Structure and process change to turnaround business performance.
Manufacturing and installation company experiencing a fall in profitability.
A manufacturing and installation company supplying the construction sector reached out to us for support with cited business performance issues. They were experiencing a significant fall in sales with 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 issues with:
- Margins for quoting and pricing.
- Significant quality and warranty issues impacting profit margins.
- Poor labour management and supervision.
The company simply was not running at a level of margin that was long-term sustainable. Our business review identified the key areas to address which we supported our client to facilitate:
- Management review practices and reporting within the business to build an understanding of why these difficulties were occurring.
- Provision of 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 within production and management teams.
- Training and coaching of key management staff.
- Project management processes for all new projects initiated.
- A thorough review of the sales team and sales processes and the establishment of a sales management program with a priority to refocus the sales team.
- A review of pricing and quoting margins and the setup of a new pricing and quoting policy.
Our work with this organisation has enabled the following results:
- Sales returned to their normal levels after 6 months.
- Profits increased to 12% of sales after 9 months of sustained implementation of our recommendations.
- No significant quality issues have occurred for 6 months.
- Profit 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.
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. It is with consistency and perseverance that business transformation is possible.
[Photo credit: Minku Kang]