Metrics from an Ownership Perspective

Speaker A I have a background in the pharmaceutical industry. First, I worked seven years for an American company ledle owned by American Cyanide and came through did. Oh really? And I came through the marketing and sales lines. But I was also heading up phase four clinical trials in Scandinavia the last few years at that company. And I'm saying that because I'm not a researcher, I'm a business person. After that I was recruited to Pharmacea, which was a pharmaceutical company, a global one. And by the end of the was in the executive committee of Pharmacea being responsible for corporate culture and global positioning. Then we were acquired in a hospital takeover late 80s. Since I was the one that owned the business plan and were younger than the others, I thought I could impact and I had to leave after a short while. And then I developed Sweden's largest training house. I developed a company that year, free, made $30 million a year. Then I moved to the US and we're heading up an It company, a software house here in the United States for four years. And at that time I had some major conflicts in the company and that's how I met Elliot Jacks. So I came here in 19 898 for a conference here in Toronto actually. And after that I met Elliot the day after for a day in his apartment. And after that I thought this was the missing piece, this was better than sliced bread. So I thought now I go back to Sweden and I develop a huge consultancy house based on these findings. And what I found was it wasn't so easy and the kind of things that you all discovered. But I found one customer, for example, Janokolson, that is my colleague today. At that time he came from GE and was heading up the Swedish business in northern Europe largest utility company. And he was coming in there when it was regulated. So I helped him as a customer and he's been with me now for the last two years. The reason why Elliot, he also actually was an owner of our company. So he's stake and he was an honorary member of the board. And I'm happy to have learned to know him by the last years of his life because I think that he always continuously discovered new things. So I think we really learned some good things out of him. And he helped us Productify what we are doing and we try to help him to commercialize and try to sell and market because I think that's where we are all missing because this is not an easy sell as we all know. What we have been doing is we have always been targeting this business from an ownership perspective like you were indicating. And we have been targeting the venture capital and buyout market also families, we have also been going for the big guys, but we have ended up then now today after nine years in business, we have been able to do time span and talent pool in more than 150 top management companies. And then I mean top management, it's not business units, it's top management. And they range from all the way from venture capital owned small businesses up till big global, multinational, multibillion dollar companies. So we work through the whole register of companies. And what I'm going to show you is I'm not going to show you the software that I'm also launching in September because we have signed a four years contract with a Swedish multibillion dollar company that is paying for the development partly, at least, of the software that we are developing. And we are installing that by September with this customer. But we have also been working then, as I said, a lot with the venture capital industry, which means that we have worked with small companies. And since I have a pharmaceutical background, I used to talk about the small companies as laboratory research because when we work with the big guys, when we do something really good and sometimes we can cut a lot out and then we can really prove the effect of what we did, at least when we save money. But it's harder to prove our effect on the positive side. So therefore I talk about the small companies as laboratories because it's more obvious what we do in those companies. So I'm going to show you a few cases from that. Which one is it? This one. We're going to jump over a few slides. This is the first company we have tried to document. We haven't done any research, but we have been able in three of the Swedish universities to do master thesis studies where they have been going back to cases that we've done and been doing, investigating what has been the outcome of the research we've made. And this is a company that works with workforce optimization and it's venture capital owned. It's only $4 million in turnover and they are losing money. And the sales manager is trying to get the CEO fired and he knows the board and the CEO is new and the CEO, he wants to sell a bigger package and the sales manager wants to sell a smaller package. So we are brought in just when they are going to fire the guy. And we do the analysis, we do the time span and we do it by interviewing the chairman and we interview the president and we interview the sales manager. And as you can see here, like in the financial systems, instead of having black, we have green, but you have red figures when it's wrong. Here you see the role of the sales manager on level four. You see that there are three reps on level three and four reps on level two. So they become red because they are too far away. You have a gap to the sales manager. If you then look at the individuals. Here is the president. He is on the right level for the job. Here you can see the sales manager. He is red because he's too far away from the president. But he is also not on the level where the role is. You can see that he has one rep that is on the same level as himself. Then that becomes red. But then you have all these ones. They are green, so it looks nice. All the reps are good for the sales manager. But obviously this kind of business is sold to decision makers on this level, which means that these reps can't make any deals. So that's a sad story. He got his right reps, but it's not the right for the company. And what we recommend then is to pursue the system strategy, the big package strategy to support the CEO and to upgrade Safe. And the results is