CORPORATE MISSION STATEMENT VISION THE BOTTOM LINE
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Transcript CORPORATE MISSION STATEMENT VISION THE BOTTOM LINE
MANAGEMENT: A BIBLICAL APPROACH
BY
KWAME BOASIAKO OMANE-ANTWI
LESSON:
CORPORATE MISSION STATEMENT
VERSUS THE BOTTOM LINE (PROFITABILITY)
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BIBLE TEXT: Gen 11: 1 - 9
Key ingredients of successful organisation:
Commitment to work on a goal (v. 3 – 4)
Unity among the people (v. 6)
An effective Communication System (v. 1, 6)
Doing the will of God (v. 7 – 9)
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One of the most important possessions of a leader is vision.
It is critical requirement for effective leadership. A leader without a vision is not
worth following; he is blind.
“And if the blind leads the blind, both will fall into a ditch” (Matthew 15:14).
“If you do not know where you are going, every road will get you nowhere” Henry Kissenger
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A vision is a global concept, it points a picture of the enterprise’s direction and
future. An effective vision statement succinctly communicates an uplifting
philosophy that energizes the enterprise stakeholders to embrace challenges in
order to successfully accomplish its goals.
A vision statement should remain relatively constant well beyond the life of
your involvement in an organisation. The normal life span of a vision statement
is 10 to 20 years.
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Three Components Help To Make A Vision Statement Valid And Useful
For People:
1.
A focused concept – Something beyond platitudes; a value creation premise that
people can actually picture as existing. “Leadership is a combination of strategy
and character. If you must be without one, be without the strategy.” General
H. Norman Schwarzkopf
2.
A sense of noble purpose – Something that is really worth doing; something that
is really worth doing; something that can create value, make a contribution,
make the world a better place in some way, and win people’s commitment.
3.
A plausible chance of success – Something people can realistically believe to be
possible and, if not perfectly attainable, at least plausible to strive for.
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A mission statement is a statement that defines the essence or purpose of a
company – What it stands for i.e. what broad products or services it intends to
offer customers. The mission statement also gives readers a window on the raison
d'être of the company and was initially designed as a means by which potential
shareholders and investors could understand the purpose of the company
statement as a cross between a slogan and a mini executive summary.
Just as slogans and executive summaries can be used in many ways, so too can a
mission statement. An effective mission statement should be concise enough for
you to describe your company’s purpose and ideals in less than 30 seconds.
Provides a “reason for being”
Provides clarity and focus and makes choices
Is clear and concise
Is agreed by the wider organisation
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The mission statement ensures some transparency for investors and employees
alike so they can have some confidence as to any potential use of their
resources be they capital investment or labour.
A mission statement is also designed to ensure that all stakeholders are clear
on the overarching purpose of the company so everyone can be focused on the
same goals and objectives. When someone reads a mission statement in a
business plan they are looking to get a feel for the range of activities that the
company will focus on, in other words its core purpose and what it stands for.
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Function
An effective mission statement defines the fundamental, unique purpose
that sets a business apart from other firms of its type and identifies the
scope of the business’s operations in product and market terms.
It is an enduring statement of purpose that reveals an organisation’s product
or service, markets, customers, and philosophy. When prepared as formal
organisational document, a mission statement may be presented under maze
of labels, including “creed statement,” “statement of purpose”, “statement of
philosophy,” or a statement “defining our business.”
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Function
Yet regardless of the label, a mission statement provides the foundation
for priorities, strategies, plans, and work assignments. It is the starting
point for the design of managerial jobs and structures. It specifies the
fundamental reason why an organisation exists.
A mission statement should create an organisation identity larger than the
limits placed on the firm by any individual. An effective statement
helps to satisfy people’s needs to produce something worthwhile, to
gain recognition, to help others, to beat opponents, and to earn respect.
Thus, it is a general declaration of attitude and outlook.
Free from details, a mission statement has breadth of scope; it provides
for the generation and consideration of a range of alternative objectives
and strategies because it does not unduly stifle management creativity.
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If you are looking to develop one for your company the process in
creating one should be an inclusive one, involving all relevant
stakeholders. It should not just be something written by the Managing
Director and then circulated to everyone. The aim is to create
a succinct definition that people can relate to.
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Here are some basic guidelines in writing a mission
statement:
A mission statement should say who your company is,
what you do, what you stand for and why you do it.
