Management quality and creating or destroying value

For many, "management risk" is a relatively impersonal issue, a subject that calls up questions related to a company's strategy and policy, or its organization and systems. Others accept that the issue can be considered on a human level, but usually in collective terms, rarely personal – especially when they themselves are in a leadership position, and thus directly exposed to the evaluation of their ability to manage teams and projects. And yet, the "managerial" abilities of a boss, a manager, or a department head are a factor that can multiply or limit the performance of a company, a department, or a division. A manager who knows how to lead and get the best from his or her teams can make the difference in a situation of close competition.

Can an investor afford not to have a risk assessment done when it's a question of committing substantial funds to a company's development?
Management risk becomes even more relevant depending on how well primary risks (financial, market, product, operating, quality, etc.) are under control. As a 2003 study* demonstrated, awareness of this risk is growing (60% of managers surveyed), but it is far from being a systematic checkpoint during the initial investigations of investors considering holdings. This holds true even though the number 1 executive manager has a considerable impact on factors that affect value creation or destruction. It is all the more relevant in a SME, where the owner's actions are directly perceptible throughout every sector of the company.
Lack of cohesion in the management team, lack of confidence in managers, and lack of identification of roles within the company top the list of management risk factors in the study cited*. We would like to add, more simply, the ability to exercise leadership (supervise, guide) and communicate a vision to employees (through motivation and public speaking skills).

The decision to strengthen an executive through operational "coaching", which offers support rather than a substitute, is sometimes made.
Can an investor who takes a position in a company and hopes for a return on investment in line with market standards, at a minimum, and if possible a much higher one based on profitable and structured growth, afford not to supplement initial investigations and ongoing monitoring with an assessment of the organizational aspects and the leadership shown by the chief executive?
This risk (management) is far too critical to receive only minimal consideration.

EDAXIS helps companies' executive management teams to identify, qualify, and control management risk.
It also helps capital investors (particularly during LBO transactions) evaluate this risk and take the steps necessary to bring it under control.

* Les Echos study – Former students of ENA, HEC, and Polytechnique, designed and supervised by Aon Management Consulting in 2003.