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Currently viewing the tag: "value creation"

8760904287?profile=RESIZE_400xThe concept of Return on Investment (ROI) was formed as part of the concept of Value Creation.  The origins of ROI were in the Manufacturing sector, where it’s simple to measure time and output.  Next, to adopt the concept was the Banking industry where intense competition necessitated Innovation Management and with that the need to calculate ROI.  ROI calculation is now a common feature in every industry and business function.

Employee Training is part and parcel of workforce development.  It necessitates spending a lot of effort and resources.  Deliberating if the Training Program is going to be worth all the costs is a valid concern.

Return on Training Investment (ROTI) is the comparison between financial benefits obtained from a training program and the total cost of running that training program.  The objective of ROTI analysis is to see whether the benefits outweigh the costs i.e., to establish if the investment was worthwhile.

ROTI calculation and analysis is significant when:

  • Investment in a training program is viewed as a substantial outlay.
  • Attainment of explicit strategic or operational objectives is associated with the training program.
  • Financial benefits and their amount from the training program is ambiguous.

ROTI can be calculated dependably so long as:

  • Measurement data on changes in business performance, pertinent to training, is reliable or can be rationally estimated by those who matter.
  • Financial values can be assigned to the applicable performance measures.
  • Cost related to developing, delivering, and handling the training program can be classified.

ROTI calculation involves selecting performance measures, gathering data on those measures as well as data on costs—both direct and indirect—related to training, and lastly calculating the Return On Training Investments.

Key steps in the ROTI calculation are:

  1. Choose the performance measures to use.
  2. Gather data on changes.
  3. Gather data on costs.
  4. Calculate ROTI.

There are 3 types of calculations that are relevant in ROTI analysis.

  1. ROTI as a percentage
  2. Benefit to Cost Ratio (BCR)
  3. Payback Period

Let us delve a little deeper into the calculation methods.

1. ROTI as a percentage

This calculation shows Net Training Benefits as a percentage of Training Cost.  An outcome of 100% or more denotes that the Program has a Net Benefit after accounting for all the costs connected with running the program.

2. Benefit : Cost Ratio (BCR)

This ratio divides Total Training Benefits by Total Training Costs.  When BCR is greater than 1, the benefits exceed the costs and the program is judged a success.  When BCR is less than 1, the costs surpass the benefits and signify that enhancements or alterations are needed to warrant the continuation of the program.

3. Payback Period

This calculation exhibits the time in which the Training Investment will be paid back i.e., when the costs equal the benefits.  The calculation is usually done in terms of months.

Monthly Training Benefits are calculated by dividing Total Training Benefits over 12 months.

It is pertinent to note that although ROTI analysis is important in evaluating a training program, merely a ROTI calculation will not typically be adequate to make the business case for a Training Program or influence top management to act.  Sometimes we have to consider non-monetary benefits of training, such as a change in attitude.  When monetary and non-monetary benefits are combined, these supplement Performance Management resulting in benefits such as reduced absenteeism, lower turnover rates, and more promotions from within.

Interested in learning more about Return on Training Investment?  You can download an editable PowerPoint on Return On Training Investment (ROTI) here on the Flevy documents marketplace.

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The purpose of Human Resources (HR) is to ensure our organization achieves success through our people.  Without the right people in place—at all levels of the organization—we will never be able to execute our Strategy effectively.

This begs the question: Does your organization view HR as a support function or a strategic one?  Research shows leading organizations leverage HR as a strategic function, one that both supports and drives the organization’s Strategy.  In fact, having strong HRM capabilities is a source of Competitive Advantage.

This has never been more true than right now in the Digital Age, as organizations must compete for specialized talent to drive forward their Digital Transformation Strategies.  Beyond just hiring and selection, HR also plays the critical role in retaining talent—by keeping people engaged, motivated, and happy.

Learn about our Human Resource Management (HRM) Best Practice Frameworks here.

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– Roderick Cameron, Founding Partner at SGFE Ltd

Stock Image 2 - Business Transfromation CSFsBusiness Transformations have become a necessity in the fast-changing technological and competitive business environment.  Transformation is characterized by significant and risk-laden Restructuring of a company, with the objective of accomplishing Operational Excellence and changing its future course.

