Living, Breathing, Growing Business Bible

Rather than a tool to communicate and to calculate bonuses, the primary purpose of this 4^th generation MBO tool is to have your organization grow smarter, in an exponential way, about your markets, your business, your company, your capabilities and yourselves. This approach is the most powerful management technique I have ever utilized; the structure and specifics become the underlying agenda for your management team and its decisions. You create this living, breathing, growing business bible by combining (a) concept-type priorities (b) specifics for each even though your knowledge base is insufficient, (c) tough-minded initial stack-‘em prioritization, (d) scrambled assignments, (e) many mid-course learning-based corrections, and (f) event or decision driven reprioritization. I’ll discuss (a) and (b) today:

Step back, stretch your thinking, to create your concept priorities, such as: get our balance sheet credit-worthy within 6 months (or our primary lender will foreclose), re-establish our market place product quality image within 9 months (or our distributors will abandon ship), match our expenses with projected revenues and simultaneously create a revitalized organization within 6 months (we must have personnel reductions, but the resulting smaller organization has to improve performance), create three new products and successfully launch into the market place within 12 months (to replace dying products), establish a bona-fide market presence in China within 12 months (as our European market is collapsing). These are priorities that are created by you and your team, priorities whose achievement is necessary to make a significant step-change in your company’s performance and ongoing prospects. At this point, you may now know how to get there: in fact it’s better to not encumber your thinking with too much reality on specifics. These goals answer the question: “What must we do do, not only to survive but to also begin a positive surge, and how fast?” These goals result from brainstorming, from director input, from board or bank or creditor pressures, and from just plain common sense.

Now its time for specifics. For an example, I’ll use the first, “get our balance sheet credit-worthy within 6 months”. In our case this means create cash, and although I have no idea how to do it we’ll need $25M more in 6 months than we have now. There are a finite number of ways to generate cash in relatively short order, all relating to the balance sheet. P&L items such as pricing, product cost, margins, and purchased materials will help in the long term, but not in our critical 6 month window. So we look where we can, and with insufficient data but some judgment, pick every possible area of improvement and create individual targets: Accounts receivable is area #1 [customer terms $2M, collection procedures $4M, billing timing (when do the 30 days actually start) $1M]; Capital projects #2 [reduction, even stopping projects underway, $3M]; Accounts payable #3 [supplier terms $1.5M, payment policies $1M]; Inventories [work in process $3M, obsolete (sell don’t keep) $1M, finished goods (run specials, discounts to distributors to purchase) $3M], Raw materials [run down to tight levels $1M]; get repayment on loans to distributors $1.5; sale of excess assets like patents, equipment $3M. Whew! There are lots of ways to skin a cat, and we need to use them all. Now we have one of our priorities both “in concept” and with specifics. Next week we’ll take step #3 and show how to create stack-‘em prioritization and the benefits of scrambled assignments.

Comments

[thomas epley]

Nicholas, you've captured the essence of this entire publication with your comment "success is more a function of action than it is of certainty". Congratulations on your perception and succinctness.

[Nicholas Vakkur]

I really enjoyed reading this most recent 'link' for several reasons. First of all, it answered several of my questions regarding execution that I had shared in this same forum previously (e.g. in essence, these questions are the same as those which dog researchers searching for 'perfect' answers to complex questions, such as "how can you trust your conclusions to possess any degree of certainty?"). It is clear to anyone who diligently absorbs the wealth of information contained in these pages that, for a manager (and perhaps in a different sort of way for a researcher as well) success is more a function of action than it is of certainty. While action must be prudent and follow a logical course to create a desired outcome, the manager that acts only when she is entirely certain will ultimately produce a less than desirable outcome. I realize that this summary is simplistic and overlooks the majority of valuable lessons in this most recent concept. Nonetheless, it amply describes what is of most value to me personally.