The Square Orange

Creating Resilient Organisations

The following appears in "Implementing an Effective Change Management Strategy" by Neryl East, MA, PhD, published by the Ark Group in association with Inside Knowledge.

While it might be admirable for organisations to strive to be resilient, change and strategic management specialist Teik Oh says resilience is not the end of the journey. Resilience is an element that needs to be embedded in the culture of the business.

He believes that can only be achieved if the organisation and its leadership demonstrate some fundamental behaviour that point to resilience.

Resilience is not only important in the hard times or during change. It must also be demonstrated when business is going well. That can be a challenge for many leaders, who Oh says are generally suited to only one style of an economy.

Many perform well when the economy is also doing well. Other leaders rise to the challenge when the economy does badly; Oh points out that it is relatively easy to think of great leaders who have turned companies around. However, they may not have been so successful when the business was back on track.

Oh says resilience needs to be a constant, rather than something that is brought in with change management. "If you can bring in that cultural resilience over time, the next time a crisis happens, hopefully you will react accordingly," he says.

He cites the writing of Harvard Business Review senior editor Diane L. Coutu [http://hbr.org/2002/05/how-resilience-works/ib], who describes three key attitudes for resilient behaviour:

• To be able to face the truth without any ego
• To actually see the grand vision – the meaning and purpose of the organisation
• To be able to react quickly with whatever is at hand

In relation to the first point, Oh says leaders who have risen to the fore during good times are not always able to instil in their organisation the need to respond to a changing environment. Leaders who have an overly optimistic nature risk being blinded to the truth, and to believing that "we'll be right, we'll just keep doing what we're doing."

"People are looking at the positives, but do have to realise when things have changed," he says. "You do have to face the possibilities. Ego has a great part to do with it. You have to have a clear sense of your own ego so you don’t rest on your laurels. It's like being able to be on the dance floor at the same time that you are in the wings watching yourself dancing."

Oh says a resilient organisation is one in which the culture allows people to honestly challenge each other. If they are able to do that within the organisational hierarchy, they will have a culture that allows the truth to be faced. Otherwise the culture is very dependent on the leader, and workers are likely to ask questions among themselves such as, “if it’s so good, why is this happening?” rather than openly questioning.

Oh believes being resilient does not necessarily come down to personality, and is something that can be learned.  It also reaches far beyond organisational reporting systems.

"An organisation can have good systems for monitoring its environment, and they display the truth, such as an accounting system showing a loss," Oh says. "But the ability to challenge opinions adds another layer. If you bring forward that you have made a loss but everyone is very supportive and sympathetic, you try to soothe the pain and that’s when you start to get into trouble. You need that open and honest communication, with people being able to question why it’s happening, how long will it last. It's about being prepared to face the tough questions and to ask them. Or is the organisation in hiding?"

Regarding Coutu’s second point, Oh is a strong believer in setting an organisational vision that is empowering and subscribed to by everyone. "If you’re going to shake up an organisation, you need to tell them what the whole horizon looks like," he says.

"A non-resilient organisation lacks that longer term vision, and they attack current problems. One result of that is that the internal value systems change. For example, total customer service might have been a value, but if things go wrong, an organisation might sacrifice parts of its customer service system to save costs. If you’re doing that, you’re lost. Resilience has value systems that just don’t change.  If your values are right, they’re right in every situation. So, using the customer service example, even if the firm was losing money a resilient organisation would not use change management practices to reduce its customer service. You’ve got to find your savings elsewhere."

Oh believes many organisations still lack that clear vision. "They have a vision statement, but it's not quantifiable," he says. "Often it's just a flag they fly, without any real connection to the outcome and operations of the business."

Clarity of vision has to come from management. "The organisation needs to be clear on what each sentence or paragraph means, and it must be linked to the Key Performance Indicators of the organisation," Oh says. "It's effective to combine the vision statement with something like a balanced score card; 'When we’ve achieved our vision, what will our customers say about us? If we achieve it, what will our stakeholders think about it?' You do that with people, and with processes. That way, someone down the line totally understands the big picture."

Oh uses an example of NASA in the 1960s when the space agency was first trying to land a man on the moon. "A study group went around and talked to all the NASA employees, including the cleaners, and asked them if they had a boring job. They all said they had a fantastic job because they were helping to send a man to the moon!"

He says Coutu's third point, to some extent, comes from the first two. An organisation that is true to its values and vision but is also able to diagnose problems with honesty, is able to react quickly and come up with innovative solutions. When rapid change is needed, an organisation can only react with the resources it has at the time.

"I think this is why many organisations don’t perform well," he says. "They wait months before anything happens."

"This element needs a culture of empowerment, so that the person who sees the problem feels empowered to bring it up. The way it filters down to the people on the ground depends on the leader's ability to totally explain the vision."

Oh likens the power of strong leadership in a resilient organisation to the scene depicted in a recent advertisement for logistics and delivery company UPS, in which a group of van drivers are following a UPS driver through a jungle, complete with bridge washaways and other obstacles. They follow because they know the UPS van will get through.

