Through a rigorous review of formal management processes and analytical decision models coupled with a series of interviews, we evaluate a company’s existing formal and informal business management practices for:
- Setting financial goals
- Developing and evaluating strategic plans
- The annual budgeting process and rolling forecasts
- Benchmarking and linkage to performance improvement targeting
- Capital investment analysis, approval and allocation
- Portfolio evaluation and the valuation of acquisitions and divestitures
- Monitoring and appraising on-going operating performance
- Incentive compensation and other reward programs
During this Internal Capitalism Audit, we look for:
- Where decisions are suboptimal due to inadequate or incomplete analysis (for example, the way ROIC favors older assets)
- If decision criteria and subsequent Performance Measures differ and accountability breaks down (many companies use DCF to make investment decisions and then measure operating profit after the fact)
- Whether the variety and quantity of tools and measurement criteria presents a confusing picture, particularly to non-financial people.
We identify process strengths that should be preserved and weaknesses that should be eliminated to help a company better focus management on creating shareholder value.
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