14 April 2011

Use a project team to plan a turn-around

Some months ago I helped an engineering company plan a turn-around. The engineering company is part of a larger company, and has been consistently loss-making for the last five years. New owners decided that "enough is enough" and asked the management to come up with a restructuring plan. The results of this process were an unchanged strategy, minor changes to the organization, and some ad-hoc cost-saving initiatives.

This resulted in a high level of frustration at the corporate level, and the general opinion was that external consultants would need to be called in. Fortunately, wiser minds prevailed and it was suggested to use my proven approach for enabling internal teams to carry out complex projects successfully.

My first suggestion was to move the responsibility for developing the turnaround plan away from the management team to a separate project team. A team was selected consisting of a fairly young group of female middle-managers who had critical minds, good analytical skills, and the ability to think "outside of the box", and were respected within the organization.

A kick-off meeting was spent agreeing the overall approach to the project. Key outcomes was an agreement on a phased approach (with a clear separation between a first phase focusing on fact-finding and understanding the key issues, and a second phase to develop new initiatives) and use of a hypotheses-driven approach (as used by all major consultants).

In the first step we developed a hypothesis that the engineering company needed to leave behind its current approach to its business (offering a coordinated suite of engineering related services to the same customers) and focus on understanding the intrinsic attractiveness of what should be seen as separate business-areas. The CEO attended this meeting, and defended the existing strategy, but accepted the overall logic suggested by the team.

During the next few weeks the team focused on developing proof for the hypotheses developed in the first meeting. This involved understanding the markets in which the company operated, analyzing the operating processes, and developing a financial overview of the individual business areas and projects. The team agreed that the hypotheses-driven manner of working was helpful as it gave the team clear objectives to work toward and enabled a very focused and effective way of working.

The results of the diagnostic phase supported most (but not all) of the original hypotheses developed by the team. A key finding supported the decision to look at the business areas independently. Different from what we originally believed, it turned out that all the business areas provided a positive contribution to the overall profitability of the business. However, the contribution from each business was small. This was caused by a wide range of marketing and operational issues. Marketing issues included too many small loss-making projects, incorrect pricing methods, and insufficient focus on existing, profitable customers. Operational issues included insufficient planning of projects, low follow-up of budgets, and a lax attitude towards scope creep and up/cross-sell.

The final step in the diagnostic phase was to communicate the findings to the management team and the corporate sponsor of the project. The key challenge with the management team was getting buy-in to the radically different picture of the company that the team presented. Based on the thoroughness of the analysis and the pyramid based presentation this went well. The corporate sponsor was very happy with finally receiving a structured analysis of why the company was loss-making and asked the team to continue with the developed of initiatives and an implementation plan.

Follow the links if you are interested in more information on project planning or project management training.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.