- What fundamental value will your current plans generate? Is that performance really defensible given the competitive dynamics of your industry? Is it enough to meet your TSR aspirations?
- What are the market expectations embedded in your stock price? Is there a gap between what you can deliver and what investors expect? If so, do you have a plan for closing it?
- What drives valuation multiples in your industry? Why is your valuation multiple at its current level relative to industry peers?
- What are the key tradeoffs between improving fundamental value, optimizing your valuation multiple, and distributing free cash flow? Do you have a plan for managing these tradeoffs?
- Who are the dominant investors in your company and what are their priorities? Are your plans in sync with their investment goals? Do they find your value-creation strategy credible?
- What is an appropriate TSR target given your companyÂ´s situation? Does your management team understand and own it?
- How will you close the gap between the TSR your current plans are likely to generate and the TSR targets that you have set? What are the implications for your business strategy and financial strategy?
- What are the consequences of your companyÂ´s value-creation strategy for line managers and their business units? Do they know what they must deliver to achieve your TSR target? Have you translated that target into operational metrics and goals that line managers can actually influence? Are they genuinely committed to reaching these goals?
- Are management processes such as planning and budgeting, resource allocation, and incentive compensation aligned with your value-creation strategy? Do they surface the right trade-offs for management discussion? Do they appropriately balance short-term and long-term priorities?
- Do you have a process in place for revisiting the companyÂ´s value-creation strategy as economic conditions and the companyÂ´s situation change? Have you established explicit triggers for activating that process?
Source: The Next Frontier: Building an Integrated Strategy for Value Creation / Eric E. Olsen, Daniel Stelter, Pascal Xhonneux / Boston Consulting Group, December 16, 2004
Subject: CEO / Executive Questions