Tag Archives: business processes

10 Principles of Organization Design

Did you ever think “let go of the past” and “focus on what you can control” could apply outside your personal life? PwC’s strategy+business takes you through the steps of your reboot. To find the principles, click on the elements image below:

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The Eurozone Crises and its Scenarios. What does this mean to your business?

Eurozone 02
Eurozone (Photo credit: slolee)

The chances of Greece departing the Eurozone are rising sharply so what chances are there that Grece will remain in the Euro as a compromise? Spanish banks are still holding an estimated Euro 600bn of mortgages at full value on their books so Spain will be the next big test for Europe. Spanish and other Eurozone banks are going to require hundreds of billions of Euro recapitalisation in the next 12 months.

On January 2012, Congressional Research Services looked into possible scenarios regarding the Eurozone and their impact on US economy. Latest indicators from the US are mixed and patchy but this economy is out-performing the Eurozone. CEEMEA’s central outlook remains 3-5 years of sub-par economic growth, continuous Eurozone crises and tough global business conditions. PwC also provided four scenarios, including one where Greece would exit the Eurozone.

What does this mean to your business?

The risks for a worse outlook have intensified since March/April and Eurozone restructuring has the potential to create significant change and disruption to the operations of many organisations. Global companies (both headquartered in the Eurozone and ones with extensive links with it) will be impacted across their whole value chain.

There will be:

  • Treasury changes (e.g. liquidity and financing, security over banking arrangements);
  • Operational changes (e.g. documentation, pricing arrangements, customer payment mechanisms);
  • IT changes (e.g. systems configuration, payment and billing systems changes, master data, transaction data migration, package applications and support arrangements);
  • Planning, benchmarking and forecasting (e.g. contingencies, restatement of historical data, costs to implement the Eurozone restructuring);
  • Challenges in communications to shareholders, stakeholders, customers and suppliers regarding organisational impact and arrangements to manage the impact.

How one can cope with all these challenges? Here are some suggestions:

  • Evaluate your supply chain risk, particularly where raw materials become expensive for suppliers no longer in the euro-zone;
  • Develope business cases / risk analysis to take advantage of potential new sourcing opportunities and provide delivery support to realise these benefits;
  • Run rapid diagnostic tools that can be deployed simultaneously across Finance (EPM Blueprint, Finance Effectiveness);
  • The break-up of the Eurozone may even give rise to opportunities from a tax perspective: identify them and work to build them into existing contingency plans should the right commercial fact patterns arise in the future.

Other suggestions?

Where does KM fit in?

Open Knowledge
Image by okfn via Flickr

At the end of the 90’s, KM challenges were addressed through technology-based solutions. When you told someone about KM, they would reply with a tool or a software-driven initiative; usually a corporate-wide one. It took a few years to find out that an IT project would not solve the need of knowledge and would not necessarily improve knowledge sharing culture within company.

Later on, KM was perceived not along with IT but rather with HR. To comply with both, a key message soon became that organizations have to acknowledge people over technology as the active protagonists in knowledge-sharing. And now we come to the next step: processes. KM later was associated to managing processes and understanding the knowledge flow. So, where does KM fit in at the end? Does it need a separate entity? Should it be part of something else?

After reviewing a large number of situations, reports and statistics, I see that there are two situations:

  1. KM is perceived as a response to a strategic need (especially after the downturn) that often even remains unidentified. They call it somehow else but they are trying to manage knowledge flows, have a knowledge-sharing culture and even build some IT if necessary. As KM is not defined, it’s not even called that way.

or

  1. Top management perceives KM as something they “must do” to be ahead of competition. They say they are engaged to harmonizing knowledge-sharing processes across the organization but the exact reasons why they are strategically implementing KM is still not very clear. As KM is defined, it is established as an individual separate entity from other organisational structures.

So, again, where does KM fit in? Any experience is different but here might be similarities we can work on to better understand how this is developing.

Restructuring checklist #1

Business drivers

• Which parts of the business are growing? Which are shrinking? How do you respond to both?
• Does your business evolution require new capabilities? If so, do you have a strategy for putting these capabilities in place?
• What is the acceptable pay-back time for any restructuring programme in your business?

