Posts Tagged ‘Business Strategy’

“If something cannot go on forever, it will stop.” Herbert Stein

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Expert Perspective from Grahall’s OmniMeida Editorial Board

There are two paths to profitability:  growth and cost reduction.  In the financial services industry especially (all though not exclusively) where compensation cost might represent 50% or more of expenses, cost reduction in the manner of headcount reductions can be an effective  approach to corporate revitalization.  
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It’s Too Easy to Blame Compensation for Every Business Problem

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Expert Perspective from Grahall’s OmniMedia Editorial Board

Jeffrey Phillips raises some interesting issues in his August 5, 2010 blog “How Compensation Models Work Against Innovation” asking  “… why innovation seems to be so beneficial on its face and yet so difficult to accomplish.”  He goes on to claim that “We exchange our labor, our thoughts and insights and our management skills for a paycheck.”  And he blames “… very small but very powerful disincentive[s] to innovate, buried in how we compensate our teams…”

Wow, that is pretty harsh and flawed thinking.  We believe there are many more reasons that individuals work and work hard than just for a paycheck, although obviously it is a compelling incentive.  Barriers to innovation won’t be leveled by simply changing compensation programs.  The issues obstructing innovation run much deeper than that.
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Participate in the Business, People and Total Reward Strategy Changes Survey

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You are cordially invited to participate in a new study by Grahall on:

Business, People and Total Reward Strategy Changes Survey:
A Study on Recovery Driven Rewards Supporting Business and People Strategies After a Recession 

This research study is unlike any other:

o  It looks at how companies are approaching the next phase of restructuring / realigning / renewing their rewards programs to more effectively position their organization’s Business and People Strategies in anticipation of economic recovery.

o  It is designed to take an in-depth look at firms’ the present rewards structures, but more importantly, it is designed to capture rewards program plans for the future.

Detailed results and findings from this study will be summarized in a written report, which will be sent to survey participants at no cost.

To participate in this study or to download a free version of the previous study’s key findings, please contact Claudia DeFranciso at claudia.defranciso@grahall.com.

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It’s Better to be on the Bus than Under It

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expert perspective telescopeExpert Perspective from Grahall’s OmniMedia Editorial Board

The Journal’s Deal Column on June 18, 2009 titled “BofA’s Paying Bonuses to Keep Top Talent? Shocking!” the author discusses: “… the numerous pitfalls in regulating Wall Street pay. [And] the fear was that if Washington clamped down on compensation for all of Wall Street it would put the industry at a disadvantage globally. But by not regulating compensation for all of Wall Street, the Obama administration seems to be hoping that the banks that paid back TARP would follow the “best practices” the TARP banks are required to follow.”

But in the face of near overwhelming competition from overseas banks, non-TARP US banks and boutiques for the best talent, what’s a company to do to select, retain and mobilize key employees?  So far the prominent idea seems to be to pay and pay and pay.  But the question really leads us to a more important point.  That being: who are the organization’s key employees?  Who are those individuals who will really make a difference to the organization and whose contribution is critical to the organization’s success?  You can’t answer that question without understanding the organization’s business strategy.  For B of A and Citigroup, clearly a NEW business strategy is required, as the old strategy wasn’t working.  

As both taxpayers and consultants, we sincerely hope that the bonuses paid at Citi and BofA were reflective of a new strategy and intended to retain and motivate those individuals who will be, for them, the Czars of Change.

Citgroup’s CEO has announced that part of their new strategy will be to capitalize on the company’s strengths in the transaction processing arena with their Global Transaction Services unit (GTS).  “The credit crisis has indeed underscored the value of GTS’s high-margin, low-risk business, which derives its competitive edge from Citi’s global scale and technology rather than big trading bets” Says Julie Segal in an article in June’s Institutional Investor” (Read the full article.)

That commodity business might not deliver a powerful price to earning ratio increase for Citigroup’s stock, but it certainly could be the foundation on which a new a stronger Citigroup will be built.  And don’t discount B of A, with the 2008 bargain basement acquisitions of Countrywide and Merrill, they are well positioned with what will we think soon be highly valuable properties in their portfolio.  

With apologies to Joseph Schumpeter, “creative disruption” has been part of the business landscape for decades.   This time the TARP companies are in the eye of the storm.   The effect of this disruption is that a reshuffling occurs.  Those once “on top” can find themselves far down the pack as perhaps leaner and meaner competitors steal the best talent, picking them off one by one or in teams.  And we can’t blame the defectors, although while it isn’t always just money that provides adequate incentive for a move, if you can get more money for the same job somewhere else, the temptation is generally too strong to resist.