He says those strong qualities do not necessarily have to be stated. "For example, with the guiding principles or vision, the organisation may not say 'we have a clear vision', but people just act in a certain way from knowing what the bosses would do, and feel empowered to do so. They don’t say ‘oh, we have a strong values system’ but the way they act says that they do."

"And it's not necessarily the leader driving those organisations. I worked with one business with an extremely charismatic leader. In front of a group of people he could talk about where the company was going, but then organisationally he lacked the kind of operational structure to translate that into outcomes. People were inefficient because there wasn’t that central understanding of those values. They didn't react quickly with what was at hand."

Oh believes that to develop a resilient culture, an organisation needs to go back to basics. "They need to ask where they're going," he says. "They need to know 'who have we got on the bus? Are they on the right seats? What kinds of processes are we using, and do these support looking at the truth? Are they aligned to the vision and values, and do these support or reward people who take those first two things and create an innovative approach?"

He reiterates that it is much harder for an organisation to implement cultural change when business is going well. "I have yet to see a client come to me and say 'everything is OK but we need to change'. It’s usually in the middle of something," he points out. "You read about great leaders and how, despite everything being OK, they keep changing. You might go too far, though. If you don’t have an impetus for change, what are you changing to?"

The good times, however, are the ideal period to begin developing resilient characteristics in the organisation's culture "In the bad times, it becomes less likely that you’ll invite long term change," Oh says. "All your attention is fixed on your short term problem."

He says "resilience" has now been taken up as a catch phrase, in much the same way that "change management" was a hot topic in the recent past. He does not see them as separate topics. "You just need to build a good organisation, and that, surely is a resilient one."

"There is a danger that if you think resilience is the next nice thing, you will build a resilient organisation separate from all the other things that create a good organisation. You have to see resilience as one of the characteristics of a good organisation. And that gets back to the leadership team."

Oh says that even a few years on from the Global Financial Crisis, the jury is still out on which organisations have demonstrated that they are truly resilient. "There are a lot of things that muddy the water, like the government putting money into organisations," he says. "They may well have been funded out of trouble. Where organisations have clearly come out the other end, perhaps unaided, I think you’ll find they already had strong corporate cultures, which would then have displayed those three resilient attitudes. They survived, not because they were resilient, but because they were already strong corporate cultures with good leadership."

"That's a lesson for any organisation. You don't need an initiative to create resilience. You want to change your company to the type of structure and culture you want, and in that you’re creating resilience."

Structuring Australian Indigenous Business Groups

Australian Indigenous enterprises can be categorised into three main categories:-

1. Those owned and operated by Indigenous individuals or “nuclear” families where profits may be distributed to individuals;
2. Those owned and operated by Indigenous “communities” or larger Indigenous cultural family groups that are operated for the benefit of the whole group and do not result in distributions of profit to individuals; and
3. Those owned and operated by Indigenous corporate and service entities and Native Title Prescribed Bodies Corporate where profits may be distributed back to that particular corporation or service entity or its constituent corporate members such as the previously mentioned “communities”.

The second and third categories may be described as “social enterprises” or “social ventures” whether there is an intention to make a profit as a business, or whether the enterprise is a not-for-profit community service-delivery organisation.

This discussion deals with the structuring of the second and third categories. The first category is clearly a private individual business model and structuring for that category will depend on normal commercial considerations as normally applying to small business, including the application of tax.

The second and third categories are more like a combination of community organisations (that happen to run a business)and  public companies where the structural considerations, apart from any cultural considerations, need to consider the possibility of structuring to take advantage of tax concessions, community involvement, or at least interest in the transparency of governance, the possibility of community interest and possibly interference in management, as well as the more usual concerns of continuity, risk management and business succession, particularly as applying to a large corporate group. Generally these structures are constituted as PBI’s or Public Benevolent Institutions where profits may not be distributed to individuals but are used for the benefit of a group of people.

In our work over twenty years we find that the common issues tend to be:-

• Multiple types of business may be operated across various industries;
• Non-linear growth, where the early years may concentrate on one business and then multiple businesses may suddenly emerge as experience an opportunity reveal themselves;
• The need to funnel profits back to the benefit of the “community for “it” to deal with in accordance with its own goals;
• The probability of employing multiple non-Indigenous or at least “not-connected-to-central-organisation” managers for some or all of the different business lines;
• The need for transparent governance through the group, including clear delineation of management responsibilities;
• The need to encourage and allow participation by community members in key roles, and to mentor community members into management roles;
• The need to protect the central community or organisation and its assets from business failure of an inter-related business;
• The need to build in partnerships and joint ventures with others, whether part of the central group or otherwise;
• The possibility of “hiving off” some of the business elements in future.

In almost all cases we have had experience of, there is a central issue surrounding “ownership” and what that entails, as compared to the legal sense of ownership.

Members of the central community or organisation which owns a business entity do not always understand the Westminster and Common Law issues around the fact that it is the organisation that owns the entity and not themselves as individuals. This misunderstanding is compounded when businesses are placed in separate multiple entities that may have a cascading ownership structure and in such cases the “community” often become frustrated that they are unable to influence the management of an entity at the bottom of the structure.  

