The Value Theme Layout

The general format for a financial value theme is shown in figure 12-4.

Figure 12-4: Format for financial value themes.

Financial value themes state your intervention, give a direction that you have moved a financial measure, name the financial measure, and give a performance reason for the movement in the financial measure.

Identifying Your Intervention

The first step in creating your value theme is to state the intervention you are communicating value for. You can use the principles of value communication for many reasons and in many situations. Your audience will find it easier to agree with you, however, when your financial value theme refers to the results from a specific intervention. Step 4 of the financial value process helped you identify the intervention that you wanted to focus your value communication on. A discussion of step 4 was given at the beginning of chapter 8.

Examples of possible interventions include

• new hire sales training

• knowledge management consulting

• problem-solving skills for information technology specialists

• leadership screening assessments

• quality improvement training for health care administrators.

Pick a Direction and a Financial Measure

After you ‚ ve named your intervention, you need to link it to the financial measure you expect your intervention to affect, and you need to designate the direction that the financial measure should move. Your financial measures come directly from your financial value chains.

The direction of movement is simply a verb form that describes the type of movement that was created for the financial measure. Reducing, lowering, and decreasing are all ‚“down ‚½ verbs and are best used with a cost measure. Increasing, raising, and strengthening are all ‚“up ‚½ verbs and are best used with a revenue or income-producing measure. Improving is a generic term that can be used in relation to either costs or income. Because improving is often overused or misused, it is better to choose a verb that more strongly matches costs or income.

‚“Direction/while ‚½ is a special case of showing value. It is possible to write a value theme that shows that you are increasing, decreasing, or maintaining one measure while increasing or decreasing another. For example, you may have been able to increase sales income while maintaining the cost of sales. That ‚ s not always easy to do. The first assumption of your Senior managers is that the cost of sales probably went up in proportion to the sales revenue. If you were able to hold costs steady while increasing revenue, this phenomenon is important to point out.

Give the Reason

Finally, if it is not exceedingly obvious in your theme why your intervention affects a particular financial measure, you must state a performance reason why you will or have already moved that measure. Reasons leverage the same direction but name the base driver that will change to achieve that direction. Base drivers are a more detailed, specific measure on the same value chain that is used as the performance comparison for the broader financial measure.

Performance measures or base drivers can be summarized as being of three types:

• labor costs or time

• resources, a rate, or a count

• direct receivables or money.

Every performance measure that you are increasing, decreasing, or maintaining saves time, changes a count, or directly brings in more money. Arguably, time can be considered a count, but because labor costs are such a significant portion of income, accrued expenses, and cash flow, it is useful to distinguish time as a category of its own when stating reasons. Eventually, improvements in time and resource counts will be converted to money.

If the audience you are communicating with understands the terminology of your performance measures, it is best to use the name of the performance measure as your performance reason. If the audience that you are communicating with knows nothing about the area of an organization that you have improved, you can substitute a very generic and basic driver, such as saving time, improving the rate of output, or getting more money as your performance reason.

Marcella can use her financial value chains to create value themes like the ones in figure 12-5.

Figure 12-5: Marcella ‚ s financial value themes.

Each of Marcella ‚ s value chains names the contract renewal new hire training as the intervention she is focusing her communication on. Marcella ‚ s first value chain names the Mid-level measure of COGS as the theme ‚ s financial measure and describes how the intervention decreases (the direction verb) this financial measure because (performance reason) it decreases lost work hours from experienced employees who previously had to spend needed time to help new hires on the job. In generic terms for a performance base driver, this intervention saves time.

Marcella ‚ s second value chain names the Mid-level measure of other sales-driven expenses as the theme ‚ s financial measure and describes how the intervention reduces (the direction verb) this financial measure because (performance reason) it reduces average renewal contract error rates for new employees. In generic terms for a performance base driver, this intervention improves a count or a rate.

Marcella ‚ s third value chain names the Senior-level measure of CPM as the theme ‚ s financial measure and describes how the intervention increases (the direction verb) this financial measure because (performance reason) it increases average monthly team renewals by new employees. In generic terms for a performance base driver, this intervention brings in more money.