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  • Writer's pictureColin McArdle

5 questions Private Equity Operating Partners should know the answers to on rapid value creation

As a CEO influencer you already know the road to turning a profit -taking responsibility for a business with exciting growth potential is just the start. Due diligence has given you direction from the outside in, but now you are on the inside with unlimited access to resources and information. In this article I share my 'insiders' experience and pose five questions that I believe every Operating Partner should know the answers to.

Having led five large scale Operational Excellence programs over a 25 year period at multinational companies such as GE, Marconi and Johnson Controls I've learnt how to create value. Over the last seven years I've built a successful consulting firm that delivers value creation services to firms including Bain, Cinven and Bowmark Capital. With many lessons learnt across many industries I have worked out how to find and unlock value fast.

My roles in industry typically started with the CEO or COO asking, "Colin, where should we focus our resources to guarantee increased operating income of 5% year on year?" Today Portfolio company Operating Partners, CEO's and COOs pose a number of questions. "Colin, given your experience in my industry, what is 'the art' of the possible to increase capacity and operating income from operations in my business? What are the timescales? What is your approach? What ROI should we expect?"

In both scenarios, to get close to what’s really happening, understanding where every second of paid time is used, is crucial!

My advice, as you pick up the baton from the deal team don't be lured into 'fools gold' promises from the company management team stating - "we've done lean we're efficient, we just need new systems and new technology". Further, your investment team might be telling you to leave operations alone, but they don't know what they don't know!

As an Operating Partner, recall those eureka moments as you were learning the ropes, getting deep into process analysis spotting opportunities to make change quickly. Get back to the office, the shop floor, go to Gemba, watch processes as they happen to build knowledge and evidence to shape the value creation agenda.

Armed with real time data and information from your work study, use your influencing skills and get the green light to conduct a rapid deep dive diagnostic assessment of where paid time is consumed across every operating function within the business.

Now for the heavy lifting - select a cross functional team of subject matter experts and build a plan to collect data and information. Mandate the team to meet with people doing the work, observe what they do, why they do it and how long tasks take. Listen to their pain points and suggestions to improve processes.

Determine hand offs between departments and crucially the time and quality loss from poorly organised disjointed processes that lack flow. Understand bias and the root of beliefs and myths. Establish how demand is managed, how work is planned and who it is distributed to and why.

Examine every line of every regulation the business says it has to meet and challenge using application using 5 Whys - you will be surprised how many regulations are misunderstood, poorly applied and importantly how much time they consume that you can release to value adding work.

With this type of deep dive opportunities to stop wasteful activities will surface quickly. Use a simple approach such as 5Rs - for any non value adding activity ask can we Remove, Reduce, Re-order, Replace or Re-assign the wasteful activity?

Collate facts and create a visual representation of the findings. Use screen recordings, photos, videos and call recordings to illustrate where paid time is actually used on wasteful activities such as mistakes, extra checks, duplication and rework.

Finally, bring your findings to life using a variety of media and present a compelling story with recommendations for value creation.

So what are the questions?

Question 1: Where is every second of paid time consumed?

Question 2: How much of paid time is spent on wasteful activities?

Question 3: Why are we using paid time on wasteful activities?

Question 4: What should we do to reduce waste?

Question 5: If we reduce waste how much value can we create?

Having tested numerous approaches to answer all five questions we developed our approach termed - Rapid Value Creation (RVC). In my experience RVC will provide the evidence based insight needed to guide future transformation and value creation.

The opportunities for simple yet powerful tried and tested methods to make rapid change go beyond this example. There are many approaches and tools that can be used, all of which aim to add value by reducing the cost of operations, increase capacity and delivering services faster for customers. However, RVC is the surest way to identify areas of waste quickly.

For a private equity firm looking to deliver tangible results within challenging timeframe quickly, RVC is a great place to start.

If you are interested in the specifics of what we could do to reduce waste and improve productivity within your company, book a discovery call with Colin today or call him on +44 07808 840646.


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