Organisational redesign

• What should your future organisation look like in its customer-facing activities?
• Should you explore alternative channels of distribution to optimise customer reach?
• Is there scope to rethink your support structures? Are they providing you with the mix of cost efficiency, speed and customer orientation that your business requires? Have you benchmarked these features against your competitors?
• Is there an opportunity to rethink your operating principles to reduce costs through virtual teamwork, outsourcing and/or centres of excellence?

Cross-jurisdictional consistency

• Is your business operating in multiple jurisdictions? If so, have you thought through the differing legal requirements which restructuring activities prompt in these locations?
• Do you have an overarching commitment to consistent treatment of employees?
• Have you consulted appropriately at international level as well as at local levels?

Maintaining engagement

• How do you plan to maintain engagement levels in your business? Have you considered the retention challenges that may be prompted by restructuring?
• Are the challenges and associated time-frames you are setting out for your business attainable?
Do you have clear measures in place to ensure that you can respond swiftly to downturns in engagement levels within your business?

You may also want to read:
10 guiding questions to help restructuring initiatives
Restructuring checklist #2
Restructuring checklist #3

10 guiding questions to help restructuring initiatives

Cover for the Business Strategy Wikibook.
Image via Wikipedia

Turbulent economic times are making many organisations consider restructuring. Theoretically, a company that has been restructured effectively will be more efficient, better organised, and better focused on its core business. However, in practice, many restructuring initiatives fail as a result of overlooking “insignificant” issues or taking an unrealistic approach of the reality of restructuring across multiple countries and markets.

Here are some key points you should consider before and during a restructuring initiative that may help you thrive in challenging times:

Adding value to your company

1) What are the business drivers behind your restructuring requirements?
2) What should your redesigned organisation look like?
3) Are you obtaining function efficiency and true value for money for your spend?

Engaging effectively with your employees

4) Is your approach to your restructuring consistent with your declared values?
5) Have you got effective communications plans in place?
6) Are you engaging with employee representatives in an appropriate manner in each of your markets?

Balancing your short and longterm risks

7) How do you manage your employment brand in such challenging times?
8) Is there a risk of any proposed measures damaging your future business strategy?
9) How do you retain key talent now and in years to come?
10) How do you continue the development of tomorrow’s people whilst restructuring?

You may also want to read:
Restructuring checklist #1
Restructuring checklist #2
Restructuring checklist #3

The world in 2020: 79% of CEOs said they would be changing their strategies for managing talent as a result of the downturn

Fanning the flame of Talent
Image by Ian Sane via Flickr

A recent PwC report – Talent Mobility 2020 shows that in the next 10 years companies will have a greater need to deploy their talent around the world, and as a consequence, international assignment levels and overall mobility will increase significantly. Having access to the best talent continues to be a challenge for CEOs and business leaders – with 97% of CEOs in PwC’s annual global CEO survey saying that having the right talent is the most critical factor for their business growth. In addition, 79% of CEOs said they would be changing their strategies for managing talent as a result of the downturn – and 55% said they would look to change their approach to global mobility including international secondments. In the wake of a foreseeable upturn, the winners and losers of the next decade will be defined by those who are able to attract, retain, and deploy their key talent globally. The sentiments outlined above are well aligned with PwC’s key findings:

Assignee levels have increased by 25% over the last decade; PwC predicts a further 50% growth in assignments by 2020. There will be more assignees, more business travel, more virtual tools, and especially more quick, short-term, and commuter assignments.

The growing importance of emerging markets will create a significant shift in mobility patterns, as skilled employees from emerging markets increasingly operate across their home continent and beyond, creating greater diversity in the global talent pool.

Mobility strategies will need to become more sophisticated and complex as organizations meet growing deployment demands, while simultaneously managing the very different needs and expectations of three generations of workers.

Governments and regulators will accept the economic benefits of talent mobility to stimulate economic growth. This acceptance will lead to greater collaboration between governments and businesses, and within the business community, to remove some of the barriers to mobility around the world.

The millennial generation will view overseas assignments as a rite of passage, an outlook that will change the way workers and organizations approach overseas opportunities in the future.

