This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Manage the Fundamentals

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- In the movie City Slickers, Curly the old cowboy gives advice to a visitor, "The secret to life is one thing," he says. When asked what that one thing is, Curly answers, "That's what you've got to figure out."

Could there be one thing that accounts for business success? There may be. That one thing is flawlessly executing the fundamentals. Every athlete has heard it from his/her coach. But it is also true in business.

There is good research to support this assertion. Some of the most compelling come from a massive, multi-year study called The Evergreen Project.

Project members included 50 faculty members from 10 of America's leading business schools. Their objective was to use hard data and causal modeling to determine why some companies consistently outperform their peers. This project has a different approach than the type of studies found in the book Good to Great, which focuses on high-performing companies and then describes several management practices. It is not clear whether those practices caused the success or whether those practices will be effective in other industries.

Here are the Evergreen findings in a nutshell: When compared with average companies, executives of winning companies proactively measure and manage the fundamentals. Using a sports analogy, all coaches are obsessed with winning, but the most successful build a highly disciplined approach for improving capabilities. They believe that if they manage the fundamentals well, the score will take care of itself.

There are four fundamentals:
1. Managing a Business Strategy
2. Maintaining a Nimble Organization
3. Cultivating a High-Performance Culture
4. Executing With Discipline

For example, take Kmart and Wal-Mart (WMT). These two companies were financially similar at the start of the study. But 10 years later, Kmart was considered a loser.

During the study period, Kmart executives focused on managing quarterly financial results. Again and again, executives tried to "manage the score" by cutting headcount and slashing prices.

Wal-Mart, a winner, chose a different path. It focused on improving its fundamentals in purchasing, supply chain and data-driven merchandising. This allowed Wal-Mart to build muscle for future price fights. If it strengthened its fundamentals, financial results would follow.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.02 0.00%
FB $104.07 0.00%
GOOG $683.57 0.00%
TSLA $162.60 0.00%
YHOO $27.97 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs