Common Scaleup Mistakes #7 Restructuring? A Panacea for All Ills?

One of the strange things I have learnt in my time in Big Pharma is that when a decision is made to restructure or reorganise, it is too late to resolve the situation!

It's crucial to remember that restructuring decisions should not be delayed until business results are bad. Instead, we should be proactive and take timely action to address inefficiencies and improve performance.

Examples of these "bad" situations might be:

• Sales and profits have not been met for several years.
• Two or more changes in the senior crew have failed to bring the improvements desired.
• A new leader in the business unit has 'discovered' a massive increase in headcount that is incongruent with revenue increases that have not kept pace due to sales that have not been met for several years.

As bizarre as it might sound, the time to make adjustments and tweaks is when the business is doing well, not when it's crumbling and has failed. Very few seniors dare to tweak it when it is doing well. Instead, they use restructuring as a last-ditch attempt when things are almost on the deathbed for the business and the senior executive's career.

In reality, very few restructures and reorganisations bring the intended improvement.

Why?

The answer is simple.

Because the teams fail to understand and address the underlying issues causing performance deterioration, and their actions do not bring the desired results.

I have found that the problem-solving technique is superficial at best and non-existent at worst.

The typical findings are:

1. The questioning process is poor and not exhaustive.
2. They fail to define and understand the real issue.
3. They lack a cognitive process to identify the situation with confidence.
4. The divergent thinking required to generate ideas or solutions stems from flawed cognition.
5. The chosen solution is, therefore, flawed. It's like trying anything in the hope that it might work.

It is important not to rush to a conclusion about what has gone wrong and then go on to develop an inappropriate set of actions built into a restructuring programme.

In my book, I describe the telltale signs of a company that does not know what it is doing and cannot diagnose issues accurately.

Early in the book, I propose that for companies that do not know what they doing, it is a combination of two or more of the following:

• Failure to deliver budgets and the P&L (profit & loss account) for two or more consecutive years.
• Constant restructuring and meddling with the organisation chart structures.
• Changing reporting lines.
• Hive up and then hive down staff numbers within two or three years.
• Swinging from one distributor to another, they know even less well than the current distributor.
• Swinging from having a single distributor to multiple distributors and vice versa every few years.

Such organisations tend to be poor at problem-solving.

They lack a structured, robust questioning technique that I use when I am involved in identifying the root cause of a business's poor performance.

As a trained facilitator, I devise robust processes that increase and encourage delegate participation to contribute to meaningful discussions. The collective input is much greater with my involvement.

Restructuring is critical when companies merge or are acquired. Yet very few mergers realise the synergies that formed the attraction, and even fewer realise the cost savings calculated before the acquisition or merger.

They end up with numerous duplications. They have a low operational velocity that creates uncertainty for the high performers who decide to leave to a competitor - the very staff you do not want to lose.

This leaves you with the modal value performers in the Gaussian Distribution Curve and those under-performers who are sitting one or more standard deviations to the left of that Normal Distribution Curve (the ones you need to remove but are stuck with!).

It is key to avoid paralysis by analysis, and as Warren Buffet epitomised:

"It’s better to be approximately right than exactly wrong!"

I was fortunate to work with Percy Barnevik, the former CEO of ABB Sweden when the merger of Astra and Zeneca was announced. He also instilled in us the need to have velocity and not to postpone tough decisions:

I have met more "macho seniors" (both male and female) who conveyed a tough, brutal street-fighter image and stance but lacked the courage to execute these tough decisions when push came to shove. Seniority is not being a street-fighter. It is making "The Right Choices" that define "The Right Way" through a strong cognitive ability across a broad cognitive bandwidth and then moving forward with the execution despite the resistance - unless new information emerges that you had not considered or were aware of - in which case a re-think is acceptable - but questions how robust you were in your assessment of the problem and the posible options.

In my corporate life, my seniors demanded me and others at my level to demonstrate cognitive abilities and problem-solving skills and an ability to see and DEFINE the strategic big picture for my markets as well as the operational details for the next 12 months.

In reality, my experience through my consulting with Big Pharma is that seniors are strong at either one end of that continuum or the other - but very rarely able to work seamlessly across the whole continuum. Finding such seniors is a real challenge.

In the problem-solving approach, what is key is to have a robust, rigorous, structured questioning process that uncovers the key issues so that a solution can be considered.

Involve an independent facilitator for even greater value in these discussions.

Companies have worked with consultants and recruited some leading consultants from big global consulting companies. Still, the restructuring fails to create the intended results.

Assuming the analysis was accurate, the generation of ideas and selection of a best-fit solution was arrived at by a rigorous mechanism; then, we must accept that the failure is down to flawed execution, which is common. I wrote about that in a prior Newsletter:

https://www.dhirubhai.net/pulse/common-scaleup-mistakes-6-sound-strategy-flawed-execution-amit-vaidya-pllvf/

My tips:

1. Be clear about what you want to achieve.
2. Describe in a sentence or two what you want to have that you don't have today.
3. Identify what stops you from achieving what you want.
4. Be exhaustive and non-judgemental.
5. Think of the options - their costs, risks and benefits.
6. Choose one option.
7. Move FAST with high operational velocity when the option is chosen.

About Samkoman Consulting Ltd:

I started SCL after a stellar career at AstraZeneca. I am focused on helping my clients succeed in scaling up in their home market and expanding into new markets, unblocking the factors stopping them from delivering scaleup after numerous attempts in existing markets, and advising senior Boardroom executives on international and domestic business commercial challenges.

I'm happy to chat to you at no cost or obligation about how I can help you without talking nonsense and jargon but truthfully telling you how it is, with straight-talking from a senior executive who has been where you are, has faced the issues and challenges that you face, and successfully addressed them.

I will use your time effectively. I won't waste your time. I'm down-to-earth and straight-talking.

If I can't add value or if your problem is complicated by someone else having a go and botched it up, I'll tell you and walk away.

You can book a free, no-obligation Teams or Zoom call directly into my diary using the link below.

Book a free consultation with me: https://calendly.com/amitvaidya2021