Archive for the ‘Best Practices’ Category

What Stands Between Private-Equity Firms and Their Companies, Part 4: Too Little Interest in People and Processes

Wednesday, July 9th, 2014

Here we are already at the fourth installment of our five-part series on opportunities to improve the relationship between private-equity firms and “their” companies. Today, we’re going to address the lack of interest in people and procedures that we often observe.

We have been able to establish earlier, in installment three, that it’s a good thing when private-equity firms and “their” companies don’t let responsibilities fall as they may between them. In many cases, we have observed that a positive interest (by the people-in-charge at the private-equity firm) in specific individuals involved—certainly at the executive level—coupled with a greater interest in procedures and their details would have done—or would do—both parties well.

Often what’s important are the signals that are sent. If a new investor—and it is largely irrelevant whether this is a private-equity fund or a strategic investor—takes an interest in the details, and when without meddling, he attempts to understand the essence of the model beyond its efficiency and possible “leveraging,” acceptance of the investor within the company rises quickly. Do not undervalue this symbolic element, because it forms a basis for trust. Successful investors devote a great deal of time to due diligence, in order to understand the system more fully. As mentioned before, less to talk about it afterward than to show earlier: “You are important to us.”

That’s not something you support with numbers. In our projects we encourage the exchange of content as a matter of course, if it pertains to our consulting mandate.

 
© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.

What Stands Between Private-Equity Firms and Their Companies, Part 3: Uncertain Roles, Competencies, Responsibilities

Wednesday, July 2nd, 2014

In the third episode of our short series about hurdles in the relationship between private-equity firms and the companies they take over, we’ll focus on rolls, competencies and responsibilities, which are not always adequately resolved and possibly cause confusion between the players.

For a company taken over by a private-equity firm, it’s an entirely new ball game. Insecurity sets in. Your own position might be at risk. Expectations are unclear, or worse: They are supposed to be clear, but they are not articulated. What is management to do?

The company that has been taken over often perceives representatives of the private-equity firm as if the latter want to be the experts in the business. Sometimes the perception is ungrounded, but all too often, the arrival of the private-equity partner and its employees is all but certain to nourish this very expectation. A big threat, because the company will buttress itself with a counter-response, and a wholly-avoidable, confrontational situation arises. The threat manifests itself in operational results if one party seeks to prove that the other is not only wrong, but responsible for their present quandary. Pointless.

In order to prevent such situations from arising in the first place, our advice is that everyone should concentrate on what he can do best. The company must remain the expert in the field, as long as members of the advisory are highly-competent. The private-equity firms must perform their function as catalysts in matters relating to networks, finances, overall growth strategy (for example, buy-and-build), and to ask brilliant questions of management. Growth of the company is incumbent upon management, not the private-equity firm.

Through such role clarification—ideally led by a neutral third party at the very outset of the new relationship, and that must also include a detailed definition of responsibilities and competencies—brakes on growth will be released.

© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.

What Stands Between Private-Equity Firms and Their Companies, Part 2: Proliferating Control Systems

Wednesday, June 25th, 2014

Here is the next part of my short series about obstacles to growth between private-equity firms and their companies. They come from my presentation “Who Pays the Piper Calls the Tune—What Private-Equity Firms are Regularly Missing” as part of the German Private-Equity Conference 2014 in Frankfurt am Main.

So what does often stand in the way of the relationship between private-equity firms and “their” companies?

Part 2: Proliferating Control Systems

One of the fundamental competencies of private-equity firms is their virtuosity with numbers. It is not rare for a company that has been taken to benefit from this skill quite quickly. Indeed, a high degree of professionalization is often reached. Typical control systems established by private-equity firms—systems that we see in our consulting projects—make possible every kind of analysis imaginable, right up to simulation. No wonder! In the end, you want to report to investors and banks regularly and accurately.

Yet in this context, sledgehammers are often used to swat flies. Some control systems are simply so bulky that they discourage management from doing what they’re paid for: to steer the company toward growth. A great many meetings only about control poses the risk of forcing the topic of material progress into the background.

