Book Summary By Bud Roth

	Why the Bottom Line Isn’t David Ulrich and Norm Smallwood

Summary by Bud Roth

The authors, David Ulrich and Norm Smallwood, make a convincing argument that the intangible characteristics of a company are a better scorecard for success than the “bottom line”. The intangible value of a business speaks to the “how” the organization is successful. This book helps leaders create sustainable shareholder value and enables communication to all interested parties, i.e., shareholders, investors, etc. The book ultimately urges the reader to become a new breed of leader who is the architect of intangibles in their company.

This book explores the details of the model I below, “The Four Layers of Intangibles”. The models within the model are well researched, as well as Ulrich having experienced the pains of transformation with his clients. So, he knows what works. I appreciated the authors’ chapter summaries as “Leadership Implications”. These implications help us focus on important actions we need to take. Most of these actions can be implemented by leaders at any level of your organization.

Building Value
So…building value is the key objective. The architects of building value for a company need a blueprint. The ways to build your organization’s value are outlined in the book. These steps are based on research studies in many prominent companies. The architecture defines four layers of intangibles:

1. Delivers consistent and predictable earnings. (Reputation for keeping promises)
2. Articulates a future growth vision. (Customer, Innovation, Geography)
3. Ensures future competencies aligned to strategy. (Product innovation, Operating efficiency,
4. Customer intimacy, Distribution and Technology)
5. Creates capabilities. (Shared mindset, Talent, Speed, Learning, Accountability, Collaboration, Quality of Leadership)

The best learning for me in the Four Layers of Intangibles was the forth layer, “Creates Capabilities”. Auditing these intangibles can be very revealing. These areas are most important for sustainability. These are the leadership and people capabilities.

• Shared mindset – establishing the culture or identity of the company.
• Talent – attracting, motivating and retaining employees to maintain peak performance.
• Speed – excite and engage employees by building agility, flexibility and speed into the organization.
• Learning – encouraging creativity, risk taking, and knowledge sharing across organizational units.
• Accountability – executing and delivering what is proposed and promised.
• Collaboration – making the whole greater than the sum of the parts.
• Quality of Leadership – demonstrating knowledge, behaviors and motives to deliver results.

These are the intangibles that the HR professional can have the biggest impact on the bottom line.

Design New Measures
To start this journey of changing our leadership methods, we assess where we are currently. A new scorecard will emerge from this exercise. This audit process will show how intangibles can be managed as a sizable portion of the company’s market value. Of course, the traditional measures of business success are also needed, i.e., P/E ratio, EBITDA, etc. But the intangibles are the life blood of any organization’s success in reaching the financial goals. The intangibles need to be managed by design, not left to chance. The strengths in your organizations need to be exploited or enhanced. Developing the intangibles must by specifically planned, measured and executed. This development is strategic to changing the culture or re-establishing the growth vision.

Make Intangibles Strategic
An important message by the authors is to choose and maintain only a few, simple elements in the vision. Keep it simple. Bundle and cluster where you can, but the message must be easily repeatable. This sounds familiar to most of us, since we’ve followed these rules for strategic change in the past. The difference this time is that our strategic focus is on the intangibles and not totally on numbers. We are learning that enhancing the intangibles will take care of the numbers.

Take a Creative Approach
The plans you develop will require creativity in your approach. Ulrich and Smallwood provide the framework in which to work your plan. The areas of need for innovative thinking will be identified in your audit. Engaging the entire organization in creative thinking will inspire people to do what’s necessary to achieve the strategic focus. For me, this is the most exciting thing about their approach.

Getting Started
As you can see, we are trying to make the intangibles tangible. We need to understand the consequences of intangible competencies. We need to measure the intangibles. Then, we need to translate them to the bottom-line and satisfy multiple stakeholders.

At this point you may be asking. “How do I get started?” Well, you could call me. But, Ulrich and Smallwood have some suggestions for you as well.
Do an intangible audit.

• Moderate expectations to the external community.
• Start small. Work with one intangible.
• Simplify your messages, link them to your strategy, and keep repeating them.
• Create a shared direction and repeat the message frequently.
• Invest in technical excellence.
• Surround yourself with good talent.
• Be rigorous and unforgiving of poor performers.
• Constantly praise and express gratitude to all employees.
• Take note of patterns of events—what worked and what didn’t?
• Think about your organization from the outside in. Brand your culture.
• Instill personal ownership and responsibility.
• Constantly learn by taking risks, experimenting and repeatedly reevaluating.
• Collaborate frequently inside and outside.
• Build a leadership brand and have leaders live the brand.

You can learn more about the book and the audits at: www.rbl.net.

This summary is compliments of Roth Consulting Group

Roth Counsulting Group, LLC
5914 Silas Moffitt Way, Suite A, Carmel IN 46033
ph: 317-843-9521 webmaster@rothcg.com

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