CHANGE? - Executive Grapevine · 2014-09-12 · this journal is that although radical change rages around us, we don’t have to change radically ourselves. Great by choice, by Jim

issue 28

Jim Collins on how to thrive in uncertainty and chaos

survey: unpreCedented Change, unpreCedented optimism

opportunity knoCks in new high-growth markets

the Journal for Change leaders

WHAT DOES

YOURCOMPANYNEED TOCHANGE?

3 Agenda for changeBREAKING DOWN BARRIERS TO CHANGEChange is a fact of life, and our ability to adapt to it determines both individual and corporate success. But we are hard-wired to resist it. 4 Big ideasCREATING THE FUTUREWhy do some companies thrive in times of uncertainty and others don’t? Jim Collins’s new book, Great by Choice, provides some answers. 8 Adapting to uncertaintyTHINKING SMALLSmaller organisations are more agile and responsive than their larger competitors: what can they teach big companies about riding the waves of change? 10 Project managementSURVIVAL OF THE FITTESTProject and programme management is a way of making change programmes productive, accountable and sustainable. 12 SurveyALL CHANGEOur clients are experiencing more change than ever before – yet they are overwhelmingly optimistic about their organisations’ prospects… 16 SurveyCRISIS, WHAT CRISIS?...And here they explain why. 18 Case studiesFIXING AGENTSInterim managers are the answer to a wide array of short-term business problems. But the solutions they provide are long lasting.

20 High-growth marketsNEW YEAR, NEW HORIZONSOne of the reasons for companies’ optimism this year is the big untapped potential in the world’s developing and ‘emerging’ markets.

Editorial Jane SimmsDesign Phil Shakespeare

IMPACT is a publication of Impact Executives, a division of Harvey Nash Plc

Impact Executives Ltd13 Bruton StreetLondon W1J 6QA+44 (0)20 7314 2011www.impactexecutives.com

©2012 Harvey Nash PlcAll rights reserved. Contents may not be reproduced in whole or in part without the written consent of the publishers

ACCELERATING CHANGE IS a given in all our lives, but we are programmed to resist it, instinctively cowering in our cosy fur-lined rut and just hoping that a great big truck doesn’t come along and crush us, or, at least, splatter us with mud. Therefore, we have to find ways of overcoming our inherent resistance to change – and perhaps one of the most significant is to see it as an opportunity rather than a threat.

The inherent opportunities in our changing business climate are the focus of this magazine, Impact, which, as you may notice, has itself evolved from our previous journal, the Business Review.

These opportunities are waiting to be grasped by organisations with the right attitude and approach – and interim managers, with their combination of experience, results-orientation and leadership skills, are well placed to help effect and embed change.

The results of our change survey perfectly encapsulate the prevailing mood. The majority of respondents agreed that their organisations are experiencing more change than ever before, yet they are extremely optimistic about their prospects: 58 per cent of them said that the overall focus of the change they are undergoing is growth rather than cost savings and efficiencies.

ONE OF THE other important messages I take from reading this journal is that although radical change rages around us, we don’t have to change radically ourselves. Great by choice, by Jim Collins and Morten Hansen, explores this notion. The authors conclude that while great companies “evolve their recipe, revising selected elements when conditions merit,” they also keep most of their recipe intact.

It’s a challenging, yet reassuring thought. We hope you feel similarly challenged and reassured when reading Impact, and that you will be able to apply some of the lessons that the clients, academics and other experts within these pages have themselves learnt when seeking to create effective and sustainable change within the organisations with which they work.

issue 28

the Journal for Change leaders

Christine de LargyManaging Director, Impact ExecutivesGlobal Interim [email protected]+44 (0) 20 7314 2003

ABOUT IMPACT EXECUTIVESImpact Executives is a leading provider of interim managers to organisations of all sizes in the UK and around the world. With offices covering the UK, Europe, Asia Pacific and North America, Impact Executives is part of the global recruitment specialist Harvey Nash Group plc. Over the past 15 years it has helped more than 2,000 organisations, including over two-thirds of FTSE-250 companies, to engage interim talent at short notice to help them manage periods of growth, manage projects including transformation and downsizing, or to replace key management.

Impact Executives / IMPACT / Issue 28

Change is a given in all our lives. But most people find change threatening. We outline some common barriers to change below – along with tips on how to overcome them.

BREAKING DOWN BARRIERS TO CHANGE

3

Barrier to change‘Here we go again.’ Cynicism about

the latest outbreak of ‘initiativitis’.

SolutionDon’t change for change’s sake.

As Jim Collins and Morten Hansen

write in their new book Great by

choice, “managing the tension

between consistency and change is

one of the great challenges for any

human enterprise.” (See ‘Creating

the future’ on page 4.)

Barrier to change‘It’s scary.’ Failure to acknowledge or address people’s natural worries leads to low morale, low engagement, reversion to the old way of doing things and a ‘sit it out’ mentality.SolutionAddress individuals’ fears, and ensure that behaviour is aligned and consistent throughout the organisation. Walk the talk. (See ‘Thinking small’ on page 8.)

Barrier to change‘I’m confused.’ Lack of focus and clear process for managing beginnings and endings and for co-ordinating the change process leads to unclear accountabilities and dependencies.

SolutionProject management. (See 'Survival of the fittest' on page 10.)

Barrier to change‘I can’t.’ Frozen by indecision as

to which way to go, people retreat

into their comfort zones, limited

only by their own lack of ambition.

SolutionBe bold, expand your horizons and

exploit opportunities in overseas

markets – but beware of treating

them all the same. (See ‘New year,

new horizons’ on page 20.)

Barrier to change‘Why should we?’ Lack of leadership to inspire, motivate and drive people forward.SolutionChange should be endorsed at the highest possible level, but change leaders need distinct qualities. (See 'All change' on page 12.)

Barrier to change‘What’s in it for me?’ Lack of understanding about the reasons for the change, combined with lack of clear vision, clear direction, clear priorities.

SolutionCommunication, at both one-to-one and town-hall-meeting level, is key throughout, but particularly at the beginning. (See ‘Stakeholder management’ on page 11.)

FOR MOST PEOPLE in organisations today, change is about having to work harder, smarter and faster to deliver better results with fewer resources. No wonder so many are so resistant. Change arises from•dissatisfaction with the present•a vision of the future•practical steps towards that vision.

Unfortunately, many organisations focus too much on the first and not enough on the second and third. Here are some suggestions for redressing that balance.

agenda for Change

they believe, “the future will remain unpredictable and the world unstable for the rest of our lives.”

The causes of the chaos and uncertainty we all face go beyond the economic, encompassing political risk, terrorism, natural disaster, energy shocks, climate change, disruptive technologies and new media – to name but a few. And there are more still to come. We clearly have much to learn from organisations that know how to thrive in such conditions. It is relatively easy to lead in more tranquil settings.

Chaos, instability and uncertainty are not good, say the authors, and no company, leader, organisation or society can thrive on them. But they can thrive in them. And to understand how they do this they and their research team identified companies that started from a position of vulnerability, rose to become great with spectacular performance, and did so “in

Jim Collins’s most recent research project has been to determine why some companies thrive in chaos and uncertainty and others don’t. The findings, encapsulated in his new book Great by Choice, make essential – and often surprising – reading for all business leaders.

CREATINGTHE FUTURE

WHY DO SOME companies thrive in uncertainty, even chaos, and others don’t? It’s a question that management thinkers and writers Jim Collins and Morten Hansen asked themselves back in 2002 at the point when, as they put it, “America awoke from its false sense of stability, safety and wealth entitlement.”

The long-running bull market had crashed, the government surplus had become a deficit, Al Qaeda had attacked the Twin Towers and war had ensued. Meanwhile, throughout the world, technological change and global competition continued their relentless disruptive march.

They didn’t know the answer to the question, but they set about finding out – and they set out what they discovered in their new book, Great by choice.

