Decision Memorandum, Big Red Car?
Big Red Car here in the Olympic heat of Texas’ beautiful summer. The sun is shining. The heat is rising. The bougainvillea is blooming. The pool is calling. Today, we go swimming at Barton Springs and start swimming laps to rehab a painful Achilles Tendon — but I digress.
The Decision Memorandum is what, exactly, Big Red Car?
The value of standard operating procedures
The military harkens to SOPs — Standard Operating Procedures — which define how stuff is to be done, the same way, every time.
It is a perfect example of process standardization and streamlining that businesses and CEOs can use.
Dealing with a board of directors on acquisitions — and other big decisions — can have a time saving result if you standardize the approach.
The CEO and the Decision Memorandum
The CEO has to seek the approval of his Board of Directors on certain critical decisions, such as an acquisition or raising capital. A competent board quickly identifies what things they require a CEO to seek and obtain their approval for before sallying forth to do them.
Let’s use an acquisition as an example of something a board and a CEO should mutually agree upon.
Decision Memorandum, Big Red Car?
The Decision Memorandum is a document which fairly presents the decision to the board for its approval. It should cover the following:
Executive Summary
Asset Description
The Seller
The Acquiring Entity
Financial
Operations
Recommendations
All of these sections are described herein: Decision Memorandum Exemplar <<< click here for a good time
Read the Exemplar and see what is included. Modify it to your situation. No sacred cows were injured in its making.
[Pro tip: Make damn sure to require the individual who oversaw the acquisition (Managing Director – Acquisitions), the individual who is going to have to operate the acquired asset (General Manager – Operations), and the Chief Financial Officer to approve the deal before being submitted to the board. Make them sign in blood. This will save you a lot of headache in the future. The Boss learned this at full tuition when an acquisition’s wheels came off and, apparently, nobody was ever in favor of the acquisition other than The Boss. Full tuition, you will not have to pay, dear reader.]
Recusing the sponsor
Small point. A CEO, who has proposed the acquisition, should have no qualms about participating in the discussion and in vigorously recommending the acquisition but should recuse herself from voting as the proponent of the deal. This is the classy way to avoid a conflict of interest.
So, there you have it, dear reader. The Decision Memorandum. The final decision should be evidenced by a Corporate Resolution. We can talk about Corporate Resolutions on another hot, sunny, Texas day. To the pool, y’all. The deep end for the Big Red Car because, of course, I am gargantuan.
But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. Be good to yourself and sunscreen.
