Planning on Change.

Whether you're an entrepreneur thinking about cashing in your chips, or an executive who wants to retool for growth, you'll have to plan for a period of change. Two new research studies from Financial Executives Research Foundation, Harvesting Investments in Private Companies, by J. William Petty, John D. Martin and John W. Kensinger, and Reengineering Revisited, by Bala V. Balachandran and S. Ramu Thiagarajan, offer insights into both processes.

Harvesting Investments in Private Companies

From a purely financial point of view, harvesting is the process entrepreneurs and investors use to exit a business and realize their investment in a firm. But for the entrepreneur who has built the business from the ground up, harvesting is about more than money. It brings into play a wide range of personal and non-financial issues.

This new study looks at harvesting from the inside out, based on interviews with more than 20 entrepreneurs, investors and advisors who have been closely involved in a number of harvests. Many of the businessowners interviewed emphasize the importance of talking with other owners and investors who had been "in the trenches."

In turn, the interviewees have some advice for other entrepreneurs: Be prepared for the harvest. As Ed Cherney, founder of CMI Corp., points out, "Don't wait until something dramatic happens to put your package together. Start thinking about your exit strategy and going through the motions, so that if something major happens, you've had time to think through your options." Warns Ben Cooper, founder of Micromation, "It's always harder than you expect - there are no hidden secrets; it's just hard work and thorough planning and execution."

In addition to in-depth interviews, the book covers academic research on harvesting and extensively analyzes exit options and business valuation methods, including valuation for initial public offerings and for highly leveraged sales. The result is a hands-on guide to the demanding process of harvesting a company.

Reengineering Revisited

Before the early 1990s, many corporations were asleep at the wheel. The thumping of competition, the loud complaints of their customers and the noise of a changing marketplace couldn't wake them up.

Then reengineering came along, a radical approach that has dominated management thinking for much of the decade. But while some companies achieved early victories with reengineering, "it's unlikely to be remembered in the new millennium as the panacea for corporate ills," says Balachandran. "That's because some corporate executives used reengineering as an excuse for indiscriminate downsizing." When the dust settled, many companies had succeeded in cutting costs, but at a high price: stunted intellectual capital and low employee morale.

So should you throw your reengineering books in the trash? Not so fast. When used correctly, it's a sound strategy, insist Balachandran and Thiagarajan. Companies need to learn from reengineering's successes and failures so they can take the next step: reengineering for the top line - not just the bottom line - to respond to broader strategic needs.

Rhona Ferling is manager of publications at FERF.