In our experience, whatever structures are provided, education and training about this issue is required at the beginning, and throughout the life of the business, alongside training in governance so that those members can be trained to make their voices heard “appropriately” at the meetings of the central organisation rather than those of subsidiary entities.

As a result of our experience, we believe the central principles surrounding any structuring exercise are:-

• Ensuring the businesses are in appropriate and separate entities themselves, so as to “quarantine” effects of any business failure;
• That these separate businesses are owned directly by the central organisation and not by any “trustees” or “nominee shareholders”;
• That where income tax needs to be paid, to register accordingly;
• That there should be a central “Charter” of how Boards of subsidiary entities need to be comprised and how they need to conduct themselves in relation to the central Board;
• That any managers be required to sign employment contracts that include reporting responsibilities to their Boards, which are all of a similar template through the group.

The following is a “template” of a group structure that should be agreed to up front by the central Board so that as any new business activities are considered, the strategy for incorporation and operation is already set.

The Enterprise Holding Entity (“EHE”) should be owned 100% by the Central Organisation (not by members of the Central Organisation as individuals or trustees) so that there is a clearly defined ownership by the larger group and clear profit flows.

The EHE is interposed between the Central Organisation and the entities actually operating businesses so that:-

• There are clearly separate responsibilities of the two different Boards, one of responsibility for all aspects of the central organisation including its enterprises, the other of being solely responsible for enterprise activity;
• There is an interposed “second line of defence” in the case of any business failure and insolvency down the line;
• Accumulated profits can “rest” at this level so that part can be distributed up the line to the central organisation and part can be retained for further enterprise investment, the ratio to be decided as circumstances demand.

As businesses start, they are incorporated into subsidiary entities (herein noted as #1, #2, etc) so that:-

• Each separate business is quarantined from others (and EHE) as well as the central organisation in the event of business failure and liquidation – it is therefore important that cross-guarantees and collateral should not be given;
• Each business entity can have a Board that (perhaps smaller) concentrates only on its responsibility of running that single business and is answerable to the EHE Board for performance;
• Each business can have distinctly separate staff and employment contracts etc as may be necessary if they are in markedly different industries;
• Each entity can be funded separately as required;
• Each entity can be “hived off”, sold, closed, expanded, or partnered/joint ventured with an outside partner/investor without allowing that outside party into the affairs of any other business.

Land assets of the central organisation can sometimes be held in a totally separate non-trading entity. This might be applicable for example in the case of any freehold land that is considered part of the central “estate” that may never be sold. In this case, we believe the best structure is to create a “sister” entity to the Central Organisation but not connected by any ownership, where that land holding entity is owned by all the members in the same way that the Central Organisation is “owned” by the members. There should be no connection to EHE. This sometimes causes issues where the Central Organisation needs to borrow money to fund enterprise as some of this land may be required as security. This needs to be looked at separately should the need arise.

The types of entity that EHE and its subsidiaries should be constituted as, will depend on a case by case review of circumstances. Apart from incorporation as an Aboriginal Corporation under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 – which is often the most appropriate structure for the central organisation – the EHE and subsidiaries may be incorporated as companies limited by guarantee, private proprietary companies, discretionary and unit trusts. Each should suit the requirement for its particular business, position and purpose within the group

Needless to say, any trusts created as part of these structures will need to have separate corporate trustees. This is to ensure control by the EHE is channelled through a Board of Directors in the subsidiary entities, and to provide the appropriate transparency.

The ability of each entity, including the EHE itself, to obtain tax concessions ranging from income tax concessions to deductible gift recipient status to concessional Fringe Benefits Tax status will have to be examined on a case by case basis.

Clearly, a corporate structure consisting of an EHE and multiple subsidiaries under a central organisation could be a recipe for disaster in terms of control and strategic direction. Therefore it is important that before these entities are created, a “Charter” be agreed upon so that as these entities are incorporated, as far as the law allows, the central agreements of the “Charter” are included in the various constituent documents or Constitutions.

 

We believe the following should be included:-

• The constituency of the EHE Board, nominating stated officers of the central organisation Board to the EHE Board, the need of “independent” members, the number and terms of Board members, etc;
• The constituency of the subsidiary Boards, for example that the subsidiary Boards must include x number of members who are also members of the EHE Board, that there are restrictions to the number of Boards one individual may sit on, etc;
• Rules about Chairmanship for example no single individual can be Chair of more than 2 Boards, and Chair of central organisation may not be Chair of any enterprise Board, etc;
• The requirement for all Board members to attend and keep up to date with Governance and Finance Training within a set time-frame of membership;
• The requirement for the subsidiary Boards to report using prescribed template  formats to the EHE Board at set times;
• A minimum ratio of dividends or profit distribution be written into the constitution, subject to waiver by the EHE or central organisation due to the need to establish new businesses or fund capital spending;
• The requirement for Boards to be measured under agreed Performance Measures; and
• The removal of Board members for non-performance.

While it is important that each separate entity be allowed to run their business in the way they see fit, nevertheless, it is equally important that the strategic direction and indeed the day to day operation of these businesses follow the strategic direction set by the central organisation through the EHE, and that common values are being followed. The “Charter” by which the separate Boards operate will help in this.

