What Drives Your Agenda: Your Competitors' or Your View of the Future?
(Excerpts from a senior executive Business Strategy briefing in Canada.)
"The reality is that the proposition to top management that finally gets the consultant's check in the mail is the promise about cost reduction and head count". Kevin S., consultant Moravec and Associates.
Making a company thinner does not guarantee near term competitiveness growth or profitability. Rushing into restructuring, or cost cutting without a plan for renewal is like running onto a football (soccer) field without a strategy for winning the game.
In our experiences in many countries few management understand the differences among slimming - downsizing, restructuring, and process improvement - and fewer still link these options to revitalization. As a result, quarterbacking becomes very difficult.
Since slimming can be a good way to free up capital and decrease unit-labor costs, there is no case to abandon it. Which is not to say that it is always effective by itself. Layoffs, restructuring, and process improvement are often confused with each other. The differences are as follows:
- Layoffs, the most popular form of slimming, refer to contraction, divestments, closures, product curtailment, slashing head counts. The aim is to cut costs. The assumption is that this would be a one?time effort that the market would "return to normal." Since markets now never returned to "normal," downsizing has been repeated.
- Restructuring, which often follows downsizing, can mean both expansion and contraction; for that reason, it is sometimes known as "rightsizing." It involves structural realignment, adjustments of the staffing mix, and focusing on areas of future growth.
- Process improvement is not simply the elimination of non-value-added work to gain efficiency. TQM and Six Sigma means revising assumptions about what it takes to be competitive - in terms of processes, practices, people, culture, systems, and technologies. It frequently follows or includes restructuring or rightsizing.
- Reengineering is essentially a process for perfecting the advantages of the past rather than anticipating those of the future.
- TQM, Six Sigma, and Hoshin Management cannot by them or in combination create long-term prosperity because they apply themselves to existing businesses: the techniques do not invent new businesses.
As study after study has shown, layoffs, restructuring and process improvement fail to produce the results management wants. The organization may become leaner and quicker but so does a junkyard dog in winter.
Revitalization
"On average renewal consultants concurred that senior management around the world expends 3% of their energy building a company perspective of the future
- Management spends 40% of their time looking at external issues
- 30% of that time is looking three + or - years into the future
- Of the time spent looking forward, less than 20% is spent building the collective view for the future". Mike M., consultant Moravec and Associates.
No matter which option you choose, if you don't think about Renewal first, you'll end up weaker and less competitive than before. Rejuvenating a business includes:
1. Gain an organization wide (top to bottom) view of the future, what 'renewed' will look like and chart direction
- Creating the perspective requires probing for underlying trends and currents then synthesizing their implications for the set of businesses that you have or the businesses you want to get into.
- Crafting a vision is not easy. Failure to create and follow a vision - that is compelling and directional - is the main reason efforts flounder. Look toward the future and think about your firm's capacity to shape that future.
- Disabuse yourself of the notion that, 'strategy is the easy part and implementation's the killer'
2. You'll never see future business opportunities through the lenses of existing business units. Ask questions and start with:
- What is your competitive position?
- Which way is the industry going?
- How will the future of our industry be different?
- How do we want this industry to be shaped in five to ten years?
- What competencies do we need to take the high ground of the market(s) we're in?
- (More often than not you can anticipate the competencies that you'll need, but you cannot anticipate the specific product or services configuration.) What is the status of our competencies now? What skills and capacities must we begin to build now if we are to occupy the industry high ground?
- What are the changing customer expectations? What are the new benefits that will be of value? What is the basis for the interface with the customer? What are the new technological discontinuities?
- Which areas of the business are ripe for incremental change and which require a shift in assumptions and direction?
- If we were starting a new organization, what would it be like and how would we run it?
- How should we organize for opportunities that may not fit neatly within the boundaries of current business units and divisions?
- Do we need layoffs, restructuring, process improvement, hiring or some combination of these?
3. Next,
- Set measurable objectives
- Define what will enable you to achieve the high ground
- Evaluate your position as a competitor by benchmarking and obtaining in-Depth analysis from customers, suppliers, bankers, employees,
- Leverage information technology and
- Collective knowledge.
