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DCO-ZXG923/000601DschPP1
DCO-ZXG923/000601DschPP1
PRESENTATION OUTLINEPRESENTATION OUTLINE
• Tom’s brief
• Strategic Overview of Industry
• SWOT + House
• Development of Leadership Thinking
• Good to Great - Pineapple Concept
• Value Profit Chain
• 4+2 What really works?
• The Challenge
DCO-ZXG923/000601DschPP1
INTRODUCTION - TOM’S GUIDELINES!INTRODUCTION - TOM’S GUIDELINES!• Forward Thinking - Where are PKF going?
• Encourage Partners to think and Discuss by:-
• Reviewing Challenges facing the profession
• Doing a Claud! - a surprise or two
• Create “Discomfort” and “Energy for Challenge and Change”!
• BLAME TOM !!!
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STRAIGHT IN!STRAIGHT IN!
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SUPPLIERSCapital
ITTechnical Knowledge
PORTERS ANALYSIS OF AN INDUSTRYPORTERS ANALYSIS OF AN INDUSTRY
NEW ENTRANTSTenon, Vantis
NumericaBarclays?
BUYERSChallengingQuestioning
Influenced by Press
SUBSTITUTESTechnology - DIY
e.g. Inland Revenue ,Quicken, Sage
Market Competitiveness
IncreasingGlobal slowdown
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SWOT ANALYSIS - SWOT ANALYSIS - EXTERNAL OPPORTUNITIES AND THREATSEXTERNAL OPPORTUNITIES AND THREATS
OPPORTUNITIES
Client dissatisfaction with perceived independence and objectivity
Public sector spend next few years
Client migrants from Big 4
Pensions - Red Tape and Regulation
Outsourcing
Relocations abroad eg. Telecentres - UK systems and standards abroad
Technology and its uses and abuses
Work/life balances - More diverse business owners
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SWOT ANALYSIS - SWOT ANALYSIS - EXTERNAL OPPORTUNITIES AND THREATSEXTERNAL OPPORTUNITIES AND THREATS
THREATS
Global Slowdown
Wind-up’s > Start-up’s
Audit volumes and margins - down
PI costs - up!
Tightening regulations - Financial Reporting Council
Image / Probity of accountancy
Sarbannes-Oxley - post-Enron - not legislate
Litigious society - LLP
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SWOT ANALYSIS - SWOT ANALYSIS - INTERNAL TO PKF, STRENGTHS & WEAKNESSESINTERNAL TO PKF, STRENGTHS & WEAKNESSES
STRENGTHS
Culture Of Integrity
Governance - Council
Skills And Energy
Dynamic Approach
Commercial Knowledge
Range Of Services
Translate Regulation Into Business Speak e.g. Budget
PKF Brand & International Association
New It System In Core Practise
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SWOT ANALYSIS - SWOT ANALYSIS - INTERNAL TO PKF, STRENGTHS & WEAKNESSESINTERNAL TO PKF, STRENGTHS & WEAKNESSESWEAKNESSES
Strategic Alignment• London V Provinces• Geography V Sector V Discipline• Sport V Perception
Benchmark V’s Competitors
Structure • Ownership Fairness• Pyramid - Age/sex/diversity• Corporation V’s Franchises
Accountant V’s Prop Owner
UK Image Post 90’s Us Issues
Communication & More
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Where are PKF in theWhere are PKF in theHouse of Change? House of Change?
Complacency
Denial
Excellence /Renewal
Confusion / Chaos
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LEADERSHIP THINKINGLEADERSHIP THINKINGIn Search of Excellence
Elephants
1 Minute wonders
.com’s to bombs!
Built to Last
Good to Great - sustainable
Value Profit Chain
EQ
What really works?
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The Value Profit Chain - The Value ConceptThe Value Profit Chain - The Value Concept
GOALS are to :-
1. Maximise value in a web of relationships - employees, clients, partners2. Ensure value is distributed in ways that are perceived as fair
BUT FEW
1. Deliver on promises2. Can completely rethink their business3. Identify with enthusiasm and creativity their core values4. Have leaders with mind-set and skills to change
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Economic, Social, Legal,and Technological Environment
Leadership/Management
Culture/Values
Vision/Strategy
The Vale Profit Chain - Performance TrinityThe Vale Profit Chain - Performance TrinityAttention to the PT drives and sustains successAttention to the PT drives and sustains success
DCO-ZXG923/000601DschPP1
The Value Profit ChainThe Value Profit Chain
“Harder ” strategic elements are easiest to formulate BUT
“Softer” - is real challenge
The Performance Trinity are “starting point for change” - leaders first
Foundation for Value Drivers which leads to the virtue of Value for all stakeholders
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PKF’s PINEAPPLE CONCEPT!PKF’s PINEAPPLE CONCEPT!