that the CEO is still in the company they went from during the period when this student interviewed and were overlooking a certain period. He interviewed owners, he interviewed board members and he interviewed the president and the board member that was going to cut the head of the president. He said, enhances recommendations crucial for company survival. That's the quotation from the master thesis. But also, interestingly enough, there is only one board member in this company that is not a venture capital partner. He's an external guy and he is on level six. He says with this CEO we could create much more value if we could upgrade the board and think about that. The next case I'm not going to go through, but that's a company here in Denver that was the same. We found out what had to be done and it was as successful. But this one is a very small case, but it's still very interesting. This is a Swedish trading house with 7 billion Swedish in sales. So it's about a billion dollar. They were going to recruit three only trainees and had had several hundred different applicants and they selected 35. They went through the assessment center with psychologists. They did all those kind of group dynamic training with who is presenting and who is becoming the leader in the group and all that. And they found that there were four candidates that were equally good, but they should have only three. All management are involved in this process except for the CEO. So the morning that the CEO is going to meet the four and choose the three, he's getting the result from us. And obviously they haven't thought through what the time span is of the role that they're going to get when they are done. So I'm asking the CEO the role will be when they are done and I'm setting the time span on that rule. Okay. And this is how the result looked like. There were one possibility to get a role on level three when they were done with the training or it was one level four role. So it looks like it's at least two persons that are green that could be recruited. But then, as we all know, if you put it into this one, top management here, this is a level six organization and the management team is on level five. The guys here will never reach top management. The guy here will reach it in 25 years. But you can buy those on the street. This one here, he will reach that level in ten years. And sometimes when we're consultants, the clients don't do what we say, but in this case they listen. So they recruited only one and they are very, very happy. Okay, then you mentioned mergers. These are two listed Swedish companies and this is a friendly merger. But it's still and it's the kind of mergers among equals. And then, as you know, when you merge companies like that, normally you split the management team so that half of the managers become the management team from one company and half from the other. But when we do the analysis, it looks like this. And fortunately it's the buying company that have the guys on the higher level. So I'm able to convince these guys that none of these people should be in the management team. They have to report to these people. And you can imagine what would have happened if these two would be reporting to those two. You can imagine. And the result of this is that they achieved planned synergies and cost savings and they didn't lose any key member of the management team. You can see this when you merge units within big companies also it's the same thing. And then one more case before I show you a big company. This is a case where some of the major Swedish companies ABB. It was the utility company that Janoke came from and another utility company and the 6th pension fund in Sweden. They had invested an enormous amount of money in solar cell projects and now the money is out and the owners are totally in disagreement on what to do. And what we are doing then in this case is we want to do the time span. We are brought in by the pension fund and we organize a four hour session. We work with think tank brainstorming type systems, the software where everyone is working with a computer and we allow no discussions. Think about how effective we would have been at this session or this conference if we had certain exercises would have used such a tool. But we used that kind of a tool that was used when the ferry that exploded. So this software were originally developed for the US army and it was used to discover the reason why the ferry were exploding. But it's also used for business planning. And we used it and in 4 hours we have the owners, the board, top management and two brought in experts, one academic and one on the financial side and we develop a business plan we actually end up, of course, as you can imagine then with the task of the President, with the time span, okay? And that is what we come up with. And it's pretty obvious that the president that they thought they should fire because he was too academic but he was right for the role and we strongly recommended that they should keep him but the chairman wasn't on the level needed. So what we recommend then is that they should provide the funding and consolidate ownership. So we recommend the fund to buy the shares of the other owners and then to employ this new strategy and support the CEO and upgrade the board. And that's what they did. And one and a half year later, one and a half year after bankruptcy, or close to bankruptcy, they sell this company for 1.4 billion Swedish and the German company buying the companies put in 600 million Swedish, which is like 100 million US then. And the PE Fund makes eight times the money. And they still have 30% of a company with this kind of a cash and a substance value of a billion. Then as a consultant you would like to have a success fee instead of consultancy fee, wouldn't you? And this is the article in the daily Swedish business magazine the Sunny Boys cash in, that's what it says and that's the pension fund then that is cashing in, not us. This is another one which is a bigger company and shows you the kind of GUI that will come in our software. It will give you an indication of the GUI that we will have because we have worked a lot, we've been helping a lot of the gaming companies to