Pkf Presentation V 4

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PRESENTATION OUTLINEPRESENTATION OUTLINE

• Tom’s brief

• Strategic Overview of Industry

• SWOT + House

• Development of Leadership Thinking

• Good to Great - Pineapple Concept

• Value Profit Chain

• 4+2 What really works?

• The Challenge


INTRODUCTION - TOM’S GUIDELINES!INTRODUCTION - TOM’S GUIDELINES!• Forward Thinking - Where are PKF going?

• Encourage Partners to think and Discuss by:-

• Reviewing Challenges facing the profession

• Doing a Claud! - a surprise or two

• Create “Discomfort” and “Energy for Challenge and Change”!

• BLAME TOM !!!


STRAIGHT IN!STRAIGHT IN!


SUPPLIERSCapital

ITTechnical Knowledge

PORTERS ANALYSIS OF AN INDUSTRYPORTERS ANALYSIS OF AN INDUSTRY

NEW ENTRANTSTenon, Vantis

NumericaBarclays?

BUYERSChallengingQuestioning

Influenced by Press

SUBSTITUTESTechnology - DIY

e.g. Inland Revenue ,Quicken, Sage

Market Competitiveness

IncreasingGlobal slowdown


SWOT ANALYSIS - SWOT ANALYSIS - EXTERNAL OPPORTUNITIES AND THREATSEXTERNAL OPPORTUNITIES AND THREATS

OPPORTUNITIES

Client dissatisfaction with perceived independence and objectivity

Public sector spend next few years

Client migrants from Big 4

Pensions - Red Tape and Regulation

Outsourcing

Relocations abroad eg. Telecentres - UK systems and standards abroad

Technology and its uses and abuses

Work/life balances - More diverse business owners


SWOT ANALYSIS - SWOT ANALYSIS - EXTERNAL OPPORTUNITIES AND THREATSEXTERNAL OPPORTUNITIES AND THREATS

THREATS

Global Slowdown

Wind-up’s > Start-up’s

Audit volumes and margins - down

PI costs - up!

Tightening regulations - Financial Reporting Council

Image / Probity of accountancy

Sarbannes-Oxley - post-Enron - not legislate

Litigious society - LLP


SWOT ANALYSIS - SWOT ANALYSIS - INTERNAL TO PKF, STRENGTHS & WEAKNESSESINTERNAL TO PKF, STRENGTHS & WEAKNESSES

STRENGTHS

Culture Of Integrity

Governance - Council

Skills And Energy

Dynamic Approach

Commercial Knowledge

Range Of Services

Translate Regulation Into Business Speak e.g. Budget

PKF Brand & International Association

New It System In Core Practise


SWOT ANALYSIS - SWOT ANALYSIS - INTERNAL TO PKF, STRENGTHS & WEAKNESSESINTERNAL TO PKF, STRENGTHS & WEAKNESSESWEAKNESSES

Strategic Alignment• London V Provinces• Geography V Sector V Discipline• Sport V Perception

Benchmark V’s Competitors

Structure • Ownership Fairness• Pyramid - Age/sex/diversity• Corporation V’s Franchises

Accountant V’s Prop Owner

UK Image Post 90’s Us Issues

Communication & More


Where are PKF in theWhere are PKF in theHouse of Change? House of Change?

Complacency

Denial

Excellence /Renewal

Confusion / Chaos


LEADERSHIP THINKINGLEADERSHIP THINKINGIn Search of Excellence

Elephants

1 Minute wonders

.com’s to bombs!

Built to Last

Good to Great - sustainable

Value Profit Chain

EQ

What really works?


