Read more about the article Business Finance | Does EBITDA Bury Its Own Dead?

Business Finance | Does EBITDA Bury Its Own Dead?

Does EBITDA really tell you what you need to know?

“I have enough money to last me the rest of my life … unless I buy something.”–         Jackie Mason

 

Does this sound like you?

Someone recently told me that they’re bored by finance. “Don’t distract me with strategic finance stuff, just let me run my business the way I know how.”

“No problem,” I said, “if you’ll just answer one question. What if the way you’re running it is causing increasing strain on your financial resources, cash flow is dwindling and you’re destroying market value every year. Do you care about any of that?”

“Of course, I do, but when sales start picking up again, all of that will go away and my EBITDA will return to normal levels.”

“Really?” I said. “How do you know that?”

“That’s the way it’s always worked.”

“Have you had any problems with your banking relationship?” (more…)

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Vol. 62: Strategic Finance Fundamentals: It’s time!

“If I am through learning, I am through.”– John Wooden

Some of you will remember – back in the day – the E. F. Hutton commercials that intoned, “When E.F. Hutton speaks, people listen.” (Some of you are probably wondering – who is E.F. Hutton in the first place?) These days, the Sage of Omaha has taken their place and has the ear of many. When I finished re-reading Warren Buffett’s Annual Letter to Shareholders, it resonated with similar messages in a number of recent articles.

What is growth?

From a Wall Street Journal article on March 25 discussing Conoco/Phillips’ future plans: “We asked ourselves, ‘What is growth?’” an executive said. “Growth could be viewed as just growing absolute volumes, but we felt that in this challenging environment what’s really important is to grow the value of the company.”

Or this one, from an article in the April 5 edition of Business Week about the Sears/K-Mart merger: “Simplistic analyses … ignore the fact that negative or below-market returns on invested capital are as harmful to creditors as to shareholders.”

Finally, in Warren Buffett’s shareholder letter, (more…)

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Read more about the article Vol. 60: Creating a Responsible Culture

Vol. 60: Creating a Responsible Culture

Build a Responsible CultureLast time, we discussed how to create a responsible culture where each individual accepts accountability for their actions and decisions.

In our discussion of this subject, we’ve ranged from the baseline of personal accountability to a broader organizational culture, to the battle-tested power of after action reviews.

So, if the power of an accountable organization is so obvious, why aren’t we all doing it?

Victimization has a stranglehold on American business

In “The Oz Principle,” a book by Craig Hickman (recently reissued in a revised and updated edition 10 years after its original publication), the overgrown roots of a victimization mentality is chronicled as one of the most corrosive forces in American business.

[pullquote]The man who complains about the way the ball bounces is likely to be the one who dropped it.~ Lou Holtz[/pullquote]

Mr. Hickman pulls no punches in deriding the plight of victimization that he believes has a stranglehold on American industry.

How many of these lines have you heard during your business career?

* “That’s the way we’ve always done it.”
* “That’s not my department.”
* “Someone should have told me not to do that.”
* “Why didn’t you ask me?”
* “Nobody’s followed up on this. It can’t be that important.”

[pullquote]Victimization is a corrosive force in American business[/pullquote]

It’s fodder for a Saturday Night Live skit, isn’t it? (more…)

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Read more about the article Accountability | What Does It Really Mean?

Accountability | What Does It Really Mean?

When does Accountability begin?

“When is it no longer my responsibility to get people to complete their assignments … and where does their responsibility to perform begin?” a North Bay CEO asked me recently.

“Your responsibility never ends … and neither does theirs,” I said.

“Your job is to work tirelessly to build accountability into the organization so that your team understands that being held accountable is the cornerstone of a strong, successful organization. It is not punitive.”

In this column recently, we’ve discussed personal accountability as the “singular touchstone of professional success over which we have the greatest control.”

We’ve also discussed the After Action Report, a valuable teaching tool that reinforces accountability and inspires a culture of continuous improvement.

An organization focused on accountability might be seen as the thread that connects our personal accountability – walking the talk – and the After Action Report – talking the walk. But what is it, really?

What is Accountability … Really?

In simple terms, accountability is a willingness to accept responsibility for our actions.

It’s being reliable and making certain that the commitments we make, from the perspective of others, have been kept. For a responsible culture to prevail, each of us must make certain that those commitments are honest – and honored. (more…)

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Read more about the article Accountability | Powerful After Action Reviews

Accountability | Powerful After Action Reviews

Man with sack over his headMany years ago when we lived in the Midwest, we became very good friends with a young couple down the street.

He was a fellow fraternity brother, from another college, but I remember him as a very capable physician with a unique ability to describe complex medical subjects in layman’s language.

After Action Reviews are for Learning NOT Blame

One day, he asked me if I’d like to go to work with him on Saturday. He’d show me around, we’d have lunch, hang out. He couldn’t leave for lunch, but he would bring along some homemade sandwiches, bologna with lots of ketchup, he said, and I could sit in his pathology lab as he performed an autopsy … and while he was cutting and sawing, we would enjoy our lunch together.

It was when he started laughing that I realized why my vision of an overloaded bologna sandwich, dripping with ketchup alongside an autopsy table, was kicking up a firestorm in my gut. I think that’s how many business executives view an After Action Review (AAR) — a gruesome business designed to relive the pain of failed projects.  (more…)

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