BACKGROUND
A years ago, a business acquaintance referred me to a European
multinational media organization which was looking for someone to takeover
leadership of one of their major Canadian media operations. The parent
organization operated over 300 publications, 60 websites in 21 countries. North
America was their largest market and Canada represented approximately 95% of
their North American business. The particular Canadian operation that I was
asked to lead was causing them significant challenges. The most notable of
which was the fact that it had become their largest money loser globally.
This business unit operated approximately 14 regional and national magazines
and newspapers, 3 websites, employed approximately 50 people, was headquartered
in Toronto and had 7 regional offices. It was a market leader with a
circulation of over 700,000 publications monthly. The publications were printed
in 4 different locations across the country and distributed through 7,500
locations nationwide.
In the 5 years prior to my arrival, the senior leadership role of this
Canadian company had changed several times. The management team (i.e.
department heads) had been negatively impacted by this ever changing
leadership. The individual managers, for the most part, while capable within
their respective areas of responsibility, suffered from a lack of leadership
and as a result had developed a noticeable “silo” approach to handling problems
and making decisions. In other words, there did not appear to be any noticeable
team approach to dealing with issues and challenges. Each department
implemented their individual solution when it came to dealing with situations
that were of a more general nature. This had resulted in situations where the
actions of one department negatively impacted the ability of another to
function properly. There was a fair degree of acrimony among some department
heads and, on my first day, I was informed that a few key department heads had
submitted written or verbal resignations.
Financially the business was in bad shape:
- there was a significant operating loss and had
been for a number of years.
- bad debt was in the double digit range.
- some accounts receivable were over 180 days past
due and, of these, several owed well over $150,000.
- many of these larger bad debt accounts were
still booking business with the company despite their outstanding debt
situation.
- the company’s cost structure had gotten out of
control in some areas. For example, websites were locked into a cost structure
of $75,000 a month, produced no discernible revenue benefits and were experiencing
declining traffic.
The company’s European head office was losing patience with the
operation and I was advised that I was the last “kick-at-the-can” for this
business. Upon my arrival, I was given several briefings by head office senior
management on their views of what needed to be done which included a list of
which members of the management team should be replaced and where costs should
be slashed.
SITUATION
My assessment of the challenges I faced was:
- My superiors wanted to see developments quickly. (NOTE: The global COO, to
whom North America reported, met with me 2 weeks after I joined the company and
within an hour of our meeting advised me that “my vacation period” was over and
I was to send him, within 48 hours, a list of my 10 quick fixes for the
business.)
- I did not want to immediately act on the suggestions
made by my superiors. I needed to be able to make my own decisions regarding my
management team.
- There were a few members of my management team
who had indicated their intention to leave. I needed to convince these
individuals to stay.
- I had a reluctant and battle scarred management
team. Many of whom were convinced that my primary responsibility was to wind
down the operation at the behest of my superiors. The management team’s buy-in
and commitment was integral to any transformation strategy for the business.
The challenge was to find a mechanism for achieving this immediately despite
their misgivings.
- I needed to produce identifiable and meaningful
short-term progress in order to reassure my superiors that my decision to not
implement their suggestions immediately was a proper course of action.
STRATEGY
It was important to get the management team involved in the problem
solving and decision making process at the outset. They needed to feel
empowered and involved if I wanted them to stay around, take ownership and be
part of the turnaround process.
In hindsight, I guess I was implementing a cross functional team style approach.
The benefits associated with this approach, included:
- Faster problem solving and decision making
- Increased level of by-in or commitment to the
resultant action plan by those who crafted the solution.
- Increased ability to get multiple situations
dealt with simultaneously. A cross functional approach should require less
senior management involvement in each problem solving and decision making circumstance.
In my case, I worked with individual managers to help identify the key issues
or problems and then turned the matter over to teams who would return to me
when they had arrived at what they felt were implementable solutions. This
allowed me to have a number of problems being worked on simultaneously without
personally being involved in every detail and running the risk of being the
source of delay.
- Opportunities to assess the quality of the
management talent by observing them in real work situations. It can be a very
effective way to measure how individuals function in a team, their leadership
or potential leadership qualities, problem solving and decision making skills,
organizational capabilities and overall work ethic.
- Improved customer relationships resulting in increased
sales and brand strengthening. I have on occasion put inside and outside sales
together with finance to manage aspects of the sales process and experienced surprising
benefits.
This idea first came
to me when I was running a company that was facing a particularly aggressive
competitive environment. We were losing sales because the sales reps,
especially the outside sales reps, when trying to cut deals with clients were
required to contact their supervisors for approval before they were permitted
to wander off the official pricing schedule.
The solution was to
have the sales management team and finance department work together to come up
with a pricing management process that would provide the field reps with the
latitude to make pricing decisions while sitting with the clients while at the
same time safe guard the businesses margin requirements. Finance and sales
management structured a pricing practice that, while riskier in terms of
maintaining margins, ensured that our reps left very little money on the table
for competitors.
In addition to the
direct benefits in terms of increased sales, clients were impressed that our
reps were empowered to make these decisions and to make them quickly. This reflected
well on the reps individually as well as the company.
