Magazine article Strategic Finance

NO PAIN, NO GAIN? Effective Planning, Change Management, Project Execution, and Strong Leadership Can Help You Limit the Pain and Achieve Success

Magazine article Strategic Finance

NO PAIN, NO GAIN? Effective Planning, Change Management, Project Execution, and Strong Leadership Can Help You Limit the Pain and Achieve Success

Article excerpt

Companies must increase their economic value to stay in business. This may require a significant change to their strategy, business model, organization, talent, operations, and/or culture. It may require transformation within a given function, a business unit, or the organization overall. More often than not, transformations are big, complex, expensive, time-consuming, and, theoretically at least, should have a significant positive impact. Put simply, transformations are all about trying to change the way you do business whether on a global, enterprise-wide scale or one that's more limited.

Management may embark on a business transformation for many reasons. First, the organization may simply need it. On a macro level, the company is faced with globalization of markets and operations, new regulations and standards, greater business complexity, evolving technologies, and more disruptions. On a micro level, it may be struggling because of a shift in customer demands, strong competition, weak leadership, or other challenges. Business transformation may be the answer.

Likewise, management may set a new strategic direction for a function, an operation, or the overall company, whether to seize a new opportunity or to address an anticipated future disruption. For example, after years of only offering shelf-stable products (those that can stay safely unopened on a shelf for at least a year and be eaten as is), a food manufacturer may strategically shift into offering fresh, organic, and/or other on-trend products. To do so, the company may create a new business unit or division, transform its supply chain, and redirect the priorities of its sales organization. Or it may ambitiously acquire start-up businesses that have already proven successful in this space. Management will also need to ensure that Finance, HR, and other supporting functions are appropriately aligned and incented to support the new strategy.

Management's decision to initiate a transformation may also be in response to an external influence. For example, if all the company's competitors are now leveraging zero-based budgeting (ZBB), or consultants are saying that "best practice" is to outsource certain functions, or analysts are applying pressure for a given direction, management may react accordingly.

What would happen at your company if you were faced with a transformation? You probably would experience some pain, particularly at first when you find out about the situation. Then you would try to put that aside and concentrate on how you and the company could gain. Let's take a look at one company's transformation experience that was a success.

TRANSFORMING SUPPLY CHAIN FINANCE

We received the news first thing Monday morning. Supply Chain Finance was going to undergo a transformation. Here's what we were told: Based on consultant recommendations and internal analysis, the executive leadership team has decided to outsource and offshore all routine, transactional supply chain accounting activities to a third-party provider overseas in India. According to preliminary estimates, you are expected to reduce local head count by five. The intent is to announce the initiative in two weeks, begin the transition process in three weeks, and "go live" in six months. Your site, and hence your team, will be the pilot for this global initiative.

How would this work, and what were we going to do? To begin, it was imperative to fully understand the nature and scope of the initiative, then verify the preliminary assumptions, identify potential risks, and ultimately create a project plan. Several things became clear when comparing detailed local staff time studies against the third-party provider's statement of work (SOW). First, based on the detailed analysis of the work to be outsourced, fewer fulltime equivalent head count (FTEs) would be transitioned than anticipated. Second, all members of the local team performed at least one of the activities to be outsourced, meaning the roles and responsibilities of all members of the team would need to be redesigned prior to going live. …

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