Management Consultancy

BACKGROUND:

The ICT Wholesaler / Distributor (Client C) was a family-owned business with a staff complement of forty. Head office was in Gauteng and with branches in Western Cape, Eastern Cape andKwaZulu Natal.

The branches were sales-focused, comprising of sales and some support personnel, and with a Branch Manager overseeing the regional activities including customer relations and business development. The Executive Management team was based in Gauteng at HQ.

MAIN POINTS:

• After obtaining an important brand distributorship there were reasons for optimismand, like in many sales organisations, that lead to a huge hype of future potential sales. The business showed some sales growth on the back of this. Yet financial performance was poor. It did not reflect the sales growth. The support functions in the organization started to show the years of neglect that went unnoticed.
• This resulted in poor reporting of financial performance and the lack of other key metrics to allow the efficient running of the business. Soon cash flow reared its ugly head due to the lack of planning and systems and processes to managed to the business operations. Like many businesses that grow organically, staff quite often get added in an unstructured fashion and reporting lines become blurry. The organogram looked unstructured and unconventional (like an afterthought – which of course was exactlythe case). There was no real HR department, but like in many small organisations, anoffice-based support person was tasked with HR duties. This untrained employee had the burden of all admin, attending to most staff matters including external and internal personnel enquiries as well as taking care of the payroll.
• It was a classic case of “focus on a single business objective only”. In this case, Sales at the cost of long-term sustainability. However sales staff were slowly losing ground. Competitors had the right product in stock at correct and sustainable prices. They had customer credit termsthat allowed their customersto compete and be successful. Competitors’ customer and sales support teams were set up and motivated to ensure that customer enquiries and technical matters were dealt with promptly and speedily. Client C sales team could just not remain competitive.
• The business was carrying a huge amount of inventory, but not the items that the customers were buying. The continuing changes driven by the manufacturers to drive sales is a web that catches the procurement team eventually. More so if theyhave no market input from the sales function. In an organization like this, silos prevent inter-departmental cooperation and causes unhealthy competition between departments due to distorted reporting lines and unclear shared objectives.
• Sales staff were starting to show signs of fatigue and the culture drove away customers who could no longer identify with teams that showed signs of “sales at any price”. Salespeople were driven to achieve unrealistic targets from directors whoargued that “everything can be fixed with more sales”.
• Sales started to lose the transparency and integrity that is so necessary for successful and sustainable sales performance. It was no longer strategic or clear who the ideal customers were and what was important for long term survival and growth.
• Sales staff were starting to look for alternative opportunities in the market.
• Management was unclear on where to start. The information available from the CRM, accounting and ERP systems were not reliable and readily available. Reliance on information from Branch Managers from regions who were competing against each other was sometimes conflicting.

When staff started leaving other HR matters started to appear. Significant leave balances had to be paid out and disputes arose. Disciplinary matters and recruitment started to takeup a significant amount of management’s time.

WHAT TRANSPIRED:

• Within a year the business was in serious trouble. The new product supplier stopped supply because Client C’s account was overdue and, despite the business sitting with a warehouse full of product, it was not what the customers were ordering now and what the sales staff were promoting. The ultimate disaster: customers can’t supply their clients and can’t pay their bills to Client C and their sales staff can’t earn commission and the manufacturer and key supplier of product has closed the tap to supply and existing orders.
• An external investor had to be found fast to settle the account of the manufacturer. The investor could not trust the current management based on this track record and had to appoint his own “man-on-the-Board” with the skill set to fix the business and set the course to get out of the mess. Since the company no longer had a strong identity, other than the family ties, this would set a new tone at the top. This new tone trickled down to the lower echelons and eventually to customer-facing parts of the organisation.

WHERE TO START:

• The Current Reality is the key starting point. A series of one-on-one meetings were conducted with key stakeholders within the organization such as the CFO, OperationsManager, Managing Director, Branch managers and various support personnel.
•  This was necessary to understand how the current system was structured, identify what was working, what was not and areas of concern.
•  A temperature check was also done with a survey application to identify any hotspots in the Workplace Culture

FINDINGS AND SUBSEQUENT ACTIONS TAKEN:

