Identifying the Value Points within the Corporation

1. Identifying the Value Pointswithin the Corporation 30-Minute Breakout Session Alliance for Corporate Wealth Conference www.corporatewealth.info Presented by: Matt H. Evans, CPA, CMA, CFM January 21, 2005 Orlando, Florida

2. Agenda • Introduction • Common Value Points • Formal Models • Closing Comments • Additional Information

3. Introduction • About me – what I do. • Purpose of this session: - Highlight some good focal points for creating higher value within the corporation - Briefly describe some models used to help drive value

4. Common Value Points

5. Common Value Points – Three Good Sources • Value Based Finance • Balanced Scorecard Enablers • Competitive Intelligence

6. Value Based Finance – From Accounting to Real Finance Traditional Accounting Value Added Finance

7. Benefits of Value Based Finance • By focusing on non-financial measurements, the finance function pulls in other functional areas into the value management process. • Finance is the main proponent of value – educating others on how value is created. • Finance adds value through major projects: - Define Organizational Performance - Leads Initiatives on process improvement - Improve out-of-date systems - Value Chain Analysis

8. Scorecard Enablers – Applying the Generic Drivers • Generic Models provide a good starting point for understanding what drives value: - Customer Value comes from certain value drivers: Quality, Time, Pricing, Image, Reputation, Innovative features, etc. - Process Value comes from three phases in process delivery: Pre Delivery (meet customer demands in a pro- active way), Delivery (Rapid turnaround times), and Post Delivery (After sale service) - Organizational Value comes from employee results, system results, and organizational culture.

9. Strategic Business Analysis through Competitive Intelligence • Strategic Planning is dynamic through Competitive Intelligence (CI) • Competitive Intelligence is required to protect your competitive advantages in the marketplace • Risk Management is too internal and CI brings an external dimension to risk management • Senior Management is too inward in their thinking and you need CI as a reality check

10. Formal Models

11. Measuring Leadership using the LPI Model • Leadership Practices Inventory (LPI) Model was developed by James M. Kouzes and Barry Z. Posner. • Based on 20 years of research and supported by case studies with 10,000 leaders and 50,000 constituents. • Recognizes that leadership is a measurable behavior that people can observe. • Uses assessment surveys from both the leader and observers of leaders. Creates greater awareness of how to improve leadership competencies.

12. Inspire a Shared Vision Challenge the Process Enable Others to Act Encourage the Heart Model the Way LPI Model Components The LPI Model is built around five leadership practices and ten leadership commitments: • Find Your Voice • Set the Example • Envision the Future • Enlist Others • Search for Opportunities • Experiment and Take Risks • Recognize Contributions • Celebrate the Values and Victories • Foster Collaboration • Strengthen Others

13. Resources on the LPI Model • Very inexpensive and practical model - $ 65.00 for complete CD and Surveys – Facilitator’s Guide: • Visit www.leadershipchallenge.com for more information.

14. Value Dynamics Framework Model • Based on a three-year study of 10,000 companies by Arthur Andersen. • Used to determine how well a corporation is taking advantage of its asset capabilities. • Rates the contribution of assets and helps corporations leverage all assets for driving higher value. • Distinguishes the relationships of how assets add value in combination with one another. • Recognizes that assets are not fully controlled by the corporation – customers, suppliers, partners, etc. • Uses a much broader definition of assets (beyond the accounting model) for creating value.

15. Basic Principle behind Value Dynamics Framework • Assets have inbound and outbound relationships; customer assets are outbound whereas employee assets are inbound (convert resources into products and services) • All assets have outputs – Organizational assets (systems, information, etc.), Financial Assets (cash flow, etc.) By understanding these relationships, we “crack the value code”

16. Resources on the Value Dynamics Framework The Value Dynamics Framework is completely documented in the book: Cracking the Value Code by Richard E.S. Boulton, Barry D. Libert, and Steve M. Samek. “Organizations are creating value in totally new ways, using assets and combination of assets heretofore unrecognized under traditional accounting systems – and certainly unmeasured. In such a milieu, old methods of managing and measuring are simply not up to the task. To ignore the significance of the changes afoot in business today is to ignore reality itself as the page turns on a new millennium. And what organization can thrive, or even survive, in a world of illusion? None.” - Cracking the Value Code

17. Denison Cultural Model • The culture of an organization, whether explicit or implicit, is fundamental to the execution of strategy and high performance. • The Denison Model was developed by Daniel Denison and William S. Neale based on 15 years of research with 1,000 companies. • The Denison Model describes organizational culture around four traits consisting of twelve management practices. • Very business oriented – directly linked to the bottom line.