Although you may feel pressure to begin yesterday, this upfront assessment and analysis will save you time and resources in the long run. And it is absolutely critical to revitalization.
'A renewed strategy is a new organization, and it can't be run like the old one'
4. Explore readiness to change. This climate assessment will help diagnose potential causes for failure and enable management to prioritize and facilitate the transition
5. Determine where to focus initial efforts. Not every aspect of the business requires radical redesign.
- Some processes, in fact, should be outsourced.
- To determine where to focus initial efforts, use the following matrix as a framework for assessing capabilities
| EXPERIENCE |
Unique to Business |
 |
BE the BEST |
OPERATE COST EFFECTIVELY |
| Available Outside |
|
ACCESS the BEST |
CONTRACT OUT |
|
|
| |
|
Strategic |
Business Necessity |
| |
CONTRIBUTION |
- Be the best is where core competence, unique experience, and strategic importance are leveraged to be the best in the industry. This area offers high potential for reengineering processes.
- Access the best refers to activities and systems that are central to strategy but are not proprietary. Rather than reengineer these, you might have vendors customize them and then integrate them with in-house systems to add strategic value.
- Operate cost effectively contains aspects that are essential for profitable business operations but are not directly aligned to customer needs at present. Large-scale reengineering would not be appropriate here.
- Contract out are those activities that do not justify internal capability and should be handed off to outside firms that can do them better and cheaper.
6. Manage the transition. Productivity suffers during the transition period, as individuals focus on protecting themselves.
- The restructured design may be the perfect model for competitive success, but if the transition is not managed skillfully, results will be unsatisfactory.
- This phase is so critical that many companies have established teams comprised of representatives from many different functions that specifically focus on the transition process.
- Among the aspects that need careful attention are:
- Involving employees in the change. Renew should be done with them, not to them.
- Prioritizing the changes, knowing which can result in "early wins" that earn creditability, confidence, and positive energy for transformation.
- Expanding and targeting communications to craft a shared understanding of the situation.
- Training and supporting managers to generate concrete results and ignite commitment
- Providing opportunities for "survivors" to vent their feelings without repercussions.
- Maintaining forward peering relationships with other stakeholders, including customers, investors, suppliers, and community.
- Learning from the transition and being determined to achieve results.
- What aspects are viewed positively by stakeholders?
- What remains incomplete, why and what to do next
- A renewed organization is a new organization, and it can't be run like the old one. The power dynamic has shifted, and the entire workforce needs to be mobilized to achieve the new goals.
- As organizations realign, the nature of work and the competencies of individuals become of paramount concern. Core corporate and process competencies must be congruent with business strategies. More often than not, these are different from the ones that determined success in the past.
7. Institutionalize empowerment, sustains commitment through ups and downs, and imbues flexibility into the fabric of the organization. Three examples follow:
- Dual career paths. These enable employees to choose between a management track and an individual?contributor track, and to switch tracks as their interests and the needs of the business evolve. The two tracks may run parallel all the way to the top in terms of responsibility, influence, and recognition. This system allows people to do what they do best and be rewarded for it. It also eliminates midlevel managerial glut - one reason why companies restructure in the first place.
- Upward feedback. This 360-degree feedback is an effective way for employees to reflect on manager and leader behaviors. It combines the advantages of effective communication and empowerment - as long as those who participate feel minimum pain and optimum gain.
- Performance management. Some companies are overhauling their appraisal systems to implement partnerships between employees and supervisors. Other has designed do-it-yourself life development programs to help employees take charge and control of their own careers.
- High-Performance Teams, Leadership at all levels, Performance Management and Human Asset Development.
There is little point in slimming if a Renewal strategy does not follow.
- To maintain the competencies necessary to dominate the market, executives need to craft a perspective of the future and address the agendas to get there.
- Only then the firm, division, or department is positioned to create their future.
"If managers don't have detailed answers for questions about the future, their companies can't expect to last.
- Does your management foresee fundamental, structural, changes and adapt in time?
- Can the business - organization, culture, technology, people - bridge the adaptability gap?" Kevin S., Moravec and Associates consultant.
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