Dale Furtwengler - The Invaluable Leader: June 2006

The Invaluable Leader by Dale Furtwengler

Rebalancing Your Portfolio
Monday, June 26, 2006

Who will make the decision?

We're not just talking about stocks and bonds

A financial planner friend tells the story of a customer who was reluctant to shift a portion of his portfolio from a high performing fund in order to rebalance his portfolio. His client asked "Why would I change now when I'm riding a winner?" My friend's reply "Your portfolio will be rebalanced. The question is do want to control it or do you want the market to do it for you?"

My friend's insight goes well beyond personal investing. In business, if you don't:

pay attention to your customers needs
listen to your employees concerns/desires
understand the challenges your vendors face

they will rebalance your "portfolio."

Your best customers, those who value what you offer, will leave if you don't adapt to their changing needs. The top performers in your organization will leave if you don't offer them opportunities to learn and grow. Reliable vendors will leave if you become too demanding.

The best are always the first to leave. When the best leave you're left with lower profit margin customers, employees who produce less and suppliers that are less reliable.

Who's going to rebalance your "portfolio", you or the market?

Thermodynamics and Sustainable Results
Monday, June 19, 2006

What do they have in common?

A lot more than you think.

The second law of thermodynamics is entrophy which says that physical states tend toward disorder. Brian Greene in his book, The Fabric of the Cosmos, offers the striking example of an ice cube. The ice cube is a very organized state. Left on its own, the ice migrates to the very messy state we call water.

To keep the more organized state, the ice cube, we need pressure in the form of cold temperatures. Allow the temperature to rise above freezing and you get water. Apply too much cold temperature and the ice becomes brittle, fracturing and splintering as temperatures get colder. How does this relate to sustainable results?

During my 17 years as a consultant and 2 years as a Missouri Quality Award examiner, I've noticed that well-defined processes often don't produce sustainable results. What's missing? The pressure. The natural tendency is for leadership to maintain pressure long enough to achieve the desired result, then the pressure comes off, old habits kick in and performance digresses to previous levels.

Your role as a leader is to balance the pressure in the system (preferably weekly), assuring that there is enough pressure to sustain newly-achieved levels of productivity, but not so much pressure that employees experience burnout.

Home Run Fever
Sunday, June 11, 2006

Home runs are an essential part of baseball.

How do they fit into your game plan?

For most teams, home runs average between 3% and 5% of the “at bats” of its most active players. This simple statistic tells us why baseball managers don’t want their players swinging for the fences. A 3% to 5% success rate isn’t going to win many games. Baseball mangers want their players to focus on getting hits, not hitting home runs. Home runs are a natural byproduct of good hitting techniques.

Over the years I've seen many business leaders looking for that next big product or service idea or the sorely unserved niche that will make their lives easier and their companies cash cows. The reality, just as in baseball, is that these big hits rarely occur when you need them.

Get your leadership and employees to focus on getting hits, on improving performance every week. Improving your company's performance 1% per week will increase its performance 66% over the course of a year. As your company's batting average improves, so will the number of home runs it hits.

I know it's counter-intuitive, but if you want to hit more home runs; learn to hit more singles.

Debt vs. Equity
Thursday, June 01, 2006

An ongoing debate

What's right for you?

From a purely theoretical viewpoint, the authors of EVA (Economic Value Added) and MVA (Market Value Added) are correct; equity is considerably more expensive than debt in funding a business. That's why both EVA and MVA recommend debt as the primary tool for funding operations.

Does your company possess the risk tolerance and agility to employ higher levels of debt? Some business owners/leaders have trouble sleeping at night when debt rises above a certain level. If that's true for your company, following the EVA or MVA model is likely to cause fear and inaction at a time when clear thinking and quick action are needed - when the economy, regulation or unforseen competition turn your business on its head.

Another factor that influences the amount of debt that's right for your company is its agility - how quickly and effectively it can react to unforseen circumstances. If you're not sure, here are a few questions to help you make that determination:

What risks (economic, competitive, regulatory) does your company face?
What contingency plans do you have in place?
Is your leadership well-schooled in these contingency plans?
Are your employees aware of these plans?
How confident are your employees in your management team?

When is debt more expensive than equity? When it causes bad decisions. If you want to adopt EVA or MVA make sure your company possesses the confidence and agility to be successful using higher levels of debt.

Dale Furtwengler

Dale Furtwengler is an internationally acclaimed author whose work is recommended by:

University of Glasgow
University of New South Wales
Australian Institute of Management

If you'd like to make your life easier while creating enviable results, subscribe to my special reports for step-by-step instructions on becoming invaluable. Back issues are available.

