system David Ohrvall CASE 202 Saudi Major Group Crack the Case System available now on Amazon.

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1 system FREE CASE Please enjoy this free case from our Crack the Case System Case Library. Visit mbacase.com for more free cases and companion videos. Crack the Case System available now on Amazon. CASE Saudi Major Group David Ohrvall Founder of MBACASE.com

2 Your friend Jasper is offering you a sweet deal... or is it? Should you bite? RIYADH CITY FACTS P PRiyadh is Arabic for the gardens P PThe traditional lunch meal in Riyadh is a spiced rice and meat dish called Nejdi Kabsa P PThe distribution and consumption of alcohol is illegal in Riyadh, as in the rest of Saudi Arabia Train Profile Type Region Analysis Industry Number 3 Mini Business Population: 6.5M Currency: Saudi Riyal, SAR ROADMAP 9 Restructure the Team Construction 2 LEVEL Solo Practice with Video Assist Partner Practice Find your videos 2. Set up 3. Listen to question 4. Recap 5. Create your plan 6. Present your plan 7. Stop and study 8. Reinforce minutes 1. Set up 2. Present the case question 3. Recap 4. Create your plan 5. Present your plan 6. Stop and study 7. Reinforce 1

3 Interview Guide Case Situation and Question You are a Director at the, a major construction company that builds everything from housing projects to fast food franchises, hotels and public works like bridges and government buildings. A slowdown in the local Riyadh economy is forcing you to evaluate FTE reductions. You are most concerned about the proposal team. Creating winning bids is the lifeblood of the company. You are not sure you have the right team to produce proposals quickly and effectively. At lunch your friend (you were analysts together years ago) proposes that his proposal writing team leave your rival and join Saudi Major. He guarantees bigger proposals, faster output and a higher hit rate. But you must decide by the end of lunch or he ll go to another competitor. You quickly excuse yourself and call the office. What questions would you ask? What data do you need? What calculations will you make? What s your answer to your friend? Case Twist it turns out that your current team has a severance package that averages to $100k per team member. Does this change your decision? Check out the Crack the Case System videos on mbacase.com or scan the Video 3 QR code on the Post Case Review page to hear more insights. Click or scan QR to see video. Feedback Physical Skills Weak Strong Body Language Verbal Listening Thinking Skills Hypothesis Generation Comfort with Ambiguity Initial Plan & Output Data Gathering Data Analysis Basic Business Intuition Integration 2nd Level Insights Creativity Recommendation Total Score / 39 Intro Facts (Tell the Candidate if Asked) Key Insights (Do Not Tell the Candidate) Mid-case Data (Tell Only at Appropriate Time) Cost Reductions: Management wants to focus on FTE (Full Time Equivalent) reductions. Other cost categories were considered but are not a part of today s discussion. Your Role: You have the power to hire and fire. If you want to take Jasper s offer on the spot, you can. Think High Level: Successful candidates discuss the pieces to test: new team cost and performance, old team severance and implementation. Measure Impact: Candidates should lay out a form of cost (salaries, severance) and benefit analysis (hit rate, bigger proposals and more throughputs). Develop Options: Candidates that lay out clean options early in the discussion do well. If the candidate is struggling with how to approach the discussion and numbers, prompt with questions, data and directions. Use the Interviewer s Data Guide. Case Flow and Milestones 1 Prep and Review For this case the Candidate needs to interpret data from one chart and take notes on some additional facts. There may be a few questions before you get to the slide. 2 Present Main Question Take on a personality (friendly, firm or foe). Ask one or two background questions. Present the question. Candidate will take notes and ask for time to think or begin talking. 3 Answer & Ask This is an ambiguous problem. Try to help the candidate by offering ideas if he is stuck. Continue to ask why he is thinking a certain way. 4 Guide Discussion Give any missing data if necessary and the Mid-case Data tips. Review the answer on page 4 of the case pack and offer suggestions if the candidate needs help. 5 Get Recommendation Be firm and expect a final number. To see if the candidate is thinking about broader business issues ask what he would do with this information. GIVE CLUE 2