The book is a timely response to what is generally agreed to be a period of unprecedented change, with scant hope of a return to ‘normal’. Yet what is normal? As Collins and Hansen point out, “the dominant pattern of history isn’t stability, but instability and disruption.” As such,

“The dominant pattern of history isn’t stability, but

instability and disruption”


IN SEARCH OF THE HOLY GRAILGreat by Choice: Uncertainty, chaos and luck – why some thrive despite them all (Random House Business Books) is the most recent (and perhaps final?) staging post of Collins’s 25-year quest to discover what it takes to build a great and enduring company. His journey started in 1989 with the research for the 1984 book Built to Last: Successful habits of visionary companies, which he co-authored with Jerry Porras. He followed it up in 2001 with Good to Great: Why some companies make the leap and others don’t and then, in 2009, came How the Mighty Fall: And why some companies never give in. The research that underpins these seminal works covers the evolution of 75 corporations through more than 6,000 years of combined corporate history.

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unstable environments characterised by big forces, out of their control, fast moving, uncertain and

potentially harmful.” By comparing such companies to those that failed to become great in the

same extreme circumstances, they uncovered the distinguishing

factors that enabled each high-performing company to beat its industry average by at least ten times over the 20- to 35-year study period up until 2002. Collins and Hansen refer to these companies as ‘10X’ and their leaders as ‘10Xers’.

LEADERSHIP: 10XERSThe different fortunes of Roald Amundsen and Robert Falcon Scott in their epic race to the South Pole exemplify

the differences between 10Xers and the rest. The reason

the former thrived while the latter died was planning, say Collins and Hansen. “You don’t

wait until you’re in an unexpected storm to discover that you need

more strength and endurance…You prepare with intensity,

all the time, so that when conditions turn against

you, you can draw from a deep

reservoir of strength. And equally, you prepare so that when conditions turn in your favour, you can strike hard.”

Clear-eyed and stoic, 10Xers accept without complaint that they face forces beyond their control, that they can’t accurately predict events and that nothing is certain, yet they utterly reject the idea that luck, chaos or any other external factor will determine whether they succeed or fail. They exhibit three core behaviours.• Fanatic discipline. They are extremely consistent

in what they do and how they act – in terms of their values, their goals, their performance standards and their methods. They are relentless, monomaniacal, unbending in their focus on their quests.

• Empirical creativity. When faced with uncertainty they don’t look primarily to other people, conventional wisdom, authority figures or peers for direction. Instead, they look to empirical evidence, relying on direct observation, practical experimentation and direct engagement with tangible evidence. They make bold creative moves from a sound empirical base.

• productive paranoia. They are hyper-vigilant, staying highly attuned to threats and changes in their environment – particularly when everything is going well. They assume conditions will turn against them, at perhaps the worst possible moment. They channel their worry and fear into action, preparing, developing contingency plans, building buffers and maintaining large margins of safety.

These core behaviours keep their enterprises on track, keep them vibrant and keep them alive, and they animate them by a central motivating force, the ‘level 5 ambition’ (fierce ambition not for themselves but for their companies) that we know from Collins’s previous work.

Bill Gates, founder CEO of 10X company Microsoft, is an exemplary 10Xer. “If I really believed this stuff about our invincibility, I suppose I would take more vacations,” he once said. By contrast, John Sculley, the former boss of Apple, took a nine-week sabbatical after a particularly good year. A year later Apple’s return on equity began to fall. Microsoft’s stock, meanwhile, continued its inexorable rise.

“Managing the tension between consistency and change is one of the great challenges for any human

enterprise”

10X EXEMPLARSExemplars include Southwest Airlines, which, despite fuel shocks, deregulation, labour unrest, air traffic controller strikes, recessions, interest rate spikes, hijackings and the 9/11 attacks, made a return over the 35-year study period 63 times greater than that of the general stock market. It outperformed its industry sector average by 550 times. Over the same period, Southwest Airlines’ direct comparison company, Pacific Southwest Airlines, flopped. Another exemplar is Microsoft, which, over a period of 37 years, outperformed the general market by 56 times and the industry average by 119 times.

Impact Executives / IMPACT / Issue 28 5

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Photo: Justin Stephens

returns from concentrated bets. This approach marries creativity and discipline, and translates into the ability to scale innovation with greater consistency. It is this, rather than the mythology of big-hit single-step breakthroughs, that explains some of the greatest success stories, including Apple’s resurgence under Steve Jobs.

PRODUCTIVE PARANOIA: LEADING ABOVE THE DEATHLINE It’s what you do before the storm hits – the decisions and disciplines and buffers and shock absorbers you have already put in place – that matters most in determining whether your enterprise pulls ahead, falls behind or dies when the storm hits. And 10Xers build buffers and shock absorbers far beyond the norm of what others do. They assume that a series of bad events can wallop them in quick succession, unexpectedly and at any time.

The 10X companies Collins and Hansen studied carried three to ten times the ratio of cash to assets relative to the median of what most companies carry. They also maintained more conservative balance sheets than the comparison companies throughout their histories, even when they were very small.

SMAC A SMaC (Specific, Methodical and Consistent) recipe is a set of durable operating practices that create a replicable and consistent success formula that can endure for decades. 10X companies have them in spades. Once they had their SMaC recipes the 10X cases changed them only by an average of 15 per cent over the respective study periods, and any given element of a 10X recipe lasted on average for more than two decades. By contrast, their comparison companies changed them by 60 per cent.

10Xers are not complacent: they are obsessed and driven. It’s just that they accomplish their huge goals by adhering with great discipline to what they know works while simultaneously worrying about what might no longer work in a changing environment. When conditions truly call for a change, they amend the recipe.

FANATIC DISCIPLINE: THE 20 MILE MARCH‘The 20 Mile March’ was a major distinguishing factor between the 10X and less successful companies. It involves hitting specified performance targets with great consistency over a long period, and it requires two types of discomfort: delivering high performance in difficult times and holding back in good times. • The 20 Mile March needn’t be financial: it

could be creative, or learning, or service improvement. But it has to be appropriate to the specific enterprise.

• It builds confidence, because it allows companies to prove to themselves that whatever the challenges and shocks, their performance is determined by their actions, rather than external conditions.

• It helps exert self-control in an out-of-control environment.

There is, say Collins and Hansen, an inverse correlation between pursuit of maximum growth and 10X success. Comparison-company leaders often pressed for maximum growth in robust times, thereby exposing their enterprises to calamity in an unexpected downturn. 10X winners, by contrast, left growth on the table, always assuming that something bad lurked round the corner, thereby ensuring that they wouldn’t be caught over-extended.

The authors write: “We live in a modern culture that reveres the Next Big Thing. It’s exciting, fun to read about…talk about…write about…learn about and fun to join. Yet pursuit of the Next Big Thing can be quite dangerous if it becomes an excuse for failing to 20 Mile March. If you always search for the Next Big Thing, that’s largely what you’ll end up doing – always searching for The Next Big Thing. The 10X cases did not generally have better opportunities than the comparisons, but they made more of their opportunities by 20 Mile Marching to the extreme. They never forgot: the Next Big Thing just might be the Big Thing you already have.”

EMPIRICAL CREATIVITY: FIRE BULLETS, THEN CANNONBALLSThis is a better recipe for success than big-leap innovations and predictive genius. A bullet is a low-cost, low-risk, low-distraction test or experiment, and 10Xers use bullets to empirically validate what will actually work. Based on that empirical validation, they then concentrate their resources to fire a cannonball, enabling large

“Resilience, not luck, is the signature of greatness”


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the luck of finding the right mentor, partner, team-mate, leader, friend – is one of the most important, they believe. And “the best way to find a strong current of good luck is to swim with great people.”

CONCLUSIONAt the end of the research journey Collins and Hansen say they feel calmer. “Not because we believe life will magically become stable and predictable; if anything the forces of complexity, globalisation and technology are accelerating change and increasing volatility. We feel calm because we have increased understanding of what it takes to survive, navigate and prevail. We are much better prepared for what we cannot possibly predict.”

If there’s one over-arching message arising from more than 6,000 years of corporate history across all their research, they believe it is the fact that greatness is primarily a matter of conscious choice and discipline, not the result of circumstance. The concepts from all four studies increase the odds of building a great company, but they don’t guarantee success. As they say, “it’s always possible that game-ending events and unbendable forces…will subvert our strongest and most disciplined efforts. Still, we must act.”

And we must act not just in times of austerity and crisis. “Times of explosive growth are at least as difficult to navigate as times of economic uncertainty,” they point out.

It all chimes with Peter Drucker’s observation that the best – perhaps even the only – way to predict the future is to create it.

