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The business is earning more revenue, work is flying in the door, but for some reason this revenue is not reflected in margins or the bottom line.
No, not everyone is happy. The staff and clients are starting to complain. Managers are trying harder to control margins, and the finance team are cutting costs with no change. Some jobs are losing money and the blame game has begun. Internal politics have emerged and the team are less collaborative and helpful. They have adopted the ‘it’s not my job’ mentality. Processes and procedures are not being followed and IT systems are not adequate for the standards required.
The board applies pressure to the managing director who ‘passes the parcel’ and applies pressure to the business managers. The business managers are fighting their own fires at an operational level and consider the demands counter-intuitive or irrelevant. Communication issues arise at all levels of the business.
WHAT is happening?
The issues highlighted above can be symptoms of an organisation going through a growth phase or a significant change. The often intuitive and numbers based approach is to build momentum and concentrate on further growing revenues, controlling margins and keeping a control on costs. Methods often employed traditionally by business advisors or accountants is a ruler based control with the tracking of revenues, gross profits and costs. Adhoc and inconsistent rules are created when issues arise; creating authority levels of approval, removing staff, not replacing staff who exit and all this without reviewing the organisation structure.
What is NOT happening?
- Holistic approach to required organisational structure due to rapid growth or other change (or avoiding adhoc changes to personnel or reporting lines).
- Effective communication of structural decisions and or changes.
- Consideration of all aspects of the competitive advantage already created. It is often the competence, attitudes and loyalties of the people in the business that determine competitive position and profitability. Equally important is your standards of service or product delivery. For example, if customers have valued your quality, service delivery and consistency in the past, suddenly concentrating on shorter turnaround times, cheaper materials, changing their point of contact and/or reducing contact time might have short term positive effects.
- Review of the state and stage maturity of the industry, resource quality and availability, and competition.
- Review of the requirements of the shareholders and any contemplated succession plans. This is important as there can be shareholders who are interested in taking cash out of the business, or there might be shareholders who take a generational view and are happy to reinvest in creating a long term sustainable business.
- Review of the role of the board and delegated authority
What is BEING done about this?
None of the above is new. None of the above is rocket science. The owners/managers of a business might be aware of the above but the problem is that they are treated as separate issues. For example – an HR function would be delegated to deal with staff morale issues, an accountant to deal with financial issues and either the same accountant or a specialist to deal with succession plans, and an IT consultant to deal with IT and systems issues. None of whom speak to each other.
How CAN we help?
What is needed is a holistic review of the business and its operating environment, including the role of the board and the shareholders’ expectations. The internal layer of financial performance, staff and morale issues, systems, processes and IT are interrelated, and therefore to solve all these issues, these functions need to ‘talk’ to each other. To diagnose and treat one area in isolation doesn’t work.
Gilligan Sheppard can perform a holistic operational review of your business. We have a diverse range of skills:
- The ‘not so traditional’ business advisory team
- A risk management and IT specialist with extremely varied experience
- A non-accountant experienced in leading businesses through change
- An office management specialist who has led Gilligan Sheppard through significant period of change
- Diverse experience in business ownership and three team members with significant and varied board roles