JWI 599 Capstone, Week8 summary, 8/25/13
What a surreal and awesome moment in my life ! To have an opportunity to get trained by Jack Welch, one of the greatest business leaders ever and be a small part of his enduring legacy.
I. Received blessing from Jack Welch
It was a high honor this week to discuss again with the inimitable Jack Welch and get his blessing as I prepare for graduation in two weeks. When I asked "what is the single most important thing you want us to carry forward into the future?", he replied, "Be a passionate pursuer of good ideas. Know that you have a winning formula of proven business leadership principles and you are better prepared to lead companies than many other MBAs out there. When you win, everybody wins. Be confident. As someone who finished the program in six months you are a role model. You set your mind to it and got it done".
"To have the courage to speak my mind even if I am the only one with a point of view", said a Harvard Business School graduate I know when I asked the same question.
I ask myself and here is what I can say to myself without blinking an eye. "Win with self-confidence, authenticity, passion for business and extraordinary human relationships".
Thank you, Jack, for being such an outstanding and kind teacher.
II. Link Payment terms to boost Cash Flow
Prior to this course, I would never have thought of renegotiating payment terms with suppliers and customers as a means of improving organizational cash flow, as most people would think these terms are pretty much fixed.
While I am in general aware of the personal benefits of renegotiating payment terms (eg. mortgage re-finance, shifting to credit card with better terms and benefits), connecting this concept to protect the larger cash flow in the organization is new learning for me.
I had learned from the near-death IBM turn around experience of the 1993-1999 period that free cash flow is the single most important measure of corporate soundness and performance (Gerstner, 2002, page5). But I never appreciated it as much as I do now. This is like the difference between reading about fire and actually touching it to know its nature instantly.
IBM CEO Lou Gerstner taught us that companies like Compaq that get hooked on revenues as their main measure of performance will simply perish. Increased market share must result in a growing cash flow - that is cash flow after all expenses, not the notorious EBITDA . He also said that cash flow must be used in a wise manner, avoiding macho or bleary-eyed acquisitions, reinvesting in R&D, marketing, and other critical areas of the company. Gerstner sold off non-critical assets to shore up the balance sheet as soon as he came into IBM which was within months of running out of money for payroll.
IIb. Stretch payment terms to help cash flow
Getting favorable payment terms from suppliers as well as customers is key to protect and strengthen the cash flow in the business. Convincing suppliers to accept longer payment dates, being in a strong position to get customers to pay up earlier, and transferring inventory carrying costs to vendors outside the company (for instance, through just in time delivery practices made famous by Toyota) are some of the ways to get favorable terms and help the CTC company.
CFO.com recommends six practices to stretch payment terms. First, the accounts payable director should be held responsible for monitoring the best terms other firms are getting in the industry and also how purchase managers are managing their payables. Second, the CFO should anchor this work and intervene if and when rogue suppliers start spreading rumors that the firm is having cash flow problems.
Third, Finance and Purchasing functions should build a close relationship and approach vendors with a common action plan. Fourth, vendors should be classified and approached differently with suitable terms.
Fifth, rigorous understanding of the financial baseline is critical to protect the overall cash flow health. Purchase terms should not only be based on pricing, but also delivery costs, vendor discounts and other allowances. Finally, executives in the firm should be paid for performance ie those whose actions contribute to cash flow health should be rewarded disproportionately.
In the short run, negotiating better payment terms can be beneficial for the company for reasons mentioned above. Particularly for firms like CTC that are in turn-around situations, getting cash flow right can make the difference between life and death of the company. The importance of cash flow is cited as paramount in the case of the fabled IBM corporate turn around that CEO Lou Gerstner engineered (Gerstner, 2002). When negotiating favorable terms, care must be taken to leave the right impression in the minds of the suppliers and customers. The actions of the company should not be interpreted as a weakness in cash flow as explained above.
In the longer run, strong cash flow enables a company to better withstand the ups and downs of the market and also give the privilege of investing in new ventures. A company that does not manage its cash flow well, and has its money tied in inventory or stuck with suppliers and customers may be unable to manage changes in the market and could perish. After all, survival is all about being the most adaptable to change.
III.Strengths & Shortcomings as a General Manager
This Capstone course to me is about connecting the dots and getting my feet wet with actually driving an organization from the top. Until I took this course, it was like learning about swimming in the business world by standing on the shore. In this course I have taken a deep dive into turbulent waters of business situations, gotten myself wet enough to appreciate the nuances, further understood my unique strengths as a leader who can bring people's best forward and more importantly gotten my butt kicked (pardon my language) with shortcomings. In the process I have learned exactly where the gaps to my skills as a general manager are. This is a giant leap in learning for me that excites me to the core. I simply cannot get this by reading countless books (which I have done) and sitting in numerous classes (been there, done that). I am very thankful to my colleagues in CTC Inc. for the wonderful opportunity to learn from their wisdom, styles and feedback.
The finish line of the MBA marathon is in sight. It has been exhausting and I have given this my very best shot. Sprinting faster than ever now.
