BACKGROUND
A few years ago, a business acquaintance referred me to a European
multinational media organization which was looking for someone to takeover
leadership of one of their major Canadian media operations. The parent
organization operated over 300 publications, 60 websites in 21 countries. North
America was their largest market and Canada represented approximately 95% of
their North American business. The particular Canadian operation that I was
asked to lead was causing them significant challenges. The most notable of
which was the fact that it had become their largest money loser globally.
This business unit operated approximately 14 regional and national magazines
and newspapers, 3 websites, employed approximately 50 people, was headquartered
in Toronto and had 7 regional offices. It was a market leader with a
circulation of over 700,000 publications monthly. The publications were printed
in 4 different locations across the country and distributed through 7,500
locations nationwide.
In the 5 years prior to my arrival, the senior leadership role of this
Canadian company had changed several times. The management team (i.e.
department heads) had been negatively impacted by this ever changing
leadership. The individual managers, for the most part, while capable within
their respective areas of responsibility, suffered from a lack of leadership
and as a result had developed a noticeable “silo” approach to handling problems
and making decisions. In other words, there did not appear to be any noticeable
team approach to dealing with issues and challenges. Each department
implemented their individual solution when it came to dealing with situations
that were of a more general nature. This had resulted in situations where the
actions of one department negatively impacted the ability of another to
function properly. There was a fair degree of acrimony among some department
heads and, on my first day, I was informed that a few key department heads had
submitted written or verbal resignations.
Financially the business was in bad shape:
Financially the business was in bad shape:
- there was a significant operating loss and had been for a number of years.
- bad debt was in the double digit range.
- some accounts receivable were over 180 days past due and, of these, several owed well over $150,000.
- many of these larger bad debt accounts were still booking business with the company despite their outstanding debt situation.
- the company’s cost structure had gotten out of control in some areas. For example, websites were locked into a cost structure of $75,000 a month, produced no discernible revenue benefits and were experiencing declining traffic.
The company’s European head office was losing patience with the
operation and I was advised that I was the last “kick-at-the-can” for this
business. Upon my arrival, I was given several briefings by head office senior
executive on their views of what needed to be done which included a list of
which members of the management team should be replaced and where costs should
be slashed.
SITUATION
My assessment of the challenges I faced was:
- My superiors wanted to see developments quickly. (NOTE: The global COO, to whom North America reported, met with me 2 weeks after I joined the company and within an hour of our meeting advised me that “my vacation period” was over and I was to send him, within 48 hours, a list of my 10 quick fixes for the business.)
- I did not want to immediately act on the suggestions made by my superiors. I needed to be able to make my own decisions regarding my management team.
- There were a few members of my management team who had indicated their intention to leave. I needed to convince these individuals to stay.
- I had a reluctant and battle scarred management team. Many of whom were convinced that my primary responsibility was to wind down the operation at the behest of my superiors. The management team’s buy-in and commitment was integral to any transformation strategy for the business. The challenge was to find a mechanism for achieving this immediately despite their misgivings.
- I needed to produce identifiable and meaningful short-term progress in order to reassure my superiors that my decision to not implement their suggestions immediately was a proper course of action.
STRATEGY
It was important to get the management team involved in the problem
solving and decision making process at the outset. They needed to feel
empowered and involved if I wanted them to stay around, take ownership and be
part of the turnaround process.
In hindsight, I guess I was implementing a cross functional team style approach.
The benefits associated with this approach, included:
- Faster problem solving and decision making
- Increased level of by-in or commitment to the resultant action plan by those who crafted the solution.
- Increased ability to get multiple situations dealt with simultaneously. A cross functional approach should require less senior management involvement in each problem solving and decision making circumstance. In my case, I worked with individual managers to help identify the key issues or problems and then turned the matter over to teams who would return to me when they had arrived at what they felt were implementable solutions. This allowed me to have a number of problems being worked on simultaneously without personally being involved in every detail and running the risk of being the source of delay.
- Opportunities to assess the quality of the management talent by observing them in real work situations. It can be a very effective way to measure how individuals function in a team, their leadership or potential leadership qualities, problem solving and decision making skills, organizational capabilities and overall work ethic.
- Improved customer relationships resulting in increased sales and brand strengthening. I have on occasion put inside and outside sales together with finance to manage aspects of the sales process and experienced surprising benefits.
This idea first came
to me when I was running a company that was facing a particularly aggressive
competitive environment. We were losing sales because the sales reps,
especially the outside sales reps, when trying to cut deals with clients were
required to contact their supervisors for approval before they were permitted
to wander off the official pricing schedule.
The solution was to
have the sales management team and finance department work together to come up
with a pricing management process that would provide the field reps with the
latitude to make pricing decisions while sitting with the clients while at the
same time safe guard the businesses margin requirements. Finance and sales
management structured a pricing practice that, while riskier in terms of
maintaining margins, ensured that our reps left very little money on the table
for competitors.
In addition to the
direct benefits in terms of increased sales, clients were impressed that our
reps were empowered to make these decisions and to make them quickly. This reflected
well on the reps individually as well as the company.
IMPLEMENTATION
Beginning the day I arrived, I spent most of my time meeting with my
managers one-on-one to discuss their departments and to get their perspective
on what they felt was required to get things back on track. These meetings were
always held in their offices, never in mine. I needed to get them to accept my
presence and this was the best way to reinforce that I was part of their team
and my role was to remove obstacles as well as help and support them. I had no
hesitation in telling them that they were the experts when it came to their
departments. Through these initial sessions and ensuing discussions, I believe
it became evident to the management team that I had high level of confidence in
their ability to get this organization back on its feet.
NOTE: I always find it amazing that when
companies or business units find themselves in dire circumstances the senior
management (i.e. the guys in Head Office) often adheres to “safe” practices that probably got them into their difficult
situation in the first place. A major
portion of my career has involved being recruited into organizations to lead
management teams that are underutilized and, often, have become demotivated due
to being subjected to risk averse senior level decision making and problem
solving practices. The major challenge I usually face is transforming these teams
into motivated, energized groups that embrace innovation, make the tough decisions and zealously pursue
being best-in-class.
I seldom have encountered managers or department heads who do not want to take a risk. What
I have encountered are managers who have been discouraged from taking risks because
of a lack of senior management support. Someone once expressed it best when
they said “senior management want us to take risks but not to risk anything”.
Changing or transforming an indigenous team can be difficult and not
without its challenges. Often it is preferred to replace all or part of the
existing team with known talent that you may have worked with previously. It
has been my experience that the management team that was in place when an
organization went off the rails can be the best team to get it back on track.
It seldom is the front line management or department heads who have caused the
problems, they are just the ones asked to accept the blame. Given the
opportunity and the proper environment they often quickly rise to the
challenge.
With a few exceptions, I was able to keep the original team intact and
in the first 12 months the team was able to accomplish the following:
- The company, after years of losses, was returned to profitability.
- Bad debt plummeted from double digit to low single digit.
- Production costs dropped $1,000,000.
- New products were introduced.
- Web costs were reduced almost $50,000 per month and the websites were restructured to be revenue contributors.
- Magazines and newspapers were redesigned to make them more relevant to market needs, to reduce paper costs and to optimize the use of ad space. Studies were conducted regarding readers preference for size and aspects of layout. The objective was to reduce paper costs by reducing publication size but not lose ad revenue by reducing ad sizes excessively.
- Editorial costs were reduced 25% while maintaining quantity and quality of content.
- Distribution was re-engineered.
Richard Peters other case studies include:
No comments:
Post a Comment