Change can make or break a business. Which is why it’s important to understand the costs versus the benefits of any change you decide to push forward in your business.
Very often the driver behind change is reducing costs. These are often attacked and managed – sometimes overly aggressively without adequate attention given to growing revenue.
So how do you manage change while boosting profitability? Clive Hyman FCA of 528 Advisory has nine top tips:
- Success measurement of KPIs (Key Performance Indicators): Rather than making your main KPI cost reduction, make it revenue and profit increase. All change projects should focus on growing revenues and profits, and setting fair and reasonable KPI’s which are in the best interests of the company as a whole.
- Alignment of remuneration and incentives: Change is reinforced by ensuring the remuneration and incentives attached to it support the new actions required. It must be coherent with the new vision for the business thereby ensuring management, employees and shareholders are all pulling in the same direction.
- Joined up thinking: Too often the resources allocated to implement the cost cutting are then subjected to cost cutting themselves! Every project needs to be planned and managed to its conclusion – don’t abscond part way through. Think about the bigger picture and the wider impact of subsequent changes. It sounds obvious but far too often it seems the right hand doesn’t know what the left is doing.
- Bringing in help: Bring in help where needed. Companies often focus on the costs of the project rather than the benefits. Look at the overall project and the benefits it will bring, and the best and most effective way to achieve this, factoring in issues like your own time, missing deadlines, having to re-do work, etc.
- Protecting value: Consider the impact a change will have on customers. Walking the floor and visiting locations and talking to people is the simplest way to work out how to protect the value embedded in your business. Any change should include considering the customers’ needs.
- Wood for the trees: Owners, Chairs and CEOs sometimes get stuck on working in, not on, the business. They lose perspective. Allow the management and their teams to do their jobs, so you can do yours and put your focus where it is needed.
- Towards the common good: Everyone within the business should be working towards what is best for the company – not for any one individual or group of individuals. For example, too often bonus and remuneration are narrowly focussed on the particular silo a person operates in. This tends to lead to competition rather than cooperation.
- Innovation: Most large businesses struggle to innovate; shareholders and Directors won’t tolerate short-term profits being hit by the investment required to get a new idea moving. Unless the company is working for the common good, is clear on its vision, is engaging all the stakeholders and has a clear understanding of the costs vs. the benefits of any new project – it is likely the required changes and the initial costs will stop innovation in its tracks.
- Be nice and have fun: Work should be fun. Low wages, long hours and poor leadership result in disillusioned employees. Imagine if all your staff were empowered and happy at work. Would they go the extra mile? Hell yes.
Will these nine tips make a difference to your profitability as your business steers its way through a major change? Yes. For example, we worked with one CEO throughout the process of selling his business. By helping the managers focus on keeping the business performing and achieving growth, the company added US$ 150m to the sale price.
ABOUT THE AUTHOR
Clive Hyman FCA is an expert in change management, transformation, innovation, acquisition integration, and benefits realisation. He is Chair of the 528 Advisory which works with CXOs and their direct reports to set the foundations, direction and governance for a successful acquisition and/or company transformation. See: www.528advisory.com