PMCC Interactive

Tag: Value Creation

  • Back at it — and energized for what’s next.

    In July 2024, I stepped in to help lead a turnaround effort at Urban Engineers, Inc. After a focused and productive year, that chapter is moving into a new phase.  I Congratulate the two new leaders named today- Jim Bilella as CEO and Chris Bobrowski, CFO.  I worked very closely with each and know that each will do the job necessary for Urban to reach it’s objectives.  I will be remaining on the Board of Directors.   AND I’m excited to return full time to PMCC Ventures.

    For those who’ve followed the journey, this latest assignment brought things full circle. Urban’s HQ is across the street from where my consulting career began in 1984. The lessons I learned in my 20s — from auditing an ENR Top 5 firm — still proved useful in my 60s. Some fundamentals really do hold up.

    What’s next?

    • PMCC Ventures is once again open to new engagements
    • We remain focused on strategy, business readiness, leadership transitions, and unlocking value through better insight and execution
    • We’re continuing to help owners prepare for and execute successful exits

      The M&A market is active — but more crowded and complex than ever. Standing out requires more than just a good story.
      • Performance matters
      • Sound insight and foresight is rewarded
      • A clear sense of what is possible and achievable is essential

    We’re here to help business owners position themselves credibly and confidently.

    But M&A is only part of the work. At our core, we still believe:
    Good information + grounded leadership = real change.

    More to come soon.

    If you’re wrestling with complexity — or just want to sharpen your thinking — let’s talk.

  • Balancing Value Creation and Cost-Cutting: A Strategic Imperative for Today’s C-Suite

    Or, don’t just lunge at cost cutting- adopt approach that helps to focus on value creation and cost alignment

    In the current business climate, the challenges are twofold: sustaining profitability and maintain the capacity for value creation. There’s a heightened focus on cost-cutting as the immediate remedy for financial ailments. However, knee-jerk reactions can be detrimental in the long term. This post aims to shed light on the equilibrium between cost management and value creation that C-suite executives must strive for, especially in middle-market companies with revenues between $50 million and $5 billion.

    The Temptation to Just Cut Costs

    We are in a phase of the business cycle where cost-cutting seems to be the elixir to all problems. The media spotlight on downsizing and operational cutbacks can tempt leaders to make hurried decisions, focusing merely on reducing expenses. This approach may show quick wins, but the medium and long-term implications often offset these immediate benefits.

    Lessons from the Past

    The history of Leveraged Buy-Outs (LBOs) in the mid-1980s offers valuable insights. The dominating narrative was to “cut costs,” and it seemed like the logical step to generate sufficient cash flow to service debt. However, many businesses realized that this approach was not sustainable ad many cost cutting only exercises diminished the ability to quickly pivot as competitive positions changed  and the goal was not just to survive, but be prepared for value creating exits that rewarded owners and investors for the risk they undertook.  As it turns out, the goal is common, but indeed the approach does depend on your starting point, and capacity and capability to undergo change.

    Assess, Plan, and Act

    Before embarking on a cost-cutting mission, it is crucial to take a step back and assess the situation you are encountering- “why you are here” the competitive environment and ultimately what you are trying to achieve.  Here are some thoughts that might help sharpen your team’s thinking about the challenge and the opportunity.

    1. Alignment with Core Strategy: Make sure that changes you make and the resulting  cost-structure, supports achievement of your value creation goals, as well as your short term actions necessary to “weather the storm”. 
    2. Future-Readiness: Cost-cutting should not come at the expense of innovation and future growth that is in line with your goals and mid and long term value creation.  At the same time, this concept should not paralyze the efforts to get ahead of the real challenges you face.
    3. Employee Morale: Dramatic cutbacks can have a cascading effect on employee morale and productivity, affecting your most critical resource.  And at the same time, our experience is that many employees question what took leadership so long to come to grips with these critical matters.

    Balancing the Scale: Value Creation and Cost Cutting

    To achieve sustainable growth, businesses need to find a harmonious balance between cutting costs and adding value:

    • Invest in Talent: Reducing headcount may bring immediate cost savings, but investing in the right talent will yield productivity and cost gains along-with mid and long term value creation.
    • Technology as an Enabler: Instead of slashing technology budgets, consider how automation and digital transformation can lead to both cost reduction and value addition.  Also consider how technology can be used to both improve outcomes and help key employees do their jobs better and feel like they really contribute to the success of the business.
    • Customer-Centric Approach: Instead of compromising on customer service, explore ways to enrich customer experience. This is a powerful energy source for these efforts and the business
    • Data-Driven Decision Making: Utilize data analytics to identify inefficient processes and operational bottlenecks. This approach enables informed decisions, rather than across-the-board cuts.