The authors write: “The amount of change swirling about is both gigantic and, for most people, accelerating. If we tried to react to every single external change, we’d quickly find ourselves incapacitated. Most change is just noise and requires no fundamental change in ourselves.” However, they continue: “Some change is not noise, demanding that we adjust and evolve, else we face demise, catastrophe, or missed opportunities. A great company must evolve its recipe, revising selected elements when conditions merit, while keeping most of its recipe intact…Managing the tension between consistency and change is one of the great challenges for any human enterprise…We’ve found in all our research studies that the signature of mediocrity is not an unwillingness to change; the signature of mediocrity ischronic inconsistency.”

RETURN ON LUCKThe authors write: “The difference between Bill Gates and similarly advantaged people is not luck…. Gates did more with his luck, taking a confluence of lucky circumstances and creating huge return on his luck.”

The researchers found that the comparison companies, some of which had extraordinarily good luck, often squandered it. “They didn’t fail for lack of good luck; they failed for lack of superb execution.” They continue: “Resilience, not luck, is the signature of greatness.” 10Xers “never wallow in despair when hit with bad luck. They keep pushing, driving for the overall goal and cause.”

But of all the luck we can get, people luck –


NAILING MYTHS In the course of their research, the authors were constantly surprised by their findings, and the book includes a number of entrenched myths that were well and truly nailed.

Entrenched mythSuccessful leaders in a turbulent world are bold, risk-seeking visionaries.Contrary findingThe best leaders were not more risk-taking, bold, visionary and creative than the comparison leaders. They were more disciplined, empirical and paranoid. They observed what worked, figured out why it worked, and built upon proven foundations.

Entrenched mythInnovation distinguishes 10X companies in a fast-moving, uncertain and chaotic world.Contrary finding10X companies innovate, but no more – and in some cases less – than their less successful comparisons. Innovation per se is less important than the ability to scale innovation, to blend creativity with discipline.

Entrenched mythA threat-filled world favours the speedy; you’re either the quick or the dead.Contrary findingA fast world doesn’t always require fast decisions and fast action – in fact, that’s a good way to get killed. 10X leaders work out when to go fast and when not to.

Entrenched mythRadical change on the outside requires radical change on the inside.Contrary findingThe 10X cases changed less in reaction to their changing world than their less successful peers. Just because your environment is rocked by dramatic change doesn’t mean you should inflict radical change upon yourself.

Entrenched mythGreat enterprises with 10X success have a lot more good luck than the comparisons.Contrary findingBoth sets of companies have the same amount of good and bad luck. What distinguishes the 10Xers is the way they handle that luck.

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DON’T BE AFRAID TO ACT“One of the biggest barriers to change in a climate of uncertainty is lack of business confidence. It’s easy to say ‘let’s wait’ – and at times that may be the right thing to do. But it often isn’t, and it’s an approach that carries risks of withering on the vine. To that end you must ensure that people are not afraid of coming up with new ideas – albeit making big sweeping changes based on gut reaction is often the wrong thing to do, not least in uncertain times. You have to take the right incremental steps and then take advantage when you can.

“You need a vision of the future with multiple options that you can scenario-test, assess and sensitise. Focusing on the numbers provides the confidence that you have thought things through and helps to bring the team with you. Human nature is such that it’s very easy for people to say ‘no’ rather than ‘yes’ – particularly at the moment.”James Richardson, CFO Western Europe, GlobalPayments

SMEs are renowned for their agility and flexibility, qualities that allow them to respond quickly to changing circumstances and environments. What can they teach their bigger peers about adapting to the new volatile and unpredictable business climate? Here are the views of some of our clients…

THINKING SMALL

OVERCOME INERTIA“The biggest impediment to change in large companies is inertia – and inertia is a luxury that small companies can’t afford. Shorter visibility of sales pipelines and cash flow creates a healthy paranoia in small companies and makes them extremely nimble and versatile.”Fred Hallsworth, vice-chairman, Microvisk Technologies

REPLICATE THE SMALL COMPANY FEEL“You can create the ‘small-company feel’ within a big company by getting different business units to operate like SMEs, with their own p and ls [profit and loss statements], as we did in Alstom, where I used to work. Their size gives big companies lots of advantages – not least momentum – but they fall down because of the associated bureaucracy, politics and turf wars, along with an overwhelming focus on mechanics. This distracts them from the required focus on business objectives, and small companies are good at this because everyone pulls together and there is an immediate and visible link between effort and outcome.

“To ensure change happens in challenging times you have to create a change culture. Top management have to live the values of the change, by demonstrating the right behaviour and providing the right tools to enable change, in order to motivate people.”Arnab Banerjee, programme manager (continuous improvement), Transport for London


Annabel Lewis-GreySenior consultant,Impact ExecutivesGlobal Interim [email protected]+44 (0)20 7314 2007Annabel’s background is in change management consultancy, and her specialisms include mergers and acquisitions, transformation, restructuring, and offshoring and outsourcing projects.

adaPtIng to unCertaIntY

INVEST IN CHANGE“Today the biggest barrier to change is unwillingness to loosen the purse strings to invest in it. More generally, people are worried about change because it is threatening, they don’t know how it will affect them and their jobs, and they often need to see exactly what the ramifications of any changes will be.”Shoaib Oosman, sales director at Globalpark

WALK THE TALK“Internal culture can be a big barrier to change – particularly when people are understandably cynical about yet another wave of change and another round of job cuts. Ideally you bring people with you, but sometimes having a radical clear-out, painful though it is, can be your best option. But you mustn’t throw the baby out with the bathwater and lose all your corporate skills and memory. Another key driver for successful transformation is treating people well, and communicating regularly is a great motivator for everyone, even during the largest company transformations.

“The smaller the company the easier it is to communicate change, including ‘walking the talk’, to get people behind you. Some larger organisations are seeking to reduce management layers in the interests of more direct communication. Visibility of the CEO, transparency and empathy can help engender trust among employees even if they don’t agree with what the organisation is doing.” Philip Clayson, founder of Mercer Caxton, an operational transformation consultancy


IMPACT EXECUTIVES VIEW One of our clients, Toby Lovern, director of business improvement at GlaxoSmithKline, pointed out that big companies in particular tend to look externally (principally to consultants) for answers when they need to change, whereas what they should do instead, he believes, is to try to change the internal culture and equip people with the tools and ways of working that enable them to effectively diagnose, define and implement sustainable change themselves.

He is right, of course, but while management consultants typically deliver an off-the-shelf solution that may grate with many employees, interim managers can really help accelerate and embed the culture change process by working with teams to change things from within. Although they are embedded within the organisation, interim managers’ independence allows them to act as honest brokers and help people to see their way through change – not least by dint of their ability to set clear goals and ensure that everyone understands the part they have to play in the process.

And interim managers’ extensive experience of different companies, sectors and business cycles allows them to help prepare their client organisations for what might be around the corner. Because, as Lovern suggests, preparation is all. As he observed: “You have to prepare yourself for change by actively discussing and planning for different scenarios.”

The alternative, of course, is being caught on the back foot, as the public sector seems to have been. Annabel Lewis-Grey, senior consultant atImpact Executives.

adaPtIng to unCertaIntY

EFFECTING CHANGE CAN be a risky business and the reputation of a CEO may be on the line if

business-critical change programmes fail to meet their objectives. And the more business-critical, complex and visible a programme, the greater the risk it carries.

Increasing numbers of organisations, therefore, are turning to project and programme management to help them deliver focused, productive and sustainable change. Indeed, today’s flatter, less hierarchical and more geographically dispersed organisations are increasingly run as a stream of separate but interlinked projects, with the CEO acting as the ultimate programme manager.

But project management itself is changing, and the required skills for a successful project manager have

changed accordingly. Successful project/programme management calls for a very distinct leadership approach, which, in essence, combines strong

Project and programme management is a valuable tool to help organisations adapt quickly and successfully to shifting market forces. But, says Trudy Peeler, project and programme management itself is changing, and the skills needed to do it are evolving accordingly. Is your organisation up to it?

SURVIVALOF THE FITTEST

10

commerciality with a high EQ [Emotional Quotient]. Not only do project managers have to be highly results-oriented, but they also need to engage effectively with a wide range of stakeholders – including, increasingly, third parties.

Not surprisingly, great project leaders are hard to find and the demand for these talented management hybrids is high. Increasingly, therefore, organisations are using experienced interim project and programme managers to improve their ability to deliver successful projects and, critically, to embed best practice.

