The challenges presented by Covid19 have brought into stark focus for many businesses people challenges that often come with managing a turnaround, a restructure, a merger or acquisition, or a change in strategic direction.
In our experience, despite all the work that goes on, for example, in a due diligence or the often heart-wrenching consideration that has to be given to a dramatic restructure that may be necessary to bring a struggling business back to health, we see precious few examples of effective decision-making in such circumstances.
In many cases, where savings need to be made, there are some soft targets. It is not difficult to recall how jobs in training, sales, marketing, or customer service are among the first to go. The agenda is nothing more complicated than a temporary restoration of a profit and loss statement.
The problem with such an approach is that it does not take consideration of where the business wants to head and in what circumstances it is trying to get there.
However, there is an approach that works which, not surprisingly, is relatively simple to explain but somewhat more difficult to implement.
In essence, the choice is not about which people to let go and wish to retain but rather about the jobs that align with the new strategic direction of the business. Over the last 3 months many businesses will have wrestled with the challenges of a rapidly changing economic environment and what that means for their organisation. The first step in the 3-Rs (Review, Reposition, Renew) roadmap may well have been to improve cash flow by saving money on wages. The Federal government threw such an approach up in the air not only by introducing the Job Keeper subsidy, but also by advising businesses apply for the subsidy that they could reinstate workers who have been stood down to qualify for funding.
If we take a step back, and think about value from the outset, then there is a simple model that can be applied. The jobs that must be retained are the jobs that create value or deliver strategy, closely followed by the jobs that protect value. Other jobs will be support jobs but for many businesses the question of establishing which jobs are which can be challenging.
If a job (and we are not talking about the people in those jobs) has the capacity to create value or deliver the strategy of the business, it is by definition a strategic job and needs to be retained. The easiest way to recognise such a job is that performance is typically variable, the reality is that some people just do these jobs better than others. Sales is probably the simplest example. It is the variability in delivery of performance that shows there is upside in retaining and investing in these jobs.
Wherever a job demands a high level of consistency and where a failure in that consistency can lead to damage to business value, then such a job may be considered a critical job and should also be retained. A simple example is a financial controller whose role is defined by the accurate production of a full set of financial statements on a timely basis. Where these statements are inaccurate and other management makes decisions based on information included, then the decisions may be wrong and business value discounted. An even simpler example is the commercial airline pilot. Variable performance amongst airline pilots will destroy value in an airline pretty quickly.
The secret considering jobs in this way is to shift our mindset from ‘our most important jobs are our most senior jobs’ to an understanding of the jobs that deliver value and support strategy. It is the understanding of strategy that determines which jobs are of highest value. A payroll officer, for example, is unlikely to be a strategic or a critical role in most organisations. It is generally a support role. But if the payroll officer is a payroll expert and they work in an outsourced payroll company whose job it is to deliver seamless payroll expertise to its clients, then such a role clearly becomes a strategic role. Similarly, if customer service is a cornerstone of strategy, everything that can be done to retain customer service excellence and even to invest further in it should be done.
A turnaround situation is no different in this regard from a merger or acquisition. As a business moves into its new future it needs to have the right strategic roles identified and then have the best people in them at any level in the organisation.
The only way in our experience that a business can do this is by clearly understanding strategy, understanding the corporate capabilities it needs to develop to deliver shareholder value via the strategy and then aligning its strategic and critical jobs with those other strategic components.
Written by Andrew Thoseby
Andrew is a Director at 1st Executive, an Executive Search and Leadership development firm in Melbourne. He brings with him decades of experience having worked in senior management and leadership capacities around the world and now shares his knowledge with owners and executives of businesses big and small across Australia. Contact us to see how Andrew can help your business.