It’s rare that we are approached by a company requiring assistance where there is clarity about why business performance is not as expected, and what should be done to fix this. Often, there is an understanding of the problem – a drop in sales, financial targets not being met, limited growth and so on – but the ‘why?’ of the issue is not clear, nor are the actions required to turn things around. We may enter our work with a client having been given one brief, only to find that other issues come to light as we investigate the problems that are taking place.
A manufacturing and installation company supplying the construction sector reached out to us for support with cited business performance issues. Sales levels were falling, and the company was experiencing a sharp decline in their Earnings Before Interest and Tax from a level of over 10% to only 2.5% of sales. We conducted a thorough review of the business’ operations and in addition to the problems with sales levels and EBIT, identified an issue with their margins for quoting and pricing. The company simply were not running at a level of margin that was long-term sustainable. They had significant quality and warranty issues which were cutting into profit margins, and there was poor labour management and supervision in place.
Without the right business structure and processes in place, it becomes very difficult to identity the ‘why’ when things go wrong. Clarity is missing, and as such appropriate actions are unlikely to be taken to turn things around.
Our business review identified the key areas to address, and we initially focused on implementing management review practices and reporting within the business to build an understanding of why these difficulties were occurring. We provided training and coaching to the company’s accountant to better analyse and report issues as they arose, and to make appropriate and timely recommendations to the management team. Management and supervision practices were established within production and management teams, and training and coaching of key management staff was enabled. Project management processes were also set up for all new projects initiated. A thorough review of the sales team and sales processes was conducted, and we established a sales management program with a priority to refocus the sales team. Alongside this, pricing and quoting margins were reviewed with a new pricing and quoting policy agreed.
After 6 months of working with this organisation we saw sales return to their normal levels, and after 9 months of sustained implementation of our recommendations, profits returned to 12% of sales. No significant quality issues have occurred for 6 months, and margins are stronger than ever with labour efficiency dramatically improved. The company now has high accountability throughout the management team, reduced stress, and happier staff with more satisfied customers.
Business change takes time, and modifying structure and processes doesn’t immediately impact the bottom line. It is with consistency and perseverance that business transformation is possible.
The question we often get asked is “why can’t a company just do this for themselves – why do they need an external advisor?”. In the case of this company, the management structure and processes were not in place to support the company to prevent these issues occurring. Without a significant and appropriate change to company structure and ways of working, change was not possible. Often it takes someone outside of a business to identify the change required, and once initiated, it can be easier to align with business priorities to meet, and often exceed, performance goals and success indicators. It’s also never an easy and quick fix.
Find out more about our strategic approach to unearth the challenges within your business and set you on the right path for success. Reach out for a no obligation, informal chat with one of our Senior Consultants today to chat about how we could help you and your business, call us (07) 3025 3220 or email [email protected].
[Photo credit: Minku Kang]