Background Who recommended me for this opportunity – Jim or Terry? • Wyoming Farm boy • Education • AS Powell WY, Ag Econ • BS University of WY, Ag Econ • MS Texas A&M, Ag Econ, Dr. McGrann • University of NE Scottsbluff - 8 yrs • Jorgensen Land and Cattle, SD - 13 yrs • Part time FBS trainer/consultant • FBS mechanic… • Burkey Farms, NE <1yr • 3-4 key primary clients retained
The Knowing – Doing Gap “As companies talk about the importance of learning, intellectual capital, and knowledge management, they frequently fail to take the vital next step of transforming knowledge into action” The Knowing – Doing Gap “How Smart Companies Turn Knowledge into Action (Pfeiffer & Sutton, 1999)
The Knowing – Doing Gap • Types of Knowledge transfer • Traditional view • Codified, paper or electronic transfer • Billions $ spent on developing systems for reporting information • Research findings • 70% of information transfer is done in an informal manner • Learn from experience • Learn from teaching/coaching • Tacit knowledge: By definition, tacit knowledge is knowledge that people carry in their minds and is, therefore, difficult to access. Tacit knowledge is considered more valuable because it provides context for people, places, ideas, and experiences. Effective transfer of tacit knowledge generally requires extensive personal contact and trust. The Knowing – Doing Gap “How Smart Companies Turn Knowledge into Action (Pfeffer & Sutton, 1999)
The Knowing – Doing Gap • Turning “Measuring Systems” into Tacit knowledge • Redefine Measurement Systems that guide behavior • Primary measures • Identify what is important, only a select few • Progress measures • Evaluate trends • In Process (real time) measures • Learn while doing The Knowing – Doing Gap “How Smart Companies Turn Knowledge into Action (Pfeffer & Sutton, 1999)
Reinventing The CFO“How Financial Managers Can Add Greater Value” • New Vision for Finance Operations • Reduce targets, measures and controls • Improve business analysis skills • Enable managers to respond to events • Measure to learn and improve • Manage risk by raising competences Reinventing the CFO, Jeremy Hope, 2006
My Philosophy… • Clients are smarter than I am • High Expectations • Want more than accrual financial statements • Often consider themselves as “contrarians” • Work with other consultants/advisors and bring unified discussions • Willingness to deviate from “rules” if needed • But understand implications… • Education and verbal discussions essential! • Teachable moments… • Importance of “tacit information” transfer
Focus Areas • Basic Accounting and Financial Reporting • Keep the banker and CPA “happy” • Inventory reconciliation • Tax Planning, etc • Cashflows and budgeting • Visual Analytics • Driver Based Modeling
Visual Analytics • Tableau Software • Integration with excel • Awesome training and support! • Caution • I am just now learning (<3 yrs) • Yes, I’m slow • Biggest challenge getting data in proper format
Multi Finish System Pig Costs – why the increasing differences?
Driver Based Modeling • Understanding Incremental or Marginal Changes • Production is dynamic – changes often have offsetting +/-. • Measure the incremental change • Focus on activities or processes verses ledger detail • What-if and optimization capabilities
Driver Based Modeling ResultsImpact of Facility Utilization Do the ramifications of overcrowding (lower sales weight, higher culling % and increased death loss offset benefit of higher numbers?
Understanding “Cause of Change” Net Change of Comparison over Baseline Study Green – positive impact, Red – negative impact Blue – sub total Easy to verify and explain component change in dynamic system
Multi Yr Lease Bull Analysis • Jorgensen Bull Study • Significant increase in numbers • Increase in carryover inventory • Higher % Culls • Release bulls 2x • What are the key drivers of profitability?
Bull Analysis Summary • Not readily seen in financial statement nor budgeting tools • Multi Yr reporting distortions • General consensus profitability down, hunch related to lease program
Bull Group Prod Margin Change • 2006 versus 2005 Bull Group Sales Type • Increasing profitability when marketing as yearlings • Decreasing profitability when marketing as 2nd lease bulls • My Dilemma • Is this format beneficial? • How do I simplify the process? • Needed Variance Analysis • Price and Quantity • Sales Mix (% culls within lease program) 18+ Mo Yearling
Bull Lease Program – Incremental Analysis with Uncertainty • Should 1st lease bulls be sold after reconditioning? • Should bulls be leased 2nd time and sold in FL/TX market? • Additional reconditioning costs • Absorb potential fallout rate • Potentially greater value? • What are the key drivers in profitability? Red – Returns with interest Blue – Returns w/o interest
Identifying and Understanding Hedging Risks • Given an expected price range… • What are optimal hedging strategies? • What is the Expected Risk Reward Ratio? • How to compare against other strategies? • “Reinventing the CFO” • Manage risk by raising competences
Why have I discussed non mgmt accounting issues? • Recapping My Experiences – so far • Financial (accrual) Accounting (1st step) • Feel successful – invty schedules & SOCF • Management Accounting (2nd step) • Historical based –Tells us what has happened • Failed at “making a difference” with existing tools • Awareness, but limited “decision” support • Visual Analysis (3rd step) • Data summarization!!! • Seeing “pictures” easier to grasp trends • Driver Based Modeling (4th step) • Incremental analysis in dynamic environment • Measures risk and uncertainty • Optimization of key variables • Identifying key drivers of profitability Lessons learned from: “Knowing Doing Gap” “Science of Success” “Reinventing the CFO”