THE ALLOCATION OF CAPITAL AND PEOPLE DETERMINE WHETHER THE ORGANIZATION WILL DO WELL OR POORLY.
The allocation of capital and performing people converts into action all that management knows about its business – they determine whether the organization will do well or well or poorly. An organization should allocate human resources as purposefully and as thoughtfully as it allocates capital. To understand a capital investment, a company has to look at four measures: return on investment, payback period, cash flow, and discounted present value. Each of these four measures tells the executive something different about a prospective capital investment. Each looks at the investment through a different lens. Decision makers should not evaluate capital investments in isolation, but as part of a cluster of projects. They should then select the cluster that shows the best ratio between opportunity and risk. The results of capital spending be assessed against expectations in the post audit procedure. Information gathered from the procedure can then be used to help make decisions about future investments.
The decisions to hire, to fire, and to promote are among the most important decisions of the executive. They are more difficult than the capital allocation decision. An organization needs to have a systematic process for making people decisions that is just as rigorous as the one it has for making decisions about capital. Executives need to evaluate people against expectations.
ACTION POINT: Review your capital allocation decisions of the past year. Are they meeting your expectations? Review your hiring and promotion decisions of the past year. Are they meeting your expectations? Make changes to your resource allocation procedures based on feedback analysis.
SIX RULES OF SUCCESSFUL ACQUISITIONS
ACQUISITIONS SHOULD BE SUCCESSFUL, BUT FEW ARE IN FACT.
Acquisitions should be successful, but few are, in fact. The reason for this nonperformance is always the same: disregard of the well-known and well-tested rules of successful acquisitions.
The six rules of successful acquisitions are:
1- The successful acquisitions must be based on business strategy, not financial strategy.
2- The successful acquisition must be based on what the acquirer contributes to the acquisition.
3- The two entities must share a common core of unity, such as markets and marketing, or technology, or core competencies.
4- The acquirer must respect the business, products, and customers of the acquired company, as well as its values.
5- The acquirer must be prepared to provide top management to the acquired business within a fairly short period, a year at most.
6- The successful acquisition must rapidly create visible opportunities for advancement of for both the people in the acquiring business and people in the acquired business.
ACTION POINT: Evaluate three acquisition prospects against these six rules. Which ones would you recommend that your organization pursue?
“The angry men know that this golden age (of fossil fuels) has gone; but they cannot find the words for the constraints they hate. Clutching their copies of Atlas Shrugged, they flail around, accusing those who would impede them of communism, fascism, religiosity, misanthropy, but knowing at heart that these restrictions are driven by something far more repulsive to the unrestrained man: the decencies we owe to other human beings.”
“If it’s not one god it’s another. Allah or oil. Jesus or Jewels. Lenin or lust.”
VICTOR ROBERT LEE
“Pick a leader who will make their citizens proud. One who will stir the hearts of the people, so that the sons and daughters of a given nation strive to emulate their leader’s greatness. Only then will a nation be truly great, when a leader inspires and produces citizens worthy of becoming future leaders, honorable decision makers and peacemakers. And in these times, a great leader must be extremely brave. Their leadership must be steered only by their conscience, not a bribe.”
“Oil creates the illusion of a completely changed life, life without work, life for free. Oil is a resource that anaesthetises thought, blurs vision, corrupts.”
“Oil they would buy from anyone. From Satan.”
“Oil and coal? Of course, it’s a fungible commodity and they don’t flag, you know, the molecules, where it’s going and where it’s not […]. So, I believe that what Congress is going to do, also, is not to allow the export bans to such a degree that it’s Americans that get stuck to holding the bag without the energy source that is produced here, pumped here.”
“Unless government appropriately regulates oil developments and holds oil executives accountable, the public will not trust them to drill, baby, drill. And we must!”
“Control over the production and distribution of oil is the decisive factor in defining who rules whom in the Middle East.”
“By the fall of 1918, it was clear that a nation’s prosperity, even its very survival, depended on securing a safe, abundant supply of cheap oil.”
“Many have blamed the gasoline shortages and long lines at filling stations in 1973 on the Arab Oil embargo of that year. However, the shortages and long lines began months before the Arab oil embargo, right after price controls were imposed.”
“Everybody looks at oil and almost entirely forget that the percentage of jobs the oil sector creates is relatively small compared to the population; the introduction of more sophisticated exploration methods makes it even worse. Oil companies now look for smarter, leaner and cheaper operations. Where will these leave the economy? Good disposable income to the government with no real value to the people of the Niger Delta.”
“It is in our best interest to. . . embark on a revolutionary change that will lead us away from oil dependency rather than drag our feet and suffer the costs of becoming growingly dependent on a diminishing resource.’ Truer words were never written.”
“I’m not working class anymore,’ he said. ‘I’m lower-middle. I use three types of oil in my kitchen. Admittedly one of them is WD-40, but that counts, doesn’t it?”
“The Niger delta as a matter of urgency needs to re-think its development strategy by developing her non-oil sectors. There is no easy way out of this, and we will all see that at the end it is the only way out.”