become successful and we always start with the GUI. Like you also said, you have to start with the GUI and you can always improve on that but it starts there. The computer can always handle the data but this is a company now present in the US and Europe and it was then acquired by a buyout company and it has about almost a billion dollar business and 1500 employees and they're going to have 100% increase in five years. The market is growing with five to 10%. So you can imagine that they need to go out and buy companies and they need to establish in China. But this is an industry, it's a process industry but the customers have been consolidated and it's still a hands on process industry. So instead of selling to family businesses in each country they are now selling to global or at least international big companies. So they have to really transform this company into something very different and this is how they draw their organizational shock. They are very happy and proud that it's so flat. And then we do the interview. We interview the management team here in the US, we interview the subsidiaries in Europe and we interview totally 25 people. And those of you that do time span then you know by doing that we will have about 125 people and roles covered by interviewing 25. So it's a very cost effective way. This is how it looks like and this is worse than it looks like because on level four here you can see that there is one role and all these looks like they report to this one. But in fact three of these roles have a matrix responsibility for the other. So it's basically three roles on level four and you can see the gaps here but you're all familiar with what that is. Okay? And you can see then that this follows the pattern from many of the others research. It's about half wrong in terms of delegation of roles. And for example, the German guy, he says the management from Sweden, we give no direction, we're running the business as a silo by ourselves. And they say the same in Spain, they say the same in the US. It's not consolidated, it's nothing. And if you look at the people it's the same thing and you can see it's even worse. But you can also see here that here is the CFO and here is a person that is today having a role down here. But if this person becomes the boss of these, they turn green and obviously the system will allow you to play around with things like that so you can then see what happens. Like you said, then it will be easier to get an acceptance from everybody because it's a quantitative way and a very illustrative way to show what's going on. And then this is the summary of it. The role individual relationship I don't have on this chart but of course we have that as well and we also of course have this one, but I'm showing this one only because there is nobody here that is going to turn up to level five and these guys desperately need that. So our recommendation is to upgrade sales technology in production. So basically what we say, you have to go from a level five company to a level six company and you have to recruit three new managers on level five to be able to succeed. And if you are a buyout and have 100% of the shares, those are the things you can do. It's much more difficult of course when we work with a listed company and also you should reduce the layers on level four then from three to one. So you take away two layers on level four and that is our recommendation. This is going on. Then I want to show you one more thing which is in line with when we try to sell this and convince people why they should buy in. And this is a transport company with a 6 billion Swedish, so it's about a billion US company and I am over that. If you look at this, this is a level five organization. So the president role is here. This is the management team. It symbolizes all the management because we've been around there. So they are organized with level four roles reporting to the president. But you can see also that it's 35 roles reporting to this one but on the same level, 53 roles report to these 35 so they are not integrated. You can imagine the effect of such a poor organizational structure and on top of that, twelve is reporting to these also on the same level. And then if you go to the next slide it gets even worse. Now, you look at the individuals, these are people that are on level four and they have 31 people that are correct in relationship to their boss, but they have 107 reporting to them that are on the same level as them. And they have 23 that are reporting to them that are on the same level as these guys. Imagine. And then here comes the problem because when you look at the role and individual relationship, you have 284 roles here that are first line managers. 75 of those are on level three and they hate their job. Do you think they give these people the guidance and what is needed for these people to do their job? Obviously not. On top of that, since we know felt fair pay these guys cost twice as much as these guys cost, that would be doing the job much better. So then we talk about selling based on savings and then on top of that you would achieve all the positive results. So today we can stop the slides there and I just want to summarize by saying that on top of the 150 companies we have done the analysis of the management teams, we have done a time span and talent pool for about more than 4000 roles and individuals. We have also been doing rating of several hundred people in individual ratings and CPC and we have also been collecting people that are conceptual so level five and above. And today we have a database of 500 people and in Sweden, as you know, maybe it's about 9 million people. So we don't have that many people on the conceptual level, but we have today mapped about 500 which means that when we have 1000, since they know each other, we think that we will have a pretty good picture. And on top of that, we are also acting like moderator in the most extensive executive network among the big companies in Sweden where the CFOs, the HR executives and the presidents are meeting. Not the top ten, but the rest of the guys are invited. So we are acting with them. So we try to at least get a picture of what's going on in the Swedish market.