Dr DP
What a surreal and awesome moment in my life ! To have an opportunity to get trained by Jack Welch, one of the greatest business leaders ever and be a small part of his enduring legacy.
I. Received blessing from Jack Welch
It was a high honor this week to discuss again with the inimitable Jack Welch and get his blessing as I prepare for graduation in two weeks. When I asked "what is the single most important thing you want us to carry forward into the future?", he replied, "Be a passionate pursuer of good ideas. Know that you have a winning formula of proven business leadership principles and you are better prepared to lead companies than many other MBAs out there. When you win, everybody wins. Be confident. As someone who finished the program in six months you are a role model. You set your mind to it and got it done".
"To have the courage to speak my mind even if I am the only one with a point of view", said a Harvard Business School graduate I know when I asked the same question.
I ask myself and here is what I can say to myself without blinking an eye. "Win with self-confidence, authenticity, passion for business and extraordinary human relationships".
Thank you, Jack, for being such an outstanding and kind teacher.
II. Link Payment terms to boost Cash Flow
Prior to this course, I would never have thought of renegotiating payment terms with suppliers and customers as a means of improving organizational cash flow, as most people would think these terms are pretty much fixed.
While I am in general aware of the personal benefits of renegotiating payment terms (eg. mortgage re-finance, shifting to credit card with better terms and benefits), connecting this concept to protect the larger cash flow in the organization is new learning for me.
I had learned from the near-death IBM turn around experience of the 1993-1999 period that free cash flow is the single most important measure of corporate soundness and performance (Gerstner, 2002, page5). But I never appreciated it as much as I do now. This is like the difference between reading about fire and actually touching it to know its nature instantly.
IBM CEO Lou Gerstner taught us that companies like Compaq that get hooked on revenues as their main measure of performance will simply perish. Increased market share must result in a growing cash flow - that is cash flow after all expenses, not the notorious EBITDA . He also said that cash flow must be used in a wise manner, avoiding macho or bleary-eyed acquisitions, reinvesting in R&D, marketing, and other critical areas of the company. Gerstner sold off non-critical assets to shore up the balance sheet as soon as he came into IBM which was within months of running out of money for payroll.
IIb. Stretch payment terms to help cash flow
Getting favorable payment terms from suppliers as well as customers is key to protect and strengthen the cash flow in the business. Convincing suppliers to accept longer payment dates, being in a strong position to get customers to pay up earlier, and transferring inventory carrying costs to vendors outside the company (for instance, through just in time delivery practices made famous by Toyota) are some of the ways to get favorable terms and help the CTC company.
CFO.com recommends six practices to stretch payment terms. First, the accounts payable director should be held responsible for monitoring the best terms other firms are getting in the industry and also how purchase managers are managing their payables. Second, the CFO should anchor this work and intervene if and when rogue suppliers start spreading rumors that the firm is having cash flow problems.
Third, Finance and Purchasing functions should build a close relationship and approach vendors with a common action plan. Fourth, vendors should be classified and approached differently with suitable terms.
Fifth, rigorous understanding of the financial baseline is critical to protect the overall cash flow health. Purchase terms should not only be based on pricing, but also delivery costs, vendor discounts and other allowances. Finally, executives in the firm should be paid for performance ie those whose actions contribute to cash flow health should be rewarded disproportionately.
In the short run, negotiating better payment terms can be beneficial for the company for reasons mentioned above. Particularly for firms like CTC that are in turn-around situations, getting cash flow right can make the difference between life and death of the company. The importance of cash flow is cited as paramount in the case of the fabled IBM corporate turn around that CEO Lou Gerstner engineered (Gerstner, 2002). When negotiating favorable terms, care must be taken to leave the right impression in the minds of the suppliers and customers. The actions of the company should not be interpreted as a weakness in cash flow as explained above.
In the longer run, strong cash flow enables a company to better withstand the ups and downs of the market and also give the privilege of investing in new ventures. A company that does not manage its cash flow well, and has its money tied in inventory or stuck with suppliers and customers may be unable to manage changes in the market and could perish. After all, survival is all about being the most adaptable to change.
III.Strengths & Shortcomings as a General Manager
This Capstone course to me is about connecting the dots and getting my feet wet with actually driving an organization from the top. Until I took this course, it was like learning about swimming in the business world by standing on the shore. In this course I have taken a deep dive into turbulent waters of business situations, gotten myself wet enough to appreciate the nuances, further understood my unique strengths as a leader who can bring people's best forward and more importantly gotten my butt kicked (pardon my language) with shortcomings. In the process I have learned exactly where the gaps to my skills as a general manager are. This is a giant leap in learning for me that excites me to the core. I simply cannot get this by reading countless books (which I have done) and sitting in numerous classes (been there, done that). I am very thankful to my colleagues in CTC Inc. for the wonderful opportunity to learn from their wisdom, styles and feedback.
The finish line of the MBA marathon is in sight. It has been exhausting and I have given this my very best shot. Sprinting faster than ever now.
Dr DP
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