Strategic Business Design
The founder of a multi-billion dollar global health services company had achieved tremendous success and was ready to do an IPO. However, he wanted to IPO only a part of the business and keep developing the rest for the future.
The RBL Group collaborated with the executive team to determine whether this approach made sense and if so, how to organize to accomplish it. After a several working sessions, it became clear that there were two business models operating within the current structure.
One business was primarily customer driven and the other primarily capacity driven. Because they were managed as one business, neither business was achieving optimal results.
A team of their best and brightest leaders was chartered for four months to work on separating the two businesses and to prepare the larger business for the IPO.
After the businesses were separated, each business was more clearly aligned to its purpose and able to achieve better results. The capacity business reported higher margins. The customer business reported greater customer satisfaction.
Very different cultures also emerged from each business once they were aligned. The capacity business around cost efficiencies and the customer business around deeper customer connectivity and collaboration.
And the stated initial goal, an IPO of part of the original business, was successful.
One of the world’s largest pharmaceutical companies had grown rapidly through acquisitions and rising product sales. Through the expansion, HR met the business’s basic HR needs but accumulated a wide array of different HR practices and systems from three large legacy companies. A new HR leadership team saw an urgent need to improve both efficiency and effectiveness.
In terms of efficiency, HR headcount ratio, spending per colleague and revenue percent were worse than the worst benchmarks and 75% of HR interactions were with other HR employees.
In terms of effectiveness, HR lacked new ideas and innovative responses to support the business as it faced the looming loss of patent protection on key products and a challenging external environment.
RBL helped HR engage with the business to understand their needs from an outside-in perspective and to identify the capabilities the company needed for the strategy to be successful.
A cross-functional HR design team cataloged and categorized each HR output relative to the competitive advantage work. The work was then grouped by identifying where it should be located (enterprise, business unit, or manager and operations support) and work processes were designed within those three groups.
To staff the new groups, internal teams used HR competency research to create role profiles and matched existing talent to the roles, leaving some positions open for external talent to bring in new perspectives. In addition, the client joined the RBL Institute and sent multiple teams to HRLP to develop their senior HR talent. They also used the RBL HR Competency 360 assessment as a development tool for their HR professionals.
RBL supported the company in redesigning the global HR function to reduce costs and improve effectiveness of business support.
Working through the steps of a messy transformation, HR was able to reduce costs by 50%, including an estimated $42 million in year one cost reductions.
At the same time, clear accountability and focus for strategic HR roles enabled HR to improve business leader satisfaction with the services provided to support their business.
The newly appointed CEO of a global hotel chain inherited a business in crisis. It had recently de-merged and was undergoing a brand name change. It had heavy bureaucracy and overhead costs 15-20% above industry average in an extremely cost-competitive industry. Externally, there was a global economic downturn and a massive slow-down in travel post 9/11.
Not surprisingly, it was being downgraded by analysts and faced a hostile takeover attempt.
The new CEO initiated an “organization review” and invited RBL to help turn the organization around.
The review began by clarifying the strategy, so the cost savings needed to turn the business around could be achieved without cutting the capabilities needed to survive and win in the long run. As the CEO and the design team of internal high-potentials and RBL consultants worked closely together, the process evolved to include a re-thinking of both the business model and the strategy.
Once the executive team was aligned to the new model (corporate center and three global regions) and strategy (brand-building), the design team designed and implemented bold actions to develop world-class status in efficiency and speed, including:
- Reorganizing to eliminate regional budgetary and operational independence
- Streamlining differences in regional operations and aligning/centralizing finance, human resources, and corporate functions
- Creating a global shared services center
The design process included transparency with markets on targets and timetables that restored analyst’s confidence and strong multi-direction communication and a participatory process that built employee engagement and buy-in.
RBL collaborated with the executive team to engineer a significant transformation and establish a redesigned business that was attractive for investors.
- Stock price rose by 71% in less than a year and it outperformed the FTSE by a factor of 2
- Operating costs were reduced by more than $100 million/year
- Employee surveys showed a dramatic increase in morale and confidence in company leadership
- The takeover attempt was defeated and the quality of management was no longer a matter of public debate
Aligning Leaders and Leadership
To this global consumer product company, their mission statement is more than a marketing tool: it’s an identity. As a direct selling company with employees, distributors, and customers in more than 54 international markets, that identity acts as the glue that holds their people together.
Over the years, they had tried embedding the mission statement in a number of leadership competency models, but none of the models had gained the traction leaders had hoped they would. Meanwhile, the company continued to grow and with increased growth came increased demand.
A new CEO, encouraged by a proactive CHRO, realized that the pipeline was not as strong as he hoped and that the rapid growth was diluting the cultural connection to the mission statement and required a more systematic approach to leadership development.
