The Promoter Managing Director of a major Herbal Research and Products Company reached out to us initially in January 2012. The reason why they approached us has become a familiar story.
A second generation entrepreneur who inherited the business and had built it up from Rs 14 crores top line to approx. Rs 125 crores over a period 10 years. The business was profitable but managed in a traditional style. Very strong value system which was inherited from the first generation promoter. High personal loyalty and motivation to do the “right thing”. To grow any further required organizational and cultural changes.
We started the engagement by first conducting a cultural and organizational diagnostic. The cultural audit showed a very clear preference for an achievement-oriented style and a very clear vote against a power oriented culture. Lets set aggressive targets and build a back end, which takes pride in achieving. Learn to accept failure. Allow experimentation and enjoy climbing a higher mountain. The leadership was professional and loyal but the processes, which they worked with either non-existent or underdeveloped. There was no business plan, budget, cash plan. Process for recruiting was quite evolved but once people came in, there was no performance management system or compensation philosophy, which was supporting the business. The organization was quite flat putting excessive pressure on the Managing Director and the structure was a little confusing in terms of reporting to the family members….and somewhere not quite coming together as an A Team taking responsibility for the business. Well-intentioned professionals, some of whom had spent over 15 years in the business but not aligned directionally.
We started off with a quick diagnostic and then did a one day workshop with the top 25 people outlining what we thought needed to be done and the process we would follow. We obtained a buy in, and then went about our job. I must say that one of the major facilitators was a virtually complete lack of resistance or any kind of politics. People at different levels seemed to be keen to learn and do what was good for the business.
- We restructured the organization to reduce span of control and created a product supply organization (PSO) to support the growth plans of the business, and also created a marketing division to support the sales network. We played with the idea of creating an SBU structure but for the size of the organization convinced the promoter to conserve expertise through a functional structure. In any case the market facing roles were distinct with one being B2C and the other being B2B. However the back end was knit together. All structural changes were supported with detailed job descriptions.
- We helped staff the new organization and helped to get on board a Head of HR, Head of PSO, Head of Finance, and to bring in expertise in marketing as well as FP&A.
- We installed the balanced score card and assisted the company to deploy that down to the Manager level. Along with the initiative on FP&A this installed a strong business planning and review system.
- We installed a new performance management system linked to the balanced scorecard.
- We restructured the compensation system. Rationalized base pay and introduced a variable income plan linked to the financial performance of the business and the performance of the individual.
- We installed a governance system. There is an Executive Leadership Team which meets once every month and discusses the business MIS and the balanced score card of each individual member.
About a year or so back, the culture of the organization began to change. Aggression in planning, transparency of targets and actual performance of individuals. Bottlenecks are easily identified and the pressure to re-skill and develop is clearly being felt. HR function has very clear targets which are agreed with the business which include manpower cost, recruiting lead-time, attrition and capability building. The leadership has begun to look higher and further. To increase the pace of change and their appetite is increasing. Their top line is kissing Rs 200 crores and their profitability has trebled. There is a great leadership team, who are aligned, capable and working to solve problems.
We continue to coach the Managing Director and Head HR and provide advisory and consulting support where required.