Operational Value Add
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Whilst managing and growing a business is not an exact science, it does take a tremendous amount of discipline, using proven methodologies and data analyses, to execute your strategies and plans well. We call this operationalising your vision and strategy to deliver values...and this is exactly what we do together with our clients to pursue success.
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Operational Value Add
- 2. VALUE CREATION VALUE PRESERVATION VALUE REALIZATION INVESTORSCUSTOMERS Operational Value Add Creating Value With Customers, Delivering Value to Investors • Companies create sustainable economic value by developing, operationalizing and executing superior strategies which deliver valuable products and services to customers. • These strategies yield future cash flows greater than investment or economic profit. • Companies assure that investors realize the value created by the business by managing and delivering upon investors and market expectations. • Companies preserve the value of the underlying business cash flows through effective management controls, risk and tax management. Our approach recognizes companies must overcome three hurdles: creating, preserving and realizing value.
- 4. Integrating Strategy Formulation into a Value Framework Limit Value Value & Growth Profile Net Cash Return on Investment 0% 0% 4% -4% -4% 4%-2% 2% -2% 2% Release Value Destroy Value Create Value Investment Growth Advantaged Market & Competitive Profile Competitive Position Market Attractiveness Disadvantaged Attractive Unattractive Advantaged Effective strategic planning requires combining competitive dynamic frameworks with frameworks that relate investments and returns to value.
- 5. Resource Allocation and Planning Resource allocation across opportunities Resource allocation to opportunities High Low Low High Process Reengineering Deploy New Products Sell Idle Assets Reduce Overhead Expenses Launch Marketing Initiatives Reduce Purchased Services Working Capital Management High Priority Chance of Success Low Priority Value Impact Revised Business Plans -2% -4% -4% -2% 0% 2% 4% 6% 8% Net Cash Returns Investment Growth 4% 2% 0% Destroy Value Create Value Release Value Significant opportunities to create value exist by rigorously challenging capital investments to assure capital flows to the opportunities which will create the most value. ILLUSTRATIVE
- 6. Performance Measurement and Management Aligning to Strategies and Goals Evaluate each measurement against a rigorous set of criteria. Record team member viewpoints and summarize for discussion. Compile a preliminary list of measurements. Select a balanced set of measurements linked to key strategic and operational value drivers, as well as, compensation. † Selected: XX measures Formal Measurement Selection Criteria Does the measurement support strategies? Does the measurement support business processes? Is the measurement easy to understand? Assign an Overall Rating: Overall, is the measurement a good motivator and indicator of performance? Preliminary Measurement Listing Measurement Set for Definition Identified: XXX measures Can the measurement be calculated from obtainable data? Average Time to Market for New Products Design for Manufacturability Index New Product Sales Dollars as a Percent of Total Sales Dollars Number of engineering Changes After Release Number of Part Numbers (Percent, Standardized) Percent Concept to Customer Milestones Net Research and Development Investment as a Percent of Sales Return Return on Investment Achievement Cost of Material Acquisition as a Percent of Material Dollars Acquired Days Supply of Inventory (Raw) Number of Suppliers Supplier Rating Program Tooling Milestones Achieved Actual Versus Planned Production Days Supply of Inventory (WIP) Labor Usage Percent (by Department) Percent First Time Quality Percent Machine and Tooling Availability Rework Dollars Scrap Dollars Throughput Time Unabsorbed Burden Unit Cost Average Time to Ship Backorders Cost of Distribution as a Percent of Sales Days Supply of Inventory (Finished Goods) Excess Inventory Percent Orders Shipped Complete and On -Time Average Repair Turnaround Time Days Sales Outstanding Distributor Sales Versus Forecast Incoming Orders Versus Planned Market Share Percent Sales Dollars and Percent Selling Expenses as a Percent of Sales Days Away from Work (Injury) Employee Satisfaction Index Headcount Number of Complaints OSHA Recordables Percent Training Requirements Fulfilled Workers' Compensation Dollars MIS Performance Index (Is User Satisfaction Index) Percent Initiative Milestones Achieved System Service Request Backlog Waste Elimination Achievement Bid and Quote Success Rate Customer Promise Achievement Percent Customer Satisfaction Index Number of Component Failures by Product Classification Number of Credit Memos Issued Number of Customer Complaints Number of Customer Returns Number of Lost Orders Number of Warranty Claims Cash Flow from Operations Earnings Per Share Gross Profit Dollars and Percent Operating Income Dollars and Percent Performance to Budget Profitability Return on Equity Return on Investment Average Time-to-Market for New Products Bill of Material Accuracy Percent Design for Manufacturability Index New Product Development Index New Product Sales Dollars as a Percent of Total Sales Dollars New Product Target Sales