Business Transformation is a priority for many top executives but it is usually a reaction to challenging circumstances rather than being a preemptive measure.

Business Transformation is prompted by a combination of 2 situations:

  • Need to address inherent problems causing organizational drag—these problems may be internal and/or external.
  • Aspiration by the top management and other senior stakeholders to seize the occasion of addressing these problems, in ways that deeply alter the Business Model of the organization including Value Creation.

Business Transformation entails not just making incremental changes but fundamentally changing all or some of the following:

  • Organizational Structure
  • Core Product or Service Portfolio
  • Systems
  • Processes
  • People—the way employees work
  • Technology

Undertaking such arduous effort requires approaching the task in a structured way.  Research shows that quite a few of such undertakings are based on anecdotal beliefs instead of being based on empirical data.

Countering this trend, the Boston Consulting Group conducted an empirical study of financial and non-financial data-set comprising 300 U.S. public companies.  The data spanned a period of 12 years from 2004 to 2016.  Selection was based on the following criteria:

  • Companies that had a $10 billion or more market capitalization between 2004 and 2016.
  • Of these, companies with an annualized deterioration in Total Share-holder Return (TSR) of 10% or more relative to their industry average (2 years running or more) were identified.

Based on extensive analysis—that included use of methodologies like trained proprietary algorithms, prediction models, and Multivariate Regression Analysis—a pattern pertaining to Business Transformation emerged.  The pattern depicted the following themes:

  1. Frequency of Failure
  2. Impact of Digital Disruption
  3. Impact of Downturn
  4. Competitive Volatility

The study also suggested the following 5 evidence-based Critical Success Factors (CSFs) for achieving Transformation Success.

  1. Cost Management (drives short-term success)
  2. Revenue Growth (drives long-term success)
  3. Long-term Strategy and R&D Investment
  4. New, External Leadership
  5. Holistic Transformation Programs

Let us examine in a bit more detail some of the CSFs.

Cost Management

In order to launch the Transformation effort on the correct footing, Cost Management is key, in the short term especially.  Predictably, empirical analysis suggests that the leading driver for organizations recovering from severe TSR deterioration is a determined Cost-cutting effort during the 1st year of Turnaround.  By year 3, Cost Reduction is accountable for the major share of TSR growth as companies divert their portfolios and make available funding for growth investments.

Revenue Growth

Merely short-term operational improvements do not augur well for a sustainable Transformation.  There has to be a long-term Growth Strategy put in place.  For this to happen, leaders have to challenge the foundations of the company’s Business Model.

Research divulges that Revenue Growth progressively becomes the driver for TSR recovery after year 1 in all the successful Transformation efforts.  Revenue Growth overshadows, by far, all the initial drivers for TSR recovery by year 5 of all successful Turnaround efforts.

Long-term Strategy and R&D Investment

Turbulent competitive environments, particularly, require long-term Strategic Planning and investment in Research and Development for fruitful Business Transformations.  Empirical research and analysis demonstrates:

  • A 4.8% difference between Transforming companies showing above-average long-term strategic direction compared to companies with a below-average orientation.
  • More pronounced findings in transforming companies operating in turbulent competitive environments—long-term orientation linked with a TSR increase of 7%.
  • Companies with above-average R&D investments had upwards of 5.1% TSR impact in contrast to those with below-average spending.

These CSFs strengthen the odds of success in Business Transformation individually.  When used together, most of them produce an impact that is larger than the totality of their individual parts.

Interested in learning more about the 5 Critical Success Factors for Successful Business Transformation?  You can download an editable PowerPoint on 5 Critical Success Factors for Successful Business Transformation here on the Flevy documents marketplace.

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“If you don’t transform your company, you’re stuck.” – Ursula Burns, Chairperson and CEO of VEON; former Chairperson and CEO of Xerox

Business Transformation is the process of fundamentally changing the systems, processes, people, and technology across an entire organization, business unit, or corporate function with the intention of achieving significant improvements in Revenue Growth, Cost Reduction, and/or Customer Satisfaction.

