dwd/wlh /v5.0/5 september 2008 1 managing ahead of the curve daniel w. dehayes william l. haeberle...

DWD/WLH /V5.0/5 September 2008 1

Managing Ahead of the Curve

Daniel W. DeHayesWilliam L. HaeberleProfessors EmeritusKelley School of BusinessIndiana University

September 2008


Agenda

Purposes/Take-aways

Why Worry

Typical Ineffective Behavior

Suggestions for Managing Ahead of the Curve

Summary


Purposes

By managing ahead of the curve, the company leader can:

Increase the respect for the leader inside and outside the company.

Increase the sense of certainty about the future of the company for the employees.

Transform complex big problems into solvable little problems.

Reduce the number of lost opportunities.


Why Worry

In most industries, the business environment changes rapidly, affecting both the long-term outlook of the business and/or short-term revenue and cost.

Yet: We are conditioned to think about the future in annual

increments at specific times (during the planning cycle). Board meetings spend more time critiquing the past than

discussing the future. Management pays little time considering the impact and

reasons for lost sales opportunities. Industry-changing opportunities (based on new technologies or

changing supply chain economics) are often not given enough consideration.

We too often focus on “being competitive” rather than “being ahead of the curve.”


Typical Ineffective Behaviors

Spending substantial time critiquing past performance and little time considering the future.

Trying to increase total market demand at intermediate stages in the channel.

Believing that performance is determined by motivation rather than from shared expectations and skills.

Not understanding that your business model begins with the value proposition.

Substituting higher compensation for leadership. Setting goals as an extrapolation from last year’s goals.


Suggestions for Managing Ahead of the Curve

In the Boardroom

During Management Meetings

When Setting Objectives

When Setting Compensation

When Anticipating Slower Demand

When Anticipating Higher Demand


Suggestions---in the Boardroom

Make the ratio of time spent reviewing the past financials to reviewing the future 12 months rolling forecast at least 1:4.

Compare current vs. past operational performance by recording development cost and special projects below the operating income line.

List lost opportunities (either bids lost or bids we were not in a position to respond or did not hear about).

Map and understand supply chain demand dynamics. Never assume that the revenue of the “acquiror” plus the

“acquiree” will be the new company revenue. Require a good succession plan. Discuss how future changes may impact members of the

management team personally. Insure more outside members than inside on the Board.


Suggestions---During Management Meetings

Focus attention on forecasts, not on the past. Require 12 month rolling forecasts of revenue and operating

income (with last 12 months as check). Require ever decreasing COS labor cost per unit. Demand that a limited set of KPIs are developed and

maintained and insure regular reporting on their status. Require a sales pipeline report, segmented by stage in the

sales cycle. Get a revenue forecast for the month each week. Require an action plan when this month’s forecast versus last

month’s forecast is unfavorable.


Suggestions---When Setting Objectives

Include a goal on the number of new (not line extensions) products.

Include at least one revised or re-engineered key process. Translate your vision into the needed attributes (skills) of

your people. Find ways to smooth production/employment levels Include efforts by your suppliers in your plans to enhance

customer service.


Suggestions---When Setting Compensation

For senior management, reduce the base salary and increase performance-based compensation.

Eliminate annual across the board increases, replace with a bonus plan based on performance.

When an inflation adjustment is needed, put 3% of total wages in a performance pool.

Insure that there is a variance in bonuses to reflect performance.


Suggestions---When Anticipating Slower Demand

Use unpaid time off around Holidays. Establish a policy of “use it or lose it” for vacation. Provide incentives for vacation scheduling at slow times. Include alternate activities in job descriptions and insure

cross-training (to facilitate assignment to another useful activity when primary activity is slow such as production to customer service).

Release temps/new hires/low performers immediately upon anticipating slower demand.

Expand your wellness and accident prevention programs.


Suggestions---When Anticipating Higher Demand

Anticipate the need to fill future positions and start early to hire.

Write new job descriptions with goals imbedded. Gear up training capacity. Activate more careful asset management. Maintain contact with people who can “see over the

horizon.”


Summary

Your people expect you to be “ahead of the curve.” We spend too much time analyzing the past versus thinking

about the future. It is easy to develop ineffective behaviors. Leading ahead of the curve demands activities in the

boardroom, in management meetings, when setting objectives, and when anticipating significant changes in demand.

dwd/wlh /v5.0/5 september 2008 1 managing ahead of the curve daniel w. dehayes william l. haeberle...

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