Through a detailed understanding of the industrial, operational and financial position of each portfolio company, FSN Capital is able to implement a series of transformation initiatives that form the foundation of creating a shift in performance.
First, the portfolio company’s management group and organisation must acquire a frame of mind characterised by high degree of “positive dissatisfaction”, i.e. dissatisfaction with the status quo and an urgent desire to raise performance to new and significantly more ambitious levels. To accomplish this, FSN Capital uses management incentives, benchmarking, performance analysis and comparable case studies, in addition to individual and group management discussions and coaching sessions.
Second, a strategy must be developed to achieve the new and more ambitious targets. By strategy, FSN Capital means a resource allocation plan that involves a company’s scarce resources (i.e. capital and management time) being allocated to those areas in which the company is most competitive and where it is generating the highest returns. FSN Capital’s Professionals support management with analytical and sparring capacity to develop the strategy. Analytical support typically involves ABC costing analysis to determine product/customer/channel/segment profitability, as well as analysis of inter alia customers, markets, technology, competitors etc. However, management and the organisation are the key drivers behind strategy and of the accompanying next year’s budget and five-year financial plan. The strategy and five-year financial plan are updated annually as a preparation for the budget process.
Third, to realise new and more ambitious goals the appropriate change processes in the organisation must be created. This is largely a management task. FSN Capital will assist management in setting up the processes, but is cautious about getting involved in day-to-day operating decisions in order to avoid dilution of accountability. FSN Capital may, when the situation warrants it, place professionals in line positions on temporary secondment.