Insight: Think laterally not defensively to navigate this crisis
The coronavirus crisis is compelling organisations to make rapid decisions to save money. But are the full range of possibilities being considered? Reformis’ Tom Cunningham thinks not.
What makes businesses successful and keeps them competitive? People. So right now, as the full force of the coronavirus crisis plays out around us, a defensive move like right-sizing – getting rid of experienced people to reduce cost – is extremely tempting. But could it also be counter-productive?
People learn by experience, so if you have previous experience of market crashes and periods of turmoil, put it to good effect right now. A company’s real value lies in people.
It is unusual to get the depth of knowledge and ability gained over 20–30 years’ employment in a new junior employee.
Sure, you get cost savings, thus, from a finance perspective, the move reduces short-term operating costs. But ask yourself this: what price are you putting on knowledge?
What has not been measured is the impact on a company’s ability to make the correct business decisions. It is the ability to change, think laterally and challenge conventions that need to be focused on. In current markets, instead of prioritising defensive strategies, why not look at the potential opportunities and leverage your wealth of in-house knowledge to generate different ideas and opportunities at which to excel.
Evaluate a range of ideas
That digital enabling strategy with which you struggled so hard: dust it off and try again. Now, with the explosion in home working, think of the market opportunities you can access, the clients you can reach without the hassle of travel. Think of the savings in time alone! What about previously outsourced areas that could now be managed in-house for a better return?
Conversely, why not look at utilising cloud capabilities to a greater degree?
Rationalise your printers and scanners. Not only will you save money, but you will help the environment.
All those old files and tapes you hold in storage, do you really need them all? Can you still even read the data on them?
Get rid of some of your corporate art; there will be far fewer visitors in future as working habits change.
The list of ideas could be long. Some will bear fruit.
Unfortunately, most of this does not translate easily into the operating margin formula.
Good people generate good ideas
Obviously bringing in new people is also important – you need a fresh input of ideas, outlooks and skills but a balanced approach is required.
In recent years, analytical roles that were once common, have diminished in several firms, in line with wider operational and technology-based subject matter experts, as firms continue to outsource various activities. This is usually carried out under the mandate of focusing on core business activities to reduce operational cost.
Of course, in many cases what falls under core business activities is open to interpretation. This has resulted in both a knowledge drain on how the business functions and a corresponding inability to drive and organise change as fundamental knowledge about how the business functions holistically has been lost. This is even more starkly apparent in merger and acquisition scenarios where core synergies need to be achieved.
In consequence, a wide range of change and delivery issues become apparent as assumptions are made to replace lost knowledge.
Bridging the change gap
To achieve successful change, you need to know how the business currently operates as well as its future aspirations. Fundamentally, you must also know the steps that need to be taken to bridge the gap between the two.
People commonly cite the 80/20 rule when implementing change, focusing on the largest proportional coverage of delivery. However, sometimes it’s the 20% that actually lifts the business above its competitors and gives it the winning formula.
Be sure to target the key areas. To do this, you need a holistic understanding of both complex and simple components. That means you need experienced subject matter experts and analysts.
Why not actually ask for their input in how to change the company for the better? Failing that, go to the market and get a different perspective from someone with industry expertise. Sometimes the results can be surprising.
Steps to making the change
So, what should you take away to potentially ponder?
Look for new opportunities at this difficult time.
Utilise the experience and talent that has helped your business grow to achieve this.
Industry experts can give you a different perspective and highlight avenues you may not have considered.
Try engaging your staff in this process.
Spend as much time focusing on identifying and keeping your core people as you do with your new entrants. Also ensure you get a healthy mix in your promotion pipeline. A blended set of skills gives you more agility and a wider palette of ability to utilise.
Beware of Greeks bearing gifts! Challenge anyone who states this is what good should look like. Change for ever firm need not be the same. Results count, not the model or path to get there. Use what works for the business and the team. One size that fits all may not suit your culture or business and, after all, culture is what made the firm successful in the first place. Agility, flexibility, adaptability and change are better long-term investments.
Put people on a more even weighting with numbers and technology. They should be the most enabling part of your business not the underlying technology. People deliver change. Experienced people make change smoother and more successful. Technology is just an enabler in the process.
Use experienced resources to bring people with you on the journey. Don’t wait for a hard sell at the end. As the business changes you need to change, too.
There is no point delivering change that was required in the past. Deliver something suitable for a changing future. And deliver it now.
Tom Cunningham is Reformis UK Head of Advisory.