Interim managers make excellent project/programme and stakeholder managers because the skills required are virtually identical (see box left). Interims, by their very nature, bring independent thought, new – and often smarter – ways of working, excellent stakeholder engagement skills and a real focus on delivery. What’s more, the skills of both interim managers and project managers are very similar to those of good change managers, as our survey on page 12 reveals.


GOOD PROJECT/PROGRAMME MANAGERS ARE:• outcome driven, focused on

commercial objectives• adaptable, able to manage

ambiguity and stay flexible• talented stakeholder managers • natural leaders who manage

through influence and build high-performing teams

• able to operate in a structured, clear and consistent way

• able to bring creativity to problem-solving.

The work that interim managers do is similarly transformational and outcome driven, so this list also represents a blueprint for good interim managers.

WHY DO PROJECTS FAIL?The most common reasons are as follows. • Poorly defined requirements and lack of

a coherent business case.• Lack of executive sponsorship and

accountability.• Low levels of stakeholder and user

engagement.• Poor governance.• Lack of leadership.• Poor corporate communication.• Poor financial planning, measuring the

wrong performance indicators and lack of progress reporting.

• Poor risk mitigation and management.• Failure to remember lessons previously

learnt or to share best practice.

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THE EVOLUTION OF PROGRAMME MANAGEMENTProject and programme management continues to evolve in order to meet organisations’ changing needs. The following trends are likely to gain momentum during 2012.• portfolio prioritisation. Organisations are more

selective about the projects they pursue, prioritising those that are business critical, achievable and deliver the most value.

• Quantifiable benefits. The requirement to demonstrate value and clear return on investment, as well as greater customer and commercial focus, is growing.

• Embedding best practice and creating centres of excellence. Weary of repeating the same old mistakes, the smartest organisations are working more collaboratively and cross-functionally to achieve better, more consistent results.

• more effective leadership. As organisations become more complex, the ability to manage through influence is key.

• methodologies alone no longer suffice. Successful project delivery does not rest solely on the ability to manage status reports and charts; high EQ is much more important.

STAKEHOLDER MANAGEMENTProjects and programmes cut across different business disciplines and units, so effective stakeholder management has become critical.

Trudy PeelerSenior consultantImpact Executives Global Interim Management [email protected]+44 (0) 20 7314 2006Trudy is responsible for the Technology, Media and Telecoms practice, and helps businesses improve their performance through technology.

Increasingly, stakeholders may be third parties, which requires an even greater ability to communicate effectively and manage through influence. The quickest way to secure stakeholder engagement and support is to have a compelling overall vision (see box above) and a business case that is based on facts.

How well are you managing your stakeholders?• Do you have a compelling vision? If not, can you

make it compelling? Or is there no real business case to build the project on?

• Do you know who your stakeholders are, both direct and indirect, and their respective importance?

• Do you manage and communicate with them accordingly?

• How well do you understand their objectives? Can you define their corporate and personal potential wins and the impact these might have on the project?

• Where does your key support and resistance lie?

Due to their lack of ‘positional’ power, project and programme managers have to rely on their credibility, expertise and ability to build relationships quickly in order to manage stakeholders effectively – all hallmarks of effective interim managers. Interim programme and project managers bring the additional benefit of objectivity, which helps to limit politics and maintain a commercial focus.

THE VISION THINGWhen Sebastian (Lord) Coe took over the chairmanship of the bid for the London 2012 Olympics back in 2004, the bid was in a parlous state. At the time, London was deemed to have poor public transport, there was low public support for and lack of government interest in hosting the games, Britain had failed to secure the 2005 World Athletics Championships, and the problems of distributing sporting venues around the capital looked intractable.

Coe set about tackling the different challenges, but the real breakthrough came with his realisation that the bid team needed a new vision that would appeal to all the different groups of stakeholders in the Games. That vision should be to inspire a new generation of athletes around the world in the way that he himself had been inspired at the age of 11 while watching flickering black and white TV images of the Mexico Games in a draughty school hall.

“Once we had our vision nailed down we were able to go out and sell it with much more vigour,” he recalls.

Like any crystallised vision, it enabled the bid

team to generate opportunities where none had previously existed – in disparate areas of the UK government, for example. “Don't think if you're health secretary that this has nothing to do with you, because we have some of the highest childhood obesity rates in Europe,” Coe says.

More importantly, the vision appealed to the emotions and the pragmatism of the International Olympic Committee. In Singapore, at the final bid presentation ceremony, the British bid team drove home the vision by positioning a group of smiling and ethnically diverse schoolchildren shipped over from London, among an elite cadre of British athletes and politicians; and by showing a powerful video montage depicting children from around the world witnessing events at a hypothetical London Games and, as a result, becoming successful athletes themselves.

Obsessive attention to the detail of the various different aspects of the bid was a given, of course: “When I was asleep there were guys working through the night to make sure everything stacked up,” recalls Coe. “But if your vision is good enough then, on a wobbly day, it’s what you cling on to.”

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savings and efficiencies.

We are confident that the research findings are both robust and representative. We had responses from 375 directors and senior managers from a range of private, public-sector and not-for-profit organisations, most of them in the UK. Half the respondents sat on the main board in their organisations, and 29 per cent held chairman, CEO, COO and CFO roles. There was a slight bias towards small companies (42 per cent of respondents worked for organisations with fewer than 250 people), though nearly one-quarter worked for organisations with over 5,000 employees.

WHAT ARE THE BIGGEST CHALLENGES?Well over one-third of respondents are most exercised about their lack of control over the future. When asked about the single biggest challenge their company faces, ‘uncertainty over

We are living in a time of unprecedented change, with uncertainty about the global economy and unpredictable future demand posing the greatest challenges to businesses over the coming year. However, according to our recent client survey, companies are overwhelmingly optimistic about their growth prospects – provided that the right people are at the helm.

ALL CHANGE

WE’VE NEVER SEEN change like it. This is the unequivocal finding of Impact Executives’ recent survey among business leaders, 87 per cent of whom agreed with the statement ‘My company is experiencing more change than ever before’. Given the strength of that response, it is not surprising that this group considers ‘uncertainty over the global economy’ and ‘lack of visibility of future demand’ to be their biggest challenges. A close third is ‘not having the right staff and/or skills’.

However, despite this change, uncertainty and skills shortage – and despite what is probably the worst economic climate for 60 years – business leaders are surprisingly optimistic about their companies’ prospects. Some 58 per cent of them say that the overall focus of the change going on in their organisations is growth rather than cost

“The focus of change in most organisations

is growth”

12

0 5 10 15 20 25Acquisition

Lack of productivity

Additional regulatory burden

Local competitors taking market share

International competitors taking market share

Operating costs increasing

Not having the right staff / skills

Other

Lack of visibility of future demand

Uncertainty over the global economy

1. WHAT IS THE SINGLE BIGGEST CHALLENGE YOUR COMPANY FACES? (%)

2. DO YOU AGREE WITH THIS STATEMENT?: “MY COMPANY IS EXPERIENCING MORE CHANGE THAN EVER BEFORE” (%)

Yes87

No13


surVeY

the global economy’ came out top, cited as it was by 21 per cent of respondents, with ‘lack of visibility of future demand’, cited by 17 per cent of respondents, hard on its heels. While businesses are clearly concerned about not having the right staff and skills to cope with future demand, this got only 12 per cent of the votes.

But while uncertainty is a challenge, business leaders – encouragingly – don’t appear to see it as a threat. Indeed, it could even be an opportunity – at least for those companies who are prepared to face it rather than burying their heads in the sand while they wait, in vain, for the return of ‘business as usual’.

Indeed, some companies positively thrive in uncertain conditions – even chaos – a phenomenon explored by Jim Collins in his latest book Great by choice, co-authored by Morten Hansen, a management professor at the University of California, Berkeley (see ‘Creating the future’ on page 4). The message is clear: rather than worrying about the future – a futile exercise – we need to be masters of our fate.

Not having the right staff and skills is clearly a threat to future survival, however, and one that needs to be addressed urgently. Counter-intuitive though it might seem, given rising unemployment figures, there is a shortage of skills – not least in leadership. Demographic changes – primarily an ageing workforce in Western economies – combined with the increasingly global nature of business, mean that the war for talent will continue to rage, and this will have knock-on effects on

organisations’ ability to innovate. In the global marketplace, firms have an unprecedentedly heterogeneous pool of potential employees to draw on, but they will have to work much harder to attract and retain them.