Further, without limiting the independence of the different business units, we believe that the contracts of the business unit managers need to follow a common template so that all managers employed in the structure follow common goals and measurements. This employment contract template should also specifically spell out reporting and strategic responsibilities such as:-

• They have to prepare Business Plans with Financial Projections using standard templates at the beginning of each year;
• Their Business Plans and models of operation need to follow the general strategic direction and the values set by the central organisation through the EHE;
• They are to provide reports following a group template at set times which will report on matters such as actual to budget and explanations of variances, human resources issues, marketing and business opportunities, and so on;
• Their performance will be measured against agreed Performance Measures.

There could be any number of objectives to be achieved by the central organisation in starting enterprises, ranging from funding its community or charitable activities, increasing economic opportunity for individual members, and so on. It is important to note however that in our opinion, while the EHE and subsidiary businesses should subscribe to the values of the central organisation and operate within its Indigenous culture as well as its corporate culture, they do not have objectives of being a community organisation nor of a charity. In other words they need to be run like businesses (albeit Indigenous businesses that subscribe to Indigenous community culture) that have the objectives of growing the business and investment funds, and making a profit.

As the profits are distributed, what the central organisation does with that profit is outside the scope of the EHE structure and subsidiary Boards and management should not presume to dictate what happens up the line.

Choosing, Implementing and Cascading Performance Measures

Implementing Performance Measures

Determining what to measure can take considerable effort, but it will probably be less than one-third of the total effort required to implement an efficient and effective measurement system. Data collection and processing systems will have to be implemented to produce the measures; everyone will have to be trained in using the systems and measures; and as the measures are used, some problems are sure to be identified that will require changes to the system.

 

Perhaps the greatest challenge faced when implementing performance measurement systems is changing an organisation’s culture. Using performance measures requires managers and employees to change the way they think and act. For most people, this is relatively easy, but for some, changing old beliefs and habits is very difficult.

 

Overcoming such problems requires strong leadership to provide appropriate direction and support. The best measurement system in the world will yield few benefits if the right knowledge, skills, abilities, and values are not developed in a company. An organisation doesn’t just interface with a measurement system; it is part of the system.

 

Developing and implementing effective measurement systems requires leadership, commitment, and hard work. Some investment is required, but it is small relative to the key benefits of a well-designed and implemented measurement system:

· The ability to determine if sales and profit problems are caused by strategies, operations, or both;

· Early identification of problems and opportunities;

· Increased productivity, quality, and customer service;

· A clear understanding of what drives financial and operational performance so resources can be allocated to the areas of greatest return; and

· A cohesive organisation working toward common goals.

 

Cascading Performance Measures

 

Corporate level measures are very important, but they aren’t going to have much impact unless they are cascaded all the way down to front-line employees. The case for cascading is simple: Do you want 10% of your employees working toward company objectives or 100%?

 

With some exceptions, such as market share, what you measure at the top is what must be measured at all levels. However, the specific measures will change with every functional and organisational level because managers doing different jobs need different information to make different decisions.

 

The same methodologies used to develop measures at the corporate level can be used to cascade the measures down to front-line managers, supervisors, and employees. However, as you go down the organisation chart, the focus is on operations or processes. Strategy is incorporated into operational measures by giving more weight to the measures that are strategically important. This communicates strategy to all employees by translating it into operational terms – at the individual level.

 

Key Questions to be answered by Performance Measurement Systems

 

No matter what approach you use to develop performance measures, bear in mind that the objective is not to have a measurement system in itself, but to empower business improvement, and to do so, to enable managers at all levels to answer ten key questions:-

 

1. Are we satisfying our customers?

2. Are we satisfying our shareholders?

3. Are we satisfying our other stakeholders?

4. What is happening to our customer base?

5. Is our company strategy working?

6. Are our individual strategies being properly executed?

7. Are we serving our customers and stakeholders effectively?

8. Are we operating efficiently?

9. Are stakeholders contributing what they should?

10.  Are we developing the abilities we need to  execute our strategies?

 

If all of your managers can readily answer those questions about their areas of responsibility and support their answers with objective numbers, your company has the performance measures it needs. If they can’t, some of the "good" decisions they are making are undoubtedly not very effective - and they may even be harmful.

The challenge of merging two corporate cultures

  

Teik Oh

 

The most challenging change management initiative is the proper management of a successful merger between two organisations. While the actual steps and processes in themselves are not uniquely different or any more complex than any other business reorganisation, the cultural environment in which a merger takes place creates a very different situation.

Unlike any other change management engagement where disparate groups at least work under one singularly identifiable organisation, a merger brings together two totally unique groups with different core values and working environments that need to go through the same change and emerge united. In a merger, while there are usually areas of “fit”, it is unlikely that the deeper indicators of corporate culture such as corporate history and corporate experience will have any but the most remote of matches.

Mergers and acquisition transactions are usually entered into to gain advantages yet the vast majority of these transactions are done with scant thought on how best to maintain the strengths of both parties and indeed to use them to synthesise greater strengths. Accounting models are not the best indicators for merger success; in a merger 2 plus 2 rarely equals 4.

