Whose idea is that any way?
In the lead up to the recent NSW election win by the Baird Government – Premier Baird made it a policy imperative to seek out and receive ideas from the wider public and business community about the solutions to the big issues. He is widely applauded for his open and honest approach to policy setting. He often refers to the “turnaround” of NSW – shifting its performance from being no.8 to no.1 in performance
It would seem then that Premier Baird believes that no one has a monopoly on the good ideas. In a company turnaround this really holds true.
If you ask employees in a distressed business what their best ‘fix it’ idea is – mostly two things will happen:
- there will be lots of responses
- and most will be supportive simple suggestions
That’s because different people within the same organisation have contrasting views as to the business they’re really in.
Often in a turnaround, companies focus on a solution using other people’s money (e.g. distressed M&A – increased debt/equity) at the expense of finding additional dollars of earnings. It follows, therefore, that improving a company’s earnings is likely to have a high impact in any turnaround strategy. The ideas to improve earnings are often in hindsight relatively simple in application, but in practice are not always obvious to identify. Such solutions are beyond a basic ‘sell more with less’ strategy.
Typically the board looks to the CEO/CFO for ways to improve earnings. However, the challenge is that they may not have all the ideas to identify and then implement the solution(s). Indeed they may have already exhausted all ideas!
The people employed in the company across management layers will often be the ones best able to originate ideas to improve earnings and determine the path a company should take. The premise that only the CEO/CFO or externally appointed CRO can own the ideas in a turnaround is flawed, given the best ideas will often flow from the intellectual capability residing in management.
Furthermore often a ‘fresh’ set of eyes from within the organisation (e.g. the shop floor) can help identify options. Indeed, often the best ideas with the lowest risk originate from second and third tier management when given the opportunity to participate in deriving a solution.
KPMG recently ran this proces for a construction manufacturing client in a depressed sector with downward pressure on prices. Our options appeared limited other than to cut costs.
One of the best and simplest ideas came from one of the logistics managers who proposed raising prices, which in the current environment the sales team said was very problematic. We challenged the manager to develop the concept more and it became apparent from our data analysis that a number of products were only available from this company and had recently been in high demand. As a trial, prices on these products were raised with little impact on demand. The company established that it was a price leader in a whole category and soon raised prices across the board. Its competitors also raised their prices.
A simple but seemingly ‘radical’ solution that the sales team rejected initially dropped millions to the bottom line. While cost cutting is often inevitable, on that initiative no staff lost their jobs and no sites were closed. It was managed in a way that was low risk and was able to be implemented very quickly.
In the moment, even the most seemingly obvious or simple solutions can appear obscure or radical. But investing time in harnessing the intellectual capital of a company’s people can be one of the best ways to originate ideas to find a way through a turnaround. If the process of asking for ideas is good enough for Premier Baird, it’s good enough for the humble CEO.
Feature Image:Copyright: / 123RF Stock Photo