Since 1992 CSC Capital has believed firmly in the following four enduring values of its restructuring program. Over the years, no matter how large or small our client, or no matter how complex or distressed the situation the firm has always applied these values. Together they unlock corporate value even during the worse of business times.
- The first enduring value of the firm’s restructuring is that it institutionalizes that management as well as employees act and feel like owners. Running a business as an owner inevitably unlocks value. But unlike ESOPs or fathom shares of stock, that are suppose in theory to make employees act as owners, CSC Capital early on invented an approach to making management and employees act and feel like owners without the real owners having to give up equity or sell stock. We have witnessed first-hand that ESOPs, the actual selling of stock to key managers, as well as the creation of fathom shares of stock, does not in the slightest sense unlock corporate value among the new owners. Further it does motivate these new owners to generate additional profits, increase cash flow, or strive to grow the revenues of the business. Instead, it makes the new owners feel comfortable and secure resulting ironically in less productivity. You must also pay these new owners when they retirement, creating a big pension fund now haunting the company.Instead, CSC Capital believes in company-wide incentives distributed quarterly. These are incentives calculated on the bottom line of each profit and cost center. All unproductive assets are also taken into consideration (obsolete inventory and over 90 day receivables are two examples), so the incentives that are paid out are as close to cash as possible. Even for sales personnel, their commission is paid upon the actual profit they provided to the bottom line of their respective profit center. We have seen numerous times a top earning sales executive selling several million dollars a year at such a low gross margin, that they were losing money for the company. To ensure that incentives do not cause the company harm, the firm establishes a bottom line threshold percentage. The value from this compensation system is enormous, as now all employees are striving to increase margins, reduce unnecessary expenses, and grow revenues.
- CSC Capital’s second enduring value is our mantra of a functional organizational structure that mirrors a reformatted financial and management accounting system. Indeed, the foundation of the firm’s restructuring program, this alone creates tremendous corporate value.In a functional organization each top manager has oversight over their respective areas and each manager is totally accountable for their responsibility center, whether profit or cost. This human structure unleashes talent to achieve greater results, as all decisions of the top management team are made with the clear intent to create more sales, achieve higher gross margins and higher net profits, generate more cash flow, thus increasing corporate value.
The reformation of the financial and accounting aspects of the company provides the functional managers with their own financial profit and loss statement. This generates a laser focused approach to each manager’s bottom line, as well as each appropriate expense line-item; and for profit center managers, and additional laser focus on each product line sales and costs, by dollar and percentage. These organizational and financial structures working together quickly provides owners and CEO’s the ability to see managerial talent as well as managerial weaknesses.
- The third enduring value of the firm’s restructuring program is the belief that people must be managed. In accomplishing this value first a formal organizational chart must outline reporting relationships as well as all positions in the company. Second, all positions must have formalized position descriptions detailing the job’s requirements. Finally, personnel evaluations should be conducted from these position descriptions at least every six months. Besides the evaluations themselves, this will keep the position descriptions up-to-date and the organizational chart “living.” Though simple in concept, conducting these steps will provide the foundation for ensuring that management does manage. Despite what some may think, CSC Capital contends that people in general like hierarchy, they prefer order not chaos, and perform with more productivity with a logical and well laid out structure that provides clear advancement opportunities. Talented people also prefer some sort of an evaluation procedure that measures their job performance. Generally, people tend toward security, and an organization that provides security is much more preferred than one without. Without a proper and formal organizational structure, an informal and power oriented structure becomes the norm.CSC Capital calls informally managed companies a collection of “chiefdoms,” or “petty kingdoms” where managers typically thrive on crisis after crisis. In these situations managers rarely manage people at all, instead they manage tasks, they micro-manage, they sit behind their computers too much, and they are generally opposed to delegation. Talented people generally gravitate away from informally structured companies for various reasons.
- The fourth and last enduring value of a CSC Capital restructuring program is training. Ultimately corporate success today and the creation of huge corporate value is the function of having talented and hard working managers and employees. All incentive plans, organizational and financial structures, and evaluation systems mean nothing without talented people. In essence, talent is fundamental. However, in business talent comes from training and experience. At CSC Capital we believe that in-depth training of our restructuring program is essential to create a talented management team and workforce. The outcome of a complete company-wide training program also ensures implementation success. Through training people learn and accept their new roles and responsibilities and their new reward systems and accountability measurements. This ultimately ensures teamwork at all levels of an organization which eventually institutionalizes a profoundly different culture than we found at the beginning of the restructuring.
Machiavelli once wrote that one of the most difficult things to accomplish is the changing of a system. Stating that even people that would prosper from the new system, are themselves only luke-warm defenders of the changes. After twenty years of conducting corporate transformations we would agree in part with the wisdom of the 16th century Italian. Though changing a system is difficult, CSC Capital excels at the implementation of corporate change through always engaging our four enduring values in each client restructuring.