The prime objective of a merger therefore, is to make the sum of the parts greater than the whole, in as quick a time as commercially possible. To achieve this, both soft and hard systems need to be considered, new processes generated, others dismantled. A poorly planned merger, no matter how small or simple (“let’s get together and we’ll work it out as it goes”) will lead to an unmitigated disaster.

Whilst identification of the critical success factors of a merger and planning is fundamental, the merger needs to go beyond the financial efficacies of the transaction and even beyond the perceived advantages of a marriage, into the construction of a post-merger reality.

In any merger, the discovery of a new corporate culture can evolve into one of three results being a balanced integration (rare), a dominant culture and system, or a dominant system with a balanced integrated culture. The planning for any successful merger must at least attempt to achieve either the first or the last, depending on the strengths of each party and in particular the efficiencies of their systems. Based on this objective OTS Management uses a four-stage process to achieve merger success, a methodology we call FitQUICK ™:-

Stage One: Plan Well

All planning needs to be led by leaders of the two organisations, the people who can explain why the merger is taking place, how it fits into the longer term strategy of the combined entity, and the compelling vision of the future that is to come.

Depending on the strength of leadership, this need not be a time-consuming initial phase but it does require a great deal of time to stay “in touch” and on top of the processes. The issue however, no matter how long it takes, is to plan well and plan in appropriate detail. Planning then needs to continue throughout the whole process, but as cultural integration is substantially achieved, more and more detailed planning can be handed over to the integration teams then eventually the functional teams and in time morph into normal strategic planning processes.

Stage Two: Fit Quick

The purpose of Fit Quick is to get both teams and cultures to integrate quickly and feel like one.

If the primary purpose of a merger is to create a greater organisation, then the greatest strengths of both teams need to fit together quickly. The greatest strengths of any organisation rarely lie in systems or even customer lists but usually in their people who are the source of efficiently working systems and the relationships with the customers.

The Fit Quick phase needs to look at:-

• The new vision, brand and corporate culture including value systems and guiding principles (the “how we do it here” elements);
• Staff engagement with the new identity and entity, the one-team reflex (something as simple as weekly pays being converted to fortnightly pays could derail a merger);
• Teams and team structures – analysing and taking the most workable (not necessarily the “best”) parts of both team structures;
• Functional responsibilities – creation of a new and/or blended organisation chart to identify roles, responsibilities and reporting lines in order to clarify “the new way” as soon as possible;
• Analysis of individuals’ roles and where they sit (physically and by responsibility) ensuring people are physically identifiable in discrete integrated groups and the best people to populate the new organisation chart from either party are identified;
• Detailed Human Resources issues such as legacy staff contracts, packages and benefits to equalise to a “norm”.

Stage Three: Work Quick

Whether or not any one set of systems and procedures is more dominant than the other (more than likely) the integrated teams need to be able to work effectively within the new systems and procedures as soon as possible so as to recoup the costs of the merger, reduce inefficiencies and downtime, shorten transition periods, and start to take advantage of the previously identified strengths. The theme of the third phase “Work Quick” is therefore to get both teams knowledgeable about the new (or dominant) systems while integrating the best of the less dominant systems quickly so as to improve overall efficiency.

This phase is best dealt with by creating Merger Implementation Teams in appropriate areas comprised of people from both the merged organisations. These Merger Implementation Teams or MIT’s need to look at each process, procedure and system and decide which to use, how to convert data and processes from one to the other, and then provide recommendations and detailed implementation plans to management. The MIT’s also need to supervise and lead the actual implementation of the revised systems including training and re-training and data and process transfer.

In many areas decisions can be made swiftly, particularly where there are dominant systems. However where necessary it is important to take the time for some detailed analysis to ensure that the best of both are considered and integrated.

As the MIT’s recommended best practice systems may include parts of both the merged organisations, the Work Quick phase needs to identify local “experts” as points of referral to the “new people” who are new to the adopted systems. In this phase product experts need to be revered and supported.

Stage Four: Grow Quick

The fourth phase usually commences some time after the merger, allowing Fit Quick and Work Quick to establish some ground rules and identifiable results, and quite frankly, to allow some emotion to settle, in what is likely to be a stressful period. Obviously, not too much time must pass since the primary purpose of any merger is to “be better, be larger, be more competitive”.

The theme of Grow Quick is to leverage the merger to, firstly, keep the combined customer base, then to expand it, increase sales and grow profits, outcomes that will achieve the real advantages of the merger. This phase needs leadership at the highest levels of the integrated organisation, usually at senior executive level. This phase will require concentrated focus on the strategic objectives of the merger and the compelling vision of the new entity. For this reason, the senior executives who conceived of the merger, its advantages and the vision will need to lead from the front. Often, executive management identify the solid and real reasons to merge, but then expect the merged organisation to automatically realise what those often subtle advantages mean and follow through almost by accident.

As in all organisations striving for best practice, the people with the vision need to talk about it, communicate and explain what it means; bringing others along with them by the strength of the compelling vision.

