Stewardship Headroom and the Interplay of TEEL and VCBP

Stewardship Headroom

By Cenen Herrera
Writing from the San Francisco Bay Area, USA

The strategic copula between Trial-and-Error Empirical Learning (TEEL) and Value-Chain Business Planning (VCBP) provides the groundwork for increasing one’s stewardship headroom.  What is stewardship headroom?  I define stewardship headroom as the difference between your existing creative capacity to contribute community-based values and the existing limit of your innovative skills.  As a career professional, I generally find three layers of knowledge maturity, i.e., g-level career or entry level function, m-level career or management function, and c-level career or stewardship function.  Bootstrapping the finance functions, i.e., controllership, treasury, risk management, auditing and information technology, drives the strategic copula between TEEL and VCBP.

The g-level career is mostly characterized by TEEL.  In this entry-level mode, one increases the functional level of knowledge through concrete and hands-on experience.  It is at this level that the skill-set of an employee and its alignment to the job function is held to be of extreme importance.  Reading the office manual is not enough, your research efforts must be grounded on the core principles of how values are created in your organization and the accompanying rationalization of the financial support that goes to each value that is created.  At the g-level, it is extremely important to have a reliable training program aimed at continuously improving the skills of employees.

The m-level group is characterized by people who are able to differentiate risks and potentials and because of TEEL, it is heavily influenced by the science of management.  The m-level starts from the supervisory position to senior management.  At this level, leadership traits such as character, credibility and reputation are considered to be of high importance.  This is the functional group that enables the organization to monitor the day-to-day progress of work and measures the 5 Es of organizational excellence, i.e., ethics, effectiveness, efficiency, economy and the eighty-twenty rule. The performance dashboard typically outlines the difference between the rolling plan and actual performance. Gap analysis is then performed and any deviations from the rolling forecast are then accounted for in terms of pricing, material economics, product mix, business performance, and other factors such as contingent events. 

The science of leadership in turn provides the groundwork for appropriate delegation, accountability and responsibility. The third level of career maturity is popularly known as the c-level group in the organization.  These are people who are not only charged with the management of the organization, but also its stewardship.  It is at the c-level group where the interplay between TEEL and VCBP is expected to play the greatest importance.  As the c-level group matures, it is critical that the stewardship headroom is maximized to continuously generate the benefits that the stakeholders of the organization expect from them.

 

 

 

 

 

 

 

University of Iowa (UI) Graduation – Henry B. Tippie College of Business, University of Iowa

18 May 2013, Saturday (17:00 – 18:30)

What does a university graduation mean for a chess player?

By Cenen Herrera
Writing from Iowa City, Iowa
 

When a pawn reaches the eighth row in chess, it is usually promoted to an officer level, i.e., the pawn could become any of the chess officials like a horse, bishop, rook or queen.  Graduation for a pawn is not easy, but what makes it successful depends on the strategy of the player.  Every chess game is an endless struggle to think in advance the moves of your opponent, e.g., probably the next 2 to 25 moves of the opponent, anticipating the best and worst scenarios and executing a game plan that could lead to success.  It is extremely difficult to have a complete control of your game, but along the way it is always important to bear in mind that risk is the only thing certain in chess.  A good chess player will prepare hard for an endgame that is at least, characterized by a winning position, a material advantage or the possibility of salvaging a draw under the worst scenario.

This is a probable scenario on how a chess player could reflect on the graduation of a child.  The chess player will remind the child that a key success factor after graduation in college is the formulation of a winning strategy.  Championing hard work, humility, and honesty requires careful planning.  The opening years might be full of excitement as the new graduate balances career and social life.  It is under this stage, after the first six-month euphoria is over, that serious planning should begin.  A well-laid out plan would normally spell-out the Graduate’s career objectives by crafting a vision/mission statement, which is normally prepared during or before college.  The sure guide for this plan is to craft an objective where you will find the ultimate happiness: How much equity do you intend to win in your chosen field?  Equity here could be defined as either tangible or intangible.  Tangible equity might mean the financial assets you have earned and retained, and intangible equity might mean the intellectual/social assets you might have accumulated.

Once the overarching vision/mission statement has been defined, the Graduate should look for the opportunities that could align vision with resources.  A value-driven career is the catalytic tool that could transform one’s resources into a robust income engine.  Such income engine should be able to sustain one’s professional lifestyle at the same time enabling one to retain a decent amount of savings for the end-game.  As one of my former colleagues in the company we were working for in Iowa said: “I only know two types of speed in my career: fast and faster;” To which I countered:  “I only know two types of leadership altitude: high or higher.”  