An effective mission statement is best developed with
input by all the members of an organization.
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A mission statement may be the most visible and public part of a strategic plan.
As such, it is comprehensive in its coverage of broad organisational concerns.
Although no empirical research has been published to guide corporate mission
statement development, the limited evidence available suggests eight key
components of mission statements:
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1.
The specification of target customers and markets
2.
The identification of principal products/services
3.
The specification of geographic domain
4.
The identification of core technologies
5.
The expression of commitment to survival, growth, and profitability
6.
The specification of the key elements in the company philosophy
7.
The identification of the company self-concept
8.
The identification of the firm’s desired public image
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Although not all authors may agree exactly on the best form for an effective
mission statement, I believe it should define at least the following three things:
1.
The Customer – Defined not in terms of some market segment or statistical
category, but in terms of a basic defining need premise that leads that person
(entity) to consider doing business with our enterprise.
2.
The Value Premise – Defined not in terms of what your organisation does,
makes, sells, or delivers, but in terms of the fundamental value it represents
in matching the customer’s need premise.
3. What Makes you special – Your special means for creating value, in order to
win and keep the customer’s business.
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Refers to a company’s net earnings, net income or earnings per share (EPS).
Bottom line also refers to any actions that may increase/decrease net earnings or
a company’s overall profit. A company that is growing its net earnings or
reducing its costs is said to be “improving its bottom line”.
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The reference to “bottom” describes the relative location of the net income figure
on a company’s income statement; it will almost always be the last line at the
bottom of the page. This reflects the fact that all expenses have already been
taken out of revenues, and there is nothing left to subtract. This stands in
contrast to revenues, which are considered the “top line” figures.
Most companies aim to improve their bottom lines through two simultaneous
methods: growing revenues (i.e., generate top-line growth) and increasing
efficiency (or cutting costs).
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It is the key linkage in forming the corporate credo which
leads to profitability
It provides a structure of the strategic success model to be
followed and to enable you plan against a business failure
It helps managers to think like business people and make
good decisions based on the global system measurements:
Revenues
Expenses
Profit
Return on investment
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1)
Going into business for the wrong reasons
2)
Sometimes advice from family and friends
3)
Being in the wrong place at the wrong time
4)
Entrepreneur gets worn-out and/or underestimated the time requirements –
Need to work 24/7 – “Work hard and cheerfully at all you do, just as though
you were working for the Lord and not merely for your masters” Col 3: 23
5)
Family pressure on time and money commitments
6)
Pride
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7)
Lack of market awareness
8)
The entrepreneur falls in love with the product/business
9)
Lack of financial responsibility and awareness
10)
Lack of a career focus
11)
Too much money – Idle funds
12)
Optimistic/Realistic/Pessimistic
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1)
Development of a business plan
2)
Obtaining accurate financial information about the business in a timely
manner
3)
Profile of target customer
4)
Profile of competition
5)
Go into business for the right reasons
6)
Don’t always borrow family money and don’t always ask the family for advice
– Use experts
7)
Network with other business owners in similar industries
8)
Don’t forget someone will always have a lower price than you
9)
Realise that customer tastes and preference change
10)
Become better informed of the resources that are available
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A company’s valuation is based on seven key discriminating factors which are
grouped into three key management areas:
1.
Profit management, as measured by changes in profitability.
2.
Asset management, as measured by liquidity, working capital, and
current asset cover.
3.
Funding management, as measured by adequacy of the capital base,
dependency on debt and dependency on current liabilities.
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Autocratic chief executive
Failure to separate role of chairman and chief executive
Passive board of directors
Lack of balance of skills in management teamfinancial, legal, marketing, etc
Weak Accountant
Lack of ‘management in depth’
Poor response to change
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No budgetary control
No cash flow plans
No costing system
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High gearing – a company allows gearing to rise to
such a level that one unfortunate event can have disastrous
consequences.
Overtrading – this occurs when a company expands faster than its
financing is capable of supporting. The capital base can become too
small and unbalanced.
The big project – any external/internal project, the failure of
which would bring the company down.
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Creative accounting - Optimistic statements are made to the public and
figures are altered (inventory valued higher, depreciation lower, etc).
Because of this, the outsider may not recognise any change, and failure,
when it arrives, is therefore very rapid.
