In January 2002, Ameren, a large Midwestern utility, launched a new phase of its “Driving Shareholder Value” program, which helps the company’s current and future leaders develop an understanding of the language of business. Root Learning Inc. and Towers Perrin partnered with Ameren to design the new phase (including a one-day learning session as well as a simulation tool that would reside on manager desktops on an ongoing basis), which was designed to increase the level of financial literacy among Ameren’s top 120 executives. The one-day session included a morning of small-group dialogue sessions, which were facilitated by senior leadership, and an afternoon of business simulation and competition. The objective for the session was to engage leaders in thinking about how the business has changed, the current business realities and the future business opportunities.
First, Ameren’s leaders were divided into cross-functional groups of eight to 10 people to explore the changing dynamics of the energy industry using Root Learning’s Learning Map modules. Industry deregulation has resulted in significant change; including mergers, acquisitions, sales opportunities and customer trends’ and has radically altered the competitive environment. The first learning module explored these changes, while the second module helped the executives gain a common understanding of the finances of the business and a common language, or set of terms, for discussing the finances. This discussion covered basic information on revenue, expenses and net income, as well as more complex concepts such as free cash flow and stock-price valuation.
The afternoon session built on this common language and allowed the participants to explore the complexity of the company’s financial environment. The morning’s groups were further divided into cross-functional teams of three or four people to play a sophisticated, highly interactive business-simulation game specific to Ameren’s business, market and industry dynamics. In the simulation, teams worked through a series of progressively more difficult scenarios designed to foster dialogue about key business issues and financial metrics. The scenarios explored in-depth topics such as how executives’ daily operating decisions impact free cash flow and shareholder value. These scenarios allowed teams to obtain a greater appreciation for the interdependencies that exist between decisions in what often appear to be unrelated parts of the business. At the end of each section, a member of Ameren’s senior management team debriefed the entire group and facilitated a discussion about results, so that all participants could share what the smaller groups had learned. In the final scenario of the day, the teams competed against one another in a business-simulation game. Winning teams had their pictures and results posted on the intranet.
Root Learning and Towers Perrin custom-developed the business simulation for a Windows NT 4.0 platform with a combination of Macromedia’s Flash 5.0, Microsoft’s Visual Basic and Imagine That’s Extend modeling tool. The simulation’s analytic engine, which contained 22 input variables and four major output variables, was developed by Towers Perrin through extensive primary and secondary research, value-driver analysis and a series of interviews with Ameren subject-matter experts.
This work formed the quantitative basis for a simulation that detailed the complex interactions between operating variables and financial outcomes through an application that lives on within the organization on manager/employee computers. The graphical, user-friendly interface, designed by Root Learning, was based on the financial Learning Map module.
The program has already been successful at many levels. Surveys designed to measure levels of enjoyment and engagement comparable with level one on the Kirkpatrick scale (a framework for determining the value of a teaching module) revealed approximately 96 percent of the participants gave the simulation experience a rating of: “Excellent,” the highest score possible. Pre- and post-event surveys designed to measure what participants have learned (level two on the Kirkpatrick scale), revealed an average increase in knowledge of free cash flow, major expense categories and the linkage of operating variables to financial outcomes of more than 25 percent, which was statistically significant.
Some of the best indicators of engagement and success, however, came from observing the actions of the participants themselves. Over the three days that the training was held, participants from previous days’ events came back during lunch breaks to try to beat their simulation results. More important, the company is now seeing changes in employees’ behavior as a result of this process (level three on the Kirkpatrick scale). After experiencing the day of shareholder-value training, one manager in the labor-relations division said he gave some extra thought to how a seemingly routine decision could add value to the entire company. By finding a way to use internal resources more efficiently, he was able to reduce the company’s need for contractors.
Ameren also anticipates positive impact on business results (level four on the Kirkpatrick scale). Matt Herzberg, director of Organization Development at Ameren and the program’s leader, estimates savings of at least $200,000 as a result of this one manager’s actions alone. If even a portion of the 120 managers who participated in this program take similar actions, the impact on the company’s business performance will be tremendous.
The results of this program are nothing short of outstanding. Probably the single most important result was that participants truly became more skilled and aware of how their day-to-day actions were “Driving Shareholder Value.” They created a common language and broke down divisional silos so each participant could view the company from a broader perspective. Furthermore, as managers continue to use the simulation over time, the intervention moves from merely creating understanding about the business to allowing people to internalize the changes needed for success. As the company now enters its next round of business-strategy planning, the team members are well prepared to take Ameren to the next level of success.
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