Beginning the day I arrived, I spent most of my time meeting with my
managers one-on-one to discuss their departments and to get their perspective
on what they felt was required to get things back on track. These meetings were
always held in their offices, never in mine. I needed to get them to accept my
presence and this was the best way to reinforce that I was part of their team
and my role was to remove obstacles as well as help and support them. I had no
hesitation in telling them that they were the experts when it came to their
departments. Through these initial sessions and ensuing discussions, I believe
it became evident to the management team that I had high level of confidence in
their ability to get this organization back on its feet.
Initially, from a few Department Heads, I was greeted with a litany of “won’t, don’t and can’t”
responses to my suggestions on how we could attack a problem. This was not
entirely unexpected, I had experienced this type of resistance in previous
roles. Most of what I was suggesting were actions that these managers had
requested under previous administrations but their requests had been met with
resistance and traditional risk averse rationalizations. What I was now hearing was the re-iteration of what they perceived
as the parent company’s resistance to these ideas.
NOTE: I always find it amazing that when
companies or business units find themselves in dire circumstances the senior
management (i.e. the guys in Head Office) often adheres to “safe” practices that probably got them into their difficult
situation in the first place. A major
portion of my career has involved being recruited into organizations to lead
management teams that are underutilized and, often, have become demotivated due
to being subjected to risk averse senior level decision making and problem
solving practices. The major challenge I usually face is transforming these teams
into motivated, energized groups that embrace innovation, make the tough decisions and zealously pursue
being best-in-class.
I seldom have encountered managers or department heads who do not want to take a risk. What
I have encountered are managers who have been discouraged from taking risks because
of a lack of senior management support. Someone once expressed it best when
they said “senior management want us to take risks but not to risk anything”.
Changing or transforming an indigenous team can be difficult and not
without its challenges. Often it is preferred to replace all or part of the
existing team with known talent that you may have worked with previously. It
has been my experience that the management team that was in place when an
organization went off the rails can be the best team to get it back on track.
It seldom is the front line management or department heads who have caused the
problems, they are just the ones asked to accept the blame. Given the
opportunity and the proper environment they often quickly rise to the
challenge.
With a few exceptions, I was able to keep the original team intact and
in the first 12 months the team was able to accomplish the following:
- The company, after years of losses, was returned to profitability.
- Bad debt plummeted from double digit to low
single digit.
o
Finance was given control over bad debt
accounts.
o
Sales was required to get finance’s
authorization before they could accept business from bad debt accounts. This
authorization was absolute. I refused to personally get involved dealing with
exceptions without finance’s approval.
- Production costs dropped $1,000,000.
o
Production was centralized to Toronto from
several regional locations.
o
Print contracts were re-negotiated. Printing operations were streamlined.
o
Production was given increased authority to refuse
last minute ads if accepting late ads meant missing print production schedules
or incurring overtime.
o
Production was significantly automated thus
reducing time lines and manpower.
o
Production and sales worked with clients to
automate the client’s process for submitting ads. This eased and helped
streamline our production processes.
- New products were introduced.
- Web costs were reduced almost $50,000 per month
and the websites were restructured to be revenue contributors.
o
Publication advertisers were given the option to
pay a little more and have their print ad appear online.
o
The sites were modified to allow for this to occur
as a simple pass through from production. In other words, once an ad was setup
for the print product it could be digitally placed on the site with no or
minimal manipulation thereby producing additional revenue with negligible additional
cost.
o
In addition to wanting to develop more
contemporary and relevant web sites, a priority in redesigning the sites was to
eliminate the need for costly out-sourced service contracts.
- Magazines and newspapers were redesigned to make
them more relevant to market needs, to reduce paper costs and to optimize the
use of ad space. Studies were conducted regarding readers preference for size
and aspects of layout. The objective was to reduce paper costs by reducing
publication size but not lose ad revenue by reducing ad sizes excessively.
NOTE: We also carried out
a number of studies regarding the quality of paper used for the print products.
But despite the results, we were somewhat restricted in using lesser quality,
less expensive paper.
Over the years, I
have been responsible for the publication of close to 100 titles including
consumer, industry and trade publications. I have never seen a study that
showed that the reader or the advertiser for that matter would actually stop
buying or advertising in the publication due to the quality of its paper. The
real opponents of lesser quality stock were ad agencies. They were usually the
ones who refused to put a client’s ads in a publication that did not publish on
high quality expensive stock despite what the studies showed.
Because we needed to
deal with agencies we were often required to use expensive paper.
- Editorial costs were reduced 25% while
maintaining quantity and quality of content.
o
A big contributor to this process was reducing
editorial staff and relying more on freelancers. I believe we reduced our full time
editorial staff almost 50% and ended up sourcing our content from a group of approximately 75
freelancers.
o
The system for compensating freelancers was
changed from a “per word” fee schedule to a fee schedule based on the specific
piece of content being provided. Managing Editors would negotiate with freelance
writers to pay according to the experience of the writer, importance or
relevance of the piece and the managing editor’s judgment regarding how many
words the article should require.
Distribution was re-engineered.
By: Richard Peters
http://ca.linkedin.com/in/richardpeters2/