18. Denison Model Framework Degree to which the organization clearly understands the needs and requirements of customers, responds and adjusts to meet those needs Degree to which the organization is clear about its vision, goals, objectives and strategic direction Degree to which the organization has values, systems, and processes that support the vision, goals, objectives, and strategy Degree to which everyone is engaged and involved in helping move the organization forward

19. How to use the Denison Model • Do you have cultural issues? • Propose solutions to address your issues. • Set targets and take action steps to change your culture. • Understand the benefits – How do the action steps close the gaps? • Determine the risks of not taking action to close your cultural gaps. • Due Diligence - Compatibility issues prior to a merger. • Benchmark against other companies from the Denison Database.

20. Resources on Cultural Assessments For more information, visit www.denisonculture.com Facilitator’s Guide for Cultural Compass - $ 98.00. Visit www.newtrainingideas.com

21. Creativity Model • Creativity Model is based on the highly respected research of Carl Jung, Katherine Briggs, and Isabel Myers. • Breaks long-standing myths about creativity: - Creativity is NOT about ideas, it’s about the range of outcomes that are available to the organization. - Creativity is NOT about certain talents (art, music, etc.), it is about using the eight creative talents that are found in everyone. - Creativity is NOT about being different, but more about articulating results that no-one else recognizes. • Creativity is critical to problem solving because of increased complexity, the need for innovation, and increased competition.

22. Creativity Model Framework –Eight Creative Talents Adventurer Quick to Act, Self Expressive, Aggressive Problem Solver, Fun Navigator Very Open, Good Source of Ideas, Energetic, Pursues New Things Explorer Deliberate, Observant, Thorough, Grasp’s Details, Helps Clarify Visionary Great sense of Future, Big Picture, Comprehends Complexity Pilot Organizing, Planning, Team Leader, Systems Thinker, Sets Goals Inventor Very Precise, Highly Focused, Analytical, Curious, Systematic Harmonizer Social, Helpful, Good People Skills, Seeks Consensus, Flexible Poet High Values, Tolerant, Quietly Curious, Supportive, Skilled Writer

23. Resources on the Creativity Model The Creativity Model is completely documented in the book Breakthrough Creativity by Lynne C. Levesque. For more information, visit www.lynnelevesque.com “Creativity drives growth, and creative people drive every great enterprise. It’s not too trite to say that. These days, we’re all too easily caught up in the tactics of competition. We can forget that sustainable advantage is ultimately a function of a company’s ability to consistently generate, develop, and sell valuable ideas. Which is to say, creativity is at the heart of work and business.” - John A. Byrne, Editor – Fast Company Magazine, December 2004

24. Overall Framework for applying these tools and techniques (Big Picture) Value Dynamics Framework Dennison Cultural Survey Identify Major Value Related Issues Determine how these value related issues align to various layers within your Organizational Framework Apply specific techniques to close the value gaps within your Organizational Framework Vision Goals Organization Framework (IBM Model) Competencies Strategies, planning, and budgeting Communication and Management Systems Products - Services - Processes LPI Model Competitive Intelligence Creativity Model

25. Closing Comments • Most value points are easy to recognize and conceptually, they are easy to comprehend. • However, getting management “value-focused” is not easy and therefore, most corporations have significant points of value that need further development. • Ironically, getting the plane off the runway seems to be the biggest challenge . . . . • And if corporations would just start with a modest understanding of where value comes from (leadership, culture, etc.), the corporation could realize enormous increases in value.

26. Additional Information Download presentation and reference files from: www.exinfm.com/workshop.html • Workshop Slides – Long Version (powerpoint) • Building HR Capital • Aligning Human Capital with Business Strategy • Value Dynamics Presentation • Five Ways to Develop Corporate Culture • Organizational Cultures that Get Financial Results • Applications of the Denison Cultural Model

27. Questions and Comments Matt H. Evans, CPA, CMA, CFM Email: matt@exinfm.com Phone: 1-877-689-4097