Gray Stone Advisors NBAA Leadership 2012 ppt
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Gray Stone Advisors NBAA Leadership 2012 ppt
- 1. Measuring and Communicating the Value of Your Business Aviation Operation NBAA Leadership | 22 February, 2012 Jim Lara and Steve Brechter ©2011 Gray Stone Advisors Confidential & Proprietary Information GrayStoneAdvisors.com
- 2. Time: A Non-Renewable Resource Page 2 Business Aviation Value Creation
- 3. Stretch Your Thinking Page 3 Business Aviation Value Creation
- 4. Why Does Business Aviation Exist? Page 4 Business Aviation Value Creation
- 5. It’s All About Alignment Page 5 Business Aviation Value Creation
- 6. Helping the Corporation Perform Page 6 Business Aviation Value Creation
- 7. Customer Facing Opportunities Page 7 Business Aviation Value Creation
- 8. International Business Development Page 8 Business Aviation Value Creation
- 9. Executive Retention Page 9 Business Aviation Value Creation
- 10. What is an Executive Worth? Page 10 Business Aviation Value Creation
- 11. Let’s Get to Work Page 11 Business Aviation Value Creation
- 12. Step 1: Start Measuring Page 12 Business Aviation Value Creation
- 13. Step 2: Quantify the Results Page 13 Business Aviation Value Creation
- 14. Step 3: Communicate Clearly Page 14 Business Aviation Value Creation
- 15. Step 4: Benchmark Page 15 Business Aviation Value Creation
- 16. Step 4: Sector-specific Benchmarking Page 16 Business Aviation Value Creation
- 17. Value Creation Page 17 Business Aviation Value Creation
- 18. Value Creation Take-Aways GrayStoneAdvisors.com/Leadership2012 Page 18 Business Aviation Value Creation
- 19. Discussion Steve Brechter 614.406.6139 SBrechter@GrayStoneAdvisors.com Jim Lara 865-357-5077 JLara@GrayStoneAdvisors.com GrayStoneAdvisors.com/Leadership2012 Page 19 Business Aviation Value Creation
Editor's Notes
- We’re here today to talk about creating and measuring VALUE in business aviation. VALUE is the ultimate metric in business aviation. But for many flight departments, it’s been really hard to quantify value. We’re here to help you take some of the mystique out of quantifying the value that your aviation organization creates. CREATING VALUE will clearly illustrate how your aviation organization is helping to improve your firm’s Operating Results. It links the flight department to your “Bottom Line”. VALUE CREATION is your reason for being a part of the parent company. And your VALUE must be consistently demonstrated by your firm’s business aviation assets. For most of you in this room, you have a business jet in order to IMPROVE your OPERATING RESULTS. In reality, this is what your host organization is “buying” from you and your flight department. So today we’re going to help you determine your unique value and how to measure and communicate it to your parent company or host organization.
- Let’s begin with a “soft-ball” question: “Where would your shareholders rather have your CEO spend his or her day -- sitting in an airport or in front of a potential client?” The answer, of course, is self-evident. The point is that business aviation’s real “product,” or VALUE, is in the CREATION OF MORE USABLE TIME. I don’t know about you, but I can’t think of many ways to create more time, let alone more usable time. Truly, Time is our only “Non-Renewable Resource.”
- To get you into the right mindset, we’re going to get you thinking and stretch your mind. This might make some of you uncomfortable because you may just see your flight department as “Trip Doers.” Or your pilots as “Aircraft Drivers.” Or your mission as similar to a limo company, just in the sky. Many of us are much more comfortable acting tactically in our business aviation roles.And we often fail to first answer the strategic question of “Why.” We go straight to the “What” and starting “Doing”. We’re here to tell you that you’ve got to significantly expand your horizon.