 The Speaker during the UI graduation rites shared her career journey from a fresh college graduate in marketing at UI way back in the eighties to become a c-level executive in her career in one of the most respected TV stations in America today.  She said that to be successful in one’s career, you have to find your happiness, meaning, the work place should be interchangeable with your play place.  You should be happy with the people you work with, the clients you work for, and the community you serve.  Life is preparing for the end-game which many call graduation from physical to eternal life.  She reminded the graduating class to be mindful of their spiritual being.  At the end of the speech of the Guest Speaker, I came to realize that graduation is not an end-game, but like in chess, an opening where you could face the familiar and dangerous financial gambits, the classical book openings, and the unorthodox and unexplored moves of a genius who once ruled this game - American chess grandmaster and the eleventh World Chess Champion Bobby James Fischer.

Playing Chess Could Help Business Strategists Perform Better in their Leadership Functions

By Cenen Herrera

Writing from the City of Olds, Iowa
United States of America

Business leaders are under constant pressure from stakeholders to meet their respective interests in the organization and increase the firm’s competitiveness in the market. As a result, corporate leaders continuously strive to sharpen their analytical skills, focus on long-term thinking, improve their strategizing abilities, and look at the “big picture” for assessing risks and potential rewards.

In my long years of playing chess, I learned a number of important lessons which allowed me to perform better in my career.

First, just like in chess where you expect the moves of your opponent, I learned to expect the moves of my boss. When I was a young professional, I practiced the art of expecting the next two to five moves of my boss. As I mature in my career, not only did I learn to think several moves ahead of my boss (up to 25 moves), but I also learned a number of important lessons that helped me increase the accuracy of predicting the requirements of my job as well as winning the excellent ratings from my boss.

Second, I learned that both business and chess rely on exchanges, and successful trades usually end up to one benefitting from the exchange and the other losing in the exchange. Thus, hard work, perseverance, learning from mistakes, and other intellectual and character traits are needed to successfully play chess, and the same is true in business.

Third, I learned that ethical behavior is important in both business and chess. Winning in chess is better if it results from a superior strategy rather than just as a result of a careless move by an opponent. The same is true in business; having a superior strategy creates a win-win situation that ultimately results to the company's positive performance.

Fourth, I find the classic chess gambit as the equivalent of opportunity cost in business. Chess gambits are normally applied to a chess beginner, and while it normally involves gaining a piece or two, the chess beginner normally ends up in an awkward position.

Fifth, I learned that flexibility in chess means the ability to have contingency plans for every move that the player takes. Flexibility refers to the ability to quickly change strategy in light of the development in the markets, i.e., depending on the opportunities and threats. I fully agree with Robert S. Graber of University of Arkansas – Monticello that there are a number of parallels between chess strategy and business strategy.

Strategic Winning Gambits in Financial Stewardship: The Green Ocean & Clear Water Strategies of LJ Roth Reconstruction, Inc.

by Cenen Herrera

Writing from Clear Water City, Pinellas County, Florida, USA

Clearwater Beach is the Best City Beach on the Gulf of Mexico according to Dr. Stephen Leatherman ("Dr. Beach"), a Florida International University professor who has been ranking America's beaches for nine years. USATODAY.com readers ranked Clearwater Beach in their 2001 Top 10 list of Best Beaches from Maine to Hawaii.

Taking a break from a busy schedule in my new found industry: the restoration business of LJ Roth Reconstruction, Inc. (www.ljroth.com), I and my family took a vacation at Sail Port, Tampa, Florida, USA. The place is near Clear water beach where my youngest daughter told me during a mid-afternoon swim that the color of the water was green. I then reflected on the blue ocean business strategy book written by W. Chan Kim and Renée Mauborgne against the background of the restoration industry.

According to WIKIPEDIA, the underlying concept of the book titled “Blue Ocean Strategy” is the metaphor of red and blue oceans, which describes the market universe.

Red Oceans represent all existing industries. This market is a zero-sum-game, meaning, you get an additional share while at the same time your competitor loses the same amount of market share. Under the red ocean strategy, cutthroat competition turns the ocean bloody, i.e., red oceans.

Blue oceans on the other hand involve the creation of a new market opportunity by creating a new market place. A potential market space is explored, which results in rapid growth and enhanced profitability. Thus, where new markets are created, lesser competition is expected. In addition, blue oceans pertain to companies taking care of the environment as their business and making profits along the way.

Green Ocean Strategy is like the Clear Water beach at Florida, USA. It pertains to the strategic winning gambits that we have employed at LJ Roth Reconstruction, Inc. in creating a combination of red ocean and blue ocean strategies. At LJ Roth Reconstruction, Inc., green ocean strategic winning gambits pertain to the simultaneous expansion of its existing markets and the creation of new business opportunities that are unrelated to its existing product lines such as the newly launched marketing focus on duct cleaning services. Green Ocean Strategy is the latest catalyst of innovation at LJ Roth Reconstruction, Inc.

