Topic:  Capital  Management  (2)    

 

 This  week  we  continue  our  exploration  on  the  topic  of  capital  management.  The  first  article   sheds   light   on   the   effective   management   of   working   capital   which   is   a  barometer  of  how  freely  cash  flows.  The  other  two  articles  focus  on  human  capital,  with   the   second   article   highlighting   five   global   trends   in   human   capital   that   have  emerged   in   2014   and   the   third   article   elaborating   on   the  main   elements   of   talent  management.        

   

     

• Switch  to  cash  flow  as  a  primary  measure  of  performance.  Examples  include  1)  measure  cash   flow   at   the   plant   level   and   identify   the   right   level   of   stocks   and   coordination  among   plants;   2)   add   a   capital   charge   for   outstanding   accounts   receivable   to   the  measure  of  account  profitability  used  to  determine  compensation  levels  for  sales  force.  

• Collecting  cash   flow  data   into  a   consistent  and  usable   format  by  either  drawing  on  a  single   integrated   IT   system  to  automate   the  process  or  clearly   identifying   the  kind  of  data   needed   and  where   to   get   it   and   building  with   a   standardized   template   into   an  Excel  spreadsheet  

• Focus   on   areas   of   working   capital   with   the   largest   dollar   values   such   as   inventory,  accounts  payable,  and  accounts  receivable;  set  more  meaningful  targets  by  re-­‐creating  business   processes   as   if   there   were   no   constraints   and   explicitly   testing   their  assumptions—a  so-­‐called  clean-­‐sheet  approach.  

• Maintain  the  momentum  of  the  baseline  programs  for  working  capital  management.    http://www.mckinsey.com/insights/corporate_finance/uncovering_cash_and_insights_from_working_capital          

   

capital   management,   it   is   crucial   to   rethink   about   the   recruiting   process   against   the  company’s   current   situation   as   well   as   against   a   bigger  macroeconomic   background.   This  article  from  PwC  has  summarized  five  global  trends  in  human  capital  that  have  emerged  in  2014.   They   are:   the  behaviour  of   organisations  during   a   recovery,   the  nature  of   emerging  markets,  workforce  management  and  the  role  played  by  diversity  and  trust,  and  the  impact  of  HR  itself.      http://www.pwc.com/hctrends2014          

Working   capital   is   the   lifeblood   of   every   company   and   can  amount   to   as   much   as   several   months’   worth   of   revenues.  Improving  its  management  can  be  a  quick  way  to  free  up  cash.  In   efficiently   run   businesses,   cash   runs   freely;   in   others,   cash  gets   trapped   in   working   capital,   restricting   the   company’s  ability   to   grow.   This   article   published   by  Mckinsey   examines  four  steps  to  effective  working  capital  management.  

Organisations   are   racing   to   recruit  as   they   accelerate   out   of  recession.  While   this   is   definitely   great   news   for   companies,   it  has  to  be  noted  that  recovery  has  brought  with  it  some  problems  –   low   employee   engagement,   wage   inflation   in   some   markets  and   most   importantly,   skills   shortages.   The   world   has   changed  over   time,   and   so   has   the   rules.   Therefore,   to   maximise   the  

   

 investment  and  dealt  with  as  such.  The  article  identifies  12  fields  that  must  all  be  considered  when  concerned  with  talent.  An  overarching  theme  that  is  present  in  the  12  fields  is  one  of  constant  change  and  adjustment,  with  a  specific  focus  being  placed  on  the  importance  of  the  current   environment.   The   final   message   is   that   talent   must   be   part   of   the   development  strategy  and  therefore  must  be  well  monitored  and  continuously  developed.    http://www.silverstonegroup.com/wp-­‐content/uploads/2014/05/whats-­‐your-­‐talent-­‐management-­‐strategy-­‐f13.pdf            As   we   can   see,   it   becomes   imperative   for   firms   to   refocus   on   those   previous  underestimated  areas  such  as  working  capital  and  talent  management,  both  of  which  harbor   great   potential   for   the   improvement   of   firms.   With   regard   to   managing  working   capital,   analysis   of   cash   flow   data   and   identify   potential   areas   of  improvement  are  the  key.  When  it  comes  to  developing  strategies  to  manage  human  capital,   firms  need  to  take   into  consideration  the   impact  of  their  current  processes  and  strategies  on  their  overall  business  outcomes,  their  current  business  situations,  as  well  as  the  bigger  macroeconomic  background.    

This   article   from   the   Silverstone   Group   focuses   on   the   main  elements   of   talent   management.   They   define   talent  management  as  the  "alignment  of   talent  to  achieve   the  current  and   future   business   strategies   of   an   organization."     Silverstone  states  that  talent  management  should  be  looked  at  as  an