For example, they will have to work harder to integrate and develop international migrants, older people, and women and others with ‘caring’ responsibilities. This, in turn, means introducing family-friendly and age-appropriate employment models, along with educational and development programmes – including those designed to transfer knowledge between different generations.

There is a clear leadership challenge here, as Hay Group’s recent ‘Leadership 2030’ report points out. Leaders will increasingly need to understand, lead, integrate and motivate teams of increasingly diverse employees. Fostering inter-generational and inter-cultural teamwork is essential, as is finding ways to engender commitment and loyalty among people of different ages, from different cultures and with different values. Leaders will have to adapt their organisations in order to encourage more women and other ‘minorities’ into leadership positions.

HOW MUCH CHANGE IS GOING ON?Regardless of their size, 87 per cent of companies claim they are experiencing more change than ever before. However, there are sectoral differences. As might be expected, 100 per cent of government respondents agreed with the statement, compared to just 67 per cent of pharmaceuticals companies – probably because the latter’s fortunes are more dependent on drug development and patent cycles than on macroeconomic factors. There is a range of opinion in between but, other than in pharmaceuticals, at least 80 per cent of respondents in all sectors believe they are living through unprecedented change.

“Not having the right staff and skills is clearly a threat

to future survival”


80

67

0

20

40

60

80

100

Pharmaceutic

als

Business

/ Pro

fessional S

ervices

Energy

Healthcare

Retail / Leisu

re

Financial Services

Charity, N

on profit

Manufacturin

g

Technology / Telecoms

Education

Constructio

n / Engineerin

g

Government

3. WHICH SECTOR HAS THE MOST CHANGE? (%) 4. WHICH OF THE FOLLOWING BEST DESCRIBES THE OVERALL FOCUS OF CHANGE IN YOUR ORGANISATION IN THE NEXT 12 MONTHS? (%)

Growth58

Cost saving / efficiency42

surVeY

AND WHAT SORT OF CHANGE IS IT?The good news is that the focus of change in most organisations (58 per cent) is growth, rather than cost savings and efficiencies. Overall, this suggests that business leaders knocked their companies into shape after the last recession, and are now poised to take advantage of growth opportunities – not least those in the burgeoning high-growth economies of Asia and elsewhere (see ‘New year, new horizons’ on page 20).

But there is an interesting split by size. Small companies (those employing 250 or fewer people) are the most growth oriented (70 per cent) and large companies (those employing over 5,000 people) are the most cost oriented (58 per cent). This finding suggests that SMEs feel they have more growth to go for and/or they are already lean, mean and agile, and that the biggest firms are reasonably happy with their market share and/or still have fat to cut.

The growth categories between the small and the large – that is, 250 to 499 employees, 500 to 1,000 employees, and 1,000 to 5,000 employees – are all significantly more focused on growth than cost savings, but the bias is less pronounced.

The sector split is interesting too, with a clear divide between the preoccupations of the private and public sectors. Business and professional services is the most growth-oriented sector (89 per cent going for growth compared to just 11 per cent for efficiencies), followed closely by energy (83 per cent), technology and telecoms (72 per cent), pharmaceuticals (70 per cent) and financial services (70 per cent). The most cost-

conscious sector, by contrast, is government (82 per cent focused on cost), followed by healthcare (67 per cent), charity and not-for-profit (63 per cent) and education (58 per cent). This is not surprising: the public sector is currently experiencing the pain that the private sector was forced to endure a few years ago.

Turning to the drivers for change within organisations over the coming 12 months, responses are split between growth and efficiency strategies – though it seems that rather than going for one or the other, companies (even the most growth-oriented ones) have one foot on the accelerator and one foot on the brake. This caution reflects the new imperative of having to meet rising customer demands and to grow, but with fewer resources.

Some 43 per cent of respondents plan to re-engineer business processes to drive out operational improvements and save costs, and 26 per cent plan to restructure the organisation to drive out cost reductions and business efficiencies. However, 41 per cent are looking to develop and grow their business into a new

14

“Companies (even the most growth-oriented ones) have one foot on the accelerator and one

foot on the brake”


0 20 40 60 80 100

100

Business / Professional Services

Energy

Technology / Telecoms

Pharmaceuticals

Financial Services

Retail / Leisure

Construction / Engineering

Manufacturing

Education

Charity, Non Profit

Healthcare

Government

GR

OW

TH

COST

0 20 40 60 80 100

GR

OW

TH

1-249 employees

250-499 employees

500-1,000 employees

1,000-5,000 employees

5,000+ employees

COST

5. WHAT IS THE PRIMARY FOCUS – GROWTH OR COST REDUCTION? BY SECTOR (%)

6. WHAT IS THE PRIMARY FOCUS – GROWTH OR COST REDUCTION? BY COMPANY SIZE (%)

surVeY

sector, 33 per cent want to develop and grow into a new region and 29 per cent will be developing a new product to enter a new market.

WHO SHOULD LEAD THE CHANGE?So, overall, it seems that companies feel positive about their ability to grow even in a period of unprecedented change and uncertainty. But what sort of leader is best equipped to drive that growth? Our research offers some clues.

Respondents told us that the best change leaders are not perfectionists, nor are they good at detail. Indeed, in many ways they are very different from their colleagues who focus on operational excellence. Change leaders’ most important quality is the ability to manage ambiguity, closely followed by strategic thinking, adaptability, the willingness to confront situations, and the ability to exercise subtle influence behind the scenes.

The best change leaders are clearly big-picture strategists, but their ability to get on with people coupled with their high emotional intelligence (although operational experts are also likely to have the latter two qualities in equal measure)

allows them to recognise where they need other experts (and which experts) to compensate for their shortcomings.

Adaptability and the ability to manage ambiguity mean that leaders can be flexible and focus on a number of different priorities rather than being fixated on just one. It allows them to reconcile the apparently conflicting demands of modern businesses – like making a profit while being socially and environmentally responsible, for example, or running a global business while adapting to local markets, or being operationally agile within a clear strategic framework.

They are also tough and resilient – qualities that go hand-in-hand with their willingness to confront situations. But it seems from the responses to the survey that they are not confrontational in the traditional sense, but are instead able to anticipate and head off potential derailers before they become major problems, through subtle behind-the-scenes influence.

CONCLUSIONBusiness leaders are having to steer their organisations through times of unprecedented change and uncertainty. But having cut most of the excess fat after the last recession, those organisations are lean and agile and well-positioned for growth – albeit careful and considered growth. However, the choice of leader to manage this growth in turbulent times will be crucial – and, given the global shortage of leadership talent, finding the right people could prove to be the biggest challenge of all.


“Change leaders’ most important quality

is the ability to manage ambiguity”

Turnaround

Integration of an acquisition

Brand repositioning

Acquisition – origination, negotiation and delivery

Implement a major cost reduction programme

Significant investment in IT or system upgrade

Restructure to drive out cost reductions/ business efficiencies

Develop a new product to enter a new market

Develop and grow into a new region

Develop and grow into a new sector

Re-engineer processes to drive out operational improvements/save costs 43

41332926232422191714

7. WHAT ARE THE BIGGEST DRIVERS FOR CHANGE WITHIN YOUR ORGANISATION OVER THE NEXT 12 MONTHS? (%)

8. COMPARE TWO HIGHLY EFFECTIVE LEADERS, ONE WHO FOCUSES ON CHANGE, THE OTHER WHO FOCUSES ON OPERATIONAL EXCELLENCE. IS THE CHANGE LEADER MORE OR LESS LIKELY TO HAVE THE FOLLOWING TRAITS / SKILLS? (%)

0 20 40 60 80 100

100

Able to manage ambiguity Adaptable

Strategic thinker

Confronts situations

Tough / resilient

Subtly influences behind the scenes

Creative

Gets on well with people

High emotional quotient (EQ)

High intellect

Organisation and planning

Understands the detail

Perfectionist

MORE EQUALLY LESS

surVeY

CRISIS, WHAT CRISIS?