    Conclusion

    Cost-cutting is not inherently detrimental; it becomes so when it overshadows the more vital goal of creating value. As a C-suite executive, your role isn’t just to survive the downturn but to position your company for future opportunities. By maintaining a balanced approach between cost management and value creation, you are laying the groundwork for sustainable growth and long-term success.

    For a deeper discussion and more targeted strategies on balancing these aspects, just click here

    https://pmccinteractive.com/wp-content/uploads/2023/09/20230918-value-creation.pdf

    Or reach out directly: pjm@pmccventures.com or  calendly.com/pmccventures-pjm-4

  • This might be part of the [apparently] secret formula necessary to help you Improve the Business of your Business

    Active observation over the past several years suggest that curiosity seems to have dampened. Perhaps it is the fear of “doing deep dives” in situations that we fear might become uncomfortable. Perhaps it is remote working- or perhaps it is mentoring and leading that is not geared to the realities of our current workplaces.

    For whatever reason, we have to come to grips with this and really build this capacity in all sorts of organizations. Take a quick read of this, and spend more time assessing your own situation:

    https://www.fastcompany.com/90782370/why-we-should-embrace-radical-curiosity-and-learn-to-ask-better-questions?utm_source=newsletters&utm_medium=email&leadId=769432&mkt_tok=NjEwLUxFRS04NzIAAAGGl93cUD0tiBqiCILiqG9sDYBQJq_laztr0VQwMHYcfEw6nq0feW_S9-qdGDRIKqSuKeVVN69Yy-PqDFFQfqw8G8uY_YqoWhoPE6jcUA

  • Pat McCormick joins Urban Engineers Board of Directors

    I am honored to have the opportunity to serve the people and owners of Urban Engineers. Urban is an ESOP company so there is a lot of enthusiasm and team work evident in the business.

    I was impressed in our first Board event to hear the management team express how they treasure long term client relationships and the passion they have for dealing with complex situations in sound and innovative ways.

    To read more about Urban Engineers: https://urbanengineers.com/news/urban-appoints-patrick-mccormick-board-of-directors

  • The conversation about the role of the CFO- and where she adds the most value continues- but the bottom line is that Finance counts!

    Thirty some years ago, we began research on the role of the CFO and the impact of financial leadership on the performance of the enterprise.  After interviewing and reviewing more than 50 organizations and engaging thousands of CFO/Financial leaders in workshops around the world, we found that there were several determinants of success.

    Moreover, we found great frustration on the part of CFO’s wanting a seat at the “business management/Strategy table” and the rest of leadership questioning why they needed/should have that seat.  While that conversation continues, the accompanying link to the Visual Capitalist shows that significant progress has been made and that the conversation continues and that is a good thing.

    Enjoy the link:  https://www.visualcapitalist.com/future-of-the-cfo/

    Meanwhile, each day, we continue to prompt the conversation and help Clients create value by  improving the business of their business

  • Changing strategies…. make sure to check the alignment

    We are in a period of uncertainty on many fronts….Technological, shifting go to market options and priorities, emerging and leap frogging competitors and opportunities, just to name a few.  Many are appropriately responding to the changes by revisiting goals and objectives, and their strategies to achieve them.  In these times it is important to remember to adjust business practices, processes and resources to support your chosen strategies to ensure sustainable success.  Read more:  Strategic alignment notes

  • Creating enterprise value: Getting to know more and getting to no faster- Finance Business Intelligence

    Yesterday we had the opportunity to work with a great group of financial and marketing leaders at a forum hosted by Waypoint Consulting and Host Analytics.  In our work we explored the value of strategic, financial and operational  information to increase an organization’s insight into their business and ultimately increase the wisdom of the leadership team in managing the business.

    We shared our experiences with under achieving and underperforming companies.  We noted that  most all of our underachieving and underperforming clients that they suffered from a lack of good information about their business in general- and in the really challenged situations that they lacked insight into operations, customers, and in turn, markets.  And, of course, the pathway to creating value for them is to harness those insights and make smart moves to create value.

    We also explored and wondered why this topic continues to be of interest today, almost 20 years after finance business intelligence came into prominence as a key distinguishing factor for financial and economic performance.  We discussed possible organizational barriers to creating more robust financial planning and control processes and how more effective financial planning and control processes coupled with relevant, reliable and readily available finance business intelligence can combine to drive significant enterprise value.  