• Centralised support functions at HQ. The Payroll and HR functions were combined, and the responsibilities were assigned to a newly appointed HR Officer. The HR Officercould focus on filling in the gaps resulting from lack of attending to the basics that were neglected and missed by someone that was looking after HR as a distraction rather than being their core responsibility given the dynamic nature of a multi-region organisation.
• Review of the regulatory compliance and determining of the GAP was done to get to compliance and prioritization of the issues.
• A closer look at job roles and skill requirements and reviewing any skills gaps was urgent, but it was not a quick process to undo years of poor recruitment and lack of performance management. It was clear that staff were underperforming in many positions across the business, but more alarming was the number of staff that was lacking several competencies to carry out their daily core responsibilities.
• The introduction of a performance management was urgent and an application that is cloud based and allow for 360-degree feedback was introduced. This was to become a framework for personal development and to map out routes for growth within the organisation. This would address the issue of competent staff wanting to leave their dead-end job. The key fundamental of successful management of the performance of employees are first that the employee is clear what is expected of him/her, and secondly, the employee is clear what their manager’s perception is of their current performance. They are likely to assume in the absence
  of any feedback that they are doing well so nothing will change except continuing deterioration of their performance and increasing frustration of the managers.
• A direct consequence of the implementation of such a performance application is that almost everyone wants to do better and learn more.
• The workplace culture receives a major boost and labour cost over time reduces drastically with the efficiencies that employees implement and are searching for.
• Training is no longer done just to claim some benefit or goodwill but can be applied with laser target focus on the skills gaps as documented in Personal Development Plans to ensure a return on the investment in training rather than training employees to perhaps leave and join the competition. This was easily accommodated with the implementation of learning journeys with a range of content available, and very effectively presented with an advanced Learner Management System (best of breed LMS) that reduced the cost of training exponentially. Staff were assigned a curriculum (soft skills and various business-related courses) to be completed based on the PDP on an annual basis.
• There was a sharp drop in disciplinary matters to be addressed and another boost to an already progressive workplace culture that started to manifest. In just a year it started to shape up to a culture of productivity and excellence.
• The business had a few strong sales executives with good track records and good product knowledge. The commission structure was very favourable compared to the rest of the industry and meant that whilst sales were good, the team was motivated, and performance was good. When product supply issues began, the restlessness of the team showed up very quickly and enquiries for jobs with competitors started. Management in the desperation to retain talent was looking at remodelling sales commission with a team-based commission and even increasing basic salaries to compensate for the earnings drop of most of the sales executives. Neither of these were suitable solutions given the problem that was driving poor individual performances. The team-based commission structure just allowed the poor performers to hide and earn off the few good performers and the second “solution” of increasing basic salaries is something that only the most inexperiencedsales managers would attempt.
• Across regions sharing HR-related information is important and nothing does that better than automation of the process. An Employee Self Service (ESS) portal that resides on the company’s Intranet, allows employees to apply for leave and managers to approve leave requests, ensuring full control and record-keeping and becomes a vault for employee specific information such as signed employment contracts, copies of pay slips, copies of previous performance reviews and tax documentation as well as copies of HR and other policies and procedures. This saves significant time in handling numerous enquiries from employees which quite often is a frustrating process. This is also integrated with the payroll system, so data is always current and up to date.
• Once the organizational design was completed, all vacancies were considered for internal transfers, recruiting from within was the first option allowed. Priority was given to positions where there was clearly a mismatch with the incumbent as reflected in their performance and review discussions regarding their skillset and ambitions. In cases where the performance was inadequate or below required specifications, but the incumbents were open to upskilling and improving, a training plan combined with on the job reskilling and coaching was agreed and monitored.
• All new recruits, having been appointed after personality profile or psychometric testing (for more senior positions) and a proper brief of what the job entails and what would be expected of them, were put through a detailed onboarding programme including a buddy system during the probation period of three monthsand getting a copy of the induction pack. During the probation period, bi-weekly reviews were done, and feedback was provided. The employment agreements werevetted by a labour lawyer and formed an integral part of the employment relationship.
• A review of salaries was done after jobs were graded and outputs of the specifics were outlined and matched with comparable jobs compiled against a salary agencies database.
•  A detailed review of the entire supply chain process was done with specific attention to segregation of duties and independent verification of certain processes to improve accuracies of good beings shipped and products received from suppliers and checked into the warehouse. Monthly stock takes were implemented with attention to developing a stock take procedure that pinpoint variances against the ERP system.

This process exposed a crime syndicate operating in the warehouse for over a year at a hugecost to the business and led to disciplinary action against several senior staff members

RESULTS:

• Sales increased by 361%
• In year 1 a profit of R2,541,000 was achieved
• In year 2 a loss of R875,000was recorded after adjustments of incorrect inventory records and some bad debts due to credit terms extended to customers who were unable to settle their accounts after supply issues from the business.
• In year 3 a profit of R8,765,000 was recorded.
• The temperature check of the workplace improved by 400% over the 3-year period based on the initiatives as described. Ambitious company and personal goals were constantly achieved and celebrated.
• Retention of good performers was at an all-time high and teamwork improved across departments.
• A general system of “Work smarter not harder” became the norm
• An increase of interest in the company as a place to work increased and branches sharedthe sentiment and appreciated the opportunity to contribute to strategic matters that were previously dictated with little input from the regions. The ability to attract talented individuals from within the industry was possible as the word spread and awards from the suppliers reached the market.
• Staff complement more than doubled nationwide over 3 years to just under 100 employees on the back of the growth in profitability and market share and sales growth.
• Above market related performance-based increases and bonuses were granted annually which allowed the business to become an employer of choice for many
  candidates.
• Staff were upskilled in soft skills and, where necessary, informal qualifications to better their chances for promotion.
• At least 10 people within the company were successfully promoted.