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    BU M3319

    Managing Emerging Issues

    Chris Boulton Dr Kay Emblen-PerrySenior Teahing !ello" Senior #eturer 

    Lecture 9: Final considerations and

     presenting a Balanced Strategy 

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    Chris BoultonManaging Emerging Issues

    E$aluating Emerging Issues

    Issue E$aluation

    StrategiChoie%&es'onse

    &eommen(ation

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    #earning outomes

    To(ay)s leture*

      Strategy in 'ratie+

    Using e,ternal onsultants+

    &e"ar( systems strategy+

    Pri$ate e.uity sharehol(ers+ E,its+

    The nee( /or a balane( strategy assoiate( /rame"or0s

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    Chie/ E,euti$e 2//ier 

    To' management team

    on-e,euti$e (iretors

    Who gets involved in Strategy?

    4   Chie/ Strategist4   2"ns the strategy is aountable4   2/ten re'lae( "hen setba0s 5larger

    businesses64   In smaller businesses has more

    in/luene

    4   7ble to o//er an e,ternal ob8eti$e

    $ie"

    4   In$ol$ement (e'en(s on o$ernanestyle : ountry an( om'any sharehol(er

    struture 5eg 'ubli $s 'ri$ate%/amily64   Delegates res'onsibility4   I(eally "ith Boar( is able to remo$e

    CE2

    4   Can share strategi res'onsibilities4   2b8eti$e ability re(ue( by loser

    in$ol$ement in (ay to (ay o'erations4   Can ten( to /ollo" CE2 : eg

    ;rou'thin0<4   #ess e,'eriene( 5(e'en(ing on si=e o/

    organisation

    >ohnson Sholes? Exploring Corporate Strategy 5@A116? Cha'ter 1

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    Mi((le Management

    Strategy Consultants

    Strategi Planners

    Who gets involved in Strategy? (2)

    4   2'erational "or0-horses an( li0ely to

    be hea$ily in/luene( in terms o/

    o'erational matters "ith little time orshare o/ min( /or ob8eti$e strategi

    thin0ing4   Use/ul in/ormation soure : su''ort /or

    strategi 'ro'osals4   I(eal ham'ions o/ strategi 'ro8ets

    4   Part o/ e,euti$e management "ith a

    s'ei/i res'onsibility /or managing the

    'lanning 'roess4   #u,ury o/ large businesses4   Usually a''ointe( /rom "ithin : ie "ith

    goo( un(erstan(ing o/ the organisation

    4   2/ten use( to analyse%'rioritise%generate

    o'tions4   Im'lementing hange4   Can be a 'olitial tool to e//et hange4   E,ellent in/ormation soure4   To' /irms inlu(e BC? Bain? MKinsey

    et

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     7nalysing? 'rioritising?

    an( generating o'tions

    Trans/erring%a''lying

    0no"le(ge

    Promoting strategi (eisions

    Im'lementing strategi

    hange

    Using Consultants (1)

    4   Use/ul in hallenging%on/irming 'ro'ose(

    strategy an( assum'tions

    4   7ble to hel' onsensus 'roess4   Can 'ro$i(e ne" o'tions%i(eas

    4   Can bring signi/iant setor 0no"le(ge to bear 4   Use/ul on/i(ential) om'etitor%benhmar0ing

    in/ormation

    4   Some ha$e (ee' s'eialist 0no"le(ge eg 2il as? !inanial? Ta,? #egal? &? Country%Politial &is0

    et

    4   7 tool o/ the CE2%Boar( to 'romote a 'artiular

    strategy4   2b8eti$ity Fho 'ays the in$oie

    4   7 gro"ing area o/ 'o'ularity inome4   I(eally "or0ing "ith internal managers

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    Using Consultants (2)

    1 De/ining the S'ei/i Issue

    4 For0 out e,atly "hat issue5s6 you nee( them to a((ress 7 broa( so'e

    G lots o/ time an( high /ees

    @ Can they (o the 8ob%&e$ie" Pro'osal

    4  7s0 /or e$i(ene o/ e,'eriene : setor? issue? geogra'hy et

    4 Fho "ill be on the team Key 'oint o/ ontat

    4 o" "oul( they a''roah the tas0

    4 o" long "ill it ta0e

    4 Fhat are (eli$erables Eg "ee0ly u'(ates

    4 o" muh "ill it ost Dri$ers o/ ost

    4 &e.uire( in'ut /rom the business%internal managers

    3 Continual re$ie" o/ 'rogress

    4 Kee' 'ressure on : senior atten(ane at u'(ates

    4 Ensure stay on message : monitor senior onsultant in$ol$ement in the

    'ro8et

    4 U'(ate on osts%ini(entals 5I/ they ta0e H2U& 'eo'le out to lunhit "ill

    en( u' on H2U& billJ6

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    • &e"ar( the right things

    • Monetary re"ar(s

    • on monetary re"ar(s

    • &e"ar( em'loyee /or results not ati$ities

    Reward Systems

    The reward system…is an unequivoal statement o! the

    or"oration#s values and $elie!s% &s suh' it is the *ey tounderstanding ulture% &n analysis o! reward systems an