Achievement Number of Cross-Functional Team Meetings Number of Document Change Notices Number of Engineering Changes After Release Number of New Products Number of Part Numbers (New, Deleted, Standardized) Number of Requests for Drafting Services Number of Requests for Engineering Actions Number of Requests for NIOSH Submittals Percent Engineering Deliverables Released On-Time Percent engineering Milestones met Research and Development Cost-to-Complete Research and Development Investment as a Percent of Sales Return on Investment (by Product) Target Design Cost Achievement Target Product Cost Achievement Average Procurement Leadtime Days Supply of Inventory (Raw) Major Purchase Cost Trends by Supplier New tool Set-Up time Number of Procurement Change Notices Number of Suppliers Payables Aging Percent Certified Suppliers Percent Orders Received On-time Percent Tooling On-Time Percent Tooling Rejects Premium Freight Dollars Inbound Processing Cost Per Purchase order Purchase Dollars Per Supplier Purchase Market Basket Purchase Price Variance Supplier Rating Program (Quality, Delivery) Actual Versus Planned Production Conversion Cost Per Unit Cost of Quality Days Supply of Inventory (WIP) Inactive and Obsolete Part Inventory Labor and Burden Absorbed at Standard Labor Efficiency Labor Utilization (Direct, Indirect) Machine/Process Capability (Cpk) Maintenance Dollars/Sales Dollars MAPI Attainment of Projected Cost Reductions Material Dollars Shipped and Received (WIP, Raw) Material Yield Percent First Time Quality Percent Machine Utilization Production Transferred Out rework Dollars Scrap Dollars Set-Up Time Throughout Time Unabsorbed Burden Unit Cost Average Time to Ship Backorders Days Supply of Inventory (Finished Goods) Excess Inventory Forecast Versus Actual Units and Dollars Incoming Dollars/Shipped Dollars Inventory Dollars Per Square Foot Number of Stocking Locations (Finished Goods) Order Fill Rate (Percent of Order Complete) Percent Direct Ship Items Percent Distributor Accounts Receivable Uncollected Percent Order Accuracy Percent Orders Shipped Complete Percent Orders Shipped On-Time Percent Overdue Shipments Premium Freight Dollars Outbound Resale Inventory Cost Slow-Moving Inventory Advertising Dollars/Sales Dollars Average Sales Volume Per Order Backlog Units and Dollars Days Sales Outstanding Incoming Orders/Invoicing Orders Product Group Incoming Sales Bogey Achievement Market Share Percent Number of Calls Per Salesperson Per Day/Week (Call Reports) Number of Customers Number of Distributors Number of Large Orders (<$10,000) Number of New Customers Number of New Product Applications Number of Service Call Backs Percent Distributor Sales Percent Distributors Trained Percent Sales Forecast Accuracy Receivable Aging Repair Turnaround Time Sales Dollars Salesperson activity Management Selling Expenses as a Percent of Sales Absenteeism Days Away from Work (from Illness or Injury) Employee Satisfaction Index Headcount Number of Complaints Number of Environmental Protection Agency Violations Number of Suggestions Per Employee OSHA Recordables Percent Appraisals Completed Percent Staffing Requirements Fulfilled Percent Training Requirements Fulfilled Recruitment Cost Per Employee Workers' Compensation Dollars Initiative Milestones Achieved MIS Performance Index (IS User Satisfaction Index) Number of System Service Requests Number of Transactions Processed Percent Uptime Component Failures by Product Customer Satisfaction Index Lost Order Dollars Number of Corrective Action Reports Number of Credit Memos Issued Number of Customer Complaints Number of Customer Returns Number of Orders Canceled Number of Rebills Issued Number of Warranty Claims Product Availability Return and Complaint Processing/Resolution Time Administrative Expenses as a Percent of Sales Cash Flow from Operations Earning Per Share Gross Margin Dollars Gross Margin Rate Investments as a percent of Sales Operating Income Dollars and Percent Performance to Budget Profitability Return on Equity Return on Investment Share Market Price Value Drivers Compensable Measures ILLUSTRATIVE
- 8. Value Communication Focuses on Making Goals, Decisions, and Results More Transparent To Eliminate Value Gaps Common Language and Frameworks Common Goals and Measures Efficient Communication Internally and Externally INVESTORSCUSTOMERS INVESTORS Compensation Value Communications Performance Management Planning and Resource Allocation Business Strategies and Goals Growth Company X Three Yr. Goals Total Investor Returns ___ % (___Quintile) Comprised of: Increase in warranted value _____ % Dividends to investors _____ % Closing the value gap _____ % Business Annual Plan: Total Investor Return: _____% From: Increase Value _____% “Dividends”/Cash _____% Margins Specific Goals Value & Growth Profile Net Cash Return on Investment 0% 0% 4% -4% -4% 4%-2% 2% -2% 2% Release Value Destroy Value Create Value Investment Growth • Strategic Intent and Goals • Investment Plans • Performance Investments
- 9. Let’s talk and see how we can collaborate to grow your business ! Contact: John Suen, Operating Partner john.suen@tophill-consultant.com All rights reserved. Copyright for every part of this document belongs to Top Hill Consultant Ltd., and cannot be used, transferred, copied or reproduced in whole or in part in any manner or form or in any media to any person other than with the prior written consent of Top Hill Consultant Ltd.