunities
 The speed at which new data are posted on
dashboards is the central factor in determining
meeting frequency
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50. Stage 5: Test and Adapt the Strategy
Conduct profitability analysis
Conduct strategy correlation analysis
Examine emerging strategies
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51. Conduct Profitability Analysis
Cost and profitability reports
Examine activity-based costing reports for
P&L of each product line, customer, market
segment, channel, and region
See where existing strategy has succeeded
and failed
Re-boot loss-making operations and expand
scope and scale of profitable ones
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52. Management Loop
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54. Contact Information
Steven Russell
Chief Financial Officer
RevenueMed, Inc
3937 Holcomb Bridge Rd
Norcross GA 30092
srussell@revenuemed.com
770.246.9797 (o)
770.330.7836 (m)
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