Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword
Like this
1Activity
0 of .
Results for:
No results containing your search query
P. 1
Business Performance II: Moving Toward Crisis, Managing By Hubris

Business Performance II: Moving Toward Crisis, Managing By Hubris

Ratings: (0)|Views: 810|Likes:
Published by Dave Livingston
We're all dependent in general on how well business performs but never more so than during these turbulent times. The roots of the problems we face now like a few years back when most businesses ignored the warning signs of a slowing economy, failed to prepare and didn't position themselves. Instead they focused on financial engineering to drive stock prices and bonuses. Here we look at the Principles that should have been followed, build up a toolkit for analyzing performance and walk thru several case studies. If you're an employee, business partner, investor or customer (and aren't we all) it'll pay you to learn more about how businesses should operate, what they did or didn't do, what drives long-term value and how to judge their performance. We hope this is a good starting point and complementary to previous white paper on performance and industry studies.
We're all dependent in general on how well business performs but never more so than during these turbulent times. The roots of the problems we face now like a few years back when most businesses ignored the warning signs of a slowing economy, failed to prepare and didn't position themselves. Instead they focused on financial engineering to drive stock prices and bonuses. Here we look at the Principles that should have been followed, build up a toolkit for analyzing performance and walk thru several case studies. If you're an employee, business partner, investor or customer (and aren't we all) it'll pay you to learn more about how businesses should operate, what they did or didn't do, what drives long-term value and how to judge their performance. We hope this is a good starting point and complementary to previous white paper on performance and industry studies.

More info:

Categories:Business/Law, Finance
Published by: Dave Livingston on Dec 29, 2009
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

02/28/2010

pdf

text

original

 
Business Performance II - Moving Toward Crisis, Managing By Hubris:
Earnings, Financial Engineering, Non-Performance, and Malfeasance
By Dave Livingston, Managing Principal, Llinlithgow Associates (
www.llinlithgow.com
)
Dave is a management consultant primarily focused on improving enterprise performance by coupling strategy with execution thru the design and implementation of workable, integrated management systems.He blogs on this and related issues in Economics, Markets 
 
& Investments and specific industries and companies at 
www.llinlithwo.com/bizzx 
, his BizzXceleration blog.
 
Introduction
This collection of blog essays look at business performance in 2008 and focuses on several inter-relatedquestions. First, with the slowmotion slowdown quickly turning into something much more serious, how well werebusiness prepared and preparing for the upcoming storm? Next, two key, critical and highly co-dependentquestions – what should a business be doing? That is what are the strategic and operating principles by which itshould be judged and analyzed? And how, in fact, do you conduct such an analysis? What are the perfomers andnon-performers doing, what are the data sources, how do you collect you own data. Finally, what were companiesdoing instead of what they should have been?The short answers are that a business should be focused on creating value for its customers. That means that itneeds to have a workable, executable strategy where the strategy reflects the realities of the world around it aswell as operational capabilities. It also includes balancing short-term decision-making with long-term developmentand investment requirements. You can imagine if you like a matrix defined by columns of Current and Future androws defined by Strategic and Operational.The essays use numerous case examples to illustrate the approach and test it’s usefulness as well as appealingto great gurus, such as Warren Buffett, as sources of insight and inspiration.The bottomline is anything but good. But the machinery, case studies and principles developed and discussedhere are as applicable today as they were when first published. In fact they underpin a lot of what we see goingon around us every day.Instead of focusing on creating value, on evolving sensible strategies and developing the operational capabilitiesrequired to be effective it seems that many of the problems that showed throughout our 2007 assessments werecontinued into 2008. Business focused on the short-term at the expense of the long-term, didn’t update or refreshstrategies or develop new ones and certainly didn’t focus on developing the operating capacities required. Worsethey largely ignored the warning signs surrounding them and instead focused on short-term stock performanceand the use of financial engineering to boost apparent stock performance. All the long-term damage of thecompany and resulting in poor positioning when the crisis arrived for real.In short the focus was on financial returns not value creation or business performance. It can only becharacterized as a combination of hubris, short-sightedness and self-interest bordering on malfeasance.There are of course many exceptions and we discuss a few. In the process we hope we provide a toolkit thatallows you to evaluate the health of a business and its prospects, whether you’re an employee, business partner,customer or investor. These are approaches, techniques and data sources intended to be used and they havebeen accurate and timely.
 


 
Page 2 of 32 Strategy without execution is fantasy. Execution without strategy is thrashing.Either without a management system is unlikely.
 
Table of Contents
1. Ganesh Filters III: Analyzing Businesses Blueprints 32. WRFest(Business): Business Shock 43. Truth, Justice and the NDX Way: More Tech Outlook Reflections 54. Brave New Worlds, Painful Old Ones 65. Winners & Losers: Rubble Sorting 76. Principles, Paradigms and Potzers 97. WRFest(Tech Bizz): Times They are Changing 108. Buybacks, Bounces and Splats: Buying High, Selling Low 119. Masterclass: Buffett on Investing and Business Analysis 1210. Earnings, Valuations & Business Analysis (I): Readings 1411. Earnings, Valuations & Business Analysis (II): Resources and Approaches 1512. Naive Questions: Taking the Next Step 1813. Business Strategy: What the Future May Hold? 1914. Strategy, Context and Awareness: Sub-prime Lessons 2015. Performance Assessment Basics: Five Fundamental Factors 2216. Business Performance II (Readings): Performance, Pain and Prospects 2517. Business Performance III (Readings): Sad Stories, Good Stories & "Fixes" 2618. Sailing Into the Storm: From Execution to Innovation 2819. General Business: Perspectives, Issues & Companies 31
20.
About Llinlithgow Associates 32
 
 


 
Page 3 of 32 Strategy without execution is fantasy. Execution without strategy is thrashing.Either without a management system is unlikely.
 
January 03, 2008
Ganesh Filters III: Analyzing Businesses Blueprints
http://llinlithgow.com/bizzX/2008/01/ganesh_filters_iii_analyzing_b.html
 The prior posts surveyed the general economicand market situation and the investmentperformance situation. Here we'd like to continuethat theme and fortunately ran across severalinteresting sources and stories that reinforce theargument. Links and excerpts are continued belowthe line. A fascinating WSJ article finally extendsthe enterprise value argument by looking at currentresults vs future performance expectations.The graphic example points at MickeyD's butplease take note that it was strategic re-thinkingand operational improvements that led to changesin future value, current valuations and stockimprovements.In other words the way to translate our model ofenterprise performance assessment is nowexplicitly linked to stock performance. But, we'dstrongly emphasize, the key is the performanceimprovements, not pandering to short-term streetexpectations.Below are some equally fascinating links to analystexpectations which seem, in this light to be wildlymisjudged, to the likelihood of very large increasesin corporate bankruptcies and, fresh today, two financial columns that outline strategies that coincide exactly withour overall outlook, sector analysis and individual performance analysis. We also provide linkages to applicableprior posts.Just to explore this whole topic we ran aninteresting experiment on LinkedIn by
posting aquestion
on expectations on enterpriseperformance. So far the response has been rathersmall - which may be a sampling problem. We'dalso suggest that it's serious awareness problem.And, as today's headlines illustrates, earlywarnings are easy to ignore. The "surprise"downturn in Employment has been visible formonths yet everyone is shocked, simply shocked:). Anyway if you can get to linked in check out thequestion for yourselves. Better yet leave yourcomments on your expectations here!For another perspective we'll point to theperformance of the SP500 over the last severalyears, especially PE Ratios (for why they'reexcellent indicators of eventual long-term

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->