RBL was asked to help create a leadership brand that would resonate with all of the company’s stakeholders. They began with an outside-in perspective, conducting interviews with internal and external stakeholders to find out what it meant to regions, distributors, investors, employees, and management to be successful at and for the company.
Working with the executive team, RBL helped the company articulate a leadership brand that communicated what it meant to be a good leader and deliver results.
To implement the new brand, the company began rolling it out in phases and incorporating it into existing systems such as coaching conversations, total rewards, employee development, hiring processes, succession, and new employee orientation, all from a leader-led perspective. RBL has also helped to design and deliver a series of workshops built around the brand.
Because of its close relationship to the existing culture, it’s clear the leadership brand is gaining traction in a way previous attempts hadn’t. A successful leadership transition in the CEO role and the way the brand has been integrated into all the company’s people processes has helped create real belief and investment in the company identity.
Improving on Success
A national restaurant chain was doing well— reporting strong returns for stakeholders and a growing and loyal customer base. In fact, they were growing so fast that they had outgrown their current structure and their current ways of getting work done. They realized that their work processes and how they were organized was slowing down their ability to grow.
To stay relevant as a brand in their highly-competitive industry, they needed to sharpen their understanding about what made them different and strengthen the way they executed their competitive advantage.
RBL was asked to help design and implement the new roles, relationships, and work needed to make this vision a reality.
Over the next few months, a design team of restaurant and RBL experts looked at every function of the business and determined how it contributed to creating the experience their customers were expecting when they came to the restaurant. They identified the work that had the greatest impact on their competitive advantage in light of the new business model and capabilities.
Next, they designed a new structure to prioritize competitive advantage work, implementing new roles in restaurants, a change in the management structure for corporate and each restaurant, and several new teams in the corporate office dedicated to innovating the customer experience.
While it took some effort and perseverance to change the way people worked, the processes that created better focus on customer experience started paying off right away.
Within the first 90 days, the pilot restaurant saw a 25% growth in sales. Since the implementation of the new organization model, restaurants that have fully implemented the new model have seen 28% higher sales over other restaurants, improved customer loyalty, and are significantly outperforming the industry.
Two global oil companies created a joint venture to manage $3 billion mature oil fields that were declining in production. While each owner had a lot of pride and history, there were significant differences in culture, technology, and operating philosophies. To remain profitable and to meet their aggressive performance targets, the new organization had to get up and running quickly and be more efficient than either parent organization.
The joint venture was expected to deliver benefits calculated to exceed $300 million over twenty years. This included expected savings achieved by optimizing infrastructures, reducing overhead, and greater economies of scale. More than a third (35% or more than $100 million) of the savings were predicted to come from “creating a different, more independent company” with no specifics about how this would be achieved.
The leadership team concluded that a whole systems approach starting from a “clean sheet of paper” was the only way they could achieve these aggressive targets. The entire design process was one of high involvement, seeking the input and wisdom of those who do the work, and included:
- hundreds of employees on various teams working the design and start-up made key design decisions
- these decisions were then tested with open forum focus groups to improve the design and create ownership
- two large group (~500 person) design sessions were held where employees established company values and agreed to desired behaviors.
By focusing everyone on a common goal and clear strategic direction, the design process was able to avoid the turf wars that accompany joint venture situations and can lead to sub-optimized designs. This also served to galvanize and energize employees as they looked forward to being part of something new.
Another unique aspect of the design process was an inclusive view towards external service providers that included agreements where service providers share in the success of the company and even co-location of external and internal teams to make it easy to collaborate to create value together.
The design led to a company that outperformed against these aggressive targets:
- In the first three years, benefits exceeded projections by over $70 million.
- Output improved as the mature assets experienced lower than historical and projected declines based upon the focus on core work. This was done with significantly reduced capital reinvestment rates.
- While some skill areas required additional staffing, others required less after the work process and seven-percent greater than required work force efficiencies were identified.
- Three to five levels of supervision between employees and the president were eliminated and in many instances, spans of control more than doubled. This substantially increased levels of responsibility and delegations of authority for most employees.
- Based on external benchmarking data with other industry companies, the company achieved “best-in-class” unit cost in over 80% of its producing assets.
In terms of more intangible benefits, subsequent improvement opportunities were viewed through the lens of the focus on core work and optimized value-creating activities. The process used to get to the final design contributed to a unique culture that enhanced employee engagement and the skills and confidence of employees.
Even following the initial design work, cross-functional teams continued to be formed on a regular basis to address critical work issues.
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Effective collaboration does in fact drive results. When colleagues work together effectively, the process is highly engaging and exhilarating. At The RBL Group, we have been fortunate to work with a number of cross-functional teams who had a focused goal and left the...read more