    We enjoyed the morning with a great group of leaders.  If you want to learn more, read here: 20170315 FPM-Symposium-pmccv only

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  • Helping create value in underperforming and underachieving Private Equity Investments

    The Best way to make money is to start by not losing it.  PMCC Ventures has worked with scores of private equity backed companies to improve performance and move from the bottom 50% of performers to the top 50%.  Our 35 years of experience span industries, company size, stages of development and  range of performance.  These individual experiences are good and interesting.  The combination of the experiences provides our clients with significant value.  We understand that underperforming is not a comfortable place for most organizations- and we know how to help stabilize the organization to enable it to execute a thoughtful and productive process to become the best it can be.

    The core investment hypothesis generally revolves around finding several good business ideas and businesses and provide capital to help them become value creating sustainable businesses.  That is the straightest path to value creation.

    Sometimes, companies stagger along that path.  Changes might occur in markets and industries, the company is leapfrogged by competitors, or the company just isn’t executing the way it needs to.  The bottom line is that the company slows progress and its  performance begins to deteriorate yields on investment.

    Most Private equity firms plan for and build to manage the upside.  That makes sense until the arrows start pointing down.  Our approach is to support our clients dealing with downturns, and underperforming and underachieving investments.  We have the skills experiences, and track record to help clients get out of the hole and back on the path to performance and value creation.

    If you want to learn more, click on the link below.

     

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  • Reflections on 2011 learnings and affirmations regarding improving the business of the business

    As we pledged when we started, we would periodically share our learnings and affirmations with our friends and supporters.  We are a bit late with our learnings from 2011, partly because we were busy, and partly because there was so much ambiguity and paradox operating in our client situations.  As a result, we wanted to take time to sort out what we believed to be most meaningful and beneficial.  None of our thoughts are groundbreaking, but we believe it is healthy and helpful for leaders to frequently revisit the basics and to question how they are operating in their own areas of responsibility.  We hope the following is helpful and not pedagogic.  Our intent is to help you improve the business of your business.

    Good luck!

    Cash is King, Information is the power behind the throne

    Creating and managing cash were certainly key to survival in 2011.  While there was a lot of focus on cash, few focused on the value of knowledge in the business.  Information that can be synthesized has much greater value than cash- as it can grow and renew- and is not really a one or few-time event.  Like cash, idle vessels of data and information sit around the organization and are never harvested for the benefit they can provide.  While a trait of a successful business is that they significantly invest in gathering and using information, a trait of a company that is struggling to survive- is that they don’t focus on what they can learn about the business through the resident data and information they can create.  Like many who develop their careers in cash starved businesses don’t appreciate and are frequently loathe to use cash resources to invest or develop, those that have developed in information starved environments, don’t have an appreciation for the value of information and don’t have the resolve to find out how to get it and capitalize on it for the business.

    To help businesses thrive- they have to capture, harness and use all of the resources available to their business.

    This past year we have been particularly focused on the collection of Accounts Receivable and have used information in client and payer billing files to reduce outstanding balances and increase cash flow.  We moved this organization from one that closed its books 6 times a year and presented corporate level financials, to one that can now close in under 3 days and present business level financial information. This has become information that can help positively impact operations before the middle of the next month, helping business leaders to improve the business of their business.

    As leaders you have to strive to know, and can’t take no for an answer

    In many organizations- particularly those that are challenged and stressed- it becomes increasingly easy to accept “no” or “we can’t” as an answer- particularly in domain of items that (as the Brits say) fall into the “too hard” bin.  Data and information about finances, transactions, operations, and competitors are frequent visitors to the “Too Hard Bin” as it frequently takes less than glamorous actions to make that data helpful and useable.  But, this information can be a tremendous resource to the organization- and for all intents and purposes, once it is acquired (usually as a by-product) its development and use is practically free.  Knowledge will build and enhanced perspectives will help people in the organization continuously make better, more informed and more aligned decisions.

    As leaders you have to set the example by displaying and demanding your satisfaction of a huge appetite to know and understand more about the business.  You have to energize the organization to work and think in the same way.  As ad-hocracy gives way to fact based decision practices, the organization will respond positively.  Wistful and Pollyanna like requests will give way to solid requests and decisions about the business that add value.

    Like tough-love parents we have to inspire the organization to search, be innovative and creative in the development and communication of fact based information.  We can’t take “ I can’t find it” as an answer, but instead have to know enough ourselves about data and information (and its attendant structures) in the organizations to inspire and guide others about how to access the data, create information and use it in decision processes

    You can never fight hard enough to achieve strategic and operational fit and balance in your business

    In years like the past one, it is difficult to attract or create additional resource or capacity for your business to work.  Yet, many organizations allow existing organizational resources to be wasted and dissipated by continuing with organizations practices and processes that don’t fit with their strategy and prevailing market conditions.  The cost of lack of alignment or fit is sometimes difficult to isolate, but we all know that friction and rework sap organizational resources.  Lack of alignment and fit, is simply too costly to continue to fund.  Further, the folks in the trenches see it and understand it and question why leaders don’t do something about it.  That makes the issue an implied question of leadership authenticity, connectedness and understanding.