A Paradigm Shift Towards Open-Book-Management

by Cenen Herrera

Writing from Springfield, Missouri - USA

During the first quarter of 2011, I attended a seminar entitled “Great-Game-of-Business" authored by Mr. Jack Stack, President & CEO of Springfield Remanufacturing Corporation (SRC). The seminar was all about common-sense accounting and how transparency played an important role in professionalizing an organization. How much information should shop-floor managers and their workers know about an organization’s performance and the critical numbers that drove such performance were the two important lessons that were taught during the seminar. SRC’s actual turn-around strategy in the early nineties using open-book-management was used as the reference case, and top-executives representing various industries came together to play the great-game-of-business.

I attended the seminar together with top executives from our company and in a scale of 10 where 10 is the highest, I would give the seminar a score of 10 for the following reasons:

1.      Open-Book-Management is a strategic winning gambit for companies who believe that employees are the best and real assets of their company;

2.      The great-game-of-business is a highly functional game for professional managers to cultivate unlimited business opportunities;

3.      The critical numbers that drive performance should be clear to all employees of an organization for all to see the actual causes of any gap between target and actual numbers;

4.      Precision marketing is when all employees are committed to the marketing plan and this plan is best carried out through open-book-management; and

5.   SRC and its employees have been playing the great-game-of-business for decades, and have shown a large number of organizations and their employees how to play the game to earn regular bonuses that are not found in organizations that do not practice open-book-management.

Starting the New Decade (2011) with a New Corporate Mantra

By Cenen Herrera

Writing from Manhattan, New York, USA

Starting 2011, LJ Roth Reconstruction, Inc (LJR) will have a new corporate mantra: Collaborative Innovation (COIN). LJ Roth Reconstruction, Inc. was incorporated in 1976, but was founded by our President - Larry J. Roth in 1971. In line with the company's new corporate vision of "Restoring Quality Living with Speed, Craftsmanship & Innovation," the new LJR Management Team is starting the new decade by trying to reach all our employees, to have more interactive activities, to keep all our employees fully informed in our rapidly expanding business activities, and of course to enhance the reputation of our company. Leadership at LJ Roth Reconstruction Inc. believes that collaborative innovation could be a strategic winning gambit for all its stakeholders.

According to Peter A. Gloor, Research Scientist at the Center for Collective Intelligence at MIT's Sloan School of Management, within a decade, the most successful companies will be those adept at unleashing the power of Collaborative Innovation (COIN) or what we call "swarm creativity." These are companies that give power away, in order to gain power - be it as growth in market share, in revenue, or both. These companies trust the principles of self-organization, ethical behavior and collaborative innovation. At the heart of COIN is the creation of self-motivated teams, a collective vision, and the sharing of ideas, information and work. This is what the newly launched LJR newsletter is all about. It encourages everyone to send articles that are informative, passionately positive and stimulating to the mind. At the end of the day, a company's newsletter is a forum where everybody's voice should be heard, appreciated and encouraged for facilitating continuous learning.

Stewardship Role of the CFO

By Cenen Herrera

Writing from Chicago, USA

In many of the Boardroom discussions I have attended about the financial prospects of the organization, the review of financial performance reports had typically evolved around the complex scenarios prepared by the Chief-Financial-Officer (CFO). These financial scenarios are oftentimes loaded with examples that contain large amounts of asset/liability/equity/income/expense transactions which are sometimes up to six or even nine digits long. Even if these financial reports are rounded to the nearest thousand or million, I find them meaningless if they are not summarized into a "big picture" format. After all, Board discussions are strictly time-bound, and Board expectations are high that only the most significant items that strategically impact on corporate values, financial issues, operational challenges, administrative issues, and regulatory compliance should be discussed.

Scenario planning is an essential tool that CFOs undertake in their normal functions. The scenario planning exercise begins by evaluating the current results of operation using the company's decisive financial indicators. The CFO then coordinates with marketing and operational functions to determine the short and long-term prospects of the organization. Assumptions are then used as inputs for the scenario planning exercise. The important findings of these planning scenarios are then brought by the CFO to the attention of the Board. As the CFO is primarily charged with the management of the company's financial resources, the CFO's responsibility is heavily focused on providing the Board with a dynamic financial framework that could achieve the mission of the organization.

Rolling financial reports, e.g., rolling financial budget, rolling financial forecasts, rolling risk assessments, rolling marketing goals, rolling operational targets, have become the most sought after reports by the Board in its periodic review of the company's performance. To help the Board understand the complexity of these reports, the CFO should find a simple way of explaining the findings of these reports. At the end of the day, the Board heavily relies on the judgment of Management and the CFO's stewardship role in crafting the future direction of the company.