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Management Grading System

Our Management Grading System

The Management Grading System™ is comprised of three phases: Diagnostic, Therapeutic and Quarterly Benchmarking.

The Diagnostic Phase uses various proprietary metrics to form a grade for the company or industry: 1. The Velocity of Cash Index™ is a factor of the number of days it takes to turn a sale into cash; and 2. The Velocity of Capital Index™ utilizes operating earnings as a percent of total invested capital (total long term debt plus shareholders' equity). The final grade is generally biased toward the Velocity of Cash Index.

Companies that do both well have a high Velocity of Information Index™ High VOI Index companies get a high ratio of market value to sales.

The VOI Index shows what has never been demonstrated before: how effectively a company uses its information resources. In an era when the cost of information is in a freefall, only those companies that most rapidly substitute information for other factor inputs - like land, labor, and capital - grow and prosper. The higher the VOI Index, the better.

The Management Grade

The Management Grade reflects management's control over operations. It tells more about a company's total capability than any existing measure. The resulting diagnosis is simple: a low grade indicates poor control over operations and vulnerability to competition. A high grade indicates good control over operations and limited vulnerability to competition.

High-velocity, A-Grade players always have the best brand, fastest growth, and vacuum all the operating free cash flows from their markets. They are also best positioned to sack market adjacencies occupied by competition with more cash and capital wait states. Some high-velocity players, like Apple (North River Management Grade: A+), define and compete in market dimensions that others with more cash and capital wait states never see. These A-Grade players navigate proprietary profit opportunities with impunity.

If the Grade Calculator throws you an A, you have one of the best performing companies in your sector. You're a top predator. If you come up with a B, or worse, you have too many cash and capital wait states. You don't want to tell shareholders after their earnings have evaporated that you got North River's Management Grade F, for free, and did nothing about it!

The Therapeutic Phase is a five-step process. The ease or difficulty of this phase is contingent on the quality of the grade received. We guide you through the following:

  1. Define what you must do to manage your customers' experience of your product ten years from now.
  2. Identify what customer-facing assets and operations you must have to manage the customer experience envelope.
  3. Identify the system you must have to manage them.
  4. Identify which assets you now have that must be disposed of and those that must be acquired.
  5. Set your velocity of cash and capital goals and the time-line for implementation.

The Quarterly Benchmarking is essentially our maintenance phase where we track the accuracy of our diagnostics with the ongoing effectiveness of the therapy. At this point, only slight tweaking is necessary to remain on a profitable course.

The value of our Management Grading System is simple: Raise your grade and your shareholder value will go up.

A-Grade companies have outperformed the S&P 500 by 4.5 times since January, 1997. These companies create and hold their value. We have the tools to help make your company one of them.

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