GOOD to GREAT Companies
The Hedgehog Concept ! Stick To It
Deep Understanding Of 3 Interconnected Issues:-
What Are You Deeply Passionate About?
What Can You Be The Best In The World At?
What Drives Your Economic Engine?
Achieve Truly Superior Economic Returns
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WHAT REALLY WORKS:WHAT REALLY WORKS:The 4+2 Formula for The 4+2 Formula for Sustained Business Sustained Business SuccessSuccessThanks to Nitin NohriaHarvard Business School
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What management practices differentiate companies that
dramatically outperform their peers?
FUNDAMENTALFUNDAMENTALQUESTIONQUESTION
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Source: Compustat
LosersWinners
Growth over 10 years
Operating income
22%326%
ROIC (%) -8.52 PTS
+5.45 PTS
Sales
83%415%
Assets
97%358%
TRS 62%945%
WINNERS DRAMATICALLY OUT-PERFORMED ON ALLWINNERS DRAMATICALLY OUT-PERFORMED ON ALLFINANCIAL MEASURESFINANCIAL MEASURES
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ANSWER IS STRAIGHTFORWARD: ANSWER IS STRAIGHTFORWARD: 8 MANAGEMENT PRACTICES MATTER8 MANAGEMENT PRACTICES MATTER
4 Foundational 4 Complementary
• Superior talent management
• Insightful, involved CEO driven by knowledgeable, financially incentivised board
• Innovation machine with industry transformational intent
• Merger, Acquisition, and Alliance Intensive Growth
+
• Active external antennae, driving clearly stated, narrowly focused growth strategy
• Operational excellence and quality branded customer- focused products
• Aggressive, exciting, value- driven culture with high expectations and rewards
• Fast and flat organization
Average number of practices3.2 1.7
0.20.5
Winners
Losers
DCO-ZXG923/000601DschPP1
External Antennae External Antennae
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Begin Period 1 End Period 2
CAGRPercent14
28
15
CAGRPercent
114
6
Begin Period 1 End Period 2
483
100
193
* Related businesses are those businesses whose primary SIC code is the same as the core business
** Core businesses are those businesses (primary and secondary 4-digit SIC) contributing the majority of 1986 revenues
Source: Compustat; team analysis; Dr. H. Singh
Winners LosersUnrelated businesses
Related businesses*
Core businesses**
Revenues baselined to 100 at Year 0
WINNERS GROW THEIR CORE BUSINESSES AND BUILDWINNERS GROW THEIR CORE BUSINESSES AND BUILDBIG RELATED BUSINESSESBIG RELATED BUSINESSES
100
Strategy
DCO-ZXG923/000601DschPP1
Operational Operational ExcellenceExcellence
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EXECUTION: OPERATIONAL EXCELLENCE AND EXECUTION: OPERATIONAL EXCELLENCE AND QUALITY, BRANDED,QUALITY, BRANDED,CUSTOMER-FOCUSED PRODUCTSCUSTOMER-FOCUSED PRODUCTS
Key Components
•Excellent product/service/design and quality
•Strong brand and overall value
•Strong relationship with customers
Quality, branded customer products
Quality, branded customer products
Operational ExcellenceOperational Excellence
•Superior manufacturing/ production systems
•Superior operations and distribution systems
•Low cost structure
56% of56% ofLosersLosers
81% of81% ofWinnersWinners
Execution
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High PerformanceHigh PerformanceCultureCulture
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CULTURE: AGGRESSIVE, EXCITING, VALUE-DRIVENCULTURE: AGGRESSIVE, EXCITING, VALUE-DRIVENCULTURE WITH HIGH EXPECTATIONS AND REWARDSCULTURE WITH HIGH EXPECTATIONS AND REWARDS
Key Components
•Deliberate intent to create an unbelievably high-performing culture
•Fun, action-oriented, aggressive, and exciting culture
•Cherished core values and beliefs
Fun, exciting, value- driven environment
Fun, exciting, value- driven environment
•Aggressive performance expectations for staff at all levels
•High “at-risk” compensation
Aggressive expectations and rewards
Aggressive expectations and rewards
47% of47% ofLosersLosers
78% of78% ofWinnersWinners
Culture
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Fast and Flat StructureFast and Flat Structure
DCO-ZXG923/000601DschPP1
•Little or no bureaucracy
•Simple, flat, and lean organizational structure
•Fast decision making
•Effective cooperation between units
ORGANIZATION: ORGANIZATION: FAST AND FLAT ORGANIZATIONFAST AND FLAT ORGANIZATION
Organizational structureOrganizational structure
Key Components
50% of50% ofLosersLosers
78% of78% ofWinnersWinners
Org.
