This is a follow-up to "Creating a Performance Culture". See the financial impact of implementing a Performance Culture. As well as, the level of financial investment needed and the ROI expected.

1. Financial Return of the Performance Culture™

2.  Strategic Asset Management Inc. (SAMI), founded in 1996, spent
many years researching the Performance Culture™
 The Performance Culture model has since proven to have a
remarkable capacity to:
 Identify obstructive issues
 Implement sustainable improvements, and
 Provide significant financial returns for those companies that utilize it
 This presentation will discuss the financial return of the
Performance Culture
Financial Return of the Performance Culture™

3. The
Performance Culture
 A proprietary series of models, tools and
methodologies launched in 2012 that provides a
unique approach to organizational improvement
 The specific path to Performance Culture varies
for each company but typically includes:
 Organizational alignment initiatives
 Personnel development
 Efficiency enhancements
 Optimized cost structures
 Increased production volumes
 Benefits of a Performance Culture include:
 Enhanced productivity
 A motivated workforce
 Higher employee satisfaction
 Improved asset reliability
 Reduced waste
 Increased efficiencies
 A safer work environment
…and an excellent Financial Return

4. Performance Culture
Domains
 Purpose, People , Predictability , Performance
 Enabling domains (Purpose and People) focus on
leadership and organizational development
 Benefit domains (Predictability and Performance)
focus on elements which drive the financial results
of the enterprise
This presentation identifies:
1. Key variables for implementing The Performance
Culture
2. The investments necessary to achieve a higher
level of financial performance
3. The interrelationships of the variables involved in
the process

5. The Performance
Culture Model

6. Four Stable Cultural States
 Each element of the four domains combine to
establish a set of behaviors
 The behaviors can be evaluated to determine the
cultural state of an organization
 We recognize four stable cultural states that
correlate to the sustainability of financial
performance:
• Reactive
• Compliance (Planned)
• Objective (Proactive)
• Inspired
 Every organization operates in one of these states
 To change these states, significant energy (i.e.
financial investment) must be injected into an
organization over a period of time

7.  The primary categories of investment to
implement the Performance Culture are:
• Baseline Evaluation
• Design and Definition
• Behavioral Coaching
• Information Management
 Implementing the Performance Culture requires a
mix of internal and external human resources to
support the change process
 The resource mix is typically dependent on the size
of the organization
The Investments

8. Company Classifications
Classification Staff Size Revenue Size Number of Assets
Small <500 <$250 M <5
Medium <1000 <$1.0 B <10
Large >1000 >$1.0 B >10
To properly frame the range of investment and return of implementing
the Performance Culture, organizations must be classified as small,
medium or large.
Note: The characteristics used for classification can vary by industry.

9. Resources - Small vs. Large
Small Organizations:
 Typically are resource-constrained in their ability to
support the process
 More dependent on external resources
 Not ideal from a change management perspective,
but necessary to support ongoing operations and
the change initiative
Large Organizations:
 Typically have more flexibility to assign resources
to support the process
 Typically develop deeper ownership of the
proposed changes
Internal Resources:
 Due to high variability, internal resources are
excluded from the investments described

10. Baseline Evaluation
 Purpose - to understand the magnitude of
the financial opportunity and the specific
gaps
 Approach - data-driven evaluation performed
to focus on the current execution of business
processes, supporting behaviors, and overall
performance
 Outcomes - definition of the stable cultural
state and resulting levels of performance
Time Investment: 1 – 2 Months
Financial Investment: $125,000 - $500,000

11. Design & Definition
 Purpose - design detailed business processes
and define the supporting behaviors required
to sustain a new level of performance
 Approach – engage the organization to
develop ownership of the changes
 Outcomes
 enhanced business processes
 recognition of functional interdependencies
 defined measurement and reporting
 understanding of new behaviors, and
 recognition that new performance levels are
achievable
Time Investment: 2 – 3 Months
Financial Investment: $200,000 - $500,000

12. Behavioral Coaching
 Investment tradeoffs regarding:
 ratios of internal versus external resources
 time versus number of resources
 the number and sequence of assets, and
 the organizational level of coaching
 The journey to sustainable behavioral change
is largely a function of time and discipline
 Purpose – embed the new processes and
behaviors
 Approach - coaching begins with specific
and detailed training on the new behaviors
and the respective business processes
 Outcomes – new levels of sustainable
performance
Time Investment: 12 – 24 Months
Financial Investment: $1,500,000 - $10,000,000

13. Information Management
 Large organizations need comprehensive
information management systems to
understand performance variations
 Smaller ones can suffice with rudimentary
information management systems
 Purpose – install adequate information
management systems
 Approach – define processes and behaviors
and configure supporting IM accordingly
 Outcomes – timely information available to
manage continuous improvement
 Critical aspect of implementation -
measurement of behaviors and sustainability
gaps
Time Investment: 1 – 6 Months
Financial Investment: $50,000 - $1,000,000

14. Cumulative
Investments

15.  Organizations can expect substantial returns
over the short term
 Most organizations will ramp up to near
steady state benefits in three years
 The primary sources of return are:
• Production Volume
• Operating Expense
The Returns

16. Higher Production Volumes
 Higher production volumes are achieved by:
 decreasing variability
 increasing asset availability
 The returns cited below are achieved in the
absence of significant capital investment and
are the result of functional process
improvement supported by behavioral
modifications
Volume Increase: 2 – 5 Percent
Financial Return: $5,000,000 - $50,000,000
Note: Market conditions must be favorable (sold
out, price stability, distribution capacity, etc.) for
the organization to convert the additional
volume into revenues

17. Lower Operating Expenses
 Lower operating expenses are achieved by:
 increasing efficiency
 increased staff productivity
 reduced contracted services
 reduced levels of material consumption
 reduced logistics fees
 Conservatively assuming the operating
expense of the company represents twenty
percent of revenues, the following returns
have been achieved:
Expense Decrease: 10 – 20 Percent
Financial Return: $5,000,000 - $40,000,000

18. Existing or New Assets
 The scenario presented has been achieved in
existing (or brownfield) assets that have
reached steady states of operation
 The Performance Culture model is just as
applicable to new (or greenfield) assets and
the organizations supporting them
 To reach steady state operations in the most
efficient and expeditious manner, new
organizations must define the desired
cultural state
 Economics and timing are different for
greenfield assets and organizations
 Returns can be just as substantial, largely
based on cost and loss avoidance during the
progression from startup to steady state

19. Cumulative
Returns

20. Summarizing the Financial Return on Investment
After implementation the Performance Culture, Return On Investment
over a 4-year window represents a value proposition much greater than
alternative improvement initiatives..
Small Organization Large Organization
Investment Return Investment Return
Year 1 $1,500,000 $2,500,000 $4,900,000 $15,000,000
Year 2 $375,000 $6,250,000 $5,000,000 $52,500,000
Year 3 $0 $8,750,000 $2,100,000 $75,000,000
Year 4 $0 $10,000,000 $0 $90,000,000
Totals $1,875,000 $27,500,000 $12,000,000 $232,500,000
Financial ROI 14.7 : 1 19.4 : 1

21. Ratio of Return vs.
Investment

22.  Implementing the Performance Culture
represents one of the most compelling
business cases for any organizational
initiative
 The challenges of implementing the
Performance Culture are many and
difficult, but the financial returns are
worth the effort
Conclusion