Taking Operational Excellence to the Next Level: 

A Corporate Vision Comes to Life for Division Leaders at a Highly Diversified Manufacturing Company

Abstract

A renowned, long-standing manufacturer hired a new CEO and set aggressive corporate goals. Before this, the operating units ran independently, and corporate merely aggregated the results. Insight Experience created two multi-day immersive sessions for senior leaders, one focused on strategic leadership and one on strategic finance, that can be provided annually for new division managers. The corporation met its aggressive five-year plan early and set additional targets. The company’s stock price has more than quadrupled over the period.

Challenge

The divisions of this diversified defense and aerospace equipment manufacturer see themselves as independent operations that possess few synergies and little shared knowledge with their fellow divisions. The stock performance of the corporation had languished and seemed undervalued for the size and strength of the business. The new management group introduced corporate goals and an operating group structure, but there was little understanding in the divisions about how each unit’s performance fit into the whole — and why it mattered.

Solution

Insight Experience worked closely with the CFO and strategy group to create two multi-day programs for senior leaders, one about strategic leadership and the other about strategic finance. Each session incorporated the company’s actual goals and recent performance against those goals as a means to understand the components of the new approach. The sessions also incorporated interactive business simulations to illuminate the impact of individual decisions and actions on both individual and shared strategic and financial performance.

Learning Objectives

Participants in the strategic leadership program learn to: 

• Develop their ability to use strategic thinking and behaviors to be effective leaders.
• Translate business strategy into action.
• Build organizational capability to support strategy.
• Effectively engage their team and others to execute their strategy.
• Practice their skills of strategic leadership through decision-making and interactions.
• Execute strategy and deliver results through ongoing change and business evolution.

In the program about strategic finance, participants learn to:

• Understand in their decision-making the interdependencies of the elements within a balance sheet, cash flow statement, and P&L statement.
• Discuss and utilize the output of such tools and measures as: Net Present Value (NPV), Return on Investment (ROI), Return on Invested Capital (ROIC), and Return on Assets (ROA).
• Identify critical financial questions to consider before making strategic choices.
• Experience a General Manager's perspective on finance and strategy.
• Better understand how operating, investing, and forecasting decisions impact business results

Design Highlights

The strategic leadership program is designed to be an integrative experience, allowing participants to explore and practice leadership skills and behaviors in a challenging business setting. In the simulation, teams assume the role of General Manager of a fictional company and make decisions that will impact the results of the business. Participants are asked to think strategically to manage and balance the competing business tensions inherent in any leadership position. Participants also engage in role-play conversations.

For the program about strategic finance, Insight Experience used actual corporate financial statements as the structure for the content portion of the course and incorporated competitive data over time and performance against targets.

Program Agendas: 

The strategic leadership agenda asks participants to set strategic direction and think about strategic thinking skills; engage in three rounds of decision-making in the simulation software and role-play conversations; discuss the Business Cycle of Leadership™, collaboration, and leading through change; and share feedback with their peers:

The agenda for the strategic finance program involves setting strategy, engaging in four rounds of decision-making in the simulation software, and taking deep dives into financial tools and measures. For a previous program, the CFO joined the session on the final day:

Program Content:  

The strategic leadership program features content on:

• Business strategy fundamentals: leadership tasks and strategic direction.
• Strategic value disciplines.
• Strategic thinking and its cognitive processes.
• Scanning, framing, and testing one's thinking.
• Assumption testing.
• The Business Cycle of Leadership™.
• Engaging an organization with leadership interactions, collaboration, and more.
• Listening modes.
• Strategic communication.
• Leading through change.

The strategic finance program features content on: 

• Strategic finance.
• Strategic direction and execution.
• Business strategy as the foundation for financial thinking.
• The evaluation of financial performance via Income Statements, Cash Flow Statements, Profit and Loss Statements, Balance Sheets, revenue recognition, and more.
• The relationship between forecasting and budgets.
• Investment analysis.
• Financial ratio analysis.
• Corporate structure and ownership.

Challenge Application:

Teams in the strategic leadership program are given the opportunity to have employee conversations that put concepts into practice. Individual team members role-play the General Manager of the simulated business, and other team members observe and provide feedback. Each member of the team has an opportunity to engage in a roleplay.

Teams in the strategic finance program are asked to prepare a short presentation that summarizes to the corporate planning office:

• A midyear performance review.
• A midyear plan/strategy overview.
• Plans for strategy and key operations adjustments for quarters three and four.
• Guidance to management re sales and profitability. 

Simulation Overview

The strategic leadership program asks teams to collectively assume the role of the General Manager of a fictional company called InfoMaster, an independent business unit of International Information Corporation (IIC). InfoMaster is one of more than 30 independent business units of IIC. Its portfolio of companies provides software, hardware, and services for information management to corporations worldwide.

IIC’s strategic goals are to:

• Be the leaders in their chosen markets and grow market share in existing markets.
• Deliver pretax profit of more than 20% from all business units and improve profitability quarter over quarter.
• Develop the organization and build capabilities to carry the business into the future

For the strategic finance program, Insight Experience modified one of our core simulations models, which focuses on developing business and financial acumen and how leadership and financial decisions impact shareholder value, to reflect the business structure of this particular client. We also added to this simulation an issue about a major capital investment, one of the biggest financial decisions that operating managers make.

Each team collectively assumes the role of General Manager of the Air Water Conversion (AWC) business unit of Global Resources International (GRI) and is responsible for driving profit and business results over time. Throughout the simulation, participants are asked to provide guidance and make decisions about the leadership of each functional area. They are also responsible for delivering financial results to the parent company.

GRI is a well-established natural resources equipment and services company, working in a wide range of natural resources industries to meet the needs of customers worldwide. It provides strategic direction and capital support for the business units — but expects each unit to deliver results to contribute to overall corporate performance. GRI charges all business units with four performance goals:

• Grow revenue at or above market growth rates.
• Achieve EBIT (operating profit) of 15% or higher as a corporate target.
• Increase ROCE (Return on Capital Employed).
• Competitively position the company for the future.

 History and Results

The client achieved a number of their real-world strategic finance targets two years earlier than expected, reporting at their site that their team was delivering on their vision and that they were on the path toward achieving top quartile performance within their peer group for all of their key financial metrics. They reported an increased efficiency and noted that they had already met or exceeded several of their five-year objectives in only three years. Once they hit a number of the target metrics, the CEO was able to shift the focus toward improving working capital and free cash flow. This is a testament to the value of the two components of the Taking Operational Excellence to the Next Level sessions — and the program as a whole.

Here is what some participants have said about this program:

• A participant in the strategic leadership program wrote: "[I learned that] what we normally do intuitively actually can be done better with the correct methodology." Another responded that the program was a "very positive surprise" and that learning about strategic communication is "beneficial and applicable."
• About the strategic finance program, one participant responded: “I never understood why cash flow mattered to the business, now it is my number one goal.”