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Merry Christmas from Dublin Chamber
Now that there is a plan, Implement it
Executing change strategies for growth
Meet the Council Candidates
Dublin Mayor Legislation moves to committee debate
Dublin Chamber Business Owners Network 2011
Provisional Calendar of Chamber Events in 2011
“Your Dublin your Voice”
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Ciaran Kelly
Executing change strategies for growth
Sponsor Article
by Ciarán Kelly, Advisory Consulting Partner, PwC
Executing change strategies for growth

By Ciarán Kelly, Advisory Consulting Partner, PwC

How does a business reposition itself for growth, plan and execute change strategies?

Business leaders in Ireland and internationally have taken their companies through some unprecedented times.  They now face new challenges in embedding the lessons learned and driving for growth in an economic environment that continues to present challenges at every juncture. In this paper, we outline how organisations have used this period to adapt and strengthen their businesses, providing the basis for future growth.  

The recent economic downturn provided a sense of urgency and focus that helped Irish organisations to successfully implement change strategies that would have been unpalatable in other times. This demonstrates that Irish businesses can respond quickly to external pressures when needed and that above all, they are both responsive and agile.

The majority of the changes that private and semi state organisations have made in the past 2 years have focused on cost reduction and retention of market position. Many Irish organisations have already implemented or are in the process of implementing cost reduction initiatives such as reductions in discretionary spend, renegotiations with suppliers and salary and compensation reviews.  These changes could be classified as transitional changes or “wave one” changes where they are simply attempting to weather the storm.  

Looking forward, if organisations are to maintain or grow market share, a further wave of change is required that focuses on protecting the bottom line. This change needs to focus on delivering growth which is based on strategic positioning and requires focus on long term outcomes. It needs to be transformational and could be considered “wave two” of a change journey. Such transformational changes need to take account of the dramatic macroeconomic changes that are being implemented at a national level. The focus will therefore need to be different from the current cost reduction or “quick-fix” emphasis.

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” Charles Darwin.

There are several strategies that should be considered to stay ahead and position a company for future growth. These include:

Scenario Planning

It is clear that we remain in uncertain times economically and the relevance of scenario planning is as important today as it was at the start of our current economic challenges. Over the past two years, organisations that undertook downturn scenario planning to deal with a 10%, 20% and 30% declines in revenue were often the organisations that were best positioned for change. These plans not only allowed the business to be ahead of the game in terms of strategy and implementation, but also included trigger points to detect the levels of revenue or volume reduction which enabled them to measure the benefits achieved following implementation.

With uncertainty remaining, having a robust scenario plan to cope with both upturn and downturn scenarios will help prepare businesses for the future.

Focus on core business and targeted acquisitions

In order for businesses to position themselves well for the long term, they need to understand their current market position, focus on what they do best - their core business, and how they position themselves against their competition.  

Adopting a core business strategy or a “back to basics” strategy is an approach that will allow an organisation to focus on what it does best and is best known for. This strategy should aim to grow core business and dispose of noncore business units that may have been acquired in better times or when funding was more freely available.

Conversely, for some organisations, particularly those who have access to the necessary funding, this is the ideal time to consider acquiring complementary businesses, at discounted rates, as other organisations attempt to dispose of their non performing or non-core business units. 

Outsourcing and off-shoring

For all organisations, it is important to continue focusing on cost efficiency. It makes sense for many organisations to consider moving their back office functions such as finance processing, payroll or IT hosting to a shared services centre, specialist provider or a lower cost economy. The benefits of such initiatives can be two-fold – achieving cost efficiencies while at the same time allowing key resources to be focused solely on servicing customers and growing market position.  

Performance management

Effective performance management is often underestimated as to how much this can yield in terms of productivity improvements. It is often difficult to motivate staff in a downturn particularly if organisations have undergone major organisational changes and benefit re-alignment. However, it is critical that “hearts and minds” support further transformational changes and the only way to do this is by effective performance and change management.

Critical success factors for performance are based on strong leadership, clear communication about changes and measurable and achievable objectives. Many Irish businesses are currently implementing outcome based performance management where the focus is on what employees deliver rather than the time taken to complete the task. This form of management encourages staff to perform at a higher level while empowering them to manage their own performance.

Flexing the workforce

The best organisations use a wide range of solutions to not only reduce and optimise their workforce during the downturn, but also apply strategies to improve the flexibility and agility of the remaining workforce, allowing for value-added services to be provided, all at a reduced cost. Organisations need to consider how to use staff differently. Multi-skilling the workforce to increase flexibility, improve utilisation and avoid losing skilled resources should all be considered.

Recognising weakness in senior management and replacing them is also critical in optimising workforce effectiveness - although many of them managed the business competently in a steady or growing market, they lacked the experience and skill-set to manage and drive change during a downturn.

A key workforce concern has been the unavoidable loss of skilled employees where management cut too deep in terms of headcount reduction.  In some cases, organisations may struggle to re-employ these skills as volumes return. In preparation for improved business conditions, management need to consider recruitment and training programmes such as apprenticeships, graduate schemes and work experience programmes.

In addition to the above strategies and to help position for future growth, companies should review how they are progressing in relation to:

Cash and Working Capital – KPI driven behaviour and incentivising early payment or pre-payment, regular review of credit exposures.  

Cost Management – continued cost management and control, both in practice within the organisation DNA.

Supply Chain – rationalise the supply base, centralise all procurements, currency hedging.

Operations – re-scaling or cutting back core operations in-line with current trading patterns. This could also be combined with in-sourcing certain activities, where capacity exists.

Conclusion

For the past 2 years many Irish organisations have been in crisis mode, implementing cost reduction initiatives, focused on fixing short term issues.

Most Irish organisations have successfully implemented “wave one” or “quick-fix” type changes. Arguably, fewer Irish organisations have adopted a “wave-two” or transformational strategy, that is clearly needed for long term survival. What is clear however, is that a significant level of change has successfully taken place and as an economy we have demonstrated a level of agility that will assist our recovery.

Those Irish companies that can successfully implement a combination of long and short term transformational strategies including effective employment engagement will be well positioned to maintain current market share and be best prepared for growth when conditions improve.

Reviewing and adopting some or all of the above strategies will help ensure businesses are maximising their potential and best prepared for an uncertain future.

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