Transformation is pervasive across industries, particularly during times of disruption, as we are witnessing now as a result of COVID-19.  However, despite how common these large scale efforts are, research shows that about 75% of these initiatives fail.

Leverage our frameworks to increase your chances of a successful Transformation by following best practices and avoiding failure-causing “Transformation Traps.”

Learn about our Business Transformation Best Practice Frameworks here.

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“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market.  They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions.  I strongly recommend FlevyPro to any consultant serious about success.”

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– David Coloma, Consulting Area Manager at Cynertia Consulting

“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients.  In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over!  The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”

– Roderick Cameron, Founding Partner at SGFE Ltd

Srategic Human Res Stock Image 2Today’s information-based, knowledge intensive, and service-driven economy has forced organizations to make substantial changes to the way they compete.  Changing perspective and responsibility of top management amidst rapid Business and Digital Transformation and the shifting role of HR from being an auxiliary function to that of a driver are some of the dynamics of the evolved competition.

This evolution of Competition has been reached by passing through 3 phases:

  1. Competition for Products & Markets
  2. Competition for Resources & Competencies
  3. Competition for Talent & Dreams

Throughout the evolutionary phases of competition, the focus of Growth Strategy, the tools used, and the key strategic resources have been shifting.  The strategic objective of front-running organizations is on continuous evolution and Transformation, and motivated Human Capital is their key resource.  This realization is now at the forefront of Strategy Development as competition for scarce Talented Human Resources becomes more intense.  However, modern-day managers are still using old tools to deal with an emerging reality.

Dexterity in leadership and management is a prerequisite for leaders now.  Research suggests that the 3 important changes that the CEOs must make in terms of their strategic perspective are in:

  1. Strategic Resources
  2. Value Creation and Distribution
  3. Role of Senior Leadership

More on this topic in our editable PowerPoint presentation on Strategic Human Resources.

With the fast-changing focus in Strategy, Human Resource Managers are finding themselves leading the strategic charge.  However, a large majority is ill prepared for the role.  With Human Capital becoming key strategic resource and basis of Competitive Advantage, HR must adopt 3 core processes to evolve into the strategic HR function that has become their new realm:

  1. Building
  2. Linking
  3. Bonding

Let us delve into the first 2 core processes to strategic HR function in a little more detail.

1. Building

The first core process of Building is all about creating human resource systems, processes, and culture to counter the deep-rooted bias towards financial assets and recognize the value of Human Capital.  For instance, Microsoft annually scans the entire pool of 25,000 U.S. computer science graduates for the best 500 to be given offers, of which 400 – top 2% of that year’s graduates – accept.  This only fills 20% of the positions.  For the rest, Microsoft maintains industry linkages with 300 recruiting experts who scour the industry for the best and the brightest individuals, often wooing them for years.

2. Linking

Developing Knowledge Sharing Networks is core to leveraging Human Capital.  Converting individual expertise into embedded intellectual capital is what linking is all about.  For example, British Petroleum in the 1990s introduced the Knowledge Management and Organizational Learning program.  The main feature of the program was the “Peer Assist” where frontline workers in one location would help solve a problem for workers in another location without the usual hierarchy intervening.  Peer Assist was augmented by the “Peer Groups” of business units—i.e. business units engaged in the same assisting activities as frontline individuals.  This way managers of decentralized operations compare experiences and share ideas.  Once this Information Sharing Network took root it was supported by setting up information-sharing infrastructure – e.g., video conferencing, chat rooms, video clip encoders etc.

Interested in learning more about the details of the 3 Core Processes required to evolve your HR into a strategic HR function and Key Actions needed to implement these?  You can download an editable PowerPoint presentation on Strategic Human Resources here on the Flevy documents marketplace.

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Gain the knowledge and develop the expertise to become an expert in Human Resource Management (HRM).  Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. Click here for full details.

The purpose of Human Resources (HR) is to ensure our organization achieves success through our people.  Without the right people in place—at all levels of the organization—we will never be able to execute our Strategy effectively.

This begs the question: Does your organization view HR as a support function or a strategic one? Research shows leading organizations leverage HR as a strategic function, one that both supports and drives the organization’s Strategy.  In fact, having strong HRM capabilities is a source of Competitive Advantage.