THE SMALL, HIGH-GROWTH TECHNOLOGY FIRM

Fred Hallsworth is an independent non-executive director on five different boards, four of them technology companies, including Microvisk Technologies, where he is vice-chairman.“These businesses are all in their first decade and have between 30 and 100 employees, but they all market their products and services on a worldwide basis, so the state of the UK or European economies is not the be-all and end-all for them. Their biggest challenge is to work harder, faster and cleverer in order to compete with their big-company rivals who have more resources and longer-established brands and reputations.

Yes, absolutely, we are experiencing a period of unprecedented change. It started with the digital era which afforded real-time access to global information, and has been accelerated by the global interconnectedness which increases volatility and, given more standardised rules for investment, makes access to capital more difficult, even for countries.

The current focus on growth generally is the result of previous recessions and liquidity problems sorting out the wheat from the chaff: companies that have survived the recent major macroeconomic upheavals are lean and fit and know what they have to do to survive the next one. But what might arrest growth and damage the economy as a whole, is if the biggest companies, which are the engine of the economy, turn risk averse and cancel or postpone investment decisions until confidence returns.

I am relatively optimistic about the growth prospects for my companies because they have great technologies and are highly focused on exploiting those through great R&D and sales efforts in the marketplaces they serve. That is generating positive cash flow, which means they don’t have to tap the funding well too often. But at a more macroeconomic level I am more pessimistic, as the prospects for creating short-term shareholder value through trade sales or flotation are limited because of low asset values. Investors may have to revise their exit horizons from the current two or three years to five or seven years to achieve a good return. The flip side of this coin, of course, is that there are lots of opportunities for big companies to snap up assets cheaply.”

THE SMALL MARKET RESEARCH COMPANY

Shoaib Oosman is sales director at Globalpark, which provides online feedback software for market research. It has 250 employees.“We’re not feeling any sense of gloom and doom about the economy – clients always want to know what their customers are thinking and we are beating our sales and profit forecasts. But the economy is affecting us in terms of the way we manage relationships with some of the big brands. The clients are clearly trying to save money, and they are demanding, so we have to be agile enough to work with them. That has involved improving our operational capability, which, in turn, means we need to hire new people as well as upskill the ones we already have.”

THE NICHE OPERATIONAL TRANSFORMATION CONSULTANCY

Philip Clayson is founder of Mercer Caxton, which provides niche operational transformation consulting primarily for UK companies.“Generally I am finding that the UK’s largest companies are still focusing on cutting costs rather than building healthy pipelines of products, services and future business. Conversely, smaller companies are gearing up for growth in the second half of this year when they anticipate the economy will start to pick up again, with 2013 slated to be a year of improved growth. SMEs seem to be using the time more effectively than they did in previous economic challenges, assessing their options and preparing themselves for the

upturn. They also seem less cautious this time round. One of our clients has been through four recessions and dealt with three of them by hunkering down, cutting costs and

not investing. This time he is being much more speculative. He believes that by being fleet of foot SMEs like his will have pulled ahead of the large corporates by the time they ‘wake up’. So it is possible for a smaller company to capitalise on the slower super-tanker nature of their bigger competitors.

However, large companies have deeper pockets, which will help fund their expansion into new territories. A big strategic priority we are helping several UK telcos with this year is to develop the operational transformation needed to launch new products in markets such as Asia, the Middle East and Eastern Europe. Outside the big corporates, we are seeing some very creative hybrid financing options being put together by UK SMEs to fund their next growth phases and keep them ahead.”

16 Impact Executives / IMPACT / Issue 28

We went back to some of our survey respondents to gain a more qualitative picture of the nature of change they are experiencing within their organisations. Here is what they told us...

surVeY

THE MAJOR PHARMACEUTICALS FIRM

Toby Lovern is a director of business improvement at GlaxoSmithKline (GSK), which employs around 96,500 people in over 100 countries.“There is a continuing need for the pharmaceutical industry to constantly demonstrate the value of our medicines and to help payers manage the rising costs of healthcare, which are driven by an ageing population along with increasing chronic illness and lifestyle diseases.

In recent years at GSK we have been working hard to drive out cost and improve efficiency across our operations. We are putting a lot of effort into culture change at all levels, and as part of that

we are bringing people together in new multidisciplinary-team structures. For example we have project teams to systematically examine business problems and ‘innovation hubs’ to encourage new perspectives and generate new ideas. We’ve been working in these areas for several years and expect the momentum to gather further in 2012.

I think the prevailing optimism of survey respondents is well founded: while companies were managing down their cost bases as low as possible and introducing new ways of working to make them more agile and responsive, they were also thinking about how best to innovate for growth.”

THE FINANCIAL SERVICES SME

James Richardson is CFO Western Europe, GlobalPayments, a provider of payment processing services with around 500 employees in the UK and Spain.“I believe we are operating in a period of unprecedented change and for me global uncertainty and the lack of visibility of future demand are two major challenges. The financial services sector is also subject to increasing regulation, while diverse technology enables a range of new businesses to establish themselves, and these two factors have led to increasing transparency. So you never know what’s coming next, but you can be sure that whatever you do in response to it will be visible to everyone.

We have certainly had our foot on the accelerator and the brake at the same time. Over the past three or four years we have adjusted our costs in order to match supply and demand, but we have also reinvested the money we saved in areas likely to deliver a better return. As it turned out, the lower demand that we had prepared for after the last recession didn’t materialise, but redeploying the savings we have made in areas such as new customer channels, front-line sales people and new product propositions has borne fruit.

We will continue to stick to our values and beliefs, ensuring that we have the right people in the right places, and investing in areas where there is greatest demand and greatest opportunity. We will also monitor what we do as closely as ever. We are perhaps more flexible than we used to be: if things aren’t going to plan we respond much more quickly.

I am no more worried about the future than I’ve ever been, because the future always carries risks and opportunities, often in equal measure. It’s really about how you position for these and how you deliver against them.

The current economic conditions are forcing successful companies to come together and really assess things carefully. Good basic business disciplines, always important, have come into even sharper focus. But you mustn’t get so caught up in the minutiae and potential negatives that you do nothing. Nor should you implement change for its own sake.

Overall, I would describe our strategy for managing through uncertain times as defining our objectives numerically and then focusing on and investing in bringing together the various people aspects with clear direction and a convergent culture. This enables us to deliver to our stated ambition regardless of hurdles we face along the way.”

THE BIG PUBLIC SECTOR ORGANISATION

Arnab Banerjee is programme manager (continuous improvement) at Transport for London, a major public sector employer. London Underground (LU) itself employs around 20,000 people. Capital Projects, where Banerjee works, is the part of LU that manages train upgrades, new track, platforms and so on. It has around 2,000 staff and spends around £1.5 billion a year.“The challenge in Capital Projects is to deliver efficiently: half of our funding comes from fares and half from the government spending round, so we have to demonstrate efficiency to justify continued government funding. We are more protected than some companies from economic downturn,

because we are not ‘selling’ anything as such, but we are nevertheless under pressure to deliver ‘more with less’.We have just been through a major headcount reduction – 50 per cent at some levels. So job security is a big issue

for us and, overall, things can feel quite precarious and negative – though there are vast challenges ahead. And I can understand the optimism in the manufacturing sector (until five years ago I used to work at Alstom) because what alternative do they have now other than focusing on what they do best, focusing on clients, and going out and selling?

But that customer focus is important for us too. For the first time the Department for Transport has given us a set of milestones up to seven years ahead and they are public and very visible, which means we have no hiding place. As in most organisations, we have a host of talented people and the objective for corporate people like me and other more senior managers is to create the environment for success.”


surVeY

CHALLENGEThe company’s previous owner had lacked the expertise and tools to build the structure and processes needed to achieve the expansive financial goals established by the new private-equity owner. Impact Executives supported the business with an interim CFO while it searched for a permanent replacement.

WHAT SORT OF EXPERTISE DID IT NEED?Experience as acting CFO in a professional services firm; proven leadership and strategy skills; willingness to work at an operational level; and the communication skills to quickly facilitate a productive dialogue between finance, management and the board.

WHY DID IT GO FOR AN INTERIM, RATHER THAN A FULL-TIME, SOLUTION?• It let the previous CFO go at short notice, and needed

someone to not just hold the tiller but also to head the business in the right direction while it sought a full-time replacement with the right level and mix of skills.