Organizations will adopt “destination pay and local plus” remuneration methodologies as compensation levels across some skill sets and industries will begin to harmonise across the globe.

Technology will play a key role in global working arrangements and help to support compliance obligations; however technology will not erode the need to have people deployed “on the ground”.

The nature of overseas assignments has changed significantly since the 1970s. Businesses, like the population, seam to continue adjusting their operations, nature and geographic location of the workforce, as well as their fundamental structure and roles.

How an organisation responds to these rapid changes will be critical. Business and mobilisation strategies will need to progress quickly to keep ahead of both changes in the organisation’s geographic landscape, and the further increases in assignee numbers that will result. The winners of 2020 will be those companies that adjust their strategies now.

For details see PwC’s report

60% of executives say R&D will be top priority this year

Scientist Nestlé R&D Centre Tours, France
Image by Nestlé via Flickr

Research and development has risen sharply on the corporate agenda in the wake of the global economic crisis, a McKinsey survey finds. Four in ten respondents report that both R&D budgets and activity levels are up this year relative to 2009. What’s more, executives are remarkably optimistic that the R&D moves their companies made during the downturn will serve them well in the coming three to five years.

Moreover, nearly 60% of executives say R&D will be either the top priority or among the top three priorities this year – significantly higher than the 47% of executives who said the same last year. Despite the increased levels of spending and activity, companies are taking a wait-and-see approach to R&D hiring. Relatively few respondents say their companies are hiring or firing; the most common approach is a focus on retention.

Executives recognize that delaying, reducing, and eliminating R&D projects can limit long term competitiveness. Still, 42% of respondents say their organizations cut R&D costs in 2009, perhaps reflecting the lengths to which some companies needed to go in order to survive the recent economic turmoil. Further, when compared to the moves companies had made in spring 2009 (when McKinsey’s first R&D survey was conducted) with the moves they made by year’s end, it becomes clear that for many R&D organizations, conditions worsened steadily. Far more companies eliminated projects, delayed spending, and instituted hiring freezes as the year progressed.

These actions may well haunt some companies for years to come. A significant share of executives whose companies cut costs expect that these moves will have adverse effects in the coming three to five years. The problems respondents are most likely to expect include reduced market share, a loss of technological ground to competitors, a weaker R&D talent pool, a loss of institutional knowledge, and damage to morale.

Meanwhile, a significant number of companies appear to have used the downturn as an opportunity to add a measure of discipline to their R&D organizations, infrastructure, or processes. Among the most frequent changes in 2009 were increased accountability for performance and spending, increased collaboration with outside R&D groups, increased use of global R&D resources, and the streamlining of core R&D processes. All these moves should help companies innovate more effectively over the long term.

Moreover, high performers in the survey appear more attuned to the “softer” aspects of R&D than other companies are. Executives at high-performing companies, for instance, are significantly more likely to say their organizations are focusing on retention of key employees (40% versus 29%). And while the majority of high-performing companies didn’t cut R&D costs in 2009 — 63% of high performers didn’t, versus 56% of the others — those that did are far more likely than other companies to fear weaker R&D talent pools, a loss of institutional knowledge, and damage to company morale. Finally, high-performing companies appear to be markedly more proactive than the others in two operational areas that represent significant long-term investments: the streamlining of core R&D processes and the expansion of R&D infrastructure.

You may find more details at:
https://www.mckinseyquarterly.com

Transform: business trends in 25 markets across the Central & Eastern Europe

Tallinn, Rotermanni new neighbourhood
Image by Bookish type via Flickr

Transform is the bi-annual magazine of PwC in Central and Eastern Europe (CEE). It covers the latest business trends in 25 markets across the region, from the Czech Republic to Kazakhstan. Each issue of the magazine goes out to 10,000 business leaders, financiers, politicians and opinion formers in CEE.

Within the last issue, PwC brings the regional CEOs of three leading companies – Siemens, Orange and the ROLF Group – together to debate this issue and asks Romanian business veteran Dinu Patriciu for his insight. Staying in Romania, PwC features an exclusive interview with Bogdan Dragoi, Secretary of State at Romania’s Ministry of Public Finance, on how the government is trying to get the economy there back on track.

