“MANAGING THE GROWING FIRM” : LINKAGES FOR FINANCIAL VIABILITY

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JP-pic 2Dr. John Psarouthakis, Executive Editor of www.BusinessThinker.com, Distinguished Visiting Fellow at the Institute of Advanced Studies in the Humanities, University of Edinburgh, Scotland, publisher of www.GavdosPress.com.  Founder and former CEO, JPIndusries, Inc., a Fortune 500 industrial corporation

The linkages listed in this segment and following segments on this topic to be posted in separate categories are based on my experience as senior executive as well as an entrepreneur on managing growth businesses. Because statistical techniques test for probabilities but not certainties, the wordings are stated in terms of likelihoods. Discussions of these linkages are to be presented in future articles. Other executives and entrepreneurs could come to different conclusions compared to those listed in the segments posted. Therefore, those that read my views should take them as the experience of one person and use their judgment as to whether these linkages are to be taken as stated in their case.

LINKAGES FOR FINANCIAL VIABILITY

Linkage-1: The greater the firm size (relative to others in the same industry), the higher profits are likely to be.

Linkage-2: The steadier the sales growth, the higher profits and the better cash flow are likely to be (the latter lags in time).

Linkage-3: The more rapid the sales growth, the higher profits are likely to be.

Linkage-4:  The more effective direction-setting strategy is, the  higher profits and the better cash flow are likely to be.

Linkage-5:  A more effective work division strategy is,  the higher profits are likely to be.

Linkage-6: The more effective the coordination strategy, the higher the profits and the better cash flow are likely to be.

Linkage-7: The greater the firm’s ability to obtain needed capital, the higher profits are likely to be (causal direction may be in reverse).

Linkage-8: The greater the firm’s ability to obtain needed capital, then the better cash flow is likely to be (same year and lagged effects).

Linkage-9: The higher the employee morale, the higher profits are likely to be.

Linkage-10: The higher the employee morale, the better cash flow is likely to be (same year only).

Linkage-11: The more similar the views of the company mission among CEO and managers, the higher profits are likely to be (lagged effect).

Linkage-12: The more effective the strategy for communicating values is, the higher profits are likely to be.

Linkage-13: The more effective the resource-allocation strategy is, the higher profits are likely to be.

Linkage-14: The greater the firm’s ability to allocate people correctly across the firm, the higher profits are likely to be.

Linkage-15: The greater the firm’s ability to allocate nonpersonnel resources correctly, the better cash flow is likely to be.

Linkage-16: The better community image is, the better cash flow is likely to be.

Linkage-17: The better community image is, the higher profits are likely to be.

Linkage-18:  The better the technical skills and performance of employees are, the higher profits are likely to be (same year only).

Linkage-19:  The better the technical skills and performance of employees are, the better cash flow is likely to be (lagged effect).

Linkage -20: The higher the quality of output is,  the higher profits are likely to be (same year only).

Linkage-21: The higher the productivity is, the higher profits and the better cash flow are likely to be.

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