• The interim manager could offer the requisite mix of skills and experience very quickly, and rapidly create a solid platform from which the company could achieve its objectives, as well as making the position attractive to full-time candidates.

WHAT THE INTERIM MANAGER ACHIEVED • The appointment of such an experienced interim CFO

in itself created a professional and serious impression of the company, and provided ‘quality assurance’ to investors.

• The interim CFO created a solid communication base between different stakeholders, resulting in a healthy atmosphere and fruitful dialogue.

• He gave the client full insight into the company’s financial situation and created efficient financial processes.

• The client used the interim CFO to give prospective full-time candidates an honest and detailed description of the company and the role.

• In turn, the interim CFO provided valuable assessments of each of the candidates, particularly with regard to their fit with the company’s culture and finance function.

• Overall, the client gained top-flight experience and expertise (rapidly and at excellent value) that would allow it to meet its new growth targets within ambitious timescales.

Blenda LagerkvistManaging Director, Impact Executives Sweden. [email protected], +46 (0)8 796 17 00

Combining wide and deep experience with strong interpersonal skills and a focus on results, interim managers provide a cost-effective solution to a range of different business challenges. Integrating a Russian acquisition for an


FAST-TRACKING THE FINANCES

THE INTERIM MANAGERThe interim CFO holds an MBA in Economics from Stockholm/Stockholm Business School. He embarked on his professional career in the mid-1980s and gained experience as a financial controller, investment manager, CFO and COO in different companies and industries. He has been an interim CFO since 2009.

NATURE OF COMPANYSmall life sciences business, established in 1990 and owned by a private-equity investor since 2010. Around 150 employees, and revenues of approximately SEK300 million (over £28 million).

LOCATION OF ASSIGNMENTStockholm, Sweden and three other locations nationally and internationally.

NATURE OF ASSIGNMENT The role required a senior interim CFO who could not only backfill the vacant position but also add real value by helping to set the strategic and financial course required by the new owner in order to meet ambitious new growth targets.

LENGTH OF ASSIGNMENT Six months.

ROLE OF INTERIM MANAGER Interim CFO.

FIXINGAGENTS

Case studIes

CHALLENGEThe company lacked a presence in the Russian market, so, as part of its expansion into new high-growth markets, had acquired a Russian plant. However, the usual merger integration issues were compounded by significant cultural differences.

WHAT SORT OF EXPERTISE DID IT NEED?• Experience of the Russian market was critical, given

the reputational risk to a major global corporation of failing to successfully negotiate the particular legal, accounting and compliance issues in Russia.

• Most acquisitions fail to deliver shareholder value, primarily because the acquirer fails to fully address people and culture change issues.

• It was critical that the company made a return on its investment in the acquisition.

WHY DID IT GO FOR AN INTERIM, RATHER THAN A FULL-TIME, SOLUTION? • Although the company had considerable merger

integration expertise based on 20 years’ experience of global expansion, there were no in-house experts on integrating large businesses within Russia. It wanted to minimise its risk by buying in that expertise, but didn’t need to hire someone on a permanent basis.

• The company did not want to increase permanent headcount. The integration was a discrete project, with a beginning, a middle and an end.

• The company brought in the interim manager at preferred bidder stage so that they could move fast as soon as the ink was dry on the final contract. This is a critical component of the kind of robust integration plan that speeds up the integration and return on investment.

WHAT THE INTERIM MANAGER ACHIEVED • He created the integration plan, including financials,

obtained sign-off from the board and managed the stakeholder community so that they all bought into the plan.

• He led the 30-strong integration team to deliver the plan, augmenting and trimming the team where needed.

• He managed the transition from a manufacturing to a marketing and distribution model.

• The integration was delivered on time and on budget.• The senior people the company wanted to retain were

retained and upskilled. Two of the critical nine lacked the right skills for the new organisation and left.

• Headcount fell from 2, 500 to 1,700 within 18 months, as per the plan.

• Productivity in the plant improved by 15 per cent over 18 months.

• Running costs fell by 20 per cent over 12 months.

international consumer goods company, and getting the finances of a small Swedish life-sciences business in shape to meet the ambitious growth targets of its new private-equity owner, are just two examples…


A RUSSIAN REVOLUTION

THE INTERIM MANAGERLondon based, the interim manager had spent most of his career abroad, working with global FMCG businesses (an effective way of building the adaptability that is a key skill for interims). He was an operations director early in his career but had spent the past seven years doing only international integration work, including a major project in Russia.

NATURE OF COMPANYGlobal FMCG manufacturing business, with head office in The Netherlands and 30,000 employees globally.

LOCATION OF ASSIGNMENTRussia, 100 miles outside Moscow.

NATURE OF ASSIGNMENTIntegrating a Russian acquisition.

LENGTH OF ASSIGNMENT Twelve months.

ROLE OF INTERIM MANAGER Interim integration lead.

FIXINGAGENTS

Case studIes

There is an urgent need, said Sir Roger, “to prospect and build in the new growth markets rather than continue to harvest the traditional – and currently less fertile – markets of our close neighbours,” and he exhorted businesses to summon the courage and energy to reach out into uncharted territories. “Don’t rely on reports,” he urged. “Get on the plane and go.”

And there is much to go for. The opportunities in growth markets are no longer confined to what, a decade ago, Goldman Sachs chairman Jim O’Neill coined ‘the BRIC economies’ – Brazil, Russia, India and China.

O’Neill has now defined what he calls ‘the Next Eleven’ high-growth economies – the four fastest-growing being Indonesia, South Korea, Mexico and Turkey – which, together with the BRIC economies, will, he anticipates, generate additional economic growth of $15-20 trillion over the next ten years, more than double that of the US and the eurozone combined. If these economies repeat over the

The proliferation of fast-growing markets around the world offers rich growth opportunities for UK companies – provided that they don’t treat them as a homogeneous group. Premila Puri explains.

GIVEN THE OSTENSIBLY dire state of the economy in the UK and the Eurozone, one of the more surprising findings of our recent survey (see page 12) is the level of optimism among our corporate clients. Nearly 60 per cent of them say ‘growth’ best describes the overall focus of change in their organisations over the coming 12 months, compared to just over 40 per cent for whom ‘cost savings and efficiency’ remain the primary focus. Look back two or three years to the aftermath of the last recession, and you are likely to see a much heavier preoccupation with consolidation than with expansion.

Why the change, particularly as we are balancing precariously on the brink of another recession, and as much of Europe seems poised to plunge into debt-fuelled chaos that will play havoc with our export markets? It’s not simply that most companies have cut all the fat they can; it is that our business leaders are increasingly attuned to the rich opportunities in the high-growth developing economies of China, India, Brazil and Russia – and elsewhere.

CBI president Sir Roger Carr commented at the CBI annual conference in November 2011 that UK companies should of course be channelling their resources into markets that are growing at around nine per cent, that being “the only way out of the corner we find ourselves in.” Exports, he pointed out, are the critical driver of growth and the linchpin of our recovery. But with a record trade gap of £9.8 billion and 47 per cent of exports currently destined for the eurozone, redressing the balance is a significant challenge.

“There is an urgent need to prospect and build in the

new growth markets rather than continue to harvest the traditional – and currently

less fertile – markets of our close neighbours”


THE NEXT ELEVENGoldman Sachs has identified the ‘Next Eleven’ countries of Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea (left), Turkey and Vietnam as potential high-growth markets.

NEW YEAR, NEW HORIZONS

Premila PuriPrincipal consultantImpact Executives Global Interim Management [email protected]+44 (0) 20 7314 2004Premila specialises in Public Sector and Business Services, with a focus on developing the HR function.

hIgh-groWth MarKets

coming decade the 15 per cent annual growth in imports they have enjoyed over the past decade (UK exports grew just 3.5 per cent a year over the same period), that would translate into a rise in imports of $3 trillion to $4 trillion.

And the “probably unparalleled” expansion of a new middle class means it is no longer acceptable – or good business sense – to refer to these countries as ‘emerging’, believes O’Neill. He predicts that the next three decades will see the emergence of three billion new members of the middle class (with incomes of between $6,000 and $30,000 a head) around the world.

“Any company that immerses itself in providing what these people want is likely to do rather well,” he says.

The way to immerse yourself in providing what they want is not to treat them as a homogenous group. Steve Varley, UK and Ireland managing partner of Ernst and Young, points out that a country such as India can on its own encompass several very distinct ‘megacity’ markets.

