Connecting The Dots

Business-simulation software is incorporated into a training program to help managers understand the effects of operation decisions on financial performance.

InformationWeek Staff, Contributor

May 9, 2002

2 Min Read

When energy company Ameren Corp. assessed its leadership-development needs last year, it was clear that managers' technical know-how far outpaced their financial savvy. The constantly changing business and regulatory landscape made the $4.5 billion St. Louis company particularly interested in having employees understand how operational decisions affect financial performance. To that end, Ameren hired Root Learning Inc. and management consultants Towers Perrin to develop a blended learning program that included business-simulation software.

In January, Ameren's top 120 managers took part in a training day devoted to assessing the drivers of shareholder value. In morning sessions, groups of eight to 10 managers discussed how Ameren had changed during the past five years and how business looked today, using a large paper-based learning map as a guide. During the afternoon, smaller teams of three or four managers used the business-simulation software to gauge how their business decisions affected four major variables: net income, stock price, earnings per share, and free cash flow. MacroMedia Flash served as the front end, and Extend from Imagine That Inc. was used for the modeling tool.

The simulation extended 10 years into the future to determine the long-term effects of 22 inputs such as labor costs, buying fuel on the spot market versus long-term contracts, and tree-trimming costs (necessary to keep trees off the power lines). Ameren is a fairly complex utility, considering it handles gas, electric, and nuclear power as well as a trading business. "The training helped people understand the corporation's profit engine and how all pieces of the portfolio interact with one another," says Matthew Herzberg, Ameren's director of organizational development. The company plans to start using the same training program this summer to help employees who are preparing to move into Ameren's executive ranks.

Herzberg says he's already heard evidence of how managers are re-evaluating their roles. After experiencing the day of shareholder-value training, one manager in the labor-relations division says 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. Says Herzberg: "Over the next five years, it will probably save the company a couple hundred million dollars."

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