Looking towards the immediate to medium term future in Grow Quick, the areas that need to be designed in congruence with the vision are:-

• Comparative selling prices and cost structures;
• Strategic marketing planning;
• Advertising and external branding;
• Vision and internal branding, the Unique Selling Proposition;
• Integration of divisions, sales teams and manufacturing teams and locations, physically moving people from both organisations around where necessary so that there is a mix of people servicing a mix of previously separate customer bases;
• Grow new service lines, products and service capabilities using the synergies of the merged organisation.

Conclusion

In working through the four phases, organisations are put well on their way to a successful merger. However two key steps need to be reiterated. The first is to ensure that there is an agreed Vision for the new entity, one that is compelling, engaging and sufficiently quantified to be the central pillar around all strategy and integration. The second key step is selecting the right person or people to lead the overall implementation and the Merger Implementation Teams, and to track the execution. The mergers that do best tend to have such leadership.

Clearly, with proper planning and the right people it is possible to avoid the pitfalls and close a successful merger initiative.

Recession Proof Your Business

Is this possible – to recession-proof your business?  Well no, probably not despite the wealth of articles about how to do so appearing on the internet (about 614,000 hits on Google).

 

However, what is possible is to secure your business as much as is possible by following a series of simple and common sense business strategies.  These strategies are no different from strategies you should employ under normal circumstances, but which application is much more acute in today’s economic climate, and with a different emphasis required.  Sadly when times are good, businesses allow themselves to get “fat” and some of these every-day disciplines are allowed to slacken.

 

The strategies can be grouped into defensive and offensive strategies.  As you look at your business performance it is likely that you will find profit performance heading south, and with the economy looking the way it is, it is difficult not to panic and begin to tighten all the hatches.  However you can tighten too much, to the extent that your business finds it difficult to operate normally.  Hence, while it is natural to concentrate on the defensive strategies such as cutting costs, it is important to keep in mind the offensive strategies – those that your business should take to ensure that you are the one in your industry that keeps selling when others are closing down.

 

Let us deal with the defensive strategies first and get them out of the way.  There are six simple strategies that you need to look at and with some discipline, enforce them.  These are:

 

1. Control your inventory

2. Retain your cash

3. Keep your receivables flowing

4. Cut your costs

5. Review your borrowing

6. Increase efficiency

 

First, control your inventory.  If you do not know, find out immediately which lines of stock turn over quickly.  If you do not already know find out immediately the number of days’ each lime of stock takes to turn over.  Calculate economic order quantities (EOQ) for each line of stock – this is a function of cost, time taken to receive an order from your suppliers and the time taken to turn over stock in hand.  Ensure you are only carrying EOQ’s in hand as otherwise you may be sitting on your profits.

 

  Second, retain your cash.  Ever heard the phrase “cash is king”?  Where assets such as stock and capital growth investments or even plant and equipment may have been good investments in times of growth, in times of recessionary influences, cash in hand is useful to take advantage of opportunities, save costs and make rainy day decisions.  The other 5 defensive strategies will help you retain cash, however the most important strategy is to keep focus on cash and cash transactions – how much does stock cost? Can you find a cheaper supply? Are discounts available? Are you carrying excess plant and equipment that can be sold?

 

Third, keep the receivables flowing.  Ensure that you are in constant communication with your customers, not only for offensive purposes as discussed later but certainly to be aware of their trading conditions. Do not get caught out by customers closing down while owing you money.  Review your credit policies and ensure that they are followed.  As soon as debts become overdue, call them and find out why.  Offer discounts for early payment (without allowing margins to suffer significantly).  Be prepared to cut customers who are using you as their bank.

 

Fourth, cut your costs.  Review all your expenditures and ask yourself if any savings can be made.  However a word of caution here!  The answer must be in the light of maintaining trading positions.  It may be clear that you can save costs by reducing telephone lines from 6 to 4, but if your business needs constant telephone contact with customers and all 6 lines are constantly lit up, reducing this cost merely restricts your trading model.

 

Fifth, review your borrowing arrangements.  Most businesses have a medium term relationship with their bankers and financiers, that is, they arrange a loan, lease or hire purchase contract and then fail to communicate with their bank until it is time to renegotiate.  Instead, you must keep your lines of communications with banks open.  Ensure they receive financial reports from you on time, develop a relationship with your bank manager so that they know how your business is travelling.  At the same time, review your arrangements – they may have been made some years ago when interest rates were high.  See if borrowings can be refinanced or renegotiated.

 

Finally, the sixth defensive strategy is to increase efficiency.  When time are good this is usually allowed to slip, particularly as too few businesses measure efficiency.  How do you measure the efficiency of a retail business or a medical practice?  Surely it is much easier to measure efficiency in a manufacturing business or a law firm that keeps time sheets?  It may be easier but it is not impossible to measure efficiency of any business.  You can measure the efficiency of staff, of processes, of equipment.  In a retail business how many customers do individuals serve a day?  How long is a consult in a medical practice?  How long does it take you to receive an order and send it out?

 

I started this article by saying that there are both defensive and offensive strategies that you need to look at.  While we have dealt with defensive strategies first to get them out of the way, it is not defence that will create a strong impression in the minds of the people you need to help you survive the recession – your customers.  In order to clearly put your business in their minds and therefore seek their support through steady sales, you have to go on the offensive.