This has never been more true than right now in the Digital Age, as organizations must compete for specialized talent to drive forward their Digital Transformation Strategies.  Beyond just hiring and selection, HR also plays the critical role in retaining talent—by keeping people engaged, motivated, and happy.

Learn about our Human Resource Management (HRM) Best Practice Frameworks here.

Do You Find Value in This Framework?

You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library.  FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:

“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”

– Bill Branson, Founder at Strategic Business Architects

“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”

– David Coloma, Consulting Area Manager at Cynertia Consulting

“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”

– Roderick Cameron, Founding Partner at SGFE Ltd

Stock Image 2 - 5Ps of PurposeMost of us have experienced a uniqueness in some organizations.  These organizations stand out, exude fervor and zeal.  Their customers are pleased with the Customer Centric Design of the company, Employee Engagement is high, and investors and shareholders take pride in being part of it.  It is not their exceptional product or service that is the base of Value Creation rather the Purpose that makes organizations unique—their reason for existence and the resulting impact it makes on the world.

Stakeholders identify with organizations that genuinely follow their Purpose.  Leadership allocates resources in-line with the Purpose.  Employees keep the Purpose front and center while making decisions for the company.  On the other hand, in-genuine Purpose may harm the reputation of the company by turning away the stakeholders.

In order to be genuine, Purpose has to be embedded in the company’s DNA, which is no mean task.  The “5 Ps of Purpose Framework” shows how this can be successfully achieved.  The 5 Ps Framework identifies 5 areas of focus:

  1. Product Portfolio Strategy
  2. People & Culture
  3. Processes & Systems
  4. Performance Metrics
  5. Positions & Engagement

There are numerous benefits to transforming into a Purpose-driven Organization.  The 5 Ps Framework contributes to unlocking the sources of value for the company and detect points of weakness.  Purpose can pay lots of dividends, but it has to be authentic and imbued in the organization’s business model.

Let us delve a little deeper into the first P of the 5 Ps of Purpose.

Product Portfolio Strategy

An organization’s Product / Service offerings and the associated modalities of market and position planning that best cater to the target market ought to imbibe the Purpose of the company in order to appeal to the stakeholders.

The 1st step for achieving this objective has to be the alignment of business portfolio with the company’s Purpose–i.e. we need to integrate Purpose with our Portfolio Strategy.  Companies already in existence may not be able to start afresh but they can surely reshape their business mix in a dynamic and resolute manner.

In step 2, the business portfolios are filled out with Products or Services that match the Purpose, and the ones that do not are rooted out.  Certain key actions are needed to embed Purpose into the Product or Service offering, they include:

  • Rethinking product portfolio — for example pulling out certain products, launching new products.
  • Modifying pricing in line with Purpose.
  • Re-evaluating portfolio and testing rationale of individual assets in light of common criteria.

A case example is an energy company in the extractive industries, founded 85 years ago, which has proved successfully that Purpose can be reinvented.  Being in the extractive business for such a long time has not restricted the company from reexploring what an energy company may look like in the transforming environment of the future.

The company has significantly transformed its Purpose — “reimagining energy for people and planet.”  In line with its Purpose, the company has divested from its petrochemicals businesses and plans to reduce its legacy oil and gas business by 40% by the year 2030.  The company will instead augment its low-carbon energy businesses such as bioenergy, hydrogen, electric vehicle charging businesses, and aims to be a net-zero carbon emitter by the year 2050.

Interested in learning more about 5 Ps of Purpose Framework?  You can download an editable PowerPoint on 5 Ps of Purpose here on the Flevy documents marketplace.

Do You Find Value in This Framework?

You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro LibraryFlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:

“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”

– Bill Branson, Founder at Strategic Business Architects

“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”

– David Coloma, Consulting Area Manager at Cynertia Consulting

“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”

– Roderick Cameron, Founding Partner at SGFE Ltd

Value Trap1Changing industry ecosystems and competition today demand from the organizations to undergo strategic shifts.  The purpose of a company is undergoing Business Transformation from serving the interest of shareholders to serving all stakeholders that influence the organization.

