Global power group

Power generation equipment manufacturer supplier and service provider with sales in excess of €10 billion.   Operating in 40 countries and employing 50,000. Nigel Hawke, based in Paris Headquarters, led global cash release programme in excess of €1 billion increasing targets by working hands on in units to improve cash generation.  Extra cash identified in excess of €200 million for 2002/03 financial year.

Existing "Cash for Growth" programme established to ensure that in addition to profitability, industrial segments and their business units were equally focused on the importance of cash.  Programme had been implemented largely at segment level and rolled out to units after proofing by pilot units.  Performance was generally enhanced amongst units committing to and training a dedicated team of "Cash Winners".  These were leaders of teams set up to implement improvement plans backed by senior management.  

Endorsement by top management of a cash improvement programme avoids mixed messages weakening the effectiveness of measures designed to generate cash.  For example, stressing in monthly performance review meetings only sales volumes and profit margins, and ignoring cash generation, loses the extra cash that could be generated with a more balanced focus.  

This is not to deny that profitable business is essential to the long-term health of the business. But failure to make cash as important a performance indicator as profitability will ultimately lead to bankruptcy.  Growth becomes unsustainable or non-quality bleeds away vital life giving cash flow.

In the power generation sector, given the size of the business, cash winners were appointed at segment level, business level and unit level with approximately 150 people involved at management level.  Extra people worked in individual teams on cash generation projects.

Nigel Hawke assumed responsibility for the programme at sector level encouraging the segment cash winners to maximise performance.  Units were visited and best practice spread at local level.  A hands-on direct approach was taken using within the existing teams.  New teams were recommended as necessary.

New streamlined reporting tools were introduced to speed up monitoring and reporting.  Reports were automated wherever possible taking direct data from the group accounts.  This produced cash waterfall graphs, working capital turns, inventory turns and receivables turns, giving an immediate appreciation of progress with cash generation.

One of the main benefits was cross functional training enabling each part of a unit's management to appreciate their own function's impact on cash.  Teamwork was essential to unlock problems where many functions were involved.  Tools from six sigma quality improvement techniques such as cause & effect trees proved very helpful in eliminating inefficiency.  Other cost of non-quality in procedures were used to address delayed invoicing, especially where complex documentation and operating manuals were required by the client, at the same time meeting the requirements of lenders financing power projects.

An entire segment was added to the programme by developing specialised training adding further cash release into the programme.

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