Non-financial signs – Various signs include frozen management
salaries, delayed capital expenditure, falling market share, rising staff
turnover.
Terminal signs – At the end of the failure process, the financial and nonfinancial signs become so obvious that even the casual observer recognises
them.
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Failure to focus on a specific market because of poor research.
Failure to control cash by carrying too much stock, paying suppliers too
promptly, and allowing customers too long to pay.
Failure to control costs ruthlessly.
Failure to adapt your produce to meet customer needs.
Failure to carry out decent market research.
Failure to build a team that is compatible and has the skills to finance,
produce, sell, and market.
Failure to pay taxes (PAYE, SSNIT and VAT).
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•Win
new customers
•Keep
customers
Improving the Working
Capital Cycle
•Increase
the average sale
•Improve
business process
•Watch
the three ‘Ms’ of Business Failure
Money
Management
Marketing
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Maintain an up-to-date balance sheet and business plan
Improve controls and reporting
Bolster budgeting and cash accountability
Scale payroll with current business
Replace fixed costs with variable ones
Heighten awareness of fraud
Utilise tax planning
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Seek alternative financing: Go beyond banking:
Factoring of debtors
Grants
Hire purchase
Equipment finance
Equity finance
Asset-based lending
Business angels
Manage Risks – the sensible company takes risks; but not gambles
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Focus on maintaining liquidity – ‘Cash is King’; “Cash is a fact; Profit is an
opinion”
Ensure adequate cash flow and a healthy balance sheet.
Reduce cost and restructure assets
Investment in new product segments
Emphasize day-to-day cash position management
Step up credit checks of customers and suppliers.
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Check credit worthiness of new customers
Speed up dispatch of invoices
Improve credit control
Police early payment discount
Improve Reporting
Bank cheques and cash on the same day
Invest surplus money
Seek Government money
Be transparent
Plan effectively
Strengthen relationships with banks
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N/B:
In a troubled company, remember cash flow today will be more important
than
profits tomorrow.
Get a qualified Accountant who should be the DNA of the business by
coming out with Cost Containment Plan.
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Improve business forecasting
Analyse spending
Review utility costs
Control Business travels
Cut the cost of debt
Automate routine processes – ICT the enabler
Use Consultants sparingly
Cut directors perks
Explore off-shore manufacturing
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N/B:
A troubled company can be a goldmine for fraud. Watch fraud analytics
Opportunity
Pressure/Incentive
Rationalisation
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CLASSIFICATION OF ACCOUNTING RATIOS
Profitability ratios
Liquidity ratios
Current assets
Acid test
Return on capital employed
Gross profit
Mark-up
Net profit
Efficiency ratios
Investment ratios
Dividend yield
Dividend cover
Earning per share
Price/earning ration
Capital gearing
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Stock turnover
Fixed assets turnover
Trade debtor collection period
Trade credit payment period
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When cash flow dries up – The 3 ‘Ms’
of Business Failure is clearly showing:
Money
Management
Marketing
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Under capitalisation
Tax burden and Regulations
Poor Cash flow
Loss of Key person
Lack of technology
Poor Location
Natural Disaster
High Trade Credit
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BUILDING BLOCKS OF A SOUND BUSINESS
STRATEGIES
OBJECTIVES
GOALS
VALUES
MISSION
VISION
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It is the key focus of your business plan:
Revenue
Profits
Market Share
Market Growth
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Business must be managed and managed in the will of God
Jacob’s success is based on these critical factors
Focus – Successful people have successful habits. Unsuccessful people don’t!
Management Skills
Application of business management principles
Gracious Hand of God – Ecclesiastes 9:11 No favour to men of skill.
Trust – Trust oils the wheel of Business and Society.
Trust worthiness = Ability + Benevolence + Integrity + Predictability
N/B Without trust we may not be able to find new and more cost effective
approach to delivering services.
2 Thessalonians 3:10 –“If a man will not work, he shall not eat.”
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Prof. Kwame Boasiako Omane-Antwi
PhD, MBA, MA, ITP (HARVARD) AMP(OXON),FCCA, FRSA(UK), FBI(Hon), FIOD(UK),
FIOD(GH), FCIM, MCIPD, MIMIS
Vice Rector & Dean - Faculty of Business Administration
Pentecost University College
Sowutuom – Accra
Tel 0244-32448/0202011775
E-mail:
[email protected]
[email protected]
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