- Let’s focus first on the “Why’s” of business aviation.First off…Put yourselves in the shoes of your CEO, the aircraft owner or the Aviation Reporting Executive (the person you report to). And think about how would he or she respond when asked, “Why do you and/or the company invest in business aviation?” You may have to redefine your relationships with your senior executives to clearly understand why they VALUE business aviation. We really need to start by assessing our operations from a strategic perspective. So let’s talk about some of the more common reasons why business aviation exists. It… Offers companies unique access to marketsFacilitates access to conduct prospecting and development of Natural Resources Brings customers to company facilities to enhance sales and grow market shareOffers access to 5000+ airports suitable for turbine aircraft here in the United Stated, as compared to 450 airports for the airlines where about 80% of their capacity goes through 30 hubsUses the aircraft as an executive communication toolProvides a rapid response to crisesIncreases security for both people and informationIncreases an executive’s “span of personal influence”. Despite all of the available technology, pressing the flesh is still very impactfulLowers an executive’s “hassle factor”Provides access to personal renewal venues which increase executive effectiveness (second home destinations) There are many “why’s” for business aviation, and they are highly situational to a particular company, culture and senior executive team.
- Do you ever feel like your flight department team is talking “orange” and your senior executives are talking “green?” If so, you’re not alone. In this visual, the green fish might represent your CEO, the aircraft owner or your flight department’s reporting executive. Successful business aviation leaders communicate in terms that senior executives understand. They become strategic partners with the executive team because they learn what’s important—what’s valuable—and deliver on it. When we start thinking more like business professionals (or green fish), we can then really “connect” with our parent company. At the same time, we should never forget about our roles as an operator. But how do you do this when you haven’t earned your MBA or had much access to the C-Suite? This is one of the reasons you’re here at the Leadership Conference. We’re here to get you thinking more green-like. You can do this by: Meeting regularly with your Reporting ExecutiveUnderstanding the needs of your Reporting Executive and his or her peersCommunicating in language that your Reporting Executive understandsEngaging in dialog with the senior executives of your company to find out what’s important to them and their business unitsDiscussing aviation performance measures candidly – The Good, The Bad & The UglyMeasuring the performance of your aviation operation beyond mere “activity” and start measuring VALUERemember that old adage, “The person who knows “how” gets the job, the person who knows “why” becomes the boss.”
- Now that we’ve addressed some of the “WHY” questions about business aviation, let’s go to the next level and discuss “WHAT” you do to support your company’s mission. The “BIG A-HA QUESTION” is, “what can business aviation do to help your corporation perform?”Ask yourselves… how am I measuring activities that support my host corporation’s business objectives? Am I clearly expressing the VALUE that business aviation creates for my firm? Am I clearly measuring and communicating my “VALUE CREATION”? The answer varies for each person in this room, but we’d like to share some of the effective methods that we’ve seen along the way.
- “Customer Facing Opportunities” are the means of placing your key corporate leaders in front of important clients. Doing so creates real competitive advantage!This involves the use of the aircraft as a competitive weapon to provide timely response to business opportunities. Real-life ExampleWe know of a senior sales executive at a Fortune 100 firm who got a phone call about a time-sensitive and unique opportunity to get in front of an important prospect within a tightly constrained time frame. The ability to launch an aircraft within 1-2 hours of notification got the executive in front of the decision-maker and made the difference in closing the deal. And that deal generated enough net profit to cover the entire budget for the business aviation department for 2 years.That’s a true story. Having an aircraft ready to launch on short notice to take maximum advantage of highly time sensitive opportunities directly supports you firm’s business performance.So, what would be a good Value Creation Metric in this case? Perhaps “The number of Deals Closed Through Use of Business Aircraft”
- If you’re a multi-national corporation, you need to execute with the speed and ease that you do with domestic trips. We’ve seen many business aviation organizations who are very comfortable operating domestically, but as the corporation’s revenues have shifted significantly offshore, they haven’t been able to keep pace. If you can launch to China with the ease of going to Chicago, and that’s what your company needs, then that’s the dexterity you need to deliver. Measure and report that level of agility. That’s a direct measure of CREATING VALUE.You need to assess, and then periodically reassess, whether or not your flight department is in alignment. Are you keeping pace with the changes in your host company?Real-life ExampleA Fortune 50 corporation recently experienced a rate of offshore growth far greater than its domestic US growth. The flight department proactively responded by undertaking a Utilization Study and found that they could meet the needs of the parent company more rapidly by basing an aircraft in the overseas market. That aircraft is there as we speak, serving their ‘In-Theater’ needs.So watch your company’s “Percentage of Sales” and determine if a shift is occurring in the domestic vs. international mix. And if so, get ahead of it with a proactive plan that CREATES VALUE for the firm.The key is that you know what’s REALLY needed before the people you serve figure it out. Take the lead, be in-front, for if you’re not, the view never changes.