     

    While this concept is more customarily discussed on the strategic level, we find plenty of daily examples where operational components don’t “fit” together, much less align with corporate strategy and the realities of market conditions.  Perhaps it is because in environments where more resources were deployable, resources were “thrown” at patching these cracks, and they really only protruded when those resources were taken away.

    The issue of strategic alignment is of course critical, but it seems that until organizations that are underperforming, can’t address operational fit issues they don’t or won’t have the capability to address the more critical issue of strategic alignment.  So the first step on the path from surviving to thriving is to deal with the issue of operational fit.

    We encountered one organization where the monthly payroll exceeded revenues in 8 months of the year; the workforce was only 30-40% productive by the most basic of measures, yet 40% of transactions were allowed to pass through business systems with critical errors.  While you could argue, that the organization was overstaffed- it was even more of a shame to see that the obviously excess organizational resources were not deployed to fix critical business processes and the related data and information quality issues that resulted.

    In most cases, significant leaps in organizational performance can be made in a cost neutral way.  It requires vision, engagement and clear thinking, but can indeed be achieved.  Organizations that can’t take the first step to improvement will likely not be able to make a leap to outstanding organizational performance.

    Our job as leaders is to help the organization build and sustain this most basic of “muscles” and to inspire and lead the organization to above average performance. This resource can create its own energy, replicate itself each day and make little waste, making this activity one of the “greenest” that can be undertaken in any organization – Now!

    Build and develop leadership and management capacity throughout the organization- use it and don’t work around it

    The silent victim of the recession in the business world has been the “surviving workers”.  They have seen colleagues’ careers interrupted, and have seen their own somewhat stymied.  Lack of growth has staunched opportunity for real advancement and the few “field promotions” that have taken place because of reassigning work etc. because of reduced resource levels, have not been the type of advancement to which many aspired.

    Many organizations that were development oriented had to reduce budgets in this area, so real development opportunities have been placed on hold.  As a result, the surviving resource is (and has been told to be) appreciative that they are employed, but many are frustrated and looking for developmental pathways.  The frustration suffered by many is deafening- it is just that its roar is overshadowed by many other challenges being suffered in the organization.

    As the economy brightens, one of the first areas for companies to invest will be in the development of existing high potential employees.  They should be challenged with developmental opportunities and rewarded with positions of increasing responsibility.  That investment will have to be conditioned.

    In many of the challenging situations we encountered, we have observed senior management frustrated with performance in the workforce, and instead of making the tough and right people choices, they have let underperforming management in place, and instead “go around them” to people they trust to get information, make decisions and implement change.  In place management can feel the neutering that is taking place, and while initially appreciative of the “vote of confidence” they question the authenticity of the management practice- and wonder if they will be next.

    For organizations to move from surviving, they will have to objectively assess the people talent in their organization and make the right management decisions to put the right people in place to lead the transition from surviving to thriving.  They will have to develop the people and establish the conditions for their success.  Satisficing will not be a successful strategy to effectively make the transition.

    You can no longer just tell people to change

    This year has been profound in terms of refining our understanding of the conditions and the “moves” necessary to set the stage for and realize successful change.  We are not talking about gratuitous or peripherally beneficial change, but basic fundamental changes necessary to “stay in the game”.  We observed in great detail the approach followed by many- just tell them to change (parenthetically:  they ought to be happy to have a job) and they will do it.  This was an “expedient change model” for tough times- and then when the desired outcomes did not take root or happen- the “changees” failed and it was their “fault” that it did not happen.

    Instead- in good times or bad, it is the responsibility of leadership to set the conditions to enable and promote change- and to establish the strategies that are based on solid principles and objective assessment of the situation.

    The change strategies have to be based on:

    • A solid assessment of the organization’s capability to change- the intersection of the understanding of its willingness and capacity to change
    • The depth of change required
    • The pace of change required

    Moreover, the context for the change needs to be firmly established, communicated and understood.  To give the people a chance to embrace the change, the need to at least understand, if not (preferably) embrace the need to change.

    Lastly, the vision for the end state needs to be clear.  It is best if that end state is mutually created by interdependent members of the “system”.

    The days of merely telling people (and employees) to change are over- in all but the evacuation of a clear emergency situation.

