Strategic Coaching to Accomplish Results

David Mead

Strategic Planning & Execution, Board Member - The Mead Consulting Group

Over the past few years, I have been asked repeatedly why Mead Consulting Group does not promote the coaching we do with CEOs and business leaders. My response has typically been that it is such an overused and “abused” term. We have not wanted to be lumped into the bucket of people who bill themselves as business coaches but who have limited or no real life business experience.
For many years, helping company leaders execute and grow as leaders has been a core part of our DNA. Our entire consulting practice is built around helping companies reach the next level – helping them to get results. Leadership, communication, strategic thinking, setting priorities, motivation, team development, alignment, accountability, and personal development are all part of the process. These are developed by close interaction with our client’s leaders. We refer to it as CEO coaching or strategic coaching, but in truth it usually involves the entire senior team.

A recent conversation with a client brought back to mind my personal situation - when I was thrust into the CEO role by the death of the Founder. My best strategic coach was one of the Board members who took me under his wing. I was 27 and he was 73. He had lived quite a life, from growing and selling businesses to failed partnerships, lawsuits, large acquisitions, employee issues. He had forgotten more than most people ever experience. He was an irascible cuss and didn’t suffer any fools. I was able to leverage his failures and successes. He helped me achieve my goals, and made sure I was prepared for almost any situation that came my way. He was the person who helped me understand the importance of developing and focusing on strategic plans that can actually be executed.

I saw an article a number of years back that listed some reasons why business leaders could benefit from having an experienced strategic coach. Long ago I turned these into my own list – which I will outline below. It is this same focus that our senior consultants bring to every one of our clients.

• You gain a needed confidante
• They force you outside your comfort zone
• You get personal attention from someone who knows your business inside and out.
• You hear the hard truth - that people inside your company won’t share
• You get objective, unbiased opinions
• You learn how to turn your ideas into reality… Or hear why you are chasing too many shiny objects and need to focus
• You are held accountable for getting important things done – focus on strategic issues not what shade of mauve the office furniture will be.
• You get exposed to a huge external network
• You gain confidence in your decisions and actions

If you want more information about how we help CEOs and business leaders continue to grow and accomplish their goals, please contact me.

Congratulations to Bev Freedman, Bob Malone and the team at The Assist Group on the sale to strategic buyer Equian

Congratulations to Bev Freedman, Bob Malone and the team at The Assist Group on its successful  sale to strategic buyer, Equian.

The Assist Group, based in Lakewood, ClinAssist^® claims review process identifies improper hospital costs, providing comprehensive data and significant savings to payers. As a leader in complex claims review and resolution, TAG offers payers a complete solution – from initial screening through final resolution. The comprehensive claims resolution service supports findings, allowing payers to avoid reimbursing facilities for inappropriate billed charges. Results have produced an unprecedented uphold rate for identified billing errors, saving payers virtually millions of dollars each year. Leveraging TAG's extensive claims compliance experience, it also offers a negotiated discount option that enables payers to retain their existing facility discount and realize additional significant pre-payment savings, while complying with the strictest of payment deadlines.

Indianapolis-headquartered Equian is a healthcare information services company focused on lowering the cost of care by eliminating waste through integrated payment integrity solutions.

HOW DO YOU HUNT FOR PROFITS? BY LOOKING IN YOUR OWN BACKYARD

[Editor's Note: Recently I have had a number of conversations with business owners and CEOs about sustaining profitability. I thought I would reach into the "article archives." While we first published this in 2003, it is still relevant ten years later in 2013.  - DPM]

HOW DO YOU HUNT FOR PROFITS? BY LOOKING IN YOUR OWN BACKYARD

Tier your customers by profitability by creating a profit map.  A profit map is a clustering of customers, products, services, and transactions by profitability, and an analysis of the key profit drivers. This forms the basis for rapidly improving a company's profitability through careful management of the details of the business without the need for major capital expenditures.

Let's look at the profit mapping process, using the example of a distribution company. The process has five steps.

Decide to analyze profitability at a "70 percent accuracy" level. Some companies spend a huge amount of time and money setting up an activity-based costing system that is much too detailed. All too often, the measurement becomes the project, and after endless debates, many projects lose momentum before they are translated into actions that hit the bottom line.

The most important results usually will be very clear from rapid, intelligent analysis using best knowledge and rules of thumb. Once a profitability picture emerges, it makes sense to improve the accuracy only where better information will change an important action. In most companies, after the analysis is over, the managers institute only a few high-leverage initiatives.

Construct a profitability database for the company. Select a time period, often two to six months, that is representative, and load the full set, or an excerpted set, of transactions (i.e. order lines) onto a computer. Each transaction should carry crucial information including the identity of the customer and product, as well as special services. Next, develop cost functions and use these to net the transaction's gross margin (GM) 

In developing cost functions, it is generally best to allocate costs using an easy-to-measure variable. For example, allocating operations costs by transaction or order line usually works well, as each line entails order-taking and picking. Inventory carrying costs can be handled by rules of thumb, such as holding "A" items for two weeks, "B" items for four weeks, and "C" items for eight weeks. Transportation costs can be allocated through simple decision rules based on customer location (region, near to or far from a distribution center). Where a sales call is needed to take an order, that portion of the selling expense can be allocated by orders. Other costs can be similarly allocated with reasonableaccuracy.