DCO-ZXG923/000601DschPP1
4 COMPLEMENTARY PRACTICES4 COMPLEMENTARY PRACTICES
Note: There are no negative spikes in the practice of M&A Growth – companies either acquire (or alliance with) new businesses or they don’t
Sources: Survey data, team analysis, Prof. Harvey Wagner
Losers
Winners
3
39
13
65
4
44
6
2
5
22
43
56
47
6
Highly negative Highly positive
Percent of companies
Average number of practices0.2
1.5
1.7
0.2
Winners
Losers
Superior talent management
Insightful, involved CEO driven by knowledgeable, financially-incented board
Innovation machine with industry transformational intent
Merger, Acquisition, and Alliance Intensive Growth
DCO-ZXG923/000601DschPP1
Talent ManagementTalent Management
DCO-ZXG923/000601DschPP1
TALENT: TALENT: SUPERIOR TALENT MANAGEMENTSUPERIOR TALENT MANAGEMENT
Key components
•High-quality talent pool
•Successful at attracting and retaining top talent
•Successful at developing top talent
Talent-richTalent-rich
44% of44% ofLosersLosers
47% of47% ofWinnersWinners
Talent
Org.
Culture
Execution
Strategy
DCO-ZXG923/000601DschPP1
Mergers and AcquisitionsMergers and Acquisitions
DCO-ZXG923/000601DschPP1
Key components
Identify themIdentify them •Rigorous analysis of opportunities
•Build or buy new businesses
• Invest in businesses that use key skills
Build or buy themBuild or buy them •History of successful M&A execution and integration
•Use entrepreneurial leaders in launching new businesses
•Special incentive structure for new business
M&A GROWTH: MERGER, ACQUISITION, M&A GROWTH: MERGER, ACQUISITION, AND ALLIANCE INTENSIVE GROWTHAND ALLIANCE INTENSIVE GROWTH
22% of22% ofWinnersWinners
M&A GrowthOrg.
Culture
Execution
Strategy
DCO-ZXG923/000601DschPP1
WINNERS DID MORE FREQUENT, SMALLER,WINNERS DID MORE FREQUENT, SMALLER,AND HIGHER VALUE CREATION DEALSAND HIGHER VALUE CREATION DEALS
18
18
29
45
718
43
21
3.6
2.5
3.7
3.1
LIMITED SAMPLE
Winners LosersNote: *Data from SDC Platinum database, international M&A transactions over $1 million or
undisclosed value 1986-1996, all international JV and alliances 1988-1996
** Data from 1/1/96 to 9/30/98; US and Canadian deals over $500 million, value creation based on market-adjusted stock price reaction of the new entity
Source: Dr. Habrir Singh, Wharton School of Business, SDC Platinum database, CF&S M&A survey 1996-98
Larger
Substantial (50-100% of buyer)
Sizeable (20-50% of buyer)
Smaller (<20% of buyer)
Deals per period*(Average)
Joint venturesM&A
M&A Deal size**
93% Value Creating0% Value Destroying
9% Value Creating27% Value Destroying
Winners Losers
M&A GrowthOrg.
Culture
Execution
Strategy
DCO-ZXG923/000601DschPP1
THE CHALLENGE!THE CHALLENGE!
1. Leaders creating climate
2. Maximising vale - ALL stakeholders
3. Pineapple concept
4. 4+4 Factors - evaluate and prioritise
5. Actions - DO IT!
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Thank you Thank you
Time to Discuss? Time to Discuss?