 

Offensive strategies need not be costly, which is the fear of any business person in a defensive mind-set.  In fact all the offensive strategies discussed here can be implemented without increased cost, by focusing on what you already do but doing it better, or by switching unproductive spending towards outcome-focused expenditure.

 

There are 6 offensive strategies you cannot do without if you want to survive the recession, and not just survive it but exit in a state ready to grow from the first opportunity:-

 

1. Increase marketing efforts

2. Focus on customer service

3. Diversify

4. Invest in winning employees

5. Innovate, innovate, innovate

6. Create partnerships

 

The first offensive strategy is to increase, yes increase your marketing efforts.  The worst possible thing you can do when there is increasing competition for your customer’s dollar is to reduce marketing.  As you reduce marketing your market forgets you.  And be quite aware, marketing is not “advertising”!  Low cost or no cost ways to increase marketing may involve “inbound marketing” on the web through your website. Build a better website, increase search engine optimisation, use social networking sites such as You Tube and Facebook.  One of the most effective means of cost-effective marketing is simply doing what you do well but doing it even better, and ensuring customer service is tuned to 100%.

 

This leads us to the second offensive strategy of focusing on customer service. Do not allow your customer to forget you.  When you are face to face, smile, ensure you are listening to their needs, thank them as they leave whether or not they have bought something.  Keep up contact with them, call them after they have bought something to see if they are happy with the product and the service, offer after sales service and “frequent buyer” programs.  Give them value-added service without it costing you much more – faster delivery times, wider selections.

 

The third offensive strategy is to look to diversify.  Once you have measured your stock turn  (defensive strategy number 1) look to increase products and services with selections that meet real needs.  Firstly, see if any products or services related to the ones you sell now are more appropriate in tighter economic times – appliances that cost less to run, financial reviews by investment advisors, provide “packaged” services.  Second, look at products and services that competitors are exiting from, especially where these leave demand unsatisfied.

 

The fourth offensive strategy is to invest in winning employees.  While it is true that at all times we should look after our best employees, when we are busy and our sales is going through the roof, it is easy to allow the odd non-perfomer to slip through simply because we need the extra hands.  Some of these non-performers may have been weeded out as you went through defensive strategies to increase efficiency and cut costs, but you now need to turn your attention to the winning members of the team.  In many businesses, these are your first contact with the customer.  You need to recognise and reward winners to ensure they stay with you, keep performing, and where necessary, pick up some of the slack from the losers.

 

Innovation is the fifth offensive strategy, and so important it has to be named three times!  As much as marketing and customer service, innovation will keep you in the minds of the customers.  Innovation may take the form of innovative customer service as well as in products and services. Use the latest technology to get your services or goods to market faster; use technology to keep in touch with customers through e-mails and blogs; use innovation to improve processes.

 

Finally the sixth offensive strategy is to create partnerships.  As businesses wind down, supporting one another is a good way to keep head and shoulders above the competition.  Offer cross-selling with related or nearby businesses.  For example, get together with the local restaurant and offer a dinner for two for every purchase above $200 (and the restaurant can offer a small gift collectible from your store for every bill above $200).  On the other hand if you are a clothing retailer you might get together with a local shoe shop and offer discounts for a matching pair of shoes (and the shoe shop can return the same discount offer).

 

So, can you recession-proof your business? There is no guaranteed method but the implementation of simple and low cost strategies can increase your chances of survival, and more importantly ensure that when the recession ends, which it certainly will, you have not only survived but are ready to leap ahead.

Happy New Year - Start Planning

It’s the start of the new year for business, the start of a new tax year, but even more important, the start of a new business year.

While it is important to “re-set” your tax systems and tax plans for the year ahead, consider why you pay taxes. Taxes are paid on profits, and the ultimate tax plan is to simply make losses – however, not a great plan for your business and personal wealth! So, while we would all like to keep the Taxman at bay, ultimately the secret of your success is to make your business grow.

It is an old adage: “businesses don’t plan to fail, they fail to plan”. Yet time and time again surveys show that fewer than 3 to 7% of small and medium businesses that fail have ever done any business planning.

The start of a new business year is the best time to start a business plan. You can “close the books” and think about new initiatives and ideas about your business. It is the business equivalent of making your New Year resolutions, but with a better process that can lead to follow-through and organized action.

A Business Plan is simply a detailed plan of listed actions for your business.

It takes your strategic direction, your overall organisational goals and strategies and lays out the tactics of how to achieve those strategies and thus the goals. It is a document that ensures everyone involved in your organisation - owners, workers, suppliers, advisers - are all stepping in the same direction.

In most cases, you will need help to prepare your Business Plan from an experienced business adviser. This is because an experienced adviser will have a process that is tried and tested to walk you through a series of analytical and dispassionate steps to examine your business and desired direction, and translate it into plans. However, your Business Plan should be your document. It should not be prepared for you, it should be prepared with you.

Your strategic direction is what you are ultimately trying to achieve, your Vision for the business. From this will flow your Organisational Goals and Strategies, and from these will flow the Operational Plans for your business.