- How do you create VALUE in a Human Resources sense? It’s no secret that the availability of business aircraft is an executive attraction and retention tool. Real-Life ExampleIn a discussion with his Board, the late Steve Jobs was asked, “What would be of the most value to you? More stock options? Or cash?” Steve’s answer was, “The greatest value to me would be the ability able to use my own aircraft for both family and business travel.”What he wanted was his time back and the ability to travel securely with his family to Hawaii and other venues. Real-Life ExampleWe know of another Fortune 300 firm that encourages its top senior executives to commute to and from their homes to their offices at the corporation’s headquarters on the company helicopter. When a senior executive position was vacated, the ability to commute by helicopter was a key component in attracting the best replacement talent.Having the “aces in their places” creates significant VALUE for the firm.
- Just like in the Steve Jobs’ case, the reason for business aviation is to give senior executives back the time that they would otherwise spend traveling on the airlines or driving. Here’s a further example from the Fortune 300 firm that uses helicopters for senior executive commuting. That particular firm frequently flies a 16-minute work-focused trip from the suburbs to downtown locations that replaces a 2-hour drive. They do that about 4000 times a year. Each executive gets back almost two hours of productive time every time they get on the helicopter. It’s very common when people talk about executive time to try to put a dollar value on it. But here’s the mistake that a lot of people make -- they divide the executive’s annual compensation by number of hours worked and come out with an hourly rate. The fallacy of this approach is that no company pays an executive for breaking even. Their worth, or the VALUE they provide to the firm, must be a significant multiple of their compensation. So, here’s a thought provoking question about that 16-minute helicopter flight. If the firm generated 8000 hours of additional usable executive time, how much more executive bandwidth does that create? It comes out to about 3 “executive work years” with just the reduction in commuting time. How much is that worth? How much VALUE does that create for the firm?
- OK, this all sounds great. We’re getting you started on the path of measuring the VALUE created by your aviation department. Let’s now discuss the “How”… This will help you determine how well you are aligning your aviation organization with the parent company.It will also help you determine which VALUEcreating Performance Measures you are going to use. This will get you going on how to identify and measure what is of most VALUE to your firm. Let’s discuss the key steps in doing so.
- First and foremost, you must have a Plan. As we said before, it’s amazing how many flight departments miss the “planning” stage and go straight to “doing.” But, “doing what”? You need to create an Operating Plan that achieves alignment with your stakeholders, both within your department as well as with your firm’s senior executive team. How is that done? Here are three ways:1. Draw ideas from your aviation department team.2. Talk with your Reporting Executive.3. Interview the business unit leaders in your firm and all the authorized users of your corporate aircraft.This is the time to identify what’s most important to your senior executives. Having a direct dialog with them is the only way to establish the key elements of VALUE CREATION specifically for your firm.Many aviation organizations find this part uncomfortable, because it means forging a whole new relationship with the parent company. But you have got to do it. Remember the question about how your department sees itself? You’ve got to get past the “Trip Doers” and “Aircraft Drivers” perceptions.So get out, conduct executive interviews and find out what they VALUE.