Shareholders are often considered the only stakeholders that invest in a business.  Senior management needs to be cognizant of the importance of shareholders as well other stakeholders who create value for the organization.  They should work on building a collaborative Organizational Culture and paying heed to the welfare of all those groups that play a role in organizational growth.

This warrants a thorough evaluation of all stakeholders, their long-term interests, and Value Creation—or Value Destruction—potential for the organization.  But first, this calls for finding answers to the following key questions:

  • Who creates the most value for the organization?
  • Who among the stakeholders typically secure the best deals from the organization?
  • Who is the victim of having the worst deals from the organization?
  • Who among the stakeholders is potentially untrustworthy?
  • Are there any intermediaries or stakeholders fulfilling their personal agendas?

Answering these questions is critical for the executives, otherwise they may risk falling into Shareholder Value Traps.  Recognizing and understanding stakeholder value traps while the managing stakeholders‘ various interests helps executives achieve shared and individual long-term goals.  These 5 common traps prevent stakeholders’ interests to get integrated with the interests of the organization and destroy the value of a company if overlooked:

  1. Ignoring cash-flow driving stakeholders while distributing cash
  2. Miscalculating reaction from stakeholders
  3. Supporting under-performing units
  4. Conceding to willful vulture capitalists
  5. Misjudging intermediaries role in transactions

Let’s discuss 3 of these stakeholder traps individually.

TRAP 1 – Ignoring cash-flow driving stakeholders while distributing cash

Shareholders are often treated as the critical drivers of long-term cash flows.  However, they are often short-term cash flow generators, whereas other stakeholders who provide their input for the organization in the form of their competencies and experience deliver long-term value.  These real contributors should be given top priority when distributing cash on earnings.  Underestimating or failure to identify the real long-term cash-flow generators can be a fatal value trap for an organization.

TRAP 2 – Miscalculating reaction from stakeholders

Another trap that most executives fall victim to is discounting potential backlash from weak stakeholders upon unfair distribution of cash / incentives.  Mining value from these victims to support shareholder disbursements can be equally detrimental, as annoyed stakeholders—with the help of social media and NGOs—, legal battles, and financial penalties can devastate a firm’s reputation and financial health.

TRAP 3 – Supporting under-performing units

Senior executives and boards at some organizations foster free riders—stakeholders that sap more benefits from the enterprise than the business they generate—at the expense of long-term value shareholders.  Free riders include an under-performing department close to the board, or a dwindling business unit that is part of a profitable section and whose financials are not categorized separately.

Continued support to these free riders is often at the cost of allocating resources to other potentially more profitable ventures, and this practice has led many companies to losses and even bankruptcies.

Interested in learning more about the Stakeholder Value Traps, types of organizational stakeholders, and strategies to stay clear of the Stakeholder Value Traps?  You can download an editable PowerPoint on Shareholder Value Traps here on the Flevy documents marketplace.

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Many large corporations depend on M&A for growth and executives can boost the value that deals create. But poorly executed M&A can saddle pic 2 Board Excellence M&Ainvestors with weak returns on capital for details. In fact, the margin between success and failure is slim.

Many Boards are reluctant to cross the line between governance and management. The level of engagement is often outside the comfort zone for some executives and directors. As such, they miss opportunities to help senior executives win at M&A.

There is a need to modernize the Board’s role in M&A. Modernizing the role of the Board in M&A can result in the alignment of the Board and management on the need for bolder transactions with more upside potential. Further, this is essential in achieving a competitive advantage.

The 3 Core Opportunities in M&A

There are 3 core opportunities for the Board to play an impactful role in M&A.

  1. Potential for Value Creation. The first core opportunity, potential for Value Creation enables the Board to challenge the executive’s thinking on potential transactions. This is an opportunity for the Board to maintain constant touch with the company’s M&A strategy, the pipeline of potential targets, and emerging deals.
  1. PMI Plans. This is an essential core opportunity that enables the Board to boost value creation to as much as 2-3x the net value. Post-merger Integration (PMI) Plans representat an opportunity to pressure test against stretch growth and cost goals before and after a deal. Greater variation in the quality of post-merger plans exist compared to financial analysis and pricing of transactions.
  1. Competitive Advantage in M&A. Competitive Advantage is a core opportunity that is unrelated to a transaction’s deadline. This is an opportunity to create a competitive advantage through M&A skills. These are corporate assets that can be difficult to copy. Making that decision to create a competitive advantage through M&A can lead to bolder decisions with more upside results.