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	Rebalancing Your Portfolio Monday, June 26, 2006 Who will make the decision? We're not just talking about stocks and bonds A financial planner friend tells the story of a customer who was reluctant to shift a portion of his portfolio from a high performing fund in order to rebalance his portfolio. His client asked "Why would I change now when I'm riding a winner?" My friend's reply "Your portfolio will be rebalanced. The question is do want to control it or do you want the market to do it for you?" My friend's insight goes well beyond personal investing. In business, if you don't: pay attention to your customers needs listen to your employees concerns/desires understand the challenges your vendors face they will rebalance your "portfolio." Your best customers, those who value what you offer, will leave if you don't adapt to their changing needs. The top performers in your organization will leave if you don't offer them opportunities to learn and grow. Reliable vendors will leave if you become too demanding. The best are always the first to leave. When the best leave you're left with lower profit margin customers, employees who produce less and suppliers that are less reliable. Who's going to rebalance your "portfolio", you or the market? 1 comments Thermodynamics and Sustainable Results Monday, June 19, 2006 What do they have in common? *A lot more than you think.* The second law of thermodynamics is entrophy which says that physical states tend toward disorder. Brian Greene in his book, The Fabric of the Cosmos, offers the striking example of an ice cube. The ice cube is a very organized state. Left on its own, the ice migrates to the very messy state we call water. To keep the more organized state, the ice cube, we need pressure in the form of cold temperatures. Allow the temperature to rise above freezing and you get water. Apply too much cold temperature and the ice becomes brittle, fracturing and splintering as temperatures get colder. How does this relate to sustainable results? During my 17 years as a consultant and 2 years as a Missouri Quality Award examiner, I've noticed that well-defined processes often don't produce sustainable results. What's missing? The pressure. The natural tendency is for leadership to maintain pressure long enough to achieve the desired result, then the pressure comes off, old habits kick in and performance digresses to previous levels. Your role as a leader is to balance the pressure in the system (preferably weekly), assuring that there is enough pressure to sustain newly-achieved levels of productivity, but not so much pressure that employees experience burnout. 0 comments Home Run Fever Sunday, June 11, 2006 Home runs are an essential part of baseball. *How do they fit into your game plan?* For most teams, home runs average between 3% and 5% of the “at bats” of its most active players. This simple statistic tells us why baseball managers don’t want their players swinging for the fences. A 3% to 5% success rate isn’t going to win many games. Baseball mangers want their players to focus on getting hits, not hitting home runs. Home runs are a natural byproduct of good hitting techniques. Over the years I've seen many business leaders looking for that next big product or service idea or the sorely unserved niche that will make their lives easier and their companies cash cows. The reality, just as in baseball, is that these big hits rarely occur when you need them. Get your leadership and employees to focus on getting hits, on improving performance every week. Improving your company's performance 1% per week will increase its performance 66% over the course of a year. As your company's batting average improves, so will the number of home runs it hits. I know it's counter-intuitive, but if you want to hit more home runs; learn to hit more singles. 2 comments Debt vs. Equity Thursday, June 01, 2006 An ongoing debate *What's right for you?* From a purely theoretical viewpoint, the authors of EVA (Economic Value Added) and MVA (Market Value Added) are correct; equity is considerably more expensive than debt in funding a business. That's why both EVA and MVA recommend debt as the primary tool for funding operations. Does your company possess the risk tolerance and agility to employ higher levels of debt? Some business owners/leaders have trouble sleeping at night when debt rises above a certain level. If that's true for your company, following the EVA or MVA model is likely to cause fear and inaction at a time when clear thinking and quick action are needed - when the economy, regulation or unforseen competition turn your business on its head. Another factor that influences the amount of debt that's right for your company is its agility - how quickly and effectively it can react to unforseen circumstances. If you're not sure, here are a few questions to help you make that determination: What risks (economic, competitive, regulatory) does your company face? What contingency plans do you have in place? Is your leadership well-schooled in these contingency plans? Are your employees aware of these plans? How confident are your employees in your management team? When is debt more expensive than equity? When it causes bad decisions. If you want to adopt EVA or MVA make sure your company possesses the confidence and agility to be successful using higher levels of debt. 0 comments	Dale Furtwengler is an internationally acclaimed author whose work is recommended by: University of Glasgow University of New South Wales Australian Institute of Management If you'd like to make your life easier while creating enviable results, subscribe to my special reports for step-by-step instructions on becoming invaluable. Back issues are available. March 2006 April 2006 May 2006 June 2006 July 2006 August 2006 September 2006 October 2006 November 2006 December 2006 January 2007 February 2007 March 2007 April 2007 May 2007 June 2007 July 2007 August 2007 September 2007 October 2007 November 2007 December 2007 January 2008 February 2008 March 2008 April 2008 May 2008 June 2008