Haute Lumière

Commerce · I.01 · MMXXVI · daylight

La Bourse  /  Volume I  /  Nº I.01  /  Workbook — the executive

WORKBOOK — THE CORPORATE EXECUTIVE

Chapter I.01 · The Ninety Days

For the person with a P&L, a signature limit, a board, and a quarter. This workbook uses the language of the firm without apology, because the firm's own numbers already support most of what follows — they have simply never been arranged to show it.

---

THE PREMISE, STATED COMMERCIALLY

You are being asked to do one thing: stop depreciating assets that are appreciating, and start pricing the regeneration rate of the stocks your P&L draws on.

That is not a values proposition. It is an accounting observation with a financing consequence. Every business holds stocks that regenerate — customer relationships, supplier capability, workforce skill, brand permission, soil, plant condition, code quality, institutional memory — and conventional practice treats all of them as either expensed or straight-line depreciated. Both treatments assume r = 0.

Where r > 0 and you are drawing below R · r, the asset is appreciating and you are reporting it as declining. Where you are drawing above it, you are liquidating an asset and reporting it as operating income. Neither error shows up as an error. Both show up as performance.

The ninety days is how you demonstrate this on one line item, at a scale small enough that nobody has to be persuaded of anything philosophical, and with a financing structure that competes for no capital.

---

PART ONE — DISCOVERY

Days 1–30

Exercise 1.1 — The five-place sweep (one week, with your controller)

Do not commission a study. Sit with your controller for two hours and go looking in five places.

1. Waste and yield loss. Pull the disposal, scrap, write-off, obsolescence and returns lines for three years. Ask one question of each: would anyone pay for this? Interface funded the early years of its entire sustainability programme out of avoided waste — several hundred million dollars cumulatively — and it began as a yield question, not an environmental one.

2. Retention anomalies. Rank teams by voluntary turnover. Take the lowest quartile and ask what it is doing that the others are not. Then cost the gap properly: fully loaded replacement cost is conventionally estimated in the range of half to twice annual salary depending on role seniority, and that is before the productivity drag on the surrounding team. Run your own number; use the range only as a sanity check.

3. Assets past their schedule. Query the fixed asset register for items with book value at or near zero that are still in production. Every one of them is a person's judgment that the register got wrong. Find that person.

4. Suppliers never re-tendered. Pull the list. For each, write what you actually get that the unit price does not capture — flexibility, priority in shortage, quality consistency, engineering help. Then ask what re-tendering would cost you in those terms.

5. The thing people are proud of. Ask, out loud, in a room. "What do we do here that you'd defend if someone tried to cut it?" Take notes on the conditions, not the outcomes.

Output: five candidates on one page, roughly costed.

Exercise 1.2 — The appreciative board conversation (one session)

Before you propose anything, change one question in one meeting.

Replace "where are we underperforming?" with:

"Where did we do something in the last two years that was clearly right for the long term and paid off sooner than we expected — and what made that possible?"

Record what comes back. You are building the evidence that the organisation already knows how to do this, which is a materially easier argument than the claim that it must learn.

---

PART TWO — THE ARITHMETIC

Days 31–45

Exercise 2.1 — The counterfactual cost case (one week)

Take your chosen candidate and build the case properly. The discipline is entirely in the counterfactual.

That last row is the one that earns you credibility. Naming an asset and declining to put a number on it signals that the numbers you did put in are the ones you can defend. Executives who monetise everything are discounted entirely.

Exercise 2.2 — The crossover, for your board (half a day)

Compute the crossover year for your candidate:

  n  =  ln(1 / (1 − penalty))  /  ln((1 + g) / (1 − d))

Worked, from the chapter: an extractive line declining 4 percent a year against a regenerative alternative starting 25 percent behind and compounding at 2.5 percent crosses in year five — ln(1.3333) / ln(1.0677) = 0.2877 / 0.0655 = 4.4.

Now confront what that means in your governance. Five years exceeds the expected tenure of most people who would approve it. This is the central structural problem of the transition and you should name it in the board paper rather than hope nobody notices. Naming it is what lets you propose the answer: a pilot whose crossover lands inside a budget cycle.

Exercise 2.3 — The sensitivity that protects you (2 hours)

Run three cases: your estimate, and the estimate with the two most load-bearing assumptions moved 30 percent against you. Publish all three.

An analysis that only works at the central case will be destroyed by the first person who wants it destroyed. An analysis that survives a 30 percent adverse move on its two weakest points is very difficult to attack, and the person who brings all three cases unprompted is trusted with larger questions afterwards.

---

PART THREE — DESIGN

Days 46–60: the instrument

Exercise 3.1 — Draft the facility (one week, with treasury)

The structure is a ring-fenced regeneration facility with shared-savings repayment — mechanically an energy performance contract, which your treasury almost certainly already understands.

The decision inequality, on the front page:

              verified annual saving
   ------------------------------------------  >  WACC
    facility size + verification cost + admin

Worked: £62,000 annual verified saving on a £240,000 facility with £15,000 verification and £10,000 admin returns 23.4 percent against a 9 percent WACC. Present that sentence first and the environmental case second, or better, not at all in that meeting.