    We hope these learnings and affirmations are helpful to you.  We don’t think we have broken new ground with what we have learned or affirmed in the past year or so, but we believe it is important for Leaders to frequently focus on and take courage for action from the basics.

    We wish you the best for a healthy, happy and prosperous 2012!

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    Built on more than 30 years of experience, we tailor services to meet our client’s needs. For an overview of our capabilities and point of view, read: 20110425PMCCI Services v2

  • Effective Financial Management- Setting a Developmental Agenda

    In most instances, enhancing financial management capabilities will require that leaders not just focus on that which can be made more effective and efficient- that is obvious and easy and does not create a lot of value.  Instead, Finance leaders will have to both focus on efficiency and at the same time focus on what has been missing and create those capabilities from the “ground up”.

    I recently attended a local CFO Breakfast.  The breakfast theme was financial leadership-and it lead to a lot of different interpretations in the discussion- but some common themes emerged and not all of them are new.

    • Role of finance
    • How can finance “get more respect” be more vital etc?
    • What should finance be working on….

    The answers are of course:  It depends on the individual circumstance.  I go to the school that all improvements are good improvements- and that the value of investing in upgrading capabilities will eventually accrue to the organization.  However, absent a specific change agenda, I suggest that Finance Leaders consider the following scenario and plan their mid to long term development agenda around the needs suggested in the scenario below:

    • Investors will always demand incremental returns….
    • There  is significant cash on the sidelines of public companies and investment funds
    • So …Companies will have to invest or return cash to shareholders or limited partners- which for a whole host of reasons, there is a general reluctance to do so…
    • Hence …there is pent up demand to invest- and in the Spring of 2011 this is playing out in the volume of announced large strategic deals
    • Meanwhile,,,, Banks are offering less leverage than once considered “normal”
    • And…. Lack of leverage staunches the ability to increase returns using financial engineering techniques
    • At the same time it appears that…. developed economy countries economies will not grow very rapidly in the near term and therefore not provide volume growth opportunities to the market
    • Hence….“Class of 2011 and likely 2012” deals will have to get their returns the old fashioned way- they will have to earn them through
      • Market Innovation- new products and new markets
      • Operating excellence- achieve best cost operations
      • Working capital creation and increased velocity
      • Causing…. the overall competitive environment to intensify as mergers and acquisitions that are sure to follow an economic downturn take place but in new formats and capital structures
      • And….place pressure on all competitors for enhanced performance
      • Which… if not properly managed could start the economic challenges giving rise to this scenario to start all over again…. Just when we thought we were emerging….

    To deal effectively in this environment, companies and their finance leaders will both have to ensure that the skills and capabilities in the finance group are sharp as well as ensure that the organization as a whole understands and is focused on driving returns for the business.

    If these assumptions are plausible for your organization, it stands to reason that companies will need to have above average capabilities in most all of the five following domains.  In fact the capabilities will have to be so good that they will both enable profitable innovation and growth- as well as pave the way for solid operating performance- and today, not many companies are necessarily good at both.

    Domain Relative Financial Management ability required in the business
    Financial Planning, Control and accountability Businesses will have to plan with more rigor to ensure that scarce resources are allocated in ways that will drive value and produce measurable results in the expected timeframes; Accountability processes will have to be real time and responsive to changing market conditions and company performance.
    Information for Decision Making Business leaders will need to have relevant, reliable and readily available information where and when they need it- in the formats that promote insight and compel action.
    Cost Structure Understanding Companies will not have just have to have low cost- they will require a best cost approach to the business- that is integrated- investing, cost cutting and operating rigor can’t operate independently. For success, they will have to operate together.  Capabilities will have to be in place so that people designing operations are doing so with the cost structure in mind so that they can make appropriate optimizing trade-offs and decisions.
    Business Literacy People planning and commanding resources will have to have a firm sense of the business of the business of how profits are earned and value is created so that they can make real time tradeoffs and decisions.
    Working Capital Capital deployment will be key.  Idle assets will have to be turned into cash and invested or used to meet the capital requirements of the business.    Similarly, returns on new capital invested will have to be closely monitored to ensure sustainable value creation.

    Time is tight and the stakes are high. Financial leaders will have to take stock to ensure that not only do individuals in the business possess capability and capacity in these domains, but that the fundamental business practices and processes are in place to effectively use and deploy these capabilities.  Some organizations will have to do some quick make or buy analyses to determine their organization’s own capabilities and the most expeditious path to developing and deploying them.

    • How do you rate your organization’s abilities in these domains in light of your business requirements?
    • What can you do to ensure your finance organization is up to the task?
    • What’s in the way of you accomplishing what you need to accomplish?