Reorienting UK exports towards high-growth economies is part of a much broader process of extending the international reach of UK business. Indeed, many companies are now building on their export experience and establishing a physical presence in other countries.

But whether exporting or expanding, it is vital to adapt a global strategy to local markets – and this has implications for organisational structure and processes, as well as leadership (see box above right).

And adapting the business to local markets

means not just that you can’t treat all consumers the same; you need to treat employees differently too. The first mistake many companies make is to assume that the ‘low-cost labour’ that originally made Asian markets such attractive manufacturing and outsourcing locations is still the norm. Labour is by no means cheap in these


LEADERSHIP 2030A recent Hay Group report identifies what it calls ‘Globalisation 2.0’ as one of the six megatrends that will affect organisations and their leaders most profoundly over the coming decades.

•The shifting balance of power towards Asia means Western firms wanting to do business there will need to be highly attuned to the changing political and economic sensibilities in different high-growth markets.

•Adapting their global strategies to local markets will be helped by fostering local participation in decision-making, having more culturally-diverse leadership teams and encouraging more cross-country and cross-functional collaboration.

•Organisations will also need to be more agile, as the best global companies operate like a flattened matrix, where information and authority flow in all directions.

•Leaders will need to be multilingual, flexible, internationally mobile and adaptable, culturally sensitive, collaborative and good conceptual and contextual thinkers.

•They will also need the ability to lead diverse teams over which they may have no direct authority, and to find new ways of engendering personal loyalty in an environment where the old loyalties between employer and employee are declining due to the distance between them.

Source: ‘Leadership 2030’, Hay Group

“It is vital to adapt a global strategy to

local markets”

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But the final word goes to Sergio Marchionne, CEO of Fiat and Chrysler, an exemplar of successful international expansion.

“Acting, thinking and being global is something none of us can avoid,” he says. “Like it or not, in one form or another, globalisation is here to stay.” But while continuing to rely on domestic consumption to revive an ailing economy is “pure folly,” he warns against tipping the scales too far in the opposite direction. You have to stay involved in your domestic market, he believes, or risk undermining “the equilibrium of the entire economic system” – as Britain did in the 1980s when it decided to shift from manufacturing to a more service-based economy.

That said, the message for UK business leaders is clear. Don’t procrastinate any longer. Get on the plane and go!

talent-hungry, fast-growing economies – but equally, points out Paul O’Malley, senior partner with Mercer in Asia Pacific, “a London-headquartered multinational trying to compete with a local Chinese company for talent in China is on a hiding to nothing if it tries to use pay as its primary bargaining tool.”

He continues: “The Chinese economy is so buoyant that a Chinese firm can afford to pay what it takes to attract and retain the best people. Companies domiciled in the stagnant markets of the West have to use different strategies if they are to compete for talent.”

Western companies do, however, have an advantage over their Chinese counterparts – their sophisticated talent management and compensation approaches. But here too, “trying to impose on developing markets an approach that was designed for developed markets will fail to deliver a return on investment,” says O’Malley.

Overall, he points out, Western compensation programmes tend to focus on driving and rewarding individual and financial performance, “but in developing markets, where the key risk is lack of talent, the compensation strategy should focus more on leadership development and the ability to lead, develop and retain others.”

Such an approach not only helps to attract and retain people in countries such as China and India, where career advancement is increasingly important for individuals, but it also helps to address the skills shortage – particularly leadership skills.

IN SEARCH OF GLOBAL CITIZENSMaury Peiperl, professor of leadership and strategic change at IMD, believes that to succeed in our increasingly interconnected global business world companies need to think about mobility and talent far more broadly than they have been accustomed to. Rather than thinking in terms of either traditional ‘expatriates’ or locals, they should be looking instead to find and develop what he calls ‘global citizens’ – self-propelled, globally mobile professionals who are keen to take advantage of development opportunities in different countries.

“But we don’t know how to look for these global citizens,” said Peiperl. “They don’t fit classic HR processes, and even headhunters aren’t that good at finding them.” The way to identify them, he suggests, is through the auspices of younger employees who are adept at using social media.

But however you do it, it’s important to find these people because, in contrast to the old days when an expat out of sight in some remote outpost was also largely out of mind, people out in global markets today are the individuals delivering the business. They have moved from the wings to centre stage, but the way companies identify, manage, support and develop them often fails to reflect their critical strategic importance.

“Acting, thinking and being global is something

none of us can avoid”

The world’s top citiesGrowing urbanisation in Asia has led the McKinsey Global Institute to predict that 15 of the world’s 50 top cities in 2025 will be Asian newcomers, with 13 of the dropouts coming from the West.


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STEPS TO EXPORT SUCCESS

1 UNDERSTAND YOUR POTENTIAL CUSTOMERSAll new geographic markets are complex, but none more so than the new high-growth economies, where income levels and purchaser preferences are constantly changing. Regular visits are the only way to learn about the infrastructure, people, buying styles and competition, and to keep abreast of changes. By embedding themselves into the environment early in the process, senior decision-makers can establish important networks with government, fiscal and regulatory authorities, embassies and local trade associations. On-the-ground help through distributors, agents and service providers already in the target territory is invaluable.

2 LOOK BEYOND THE BRICS Companies should take advantage of high growth in not just the BRIC economies, but also countries such as Ukraine, Poland, Nigeria and Ghana, which Ernst and Young has identified as being among the top 25 fastest-growing economies over the past ten years. Many markets in Africa and Eastern Europe are becoming rapidly urbanised, and businesses focusing on cities rather than countries are boosting their export success. In China, for example, there are eight ‘second tier’ cities with an average population of 6,890 million and forecast annual average GDP growth of between 7.7 per cent and 9.1 per cent up until 2020. The rising wages and burgeoning middle class in such cities make them attractive specific targets for UK exports.

3 INNOVATE AROUND EXISTING PRODUCTSInnovate around existing products to begin with. Then try to move further up the value curve and secure better prices both by capturing better margins via product design and by increasing marketing spend to establish and protect valuable brand and customer franchises. Tailor products further to reflect local tastes in a range of markets. Increasing product ranges pays dividends. Co-developing products alongside suppliers, or acquiring competitors with complementary products, can boost market share and save costs.

4 BE FLEXIBLE WITH YOUR BUSINESS MODELTake a flexible approach to market entry, and focus on speed and integrating the new business into the wider operation. Ensure that your underlying business model is tailored to the local business environment – and recognise that each market approach may be different. Joint ventures between multinationals and entrepreneurs in high-growth markets can be powerful, but they require a more defined structure than other business arrangements. Many companies have found that an ineffective sales or distribution partner in rapid-growth markets can scupper success, no matter how innovative the product. Select partners rigorously using extensive due diligence, and put relationships on a sound commercial footing.

5 FOCUS CLOSELY ON TALENTTo compete in high-growth markets, you need high-quality employees with cultural awareness and language skills as well as technical expertise. The war for talent rages in these markets and wages are rising commensurately. Fill technical and operational roles early on to ensure a speedy start-up and only compromise on that speed when you are in a position to be able to find the talent that you will need longer term. Diversity of experience is more important than particular nationality or ethnic origin, and be proactive about moving people – particularly technical experts – into new markets. It is relatively easy to hire marketing, sales and, increasingly, finance people locally. Be agile in developing and deploying staff .

6 TELL STAKEHOLDERS EVERYTHINGThe ability to fund growth is generally determined by how confident stakeholders are. Take stakeholders with you by sharing detail on the potential of your innovation and the progress you are making. Communicate openly and frequently about your new market strategy and provide as much information as possible on both market entry and product development, including any problems. Understanding the degree of risk that stakeholders will tolerate can help determine market choice.

7 TAKE A LONG-TERM VIEWAnother recent report from Ernst and Young, ‘What lies beneath’, revealed that almost one-third of the 900 CFOs questioned about their experience of entering high-growth economies said the costs, time spent or risk were higher than they had expected. CFOs clearly do need to retain oversight at every stage of the investment, but a long-term vision is equally important, including strategic goals for the investment to evolve over time. Despite the early financial hit, strong GDP growth rates in high-growth markets make the long-term outlook positive – despite occasional bouts of volatility.

Source: ‘Winning overseas: boosting business export performance’, Ernst and Young.

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