Also, in the wake of the World Eonomic Forum’s annual leaders summit in Davos, Switzerland, in the New Year, PwC turned to four commentators with expertise in the region for their thoughts on what CEE’s business and political leaders should be tackling this year.

You may download a free copy from here

Managing in a downturn: three key areas of focus that management could consider in managing risk

Managing cash flow is vital to anyone’s business, especially in a downturn: any company needs to be in control of its own cash flow. You may already know that, in a downturn, your stakeholders are looking at your costs like they never have before; this is the best time to be proactive and think strategically about cost.

Here are three key areas of focus that management could consider in managing risk:

1. Understand your own data. Going through 50 pages monthly management accounts does not help you control your business. Reduce the report to an ideal 1 page summary which covers all of the key performance indicators that you have agreed as being significant to your business.
2. Settle clear ownership. Customer services, production, procurement, finance – each believe they have a right to control the cash in their domain. However, you should consider that none of them have a holistic view of your business requirements. Management of cash should clearly be stated as the responsibility of the CFO and/or the board of directors.
3. Communicate effectively with all stakeholders. On the one hand, for example, your staff need to understand that appropriate credit control is an important part of the customer experience, even if the payment is not going to be made to terms. On the other hand, as we all know, banks do not like surprises. If you will be able to predict difficulties in cash collection, you should be able to manage the banks’ expectations as well.

All the above may sound like common sense, but you would be surprised to find out in how many companies this is not a common practice. If you have decided to handle cost more strategically, here are some simple practical tips on how to do it:

  • correctly identify the drivers of cost in your company: ask yourself if there are areas of your company and cost that are destroying value;
  • improve the processes around those areas or simply eliminate the cost.

However, you cannot always take out costs quickly, as major projects may be on roll. If this is the case, you could take a more measured approach:

  • in the first phase, look at your major project spend and ask yourself what can you do differently; have a look at your supplier agreements, some of them will allow you some space to take long term decisions;
  • in the second phase look at your own levels of bureaucracy and simplify procedure to the extend of compliance and operational efficiency;
  • in the third phase, re-analyse your project and look for its competitive strength or even opportunities. The business world is moving and, since the first two phases could take from a few months to years, depending on project extend, you could redefine it in terms of new market opportunities.

Managing IT costs during crisis: four suggestions on how to generate revenue growth that exceed traditional cost-cutting

Many companies have built up complex application environments with ongoing support requirements and, unfortunately, companies rarely reach internal agreements on business priorities for information technology. Still, some companies nowadays have to improve their cash positions merely as a survival technique. Selling non-current assets, including IT, is a solution that companies needing to generate cash have already started to take.

Companies not yet confronting with critical cash generation strategies could use their current IT status to increase revenues and reduce operational costs. For instance, they can use data more effectively and optimize processes through technology. IT could improve supply chain management by enhancing logistics and inventory management. Similarly, better data can sharpen insights into customer segments, pinpointing opportunities to change prices or focus sales efforts.

James Kaplan and Johnson Sikes concluded, in one of the latest McKinsey Quarterly, that over 12 to 18 months, these kinds of projects may return up to ten times the bottom-line impact of simple IT cost reductions. In many areas, IT functions can realize further efficiencies by changing management practices and models and promoting more interaction with the rest of the business.

Let’s further look into four considerations while planning IT cost cutting:

1. Use technology investments that can have a substantial impact to develop insights into customer segments and increase revenues without increasing prices, to optimise supply chain processes and improve delivery scheduling and/or inventory management;
2. Use experienced IT specialists to find efficiency opportunities by combining a detailed understanding of business processes with straightforward analyses of consolidated data;
3. Optimise processes: Pareto’s 80/20 approach can highlight a fairly small number of activities that, once you correct them, you may deliver a substantial amount of value;
4. Use targeted technology investments to increase productivity as in many areas they generate revenue growth exceeding the savings from a traditional cost-cutting.

You may see above that a fresh perspective of your company’s activities and targets helps you focus on technology investments that can actually increase productivity proving an intelligent, business-driven cost optimisation process as your IT crisis strategy.