- Next, you must quantify what you learn from your executive interviews.What have you learned from your executive interviews? Where are the key VALUE CREATION opportunitiesfor your firm? Are there any new markets that you can help access with business aviation?What are the upcoming key customer visits that you can enable?Where are the anticipated travel patterns going to take your senior executives in the year ahead?What are the upcoming business deals that you can help close using business aircraft?How many executive hours can be saved using business aircraft? Everything hinges on what’s specific to your company. And everything is quantifiable.
- Once you’ve determined the points of VALUE and how you’re going to measure them, you need to communicate performance clearly. Here’s an example of an Aviation Performance Dashboard dealing with the purchase of Jet Fuel. Here we see the lowest and highest pricing as well as our actual experience. Since we know how many gallons we consumed over the month, we are able to calculate the expense we avoided, our opportunity for future savings and the trend of our performance over the last 12 months.Each number must be expressed on a relative performance scale so that you are answering the “Relative to What?” question. You should be able to tell a clear story so that you are answering the “So What?” question. Nothing you communicate should be reported in a vacuum. What’s the VALUE to the parent company expressed here? “Dollars Saved on Jet Fuel.” What company these days would not find VALUE in spending less on Jet Fuel?
- Now that you’ve established your initial set of VALUE CREATION METRICS, you’ve got to give them impact. The best way to provide impact is to express them in terms of how you stack-up against your peers with the same mission. Due to the tactical nature of what we do in business aviation, we’re typically in a “heads-down” mode. We’re focused on “this trip,” or “this manifest,” or “this maintenance event”. But we need to take the time to avoid being insular. Sometimes you need to get out of your own fish bowl and swim in someone else’s. This is the essence of benchmarking. It’s also the best way to identify and absorb best-practices in your aviation organization. Benchmarking your flight department is also a key way to engage your C-Suite, because they’re always doing this type of validation and comparison in other aspects of their business. They look at the firm’s competitors or those with similar business strategies or missions to understand how they measure up. You need to do the same for business aviation.
- Here’s where you can focus on how your organization is creating value for your host corporation in comparison to other aviation departments serving corporations in the your business sector.First, identify your firm’s sector (Natural Resources, Retailing, Wholesale Distribution, Durable Goods Manufacturing).Then use your firm’s NAICS - North American Industrial Classification System Code (formerly SIC code) to help identify other firms in the same group. Next, without violating any Anti-Competition laws, seek out and meet your fellow aviation leaders in your firm’s sector. As a Benchmarking Group, you will be able to identify Value Creation Metrics, specific to your sector, which everyone can track and report in a consistent fashion. Examples:Developer – No. of potential sites surveyed & deals consummatedRetailer – No. of store visits by Sr. & Regional LeadershipWholesale Distributor – No. of time sensitive sales calls resulting in a New Customer or Critical Problem ResolutionProfessional Sports Franchise – High value talent signed by prompt response to opportunityNatural Resources Firm – Crisis Response avoiding potential need for costly Disaster Recovery
- OK, let’s stop and circle back to the key questions we’ve asked ourselves. First, why does your business aviation organization exist?Second, what are you doing to identify and deliver the key attributes that your parent company considers to be of VALUE?Third, how are you communicating the results? When you get your head around these questions, you’ll absolutely know if you’re delivering VALUE to your firm. You’ll be able to quantify it, talk clearly about it and ensure close alignment with your parent company. Here’s the bottom line for you and your aviation organization. VALUE CREATION means increased profitability. VALUE CREATION is the ultimate scorecard. VALUE CREATION is what business aviation must demonstrate each and every day. VALUE CREATION is business aviation’s reason for being. It’s really just that simple.
- Because Value Creation is only one of the 7 Keys to Success in leading an outstanding business aviation organization, we invite you to go to our website where you will find a number of useful tools and articles, as well as this presentation, that you can download and use immediately. You will not find this presentation on your conference thumb drives, so if you wish to have a copy of this presentation…or a transcript, please go to this link and let us know.
- Now, let’s get to the discussion.Also, here’s our contact information if you and your team continue to have questions about the “why”, “what” and “how” of your business aviation organization after you leave today.Thank you.