4 Interviewer s Data Guide Step 1 Give Key Facts and Data Test the candidate s ability to lay out the options and do the math quickly. Say: What data would you need to test Jasper s proposal? Key Facts to Give (prompt any that the candidate misses) Current Method Say: Now that you have the data, what calculations would you perform to compare the options? Step 2 Check Candidate s Options and Calculations Proposed Approach 1 Average Bid Size $10 million USD $11 million USD 2 Hit Rate 15% 16% 3 Throughput 7 per month 8 per month # Salary Total by Type # Salary Total by Type 4 Director 1 $175,000 $175,000 2 $218,750 $437,500 5 Managers 2 $95,000 $190,000 3 $118,750 $356,250 6 Associates 4 $65,000 $260,000 2 $81,250 $162,500 $625,000 $956,250 7 Hit Rate Bonus 0 if hit 16%, flat $5M If >16%, flat $20M payment 8 Severance (<12 months) No severance package $50k per person *may be fired for poor performance Your Calculations Current Method Proposed Approach Monthly Revenue Comparison (1x2x3) $10.50 million USd $14.08 million USD Estimated Annual Rev (Mo. Revenue x 12 ) $126 million USd $169 million USD Monthly Revenue Upside in millions ($ $10.50) = $3.58 Annual Revenue Upside (12 x $3.58) = $42.96 Option 1 Option 2 Option 3 New team misses target Team hits target goal, 16% hit rate Team exceeds target goal Fire them for poor performance Salary $(331,250) Salary $(331,250) Salary $(331,250) No severance Rev upside (in M) $43 Rev upside (in M) $43 plus bonus (in M) $(5) Bonus (in M) $(20) Saudi Group net $(331,250) Saudi Group net Over $35M Saudi Group net Over $20M Will need to find a new team huge upside to Saudi Group huge upside to Saudi Group May be tough to do quickly May need to train them more Additional Thoughts Biggest downside is if the new team fails. If they underperform, the original team would have likely been better. You have to either find a new team or train them. Upside to Saudi Group for Option 2 or 3 is huge. The potential for large gain outweighs the risks of Option 1. To make this essentially risk free, negotiate the salaries down to current levels and eliminate the severance. Argue that the new team needs no safety net and that both sides need to bear risk. Step 3 Ask for an Interpretation of Analysis and a Final Recommendation Ask: What does your analysis say at this point? Look for the candidate to concisely sum up the options. Here are the three most common options, but expect variations: Option 0: Do nothing. Use Jasper s offer as an idea to train your own team and get their performance higher. If age and experience are important, hire 1 2 people but don t swap out the whole team. Option 1: If the team does not work out for performance reasons, there will be no severance. However, there will be the extra salary expenses (estimated at about $330k per year) and, if the team is let go, Saudi Major will not have a revenue machine until the team is replaced. Option 2 and 3: Under either scenario, Saudi Major makes significant upside. Under scenario 2, the net gain of $35M is about 25% of the current revenue ($140M). Under scenario 3, the net gain of at least $20M is about 14% of the current revenue. 3

5 Post Case Review Case Insights & Takeaways This is a good deal. If the team performs as promised the revenue increase to Saudi Major could be $20M or more. But if the team doesn t work out, Saudi Major will have burned its bridges. They will have lost their first team, upset company morale, and potentially provoked additional employee departure. Ask yourself, How much is this worth in its simplest form? After you have a rough estimate, layer in the complications. Additional concerns relate to Jasper. He seems like an agitator. If his team members are like him, this team could be volatile. My Takeaways To build skills and improve, you must apply what you learned to future cases. Take a few moments and review the interviewer feedback and jot down some key insights about your performance in the space below. Thinking Skills My top 2 strengths are: Math Tips For cases like this where you can develop clear options, consider making ranges quickly. Think about the potential upside and what rough range it would fall into. Don t expect to calculate all the specific numbers before making a decision. As soon as you calculated the expected new monthly revenue, it should have been clear that seven new salaried employees wouldn t exceed that upside. Practice laying out the math comparison table. Be neat and organized. My top 2 soft spots are: To address these problems I ll begin to: What to Expect with Cases Like These When you have to make a quick decision, try to lay out outcomes or options. Having a few clear on which to lay your recommendation will make you sound more supported and confident. You will be HDDM (head down doing math) for a large part of this case. Keep connected to the interviewer by explaining what you ll do, and then doing it quickly. Be confident with your closing statement. You don t know how your competition performed that day. Everyone may have gotten it wrong, but your analysis may be the strongest and other factors could weigh in your favor. Click or scan QR to see video. My Performance During the Case Add up your. Total Score: /15 F Form A Plan R Read My Audience A Anchor a Hypothesis M Mine for Answers E End the Case c 3 Structured, clean clean c 3 Good back & forth, caught clues c Solid 3 Solid hunch, pursued clue clue c Specific 3 questions, solid solid analysis c Used 3 Used facts facts and and data, data, connected b 2 Somewhat organized and and logical b 2 Awkward, trouble with b Partial 2 direction b Missed 2 some some questions, some the some the dots dots logical interviewer style a Messy, overlapping ideas a No 1 No hypothesis at at all math all math mistakes b Some 2 Some data, data, mostly understood 1 Messy, overlapping ideas a 1 Interviewer not not interested, a Vague 1 Vague questions, weak weak math, connections math, couldn t follow no no linkages a No 1 No data, data, no no passion, no no connections 4

6 5 Today s date: 2. Be original with your data 1. Zone out your paper 3. Take clean and simple notes My Initial Plan and Output 4. Leave ample room for a structure and additional notes as the case progresses Worksheet

7 6 Director,, construction company housing, fast food franchises, hotels, public Evaluate F TE reductions / economic slow down Need proposals Jasper? Pick team? Call office Take team or not? Jasper s Promise: Bigger proposals Faster return Higher hit rate Rev. - no data (faster output, more revenue) Costs - no data Click or scan QR to see video. Potential Plan and Output Is Jasper s team worth it? Bigger proposals Faster return Higher hit rate Current Meets our level Jasper Per unit?? Rate / turnaround or?? Hit rate?? Additional Study: For more questions to consider, review Section 13: Roadmaps. Costs = Salary? Bonus? Current team severance? Exceeds our level Worksheet