    "rovide e+eutives with a $asis !or e!!etively managing long

    term ultural hange%

    Kerr Sloum ;Managing Cor'orate Culture Through &e"ar(

    Systems< 519L6

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    • To be effective, reward systems must be congruent with an organisation’sstrategy – and fit with its structure and processes (awler, !""#$%(&odels

    include' &cinsey )*S +ramewor, -alanced Scorecard$

    • .b/ectives in designing the reward system – 0enerously reward  those ahie$ing ob8eti$es – 1eny rewards to those "ho (on)t – Tie inenti$e om'ensation to rele$ant outomes - both strategi an(

    /inanial

    • Ty'es o/ &e"ar(s* – Basi Pay 5/or (oing the 8ob6 – Per0s 5'art o/ basi 'a0age6 – Bonuses 5/or ahie$ing something : in(i$i(ual%olleti$e : sometimes

    'art o/ basi 'a0age6 – Share 2'tions 5'ubli $s 'ri$ate6

    Reward Systems , -in*ing to Strategy

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    Reward Systems – Reviewing

    U./0RST&./ 0ST.3 S4ST05

    4 Fhat beha$iours is it re"ar(ing4 Do these beha$iours /it "ith (esire(

    strategy

    /0T0R5.0 /0SR0/

    607&89URS

    4 Fhat is the strategy going /or"ar(4 Fhat beha$iours su''ort (esire( strategy

    &/:UST ;R0S0.T S4ST05

    4 Be a"are o/ im'liations o/ hange4 Im'lement Communiate

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    Private Equity Shareholders & Exits

    1 !ormal Pri$ate E.uity !un(s ty'ially loo0 to e,it "ithin 3- years*

    4   !un( li/e normally 1A years4   I&& base target @-3A 5Double money in 3 years64   #onger hol(ing 'erio( "ithout gro"th in $alue lea(s to (elining I&&4   &ationale /or longer hol(ing 'erio( inlu(es* 'ros'et o/ /urther signi/iant

    $alue gro"th+ reo$ery /rom (i' in 'er/ormane

    @ Im'at o/ (i' in 'er/ormane or /all behin( business 'lan

    4   PE sharehol(ers "ill o/ten beome more han(s on) an( im'at strategy+4   Management hange is /re.uently an( o'tion Stu(ies re$eal that some 1%3 o/

    CE2s are re'lae( in /irst 1AA (ays o/ in$estment an( @%3 re'lae( o$er N year

    'erio( 57harya an( Kehoe @AA64   7eleration o/ E,it Strategy 5sale o/ business6

    3 E,it /or PE !un( an mean either selling shares or selling the om'any :best $alue is usually gaine( /rom selling 1AA o/ the business

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    Exit as a Strategic Option

    1 To ma,imise $alue timing is e$erything*

    4  7 rea(y buyer 5/un(s strategi rationale64 Strong /inanial tra0 reor( 5tren(sJ6

    4 Potential /or gro"th in /uture

    4 Strategi $alue 5eg geogra'hy? tehnology?

    ustomers? e,'ertise6

    @ Ty'es o/ E,its*

    4 Tra(e Buyers4 Pri$ate E.uity

    4 Management%Pri$ate E.uity

    4 Publi #isting

    4 #i.ui(ation

    3 &ationale /or 7.uisition 5Tra(e Buyers6 inlu(es*

    4 Eonomies o/ Sale

    4 Eonomies o/ Oertial Integration

    4 Com'lementary &esoures

    4 Sur'lus !un(s 5both in a.uire( an( a.uiring om'anyJ6

    4 In(ustry Consoli(ation

    4 Eliminating Ine//iienes : buyer sees o''ortunities to im'ro$e

    Brealey et al? 2rinciples of Corporate +inance "th ed (344#$

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    Exit (Divestment !aluations

    1 Ty'es o/ Oaluation on E,it*

    1 et 7ssets eg $alue o/ assets-liabilities on balane sheet

    4 Multi'le o/ Earnings eg L , EBITD7? or 1@ , et Pro/it

    @ Distress Sale : Usually by $alue o/ et 7ssets

    4 Usually in ban0ru'ty situations? but also rele$ant in un(er'er/orming

    situations "here sharehol(ers /ore an e,it

    4  7ssets suh as buil(ings an attrat mar0et 'rie

    4 2ther assets may be (isounte(*

    4 Mahinery : seon(han( $alue

    4 In$entory is in(i$i(ually assesse( but an be (isounte( /rom A-1AA

    4 Debtors are seen as (i//iult to ollet an( also (isounte( hea$ily

    4 Cre(itors : 'artiularly ban0s "ill "ant /ull 'ayment /rom 'roee(s4 I/ om'any is un(er'er/orming but a sale is re.uire( then PE !un(s an be

    o'en to other o'tions eg sale to management rather than asset sales

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    Fhat is a balane( strategy

    •  7n organisation annot e,'et to eliminate all ris0s? a(o't all

    o''ortunities? (o e$erything an( be e$ery"here

    4  7 balane( strategy ta0es all (i//erent in'uts into onsi(eration?