The pinnacle is reached when entire systems are changed—as we have seen, for example, in the context of “secondaries,” where one private-equity firm takes over a company from another private-equity firm. In this situation, a first-class, oversize control system is changed over to another first-class, oversize control system. More precisely: A project comes to life because in reality, there can be no talk of “changeover.” These systems, which are then called the “control tower” or the like, can hold back a company significantly.

Overcome the hurdles. Less is more. The control system must fit the company. And, if you set aside your ego slightly, a private-equity firm that takes over a company can also simply take over the world-class system of another private-equity firm. That also saves time.

 
© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.

What Stands Between Private-Equity Firms and Their Companies, Part 1: Toward a Sharper Focus on Financial Aspects

Saturday, June 14th, 2014

Herewith, as promised, is a short series about obstacles to growth between private-equity firms and their companies. They come from my presentation “Who Pays the Piper Calls the Tune—What Private-Equity Firms are Regularly Missing” as part of the German Private-Equity Conference 2014 in Frankfurt am Main.

So what does often stand in the way of the relationship between private-equity firms and “their” companies?

Part 1: Toward a Sharper Focus on Financial Aspects

Absolutely. Private-equity investments are all about money. Often about a great deal of money. The investors want to earn just as much from the deal as management, which not uncommonly also become investors. That is fine, too, as long as it doesn’t affect the substance of the company.

But: It is easy to forget that company employees do not necessarily “perform” for money. Of course, there are employees who run faster when there is more money to be had, but most employees are won over by substance, by collective achievement, by goals, completed sections of a path agreed to in advance—not by operating numbers, salary, profits, EBITDA—and the number of employees will increase before it will decrease.

The junior designer would like to design cool products. The head of marketing would like to develop the brand. The young engineer would like to improve procedures. Money is a so-called “hygiene factor,” not a tool for motivation.

Overcome the obstacles. Private-equity firms are well advised to grapple with the the substance of a business and engage employees in a conversation about that. Discussions of financial aspects ought to be reserved for boards that assume control of financial management and communications.

 

© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.

Personal Growth: Increase Your Productivity

Wednesday, April 2nd, 2014

Recently there was a discussion initiated by a Canadian colleague how to get more productive. Here is my take on that:

1. Stop whining.
2. Stop blaming yourself that you are not productive enough. Recognition is the first step.
3. Define what you mean by being “productive.” A lot of people define unrealistic objectives. A lot of people define none at all. Planning a day is more “complicated” than planning a project, because you need to get so damn specific and it’s today, not tomorrow.
4. Priorities. First things first. Have three priorities for the year. Ask yourself if a specific task helps you in terms of your priorities or not. If not: is the task necessary at all?
5. No interruption. Take notes over a period of two days in order to figure out what distracts you. You’ll be surprised. Some interruptions actually have names.
6. No excuses except for “house on fire.”
7. Be specific, create chunks. Some tasks are too big to start. As you wouldn’t write a book without having created chunks, you wouldn’t “acquire.” But you would call John Smith in order to get a referral.
8. Stop. We could work all day in our profession. If we don’t stop, we work all the time.
9. Organize your work. Don’t call someone, write a letter, read a memo, call another person, write another letter. Make calls, write letters, read stuff, write stuff.
10. Never second guess yourself. Do it. Done. Although I am (and already was) highly productive, this was one of the most important insights for me, ever. I almost doubled my productivity. Disclaimer: This only works at a certain level of quality, of course.
11. Don’t care about time management systems. If you are using a Filofax, PostIts or Outlook doesn’t matter until it works for you.

© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.

Ease-of-Purchasing as a Growth Driver

Friday, March 28th, 2014

Businesses think too much about product improvement and not enough about how they can make it easier for customers to purchase their existing products.

My wife and I have been considering buying a made-to-order, so-called “anti-dirt mat” for our RV. We have two dogs that we occasionally take to dog shows, and we would resent the dirt less with even a light-colored anti-dirt mat than with the light-tone carpet that came with the RV. We decided on an especially high-quality product, similar to a carpet, that was to match the specifications of our own carpet.