There are 5 Operational Plans:-

·          The Marketing Operational Plan

·          The Production Operational Plan

·          The Operations Operational Plan

·          The Human Resources Operational Plan

·          The Finance Operational Plan

Operational Plans are the detailed steps you will take in each operational area of your business in order to achieve your stated goals. That is why it is important to continuously align the detailed steps with the expected results to see if each part of your business will help you get to the Big Picture.

The Marketing Plan will look at your markets and customers, identify who you want and what you are actually selling to them, and what you need to do to get them.

The Production Plan will look at the way you “produce” - whether this is manufacturing, retailing or providing a service, there are processes your coal-face staff follow.

Your Operations Plan looks at your systems and infrastructure, including support systems such as business advisers, accountants, lawyers.

Your Human Resources Plan looks at your most important resource - what are their skills and abilities,

what skills and abilities you actually need, your organisation chart, accountability and performance measures.

Your Financial Plan pulls all the Operational Plans together and quantifies them. It looks at forecasts and cashflows, capital requirements and financial measurements.

It is worth stating again that a successful plan aligns all the detailed action towards the strategic direction. Say for example you plan for and prepare your staff performance measures piece-meal without consideration of the strategic direction. Your performance measures might reward the number of hours the staff charge to their timesheets. However how will this affect your strategic direction that may rely on fast outcomes? The staff are being rewarded for working long hours without measurement against outcome speed. Hence once the operational plans are written they need to be reviewed against the strategic direction.

Ultimately, what is a Business Plan but a written document? In order to make it work you need action. The Business Plan process must include an Action Planning process where each Operational Plan, each step and decision in an Operational Plan, has a series of Action Plans embedded. These Action Plans serve as reminders of the day to day actions required to implement the Business Plan. They highlight negotiated responsibilities, set out what is expected when the action is complete so that everyone can measure success, and they nominate agreed timelines for completion. Where necessary, additional resources are detailed so that people are not set up to fail.

After the intensity of the work required to prepare the Business Plan, despite the best intentions, you will go “back to work” where you will get caught up in the everyday problems of the business. In that situation it is not hard to “forget” what you are supposed to be doing according to the Business Plan you so earnestly believed in just weeks ago. This is where the secret of following-through needs to be implemented and that secret is a Monitoring & Evaluation system built around teamwork and peer reviews. It must not be a punitive system but a system of support and team responsibility.

Effective Meetings

Your meeting should be an event that produces results or outcomes and not the "process of meeting." Things need to get accomplished. To improve the results of a meeting, begin by defining and improving the meeting process and people's commitments to it.

According to a study by the University of Southern California in Los Angeles (as cited in Forbes, 10/25/93)

• The average meeting takes place in the company conference room and 11 in the morning and lasts an hour and 30 minutes.
• It is attended by nine people -- two managers, four co-workers, two subordinates and one outsider -- who have received two hour prior notification
• It has no written agenda, and its purported purpose is complete only 50% of the time.
• A quarter of meeting participants complain they waste between 11 and 25 percent of the time discussing irrelevant issues
• A full third of them feel pressured to publicly espouse opinions with which they privately disagree. Another third feel they have minimal or no influence on the discussion
• Although 36% of meetings result in a "complete" resolution of the topic at hand, participants considered only one percent of those conclusions to be particularly creative.
• A whopping 63% of meeting attendees feel that underlying issues outside the scope of the official agenda are the real subjects under discussion.
• Senior executives spend 53% of their time in meetings, at an average rate of $320 per person hour.

Some Steps:-

1. Clarify The Meeting Objective

The team begins the meeting by ensuring that people understand and agree on what is to be accomplished. Objectives include both the content of the meeting and the specific process objectives, such as improving participation, gathering initial ideas and listening to others.

2. Review Roles of Participants

Confirms who will be taking on specific roles for the meeting and what their roles will be. These can include: leader, team members, recorder, timekeeper, and facilitator.

3. Review the Agenda

Each agenda item includes the methods (e.g., brainstorming, mind mapping, cause and effect tools, fishbone diagrams, system thinking, roadblock analysis process, etc.) to be used for that item as well as the amount of time to be devoted to each.

4. Work Through Agenda Items

There may be one or several items for a particular meeting. The team works through them in an organized manner, using the methods and the time frame decided upon in step 3 above.

5. Review the Meeting Record

Team members should review information recorded on flipcharts during the meeting to refresh their memories about what has occurred in previous meetings along with what has been decided. The team should check for corrections or additions to these meeting records and decide what information needs to be kept in the team's permanent transcript. In many organizations, these are included in formal knowledge management databases and archives. Try to add to the Learning Organization focus, if applicable.

6. Next Steps and Next Meeting Agenda.

By the end of the meeting, the group should discuss what needs to be done based on the results of this meeting and the start of the next. Often, there are multiple steps and tasks needing followup or planning. Agree on the work that needs to be done next in order to advance. Clarify if necessary and complete the transcription of the goals, summarizing commitments.

7. Evaluate the Meeting

Team members should take a few minutes to discuss:

* What went well that we should continue doing?

* How could we improve the next meeting?

Meetings are part of the improvement and communications process. They should be tied to long-term learning objectives and organizational development initiatives. They can serve many useful purposes (but sometimes do not!).