The 3 core opportunities can promote greater Board engagement. When this happens, discrete deals can be converted into ongoing deal processes and dialogues that can deliver greater value from M&A.

Maximizing Core Opportunities to Attain the Greatest Deal

The potential of the 3 Core Opportunities to embolden the role of the Board in M&A is great. Organizations just need to have a good understanding of each core opportunity and the underlying key areas or dimensions of each key area. Let us take a look at the 1st Core Opportunity: Potential for Value Creation.

The Potential for Value Creation has 3 critical key areas that can challenge that lead opportunistic transaction to succeed. One critical key area is Strategic Fit.

Strategic Fit is key to determining why a company is a better owner than competing buyers. Deals driven by strategy succeed more often when they are part of a stream of similar transactions that support that strategy. This is a key element in Strategy Development.

How can we enhance the role of the Board relative to this key area? The Board can play a vital role in clarifying the relationship between a potential transaction and strategic planning. They are also in the best position to define how the deal will support organic-growth efforts in target markets and provide complementary sources of value creation.

The other key areas under the Potential for Value Creation are Financial Statements and Risks vs. Rewards. The Financial Statements is a key area that can correct the Board’s tendency to put emphasis on price-to-earnings multiples which can be limiting. The Risks vs. Rewards, on the other hand, is a key area that challenges the Board to acknowledge uncertainties in pro forma.

The other 2 Core Opportunities also have their own essential points or dimensions the Board must focus on. Only then can these core opportunities be of the maximum potential of modernizing the Board’s role in M&A and gaining the greatest value.

Interested in gaining more understanding of achieving Board Excellence through M&A? You can learn more and download an editable PowerPoint about Board Excellence: M&A here on the Flevy documents marketplace.

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Business Process Reengineering (BPR) is a practice of rethinking and redesigning the way work is done to better support an organization’s mission and reduce costs. In all too many companies, reengineering has been not only a great success but also a great failure. After months, even years, of a careful redesign, these companies achieve dramatic improvements in individual processes only to watch overall results decline.

The promise of reengineering is not empty. It can actually deliver revolutionary process improvements, and major reengineering efforts are being conducted around the world. It can even lead organizations to achieve a successful Business Transformation.

Yet, companies cannot convey these results to the bottom line.

The Strategy that is BPR

Business Process Reengineering (BPR) is a Business Management strategy focused on the analysis and design of workflows and business processes within an organization. Often, companies direct Process Reengineering initiative on 2 key areas of business. One is in the use of modern technology to enhance data dissemination and the decision- making process. The second key area is the alteration of functional organizations to form functional teams.

As a strategy, Business Process Reengineering can greatly impact on the organization. It can help organizations fundamentally rethink how work must be done to improve customer service, cut operational costs, and become world-class competitors. It can help companies radically restructure their organizations by focusing on the ground-up design of their business process. BPR, as a strategy, can direct organizations to achieve Operational Excellence.

In the process, there are 2 dimensions that are critical in translating these short-term narrow-focus process improvements into long-term profits.

Understanding the 2 Dimensions of BPR

  1. Breadth. Breadth is a dimension of BPR that focuses on the range of activity types within a process. It includes the identification of activities includes in the process being redesigned that are critical for value creation in the overall business unit. Breadth can reduce overall business unit costs and can even reveal unexpected opportunities for a redesign.
  1. Depth. This is the dimension of BPR that focuses on the abstraction levels of process logic within a process. It refers to how many and how much of the depth levers change as a result of reengineering. Depth provides the most dramatic process cost reduction and avoids the classic reengineering pitfall of focusing on fixing the status quo.

Having a good understanding of the 2 Dimensions of BPR will open a range of opportunities for organizations to achieve innovative performance and enhancements.

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