The snag: The supplier needed our carpet as a template. Not a drawing, but the original, to ensure a good fit. But how do you ship a three-piece carpet? Here’s the solution: “Pack up your carpet, and we’ll have it picked up at whatever address you wish, at no charge. When the new carpet is ready, we’ll deliver it – along with the original – to any address you choose, again at no charge.”

No sooner said than done. It couldn’t be simpler. The carpet was picked up at Mandat, and both packages were delivered there later. The product is outstanding, and the process impressed us.

And that’s how growth happens.

 
© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.

“Bomb Threat? Follow These Instructions.”

Monday, March 24th, 2014

Recently as I checked in with JetBlue Airways in West Palm Beach, Florida to fly back to New York, instructions on the employee’s desk attracted my attention as she busied herself with my ticket. They were printed on blue paper, laminated to the desk top. The content was approximately as follows:

Affix these instructions near your telephone.

“Bomb Threat?
Ask the caller the following questions:

  • Where is the bomb?
  • When is it set to explode.
  • Under what circumstances will it explode.
  • What does the bomb look like?
  • What is it made of?
  • Did you build the bomb?
  • Why?
  • What is your address? Where are you at the moment?

Let’s assume that these questions were not pulled together by amateurs, but by professionals who know what they are doing – since in the end, air travel is a realm that is sensitive to security. What do we see here? At least the last three are not immediately obvious. They serve either to keep the caller on the line, to keep him talking, or there really are instances in which these questions are answered correctly.

Teaching moment: Sometimes there are questions that aren’t obvious, questions that must be asked in order to reach a goal

 
© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.

Virgin Atlantic: Very Attentive!

Tuesday, February 18th, 2014

Waiting for my first class flight with Singapore Airlines to Frankfurt on Valentine’s Day at JFK, I was not only greeted by the Virgin Atlantic team at their lounge with “Happy Valentine’s Day,” but also was presented the handwritten note below. I call this very attentive.

Valentines Day Virgin Atlantic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.***

How are businesses supposed to grow, when . . .

Friday, January 3rd, 2014

. . . the following are still part of the daily routine?
• Cell phones turned on and ringing.
• Repeated ringing of the same person’s cell phone.
• Regularly being late to meetings while mumbling an unintelligible apology that wouldn’t have been any better had we been able to understand it.
• Pronouncements such as “we won’t go through that in detail just now,” which is inevitably followed by the same person’s going through it blow-by-blow.
• Meetings scheduled to go from 9:00 to 5:00, with 28 items on the agenda.
• Meetings scheduled to go from 9:00 to 5:00 that last until 9:00.
• Meetings with no purpose.
• Participants who come to meetings unprepared, which prolongs the meeting significantly.
• Truly disparaging talk about some individual or department not represented at the table.
• Blind adherence to 30-year-old positions that were wrong even then.
• Incessant repetition of inaccuracies, usually with increasing volume.
• Face-saving insistence on old positions when confronted with better knowledge.
• To assume, except in an airplane cockpit or hospital operating-room, that there is a point-of-no-return.
• A spirited “just one more little thing,” followed by something long-winded (to address a point, to end the meeting, to try something out).
• A meeting that comes up with no “next steps.”
• Poor enforcement of supposedly-adopted standards.
• A narrow approach that limits freedom of action.
• Rewarding invalid arguments.
• The thought that something would “sort itself out.”
The good news: If we can just rid our businesses of these trifling irritants, we’re already better positioned for further growth.

© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.

Mandat Growth Tip of the Day: Surprise Your Customers

Monday, December 2nd, 2013

Your focus for today: Put some thought into how in the future you might systematically surprise your customers. (taking place according to specific rules)
If you book a first-class ticket from London-Gatwick to Victoria Station on line, along with your reservation’s confirmation you receive a download link to three music collections of various styles. At no cost, the passenger can download one of the selections for each reservation. Each of the collections is about 30 minutes long, exactly the time the Gatwick Express takes to make the run to Victoria Station. The Gatwick Express wants you to enjoy the music through headphones as your watch the the countryside go by.
Gatwick Express surprised me with this perk. It’s a service that Gatwick Express must certainly pay very little for and at the same time, reflects their customer-oriented approach. I find this worthy of a best-practice award. How are you going to surprise your customers?

© 2013, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.