Organization and Leadership
A paradigm-shift solution to a reporting problem
The CFO of a process industry company wanted to build a reporting model that supported the company’s strategic direction: building a customer centric organization. Changes in reporting created a change in overall steering philosophy.
ERP based reporting didn’t support the new business logic
The company had made a strategic decision to become more customer centric. This included several changes in its strategy and operations – including having an organizational structure based on customer segments. However, a recently implemented ERP system and its reporting capabilities were not flexible enough to support this strategic change.
Performance measurement was changed on every level of the organization
Together with top management, we implemented a mentality change in the organization. First, the measurement principles of internal reporting were revised in order to align strategy and management reporting. For example, Business Areas’ measurement was transitioned to new margin levels, overhead allocation was simplified and Group became the home base for certain assets. The company moved from profit center accounting and target setting to true utilization of management accounting. These changes had a significant impact on the way the company measured its performance from Board level to every business unit.
A new steering paradigm emerged to support a customer centric organization
The change in steering philosophy was an even bigger outcome than just implementing a new reporting tool. Businesses would focus on value creation opportunities that were truly in their hands.
Soft landing for organizational change
The company, an aviation industry player, was having challenges in implementing new ways of working and the staff was feeling frustrated. The business area head, with August’s support, needed to better understand the performance drivers of the organization – putting focus especially on ‘soft’ elements.
Management had challenges making changes and the staff was become frustrated
The company management had witnessed several challenges in implementing new ways of working. This had resulted in frustration for many of the staff members in one business area. The head of the business area asked August to help the company increase understanding of the current organizational behavior. Based on in-depth interviews in the organization we were able to increase transparency and build ways to improve communication.
In-depth interviews were needed to understand organizational behavior and its drivers
The August team helped the company interview people on different levels of the organization to understand the prevailing culture. Overall, we found that the biggest issue was communication. For a variety of reasons, people in different business units were having a hard time understanding each other and understanding headquarters. The team suggested that the company should develop “mental models” – simple tools to visualize the local environment and, for example, describe how a new concept would work in practice.
Once the source of frustration became evident, solutions were easier to come by
Despite initial management skepticism about the exercise – in the past, the company had not spent time talking about culture and “soft” issues – the head of the business area realized that August had made the right diagnosis and the right prescription.
CLIENT SVP TESTIMONIAL
“Once we showed this new model to the organization, local staff and group functions realized they finally had tools that help them work together much more effectively. Thank you, August!”
Accountability re-established with an innovative reporting solution
CFO saw that management was lacking tools to make the right operative decisions to maximize profits. He also wanted to strengthen accountability for financial performance across units and functions. New profitability reporting solution was developed that fulfilled the objectives and became the backbone for decision making in the company.
Reporting didn’t support profit maximizing decision making
CFO saw that management was lacking tools to make the right operative decisions to maximize profits. Reporting was too aggregated and it didn’t provide granular enough visibility to the root causes of profitability. He also wanted to strengthen accountability for financial performance across units and functions. To address these challenges, CFO launched a project with twofold objectives: to strengthen performance management and to better support operative decision making.
New reporting solution could provide comprehensive insights into the business
The answer was a profitability reporting solution that provided insightful information for business division management and all levels below that. The solution was built on transaction level sales data, allowing profitability to be viewed through all key business dimensions (e.g. customers, products and brands). Other financial KPIs were also reported from the same database. The solution was a perfect match with the project’s twofold targets. It helped to cascade accountability to lower levels in the organization and enabled operative management to understand the financial impact of their decisions.
The solution would become the backbone for decision making in the company
Already the first use cases revealed significant improvement potential in decision making. Businesses that were considered unprofitable before were, in fact, generating significant cash flow and could be used as a platform for growth. Production management, on the other hand, got a better grip on production costs. The solution became the backbone of the company’s management system and is a key information source in all business development initiatives.
A new organization in an old industry
Nordic FMCG company had grown via acquisitions but the acquired companies had been left un-integrated. Thus the large company was not playing to its strengths. August team supported to design a new way of working which created synergies, but allowed local organizations to prosper. This enhanced company’s renewal and improved its performance.
Past acquisitions had not been integrated, and the company was not playing to its strengths
The company, a key Nordic FMCG player, was the result of several acquisitions. The acquired companies, however, had not been operationally integrated. As a consequence, the company was more like a group of independent firms that competed against their local rivals with no benefit from its bigger muscles, especially in R&D and operations. After unsuccessful efforts to improve performance in the old, unintegrated structure, management wanted to renew the overall structure and rationalize the organization to unleash the potential of a larger multi-country company.
A new way of working created synergies, but allowed local organizations to prosper
Large group of people representing different functions and all markets were selected to create a blueprint of the targeted company with the support of August’s team. This blueprint included a new structure and organization, as well as a description of key commercial, operational and managerial practices. The aim was to build on current strengths and tackle obstacles that stood in the way of better performance. Some activities were centralized to leverage capabilities and capitalize on synergies. Others were kept in country organizations to ensure a strong local presence. The restructuring also offered an opportunity for resource optimization and reallocation to reduce operating expenses and support strategic intent.
A invigorated strategic focus enhanced company renewal and improved performance
A radical change in the way of working was well received but created mental and practical challenges. However, the change was considered necessary and the organization was committed to make it happen. In addition to releasing resources for strategic focus areas, substantial savings were made by removing parallel organizations and eliminating non-value adding activities.