    analyses them an( agrees the 0ey areas to /ous on aross all

    as'ets o/ the organisation an( sets 'riorities Priorities must be set? tra(e-o//s onsi(ere( an( o''ortunity osts

    un(erstoo(

    4 Balaning strategies aross a business retains /ous on all as'ets o/

    the organisation

    2rganisations are most e//eti$e "hen all as'ets are oor(inate(

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    Bene/its o/ a balane( strategy

    4 Sees businesses as systems o/ interrelate( strategies? o"ners?

    in$estors? management? "or0ers? /inane? 'roesses? 'ro(uts?

    su''liers? ustomers? an( om'etitors all o/ "hih 'ro$i(e ris0s

    an( bene/its

    4 Pro$i(es early "arning signals /or both o''ortunities an( ris0s/rom as many areas as 'ossible

    4 I/ 'er/ormane 'roblems an be i(enti/ie(

    early hanges an be im'lemente( to

    ahie$e inten(e( strategi ob8eti$es

     An unbalanced wheel 

    will roll neither fast nor far

    (Vadim Kotelnio!"

    Customers

    STRATEGY

    Sta!! 

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    4 Shared 8alues= ore $alues o/ the om'any

    that are e$i(ene( in the or'orate ulture an(

    the general "or0 ethi

    4 Strategy= the 'lan (e$ise( to maintain an(

    buil( om'etiti$e a($antage o$er the

    om'etition

    4 Struture= the "ay the organi=ation is

    struture( an( "ho re'orts to "hom

    4 Style= the style o/ lea(ershi' a(o'te(

    4 Sta!!= the em'loyees an( their general

    a'abilities

    4 S*ills= the atual s0ills an( om'etenies o/the em'loyees

    4 Systems= the (aily ati$ities an( 'roe(ures

    that sta// members engage in to get the 8ob

    (one

    Balane( strategy /rame"or0* MKinsey L-s /rame"or0

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    Balane( strategy

    N areas o/ e.ual im'ortane to be balane(

     1% Customers - ustomer satis/ation ie 0ee'ing them ha''y? there is

    a limite( number o/ ustomers an( om'etition is ne$er /ar a"ay

    2% Sta!! : 'eo'le are most im'ortant resoure o/ a business+ 0ey to

    suess is through reruitment? training? mentoring an( re"ar(ing

    a''ro'riately>% 9"erations : ost e//eti$e o'erations re.uire( /or all ser$ie an(

    manu/aturing businesses+ 'ro(uti$ity? e//iieny an( .uality

    %

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    Balane( sorear(

    •  7 balane( sorear( is a 'er/ormane management tool "hih is

    gi$es an holisti $ie" o/ an organisation by integrating both /inanial

    an( non-/inanial 'arameters

    >oine( u' thin0ing

    • It an be use( to signi/iantly im'ro$e the im'lementation o/

    ob8eti$es an( strategies Establishes targets "ith o"ners an( timing against all 0ey ations ie

    SM7&T targets

    • It 'ro$i(es a mehanism /or ontrolling an( monitoring the

    organisational 'rogress

    • It is a ommuniations (e$ie to 0ee' team members u'-to-(ate• It hel's in translating strategy into o'erational an( measurable ations

    an( ahie$e strategi im'lementation

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    Balane( strategy /rame"or0* Balane( sorear(

    #$hat is important for our

    shareholders%& 

    #'ow do customers

     percei!e us%& 

    #$hat internal processes

    can add !alue%& 

    #Are we inno!ati!e

    and ready for the

    future%& 

     5dapted from 6obert S7 aplan and 1avid 27

    8orton, 9:sing the -alanced Scorecard as a

    Strategic &anagement System,; $' )>7

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    Balane( sorear(

    • N areas o/ the sorear(*

    Customers= Measures ustomers satis/ation an( their 'er/ormanere.uirements

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     Thank You!

    Chris Boulton

    [email protected]

     Questions

    ?

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     7 Balane( Strategy

    •  7 'ratial gui(e to om'leting a balane( sorear(*

     5llan &acay7 5 practitioner’s guide to the balanced scorecard

    (344?$, Chartered @nstitute of &anagement 5ccountants7

    htt'*%%"""imaglobalom%Douments%ThoughtQlea(ershi'Q(os%tehQresre'QaQ'ratitionersQgui

    (eQtoQtheQbalane(Qsorear(Q@AA'(/ 

    http://www.cimaglobal.com/Documents/Thought_leadership_docs/tech_resrep_a_practitioners_guide_to_the_balanced_scorecard_2005.pdfhttp://www.cimaglobal.com/Documents/Thought_leadership_docs/tech_resrep_a_practitioners_guide_to_the_balanced_scorecard_2005.pdfhttp://www.cimaglobal.com/Documents/Thought_leadership_docs/tech_resrep_a_practitioners_guide_to_the_balanced_scorecard_2005.pdfhttp://www.cimaglobal.com/Documents/Thought_leadership_docs/tech_resrep_a_practitioners_guide_to_the_balanced_scorecard_2005.pdf