This Great Recession has impacted most if not all industries and business segments. No company that we can think of has the resources now to “just throw money” at people or problems.  Surgical approaches to compensation can help a company to select, retain and mobilize not just its best people but the people best suited to drive success in the future. 

A surgical approach requires a clear understanding of business strategy and what strategy segment the company will pursue.  For example, Harvard Business School Professor Michael Porter would suggest that a company’s strategy would follow one of three lines:  Cost based (think WalMart), Differentiated (think Mercedes Benz) or Focused (a combination of cost based and differentiated).  Once the company identifies it’s general business strategy and segment, a surgical approach is highly effective. 

Grahall has been at the forefront of designing surgical compensation strategies around appropriate market attachments that create true incentives to drive desirable and risk-appropriate behavior.   Once a company had decided what organizational capabilities are the key drivers of success, it can identify the positions in the organization that are most highly valued and therefore should be staffed by top talent, who are appropriately compensated to join and stay and work in those jobs.  

We have presented this surgical approach to clients who, in the past, have worried about the impact on corporate culture, but today in most companies cost is king and culture is a distant relative.  Companies no longer have the financial resources to make all employees happy campers.  The bus for Camp Profitability has left the terminal and you are either on it or under it.  

Email Grahall’s OmniMedia Editor at edie.kingston@grahall.com

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Financials Post Sign of Times: CEO Wanted

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Published in The Wall Street Journal June 24, 2009 by Susanne Craig and Joann S. Lublin

The revolving door for financial-company chief executives is broken. Plenty have left or could be on the way out. Some who want in aren’t experienced enough. And some of the most qualified potential CEOs are leery about entering.

Link to full article.

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UPDATE: Goodbye GM…. Helloooooo GM!

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Expert Perspective by Grahall’s Michael Dennis Graham

The king is dead. Long live the king.

On Monday, June 1, GM filed for bankruptcy.  The company was founded in 1908, and acquired Olds Motor Company.  Olds Motor Company produced its first automobile in 1897, which gives GM well over 100 years in the auto industry.   Throughout this period, GM survived numerous economic crises and was, at its heyday, the king – the largest U.S. corporation and the world’s largest employer. 

An Associated Press article published June 1st, quotes GM Chairman Kent Kresa’s written statement: “Today marks a new beginning for General Motors. … The board is confident that this New GM can operate successfully in the intensely competitive U.S. market and around the world.”  And that is exactly the point. 

Only time will tell if GM can design, engineer, assemble, sell and service cars that people want and can afford to buy; cars that are better than the competition. We are not “car people”.  We do not hail from generations of Americans who helped build GM into an international powerhouse, many working their way up through the ranks to the executive levels. But we have consulted with hundreds of companies in all industries and in all stages of their business cycles, and we believe, like Kresa and others, that “it’s all about the turnaround,” and how quick and successful that turnaround can be.
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Firms Shed India Centers to Cut Costs in Recession

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Published in The Wall Street Journal June 8, 2009 by Ben Worthen

Many Western companies that opened centers in India to perform back-office tasks on the cheap have recently sold or closed those facilities, reversing a decade-long trend as companies look to slash costs and eliminate headaches during the recession.

Link to full article.

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Innovators and Innovative Rewards

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expert perspective telescopeExpert Perspective From Grahall

The article titled “Pay-for-Performance Compensation Limits Innovation” by Thomas Claburn (of Information Week) published in the May 8th edition of Information Week resulted in a broad ranging discussion among the Grahall Editorial Board members at our weekly meeting this past Monday.


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Did the Health Insurance Industry Blink?

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expert perspective telescopeExpert Perspective by Grahall’s Robert Cirkiel

In an article entitled “Insurers Ease Stance on Pre-Existing Conditions” published in the New York Times published on March 25, 2009,  journalist Robert Pear discusses an announcement by the insurance industry indicating that “it was willing to end the practice of charging higher premiums to sick people if Congress adopted a comprehensive plan that provides coverage to all Americans.” 

Health insurers surprised lawmakers with this concession, but did they “blink”? 
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As Banks Flounder, the Perks Play On

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Published in New York Times on March 26, 2009 by Michelle Leder

For much of the 1990s and the early part of this decade, a small group of men built financial behemoths by snapping up ever larger competitors and adding branches with almost reckless abandon in an attempt to build truly national banks that stretched from Florida to Alaska.

Two North Carolina bankers were among the biggest players in the buildup: Hugh L. McColl Jr., who turned a modest North Carolina bank into what eventually became Bank of America, and Edward E. Crutchfield, who built First Union, which ultimately became Wachovia. Based in Charlotte, the two men and their rivalry helped drive the banking bonanza and made both of them very wealthy.

Link to full article

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