It's important to allocate all costs, including general overhead, for two reasons: (1) this enforces the discipline of viewing the whole cost of the business whendetermining whether to keep or change a major component; and (2) this ties the analysis directly to the company's financial statements, ensuring credibility and accurate projections.
  
This process will yield a database of transactions, each with revenues, GP, and NP. The database can be analyzed to display account, product, and transaction profitability. It will show you where the big pools of profits and losses are. The database also can be used to project the impact of changing the account and product mix, as well as changing the cost of key elements of operations and sales. The former shows the effect of focusing the company on high-profit market segments, while the latter shows the effect of altering the business model to change "bad" customers into "good" customers.

Model a customer - Determine the characteristics of the Chosen Customer. Choose a few customers and products that are reasonably representative, and look carefully at their economics. Try choosing a large and small customer each from a few key market segments, and a fast-moving and slow-moving product from each of a few key product families. Ideally, you will have about six to twelve representative situations to examine closely.

For each customer, look methodically at the profit drivers-revenues, margins, and costs-for different products. Try different business model configurations such as changing the order interval, sales interval, or service interval. Look at the pricing, both price levels and price mechanisms. Altering the product mix and developing substitution programs also can provide valuable levers for profit improvement.

Here, you are looking for "profit levers". Once you have found effective profit levers, check several other similar customers to be sure you can generalize your findings.

Modeling the effects of key profit levers on representative customers works well for three reasons: (1) it will be intuitively clear which elements of the business model (e.g. order pattern) can be changed and what the effect will be; (2) you can actually call the customers to see what their reaction to the potential changes would be; and (3) it will be easier to explain the changes using concrete examples when you "sell" the initiative to your colleagues.

Project to the whole business. Divide the entire business into clusters, or market segments, that are similar to the customers and products you've modeled. See where the big pools of profits and losses are now, and what the profit impact would be of making the changes. This will tell you what's most important to do.

With this picture of current profits and profit improvement potential, you can identify the few high-payoff actions that your company can take relatively quickly. First and foremost, act forcefully to secure the high-profit segment of your business. Only then institute a process to improve the profitability of the marginal part of the business. This process probably will include training front-line sales and operations associates in day-to-day coordination to improve profitability to its highest potential.

What about the unprofitable customers? Here's what the CEO of a major service company said about exiting unprofitable business segments or customers:
  

"Before exiting, give them a chance to pay higher prices or modify the profit levers. We did exactly that. We knew our profitability was eroding. Through analysis, we found a business segment where we were losing money. Profit analysis allowed us to determine what changes would be required to generate acceptable returns. The underlying issue was not pricing-it was order pattern, order size, and delivery requirements. Before exiting the segment, we told our customers what we needed in order to continue servicing them. To our pleasure, they agreed to make the changes, and we saw a quantum improvement in profitability in six months!"

 

Finally, phase out the parts of the business that cannot be made profitable. This will be counter-intuitive and some in the company will resist, but keep your eye on the huge upside to refocusing 20-40 percent of your sales force and operations assets away from tending unprofitable business and toward aggressively growing your share of the highest-profit end of the business.

 

Institutionalize profit mapping.Reflect on the value produced by determining the tiers of customer profitability ("profit mapping") and decide to institutionalize the process. Repeat the analysis every three to six months.Once you have set up the analysis, subsequent rounds will go very quickly. The process itself will build teamwork and it will become a new way of looking at the business. In parallel, build profit mapping into the new account qualification process. As your profitability improves, new opportunities will constantly be created. The better you get, the better you can get.

 

From financial information to action

A service company CEO mentioned above reflected on his experience with profit mapping, "Financial systems often do not have the information that you need. If they did, the problems would have been solved long ago. To be truly effective, you need to create a cross-functional team that understands how the business operates. This will allow the conversion of financial information into management information which, through analysis, will lead to action."

 

By the way, how do you hunt for profits? By looking in your own backyard-again and again and again! In work with Mead Consulting clients, our clients use proven methods designed to center their business around delivering continuous value to the best customers. Revenue and profit growth can be realized in the first 90 days of implementation.

¹Excerpted from an article by Jonathan Byrnes, The Bottom Line: The Hunt for Profits, HBSWK Pub Date: Nov.11, 2002

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Congratulations to Correctional Healthcare Companies on its sale to private equity firm, GTCR.

Congratulations to Correctional Healthcare Companies on its sale to private equity firm, GTCR.

To read more: http://www.businesswire.com/news/home/20121231005071/en/GTCR-Completes-Acquisition-Correctional-Healthcare-Companies

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Eating Recovery Centers announces its sale (recpaitalization) with PE firm Lee Equity Partners

The Mead Consulting Group offers congratulations to Dr. Ken Weiner and the team at Eating Recovery Centers on its recapitalization (sale) to private equity firm, Lee Equity Partners.

To read more

https://my.pitchbook.com/viewnewsletter/AsS90-TEJsh/pevc#xsuvF