NEW MODELS MEASUREMENTS AND MAPS Felix Barber Measuring
"NEW MODELS, MEASUREMENTS AND MAPS" Felix Barber Measuring and managing intangible values in today's economy November 6 th 2002, Swiss Re, Rüschlikon
CV 12251 -00 -01 Nov 02 -FB-ml-Z-Rüschlikon. ppt -1 -
FELIX BARBER Senior Vice President and Director The Boston Consulting Group (BCG) • Worldwide Practice Area Leader of Organisation Practice (Organisation Design, Change Management, Human Resources, Networks) 1999 – • Developed 'Workonomics' approach to Linking Human Resources and Shareholder Value. Currently in regular use by BCG in client work to assess company performance from a people perspective • Founded and lead Zurich office 1989 -98 • Previously active in London and Munich offices • Client focus primarily on Consumer and Service industries Education • MA Philosophy, Politics, Economics Oxford University 12251 -00 -01 Nov 02 -FB-ml-Z-Rüschlikon. ppt -2 -
'INDUSTRY' AND 'PERSONAL' VIEWS 12251 -00 -01 Nov 02 -FB-ml-Z-Rüschlikon. ppt -3 -
INDUSTRY VIEW An increasing share of company value is created by 'intangibles', for example by employees and customer relationships A company's capital is the source of its value, so if 'intangibles' create value we should try to capitalise them in the balance sheet We should consider and value 'Human Capital' and 'Customer Capital' 12251 -00 -01 Nov 02 -FB-ml-Z-Rüschlikon. ppt -4 -
PERSONAL VIEW Many things besides capital create value for companies Companies do not own employees or customers Instead of seeking to capitalise employees and customers as a way of recognising their value, we should ask and answer the same questions about them as we ask and answer about capital 12251 -00 -01 Nov 02 -FB-ml-Z-Rüschlikon. ppt -5 -
PRESENTATION 12251 -00 -01 Nov 02 -FB-ml-Z-Rüschlikon. ppt -6 -
PEOPLE AND CUSTOMERS STRONGLY IMPACT PERFORMANCE 35% Consumer Serv. Cosmetics Food & Tob. 30% Securities Brokers Advertising Software 25% Airlines Pharma Publishing Home 20% ROE Average 1997 -2000 Textiles Fin. Serv. Chemicals Banks Ind. Equip. Household Food Retail Ind. Div. Auto Parts Elec. Comps. Comm. Tech. Biotech Med. Prods. 15% Fixed-line Comm. Semicond. Utilities Energy 10% Technology Services Retail Beverage Insurance Industrial Services Hardware Auto Building Mats. Packaging Transportation Leisure Goods Aerospace Adv. Ind. Equip. Basic Resources Construction Wireless Comm. Real Estate 5% Healthcare Provs. Broadcasting 0% 0 12251 -00 -01 Nov 02 -FB-ml-Z-Rüschlikon. ppt 0. 5 1 1. 5 2 2. 5 3 People Costs/Capital Costs Average 1997 -2000 3. 5 4 -7 -
MEASURE PEOPLES' PERFORMANCE IN PEOPLE-TERMS Return on capital Cost of capital Balance sheet/Balance sheet structure Balance sheet changes Plant and equipment utilisation Capital investment plan Capital gearing (debt/equity ratio) Capital gains Long/short term financing 12251 -00 -01 Nov 02 -FB-ml-Z-Rüschlikon. ppt People Driven: Workonomics Metrics Employee incentives ensure alignment Capital Driven: Traditional Metrics Productivity Employee cost Workforce/Workforce structure New hires/attrition Workforce utilisation Workforce development plan Employee gearing (fixed/variable compensation) Long term contingent compensation (e. g. options) Employee contracts (golden handcuffs) -8 -
ECONOMIC PROFIT LINKS CAPITAL AND PEOPLE PERSPECTIVES Capital perspective: Return on capital above cost of capital Employee perspective: Workonomics productivity above employee cost (%) Return on Capital Required Return on Capital $ 000 / employee Economic (1) profit Workonomics productivity Employee cost per employee Capital costs Amount of capital invested (USD) Economic profit(2) Employee costs Employees ('000 s) (1) Usually calculated on post tax basis to be comparable with (post-tax) capital costs (2) Usually calculated on pre-tax basis to be comparable with (pre-tax) employee costs 12251 -00 -01 Nov 02 -FB-ml-Z-Rüschlikon. ppt -9 -
AVAILABLE LEGAL FORMS MAY BE TOO LIMITING Legal form Value creation Ownership Risk Profit/ Residual income Stock corporation Capital investment Equity Partnership Partners skills, capabilities and relationships Partners Cooperative society Customer purchases Customers 12251 -00 -01 Nov 02 -FB-ml-Z-Rüschlikon. ppt - 10 -
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