Exercise 3.2 — The audit conversation (one meeting, early)

Where the intervention creates or improves a long-lived asset, the argument is about useful economic life — a conversation your auditors have every year and are entirely comfortable having.

The position: an asset whose productive capacity is demonstrably rising should not carry a depreciation schedule that assumes it is falling. Bring evidence of condition, not conviction. Soil organic carbon trend. Plant availability statistics. Defect rates. Retention curves.

You will not win this in one meeting and you should not try. You are opening a file, not closing one. But the file, once open, changes what is arguable in year two.

Exercise 3.3 — Pilot sizing, formally (2 hours)

  effect  >  3 x (period-to-period noise)
  cost    <  one persuaded person's discretionary authority

Compute your operating unit's actual period-to-period standard deviation on the relevant metric. Most executives have never done this and are astonished by how wide it is. If your expected effect does not clear three sigma, change the candidate, not the claim.

---

PART FOUR — DESTINY AND DELIGHT

Days 61–90

Exercise 4.1 — Into the pack (one conversation)

Get the metric onto the standing monthly reporting pack. This is worth more than any presentation you will give, and it is usually a five-minute conversation with whoever owns the pack — a conversation nobody has because it feels too small to ask for.

Anything reviewed monthly persists. Anything reviewed by exception does not.

Exercise 4.2 — The compensation signal (one cycle)

Attach a modest weighting to the metric in one person's objectives. Modest is fine — 5 percent is a signal, and the signal is the mechanism. An unpaid metric is a hobby, and hobbies do not survive a reorganisation.

Exercise 4.3 — The second owner (before you need them)

Recruit them by giving them the credit for the first result. Publicly, and without hedging. This costs you nothing you will miss and converts a supporter into a principal.

Exercise 4.4 — The one page, the one person (day 90)

One page. Baseline, intervention, result, implication at ten times the size. Delivered to whoever controls the next allocation.

Not the board. Not the all-hands. Not the newsletter. One person, one page, one number. The board comes after that person is already carrying it, at which point you are not asking for a decision — you are confirming one.

Exercise 4.5 — Delight, for a firm (ongoing)

The chapter's claim is that delight is the adoption mechanism, not the reward. In a corporate setting that means: make the reporting beautiful, make the meeting short, make the metric one that people are pleased to see rise, and let the operating unit keep the whole benefit at repayment.

Every one of those is an adoption decision disguised as an aesthetic one.

---

THE FAILURE MODES, NAMED

So you can see them coming

The chapter is honest about where this fails. Read these before you start, not after.

1. The pilot was sized to impress. Result lands inside the noise band, and is argued away by anyone who wishes to. Prevention: three sigma, computed.
2. The sponsor moved in month four. The successor inherits a commitment without conviction. Prevention: second owner, and get it into the pack.
3. The baseline was built after the intervention. No clean comparison, so the result is a matter of opinion. Prevention: signed baseline, day 45, before anything is deployed.
4. You won philosophically first. Having made it a values argument, you cannot now make it a returns argument without looking as though you have changed tack. Prevention: number, then story, then philosophy — and the philosophy is optional.
5. The savings were real and someone else claimed them. Common, and demoralising. Prevention: the reversion clause, in writing, and the second owner as witness.
6. It worked and nobody scaled it. The most frequent outcome. Prevention: the "implication at ten times" line on the one page — it makes the next decision the obvious one rather than a new one.

---

THE NINETY DAYS ON ONE PAGE

---

BOARD PAPER TEMPLATE

Title. One line, commercial. "Regeneration facility: 23.4% return on verified savings, £240k, self-liquidating." Not "Sustainability pilot."

1. The number. The decision inequality, computed, first paragraph.
2. What we found. The positive core — something already working in our own operations, uncosted until now.
3. The baseline. Signed, by whom, when.
4. The structure. Facility, repayment, reversion, term, security.
5. Sensitivities. Central case and two adverse cases at 30 percent.
6. What would make this fail. Name three honestly. This paragraph is why you will be believed.
7. The horizon problem. State it: full crossover is year five, which exceeds typical tenure. This pilot is sized to clear inside one budget cycle.
8. At ten times. One paragraph. What the next decision looks like.

Length: two pages. If it is longer, you have not decided what matters.

---

APPRECIATIVE QUESTIONS FOR YOUR LEADERSHIP TEAM

1. Where did we do something in the last two years that was clearly right for the long term and paid back faster than we expected — and what made it possible?
2. Which of our assets is demonstrably improving while we depreciate it?
3. Which supplier would we protect against a cheaper offer, and what do we actually receive that the unit price does not show?
4. What does our lowest-turnover team do that the others do not?
5. If our reporting pack carried one number on its front page that we would be proud of in ten years, what would it be?
6. What is the smallest commitment we could make this quarter that we could not quietly reverse?
7. Who is the one signature that makes this real, and what do they need to see?
8. What baseline do we wish we had started three years ago — and what stops us starting it this month?
9. What would have to be true for this to still be running when everyone in this room has moved on?
10. What is the first sign we would see if this were quietly dying, and who would notice first?
11. Where are we currently reporting the liquidation of an asset as operating income?
12. If the operating unit kept 100 percent of the benefit after repayment, what would they attempt that they will not attempt today?