The Value Profit Chain - The Value ConceptThe Value Profit Chain - The Value Concept

GOALS are to :-

1. Maximise value in a web of relationships - employees, clients, partners2. Ensure value is distributed in ways that are perceived as fair

BUT FEW

1. Deliver on promises2. Can completely rethink their business3. Identify with enthusiasm and creativity their core values4. Have leaders with mind-set and skills to change


Economic, Social, Legal,and Technological Environment

Leadership/Management

Culture/Values

Vision/Strategy

The Vale Profit Chain - Performance TrinityThe Vale Profit Chain - Performance TrinityAttention to the PT drives and sustains successAttention to the PT drives and sustains success


The Value Profit ChainThe Value Profit Chain

“Harder ” strategic elements are easiest to formulate BUT

“Softer” - is real challenge

The Performance Trinity are “starting point for change” - leaders first

Foundation for Value Drivers which leads to the virtue of Value for all stakeholders


PKF’s PINEAPPLE CONCEPT!PKF’s PINEAPPLE CONCEPT!

GOOD to GREAT Companies

The Hedgehog Concept ! Stick To It

Deep Understanding Of 3 Interconnected Issues:-

What Are You Deeply Passionate About?

What Can You Be The Best In The World At?

What Drives Your Economic Engine?

Achieve Truly Superior Economic Returns


WHAT REALLY WORKS:WHAT REALLY WORKS:The 4+2 Formula for The 4+2 Formula for Sustained Business Sustained Business SuccessSuccessThanks to Nitin NohriaHarvard Business School


What management practices differentiate companies that

dramatically outperform their peers?

FUNDAMENTALFUNDAMENTALQUESTIONQUESTION


Source: Compustat

LosersWinners

Growth over 10 years

Operating income

22%326%

ROIC (%) -8.52 PTS

+5.45 PTS

Sales

83%415%

Assets

97%358%

TRS 62%945%

WINNERS DRAMATICALLY OUT-PERFORMED ON ALLWINNERS DRAMATICALLY OUT-PERFORMED ON ALLFINANCIAL MEASURESFINANCIAL MEASURES


ANSWER IS STRAIGHTFORWARD: ANSWER IS STRAIGHTFORWARD: 8 MANAGEMENT PRACTICES MATTER8 MANAGEMENT PRACTICES MATTER

4 Foundational 4 Complementary

• Superior talent management

• Insightful, involved CEO driven by knowledgeable, financially incentivised board

• Innovation machine with industry transformational intent

• Merger, Acquisition, and Alliance Intensive Growth

+

• Active external antennae, driving clearly stated, narrowly focused growth strategy

• Operational excellence and quality branded customer- focused products

• Aggressive, exciting, value- driven culture with high expectations and rewards

• Fast and flat organization

Average number of practices3.2 1.7

0.20.5

Winners

Losers


External Antennae External Antennae


Begin Period 1 End Period 2

CAGRPercent14

28

15

CAGRPercent

114

6

Begin Period 1 End Period 2

483

100

193

* Related businesses are those businesses whose primary SIC code is the same as the core business

** Core businesses are those businesses (primary and secondary 4-digit SIC) contributing the majority of 1986 revenues

Source: Compustat; team analysis; Dr. H. Singh

Winners LosersUnrelated businesses

Related businesses*

Core businesses**

Revenues baselined to 100 at Year 0

WINNERS GROW THEIR CORE BUSINESSES AND BUILDWINNERS GROW THEIR CORE BUSINESSES AND BUILDBIG RELATED BUSINESSESBIG RELATED BUSINESSES

100

Strategy


Operational Operational ExcellenceExcellence


EXECUTION: OPERATIONAL EXCELLENCE AND EXECUTION: OPERATIONAL EXCELLENCE AND QUALITY, BRANDED,QUALITY, BRANDED,CUSTOMER-FOCUSED PRODUCTSCUSTOMER-FOCUSED PRODUCTS

Key Components

•Excellent product/service/design and quality

•Strong brand and overall value

•Strong relationship with customers

Quality, branded customer products

Quality, branded customer products

Operational ExcellenceOperational Excellence

•Superior manufacturing/ production systems

•Superior operations and distribution systems

•Low cost structure

56% of56% ofLosersLosers

81% of81% ofWinnersWinners

Execution


High PerformanceHigh PerformanceCultureCulture


CULTURE: AGGRESSIVE, EXCITING, VALUE-DRIVENCULTURE: AGGRESSIVE, EXCITING, VALUE-DRIVENCULTURE WITH HIGH EXPECTATIONS AND REWARDSCULTURE WITH HIGH EXPECTATIONS AND REWARDS

