The Key To Successful Zero-Based Budgeting

To do it right, let go of your company’s “evolutionary past” and take a granular look at where your profitability comes from today—it might surprise you.

6 Factors That Determine Your Company’s Valuation

Investors consult detailed, quantitative models before making decisions. Shouldn’t corporate managers have a similar  understanding of how the market values their company, so they can make informed decisions to maximize shareholder value? An EY-Parthenon analysis of quarterly data from thousands of companies in hundreds of industries over a period of 20 years has identified six critical factors that account for most of the variability in … [ Read more ]

Five Myths (and Realities) about Zero-Based Budgeting

Companies often shy away from the method because they fear it or believe it means “budgeting from zero.” In reality, it’s a structured process that can build a culture of cost management.

Don’t Kill Share Buybacks

New proposed restrictions on companies buying back their own stock would likely backfire.

The Art of Performance Management

At most large companies, the performance management system is a hodgepodge of legacy systems. KPIs are not aligned across the organization. Different information systems categorize data differently. Decision rights as to who decides what data to collect are so distributed that there is no consistent approach to reporting across the entire company.

As a result, the finance organization spends an inordinate amount of time simply putting … [ Read more ]

Going Beyond Budgeting

Among CFOs, alternative approaches to budgeting are getting a lot of attention. In particular, Beyond Budgeting, a concrete alternative to traditional budgeting, is gaining mainstream traction. The approach is producing impressive results at a growing number of global companies. Moreover, a BCG study confirmed that Beyond Budgeting has significant benefits: 59% of 174 finance executives surveyed reported increased sales, 56% saved significant costs in the … [ Read more ]

Where a Firm’s Value Truly Lies

A new approach to uncovering the sum of all the parts of a modern firm.

Which Metrics Really Drive Total Returns to Shareholders?

McKinsey analysis of more than 2,200 large global companies reveals the importance of monitoring both economic-profit growth and revenue growth.

Do Algorithms Make Better — and Fairer — Investments Than Angel Investors?

Can an algorithm outperform the average angel investor? And if it can, does that also mean it will make less biased investments? Researchers put these questions to the test: They built an investing algorithm and put it head to head with 255 angel investors in a simulation, asking it to select the most promising investment opportunities among 623 deals from one of the largest European … [ Read more ]

The Art of the Big Decision

A new approach to analyzing capital-intensive resource investments—Dynamic Decision Management—views projects as adjustable sequences of decisions.

Admit It, Your Investments Are Stuck in Neutral

New research shows that companies that know how to shift critical resources where and when they’re needed share common traits. Rigor is the first one.

Zero-Based Budgeting: Cut Cost, Not Growth

Traditional zero-based budgeting is often a paralyzing experience, and yields only temporary benefits. Done right, ZBB can permanently lower your company’s cost base without losing focus on profitable growth.

Here’s a Better Way to Measure Long-term Shareholder Value

ost executives care about creating long-term shareholder value but haven’t had the right tool to track it. In a recent paper published in Strategic Management Journal, Wharton management professor Nicolaj Siggelkow and Phebo Wibbens, assistant professor of strategy at INSEAD, introduce a new performance measure called LIVA – Long-term Investor Value Appropriation. In the following opinion piece, Siggelkow and Wibbens explain why they developed LIVA … [ Read more ]

Fact and Fantasy About Buybacks: The International Evidence

Buybacks are under attack as a short-term stock price manipulation scheme, allowing insiders to cash out at inflated stock prices. This manipulation hypothesis predicts that, as a result of buybacks, companies will underinvest, undermining long-term performance and shareholder value. Recent research tests this hypothesis using an international sample that contains approximately 10,000 buyback announcements made by U.S. firms and 10,000 made by non-U.S. firms … [ Read more ]

How Companies Should Prepare Their Forecasts

Strong management teams spend less time obsessing over the current income statement and more time focusing on a different report: the forecast. Not all forecasts are built alike, however. We find that a great forecast has five attributes.

If Cash Is King, Why Doesn’t It Rule?

With tax rules changing and interest rates set to rise globally, companies need to organize their operations around a new value equation.

The Bitcoin Boom: Asset, Currency, Commodity or Collectible?

Ostensibly about Bitcoin, this is an excellent finance/economics article that explains the differences between assets, currencies, commodities and collectibles and the difference between trading (pricing) and investing (valuing).

The Real Value of Your Company

When your company establishes a credible long-term strategy — including a way to play in the market and the capabilities to deliver — it sets up a high level of certainty. In valuation terms, your market value (your shareholders’ expectations) will more closely reflect your intrinsic value (the profits you consistently create). This is a tremendous source of strength, but it also triggers the paradox … [ Read more ]