Management Questions

Most companies incorporate five basic building blocks into their financial reporting: the two sides (active and passive) of the balance sheet including the asset register, a profit-and-loss statement, an investment plan or budget, and some form of competitive benchmarking. Recently, shareholder-value-management indicators have been added to the list. These six measures answer some basic questions:

• How much capital do we have, what kind is it, how much did we pay for it, and how much is it worth now? (from the active side of the balance sheet, supported by the asset register)
• How productively are we using our capital, how will we reward equity capital, and what will our debt capital cost? (from the profit-and-loss statement, in relation to the balance sheet)
• On what basis is capital provided? How secure is the capital base – is the financing long-term or short-term? What reward structures – equity or debt – have we arranged with capital providers? (from the passive side of the balance sheet)
• How much and what kind of new capital will we need, what will we use it for, where will it come from, and what returns can we expect? (from the investment plan)
• Do we use our capital more productively than our competitors do? (from competitive benchmarking of financial returns)
• How much value are we creating for shareholders with our current level of return on capital? (from shareholder-value-management indicators)

Source: Valuing the Assets of the New Economy / Felix Barber, Ralf Dreischmeier, Ulrich Villis / Boston Consulting Group (BCG), October 15, 2000

32No Comments »http://www.mgmtquestions.com/2006/08/23/questions-about-capital-investment/Questions+About+Capital+Investment2006-08-23+11%3A15%3A15Administrator Posted by Administrator / Finance Questions

Scholar and ethics consultant Laura Nash suggests twelve questions that can help leaders avoid the mind game of over simplifying. The following questions may raise ethical issues not otherwise considered, or help generate a variety of “out of the box” alternatives. Before settling on a solution, ask yourself the following questions:

1. Have I specified the problem accurately?
2. How would I describe the problem if I were on the opposite side of the fence?
3. How did this situation begin?
4. To whom and to what do I give my loyalties as a person or group and as a member of the organization?
5. What is my intention in making this decision?
6. How does this intention compare with the likely results?
7. Whom could my decision or action harm?
8. Can I engage those involved in a discussion of the problem prior to making a decision?
9. Am I confident that my position will be valid over the long term?
10. Could I disclose without reservation my decision or action to my boss, our CEO, the Board of Directors, my family, or society as a whole?
11. What is the symbolic impact of my action if it is understood?
12. Under what conditions would I allow exceptions to my position?

These questions initiate a thought process that underscores the importance of problem identification and information gathering. Such a process can help leaders guard against over simplifying an otherwise complicated ethical decision.

Source: Why Good Leaders Do Bad Things / Charles D. Kerns, Ph.D. / Graziadio Business Report, Vol. 6, No. 4

31No Comments »http://www.mgmtquestions.com/2006/08/23/12-questions-to-help-avoid-the-mind-game-over-simplifying/12+Questions+to+Help+Avoid+the+Mind+Game+Over+Simplifying+2006-08-23+11%3A08%3A11Administrator Posted by Administrator / Decision Making Questions