Key Components

•Deliberate intent to create an unbelievably high-performing culture

•Fun, action-oriented, aggressive, and exciting culture

•Cherished core values and beliefs

Fun, exciting, value- driven environment

Fun, exciting, value- driven environment

•Aggressive performance expectations for staff at all levels

•High “at-risk” compensation

Aggressive expectations and rewards

Aggressive expectations and rewards



Culture


Fast and Flat StructureFast and Flat Structure


•Little or no bureaucracy

•Simple, flat, and lean organizational structure

•Fast decision making

•Effective cooperation between units

ORGANIZATION: ORGANIZATION: FAST AND FLAT ORGANIZATIONFAST AND FLAT ORGANIZATION

Organizational structureOrganizational structure

Key Components



Org.


4 COMPLEMENTARY PRACTICES4 COMPLEMENTARY PRACTICES

Note: There are no negative spikes in the practice of M&A Growth – companies either acquire (or alliance with) new businesses or they don’t

Sources: Survey data, team analysis, Prof. Harvey Wagner

Losers

Winners

3

39

13

65

4

44

6

2

5

22

43

56

47

6

Highly negative Highly positive

Percent of companies

Average number of practices0.2

1.5

1.7

0.2

Winners

Losers

Superior talent management

Insightful, involved CEO driven by knowledgeable, financially-incented board

Innovation machine with industry transformational intent

Merger, Acquisition, and Alliance Intensive Growth


Talent ManagementTalent Management


TALENT: TALENT: SUPERIOR TALENT MANAGEMENTSUPERIOR TALENT MANAGEMENT

Key components

•High-quality talent pool

•Successful at attracting and retaining top talent

•Successful at developing top talent

Talent-richTalent-rich



Talent

Org.

Culture

Execution

Strategy


Mergers and AcquisitionsMergers and Acquisitions


Key components

Identify themIdentify them •Rigorous analysis of opportunities

•Build or buy new businesses

• Invest in businesses that use key skills

Build or buy themBuild or buy them •History of successful M&A execution and integration

•Use entrepreneurial leaders in launching new businesses

•Special incentive structure for new business

M&A GROWTH: MERGER, ACQUISITION, M&A GROWTH: MERGER, ACQUISITION, AND ALLIANCE INTENSIVE GROWTHAND ALLIANCE INTENSIVE GROWTH


M&A GrowthOrg.

Culture

Execution

Strategy


WINNERS DID MORE FREQUENT, SMALLER,WINNERS DID MORE FREQUENT, SMALLER,AND HIGHER VALUE CREATION DEALSAND HIGHER VALUE CREATION DEALS

18

18

29

45

718

43

21

3.6

2.5

3.7

3.1

LIMITED SAMPLE

Winners LosersNote: *Data from SDC Platinum database, international M&A transactions over $1 million or

undisclosed value 1986-1996, all international JV and alliances 1988-1996

** Data from 1/1/96 to 9/30/98; US and Canadian deals over $500 million, value creation based on market-adjusted stock price reaction of the new entity

Source: Dr. Habrir Singh, Wharton School of Business, SDC Platinum database, CF&S M&A survey 1996-98

Larger

Substantial (50-100% of buyer)

Sizeable (20-50% of buyer)

Smaller (<20% of buyer)

Deals per period*(Average)

Joint venturesM&A

M&A Deal size**

93% Value Creating0% Value Destroying

9% Value Creating27% Value Destroying

Winners Losers

M&A GrowthOrg.

Culture

Execution

Strategy


THE CHALLENGE!THE CHALLENGE!

1. Leaders creating climate

2. Maximising vale - ALL stakeholders

3. Pineapple concept

4. 4+4 Factors - evaluate and prioritise

5. Actions - DO IT!


Thank you Thank you

Time to Discuss? Time to Discuss?