Lessons Learned. It all comes down to People...

It is funny when you think about it. The majority of the analyses made, most of the business plans, budgets and targets are around numbers. Someone (usually at the top of the company) sets the targets and ask people to deliver. It also may be the case that outsiders (like generalist consultants) set the targets and insiders are asked (by boards) to deliver. However, it is rarely the case that the human factor is taken into account when an aggressive business plan is asked to be delivered.

And this was the case in the CDMO, of our fictitious story. The generalists consultants prepared an unrealistic business plan, the board agreed to it and then people within the organization, were asked to start transforming the company. The consultants left, their legacy (the business plan) stayed, and people from middle to senior management were trying to meet it, month after month, year after year.

Nobody thought to consider, what will be the effect on people when you ask them to transform the company and raise organically the EBITDA level from 17 to 70 million euros within five years. Without tools and systems and without investing in the manufacturing sites. Nobody cared to consider what really is the impact to people, when you ask them to change their way of working and their culture overnight.

Because transforming the company from family owned to private equity owned and at the same time asking for change in strategy at all levels, is not that straightforward. Hiring couple of high calibre people in the Top Management is not by itself a recipe for success.

Asking people, for example, to f*ck contracts, and start asking for huge price increases to customers, is a change, compared to what people in the middle management were used to do all these years. Or asking people in business development from one day to another, to stop discussing with customers, customer problems, and focus only on discussions about new business, is also a change. Or asking the procurement department to provide accurate material prices for new quotations (after discussing with different vendors and suppliers) in 5 days instead of 10, is another change. To start taking for granted what the manufacturing sites are preparing for new quotations, without allowed to discuss or challenge what you receive (before you communicate it to the customer) is also a change.

All these changes represent a shift to mentality and way of working. They require a shift in organizational culture and it is impossible to be successful if you want to do this in several months. Cultural changes, take years; it is not something that you can ask your people to do from one day to another, especially if you have not established a program, the system and the tools to encourage, facilitate and adjust/modify the required changes. ?

Nobody tried to put themselves in the shoes of a business development manager that spent years in building relationships with her customers, and suddenly was asked to say to them that we don’t care anymore about the contracts, we don’t care anymore about your problems; “Please accept the price increase that we ask, otherwise we will stop producing for you, and if the OTIF level is low, this is another discussion. You can talk about this with the manufacturing sites. And by the way, is there any new RFQ that we can run for you?”

Or imagine a controller in a corporate function that is asked to start measuring what is the pipeline value of the company. And more specifically, asking him to include in the pipeline and start measuring what will be the revenue from new quotations that have not yet been submitted to customers. When, up until few months ago, the same controller was calculating the level of agreed business already signed with customers, and nothing more. There is nothing wrong with knowing your pipeline value (you need to know it), but asking from someone that has not done it before and does not have the tools and systems to do it, is not that clever. Because in the specific example, calculating what will be the revenue of something that will be quoted in the future, requires some knowledge and maybe some tools, in order to do it. Without it, people who ask to do it, just feel the pressure and start loosing confidence and self esteem.

And then of course politics enter the game, and this is when the psychology of certain people is affected. Imagine that a manufacturing site is under pressure to increase its EBITDA level and prepare a budget for the next year (that needs to be aligned with the aggressive business plan). At the same time, business development department which is responsible for bringing in new business to the sites, has a guideline to avoid reporting as agreed, a new business unless there is an official award from the customer.

The site head (that in our story was P&L responsible) in his attempt to meet the unrealistic budget, assumes that a quotation that was prepared some weeks ago has a good probability of success and therefore should be included in the budget. Some miles away, at the headquarters of the CDMO, the business development director has also been asked to report for budget purposes what will be the new business that will come in every site within the following 12 months. So, for the same quotation, that the site head assumed that has a good probability of success, the BD director has a different opinion. And after several discussions the two parties do not agree. What do you think is the impact on the person who has been asked by the CFO to prepare and present harmonized figures between manufacturing sites and corporate functions?

And if this is one stand alone case, this might be OK. But if this happens with every site and not only with new business but also with requests for price increases to customers, for which sites and businesses development do not agree, how do you think the CEO and the CFO will react when they see different figures coming from different directions on the same subject? Their reaction of course will be to get angry and ask for different functions and sites to agree on a common figure. What if there is no a harmonized policy in place? What if there is no agreed way to define what is a new business, and when should be reported as agreed??

Does the introduction of a new SKU should be considered as a new business, or a new business is defined as a new manufacturing formula, or a new brand name maybe? If there is not a common policy in place dictating this, people in different functions will act and report, according to their interest.

And the corporate people that are asked to harmonize figures between sites and functions, will get a nervous breakdown. But nobody cares about this. Nobody cared to build a procedure around such a topic; nevertheless people were asked to deliver harmonized results.

And then, it is the systems and tools. Even when the procedure is drafted and agreed internally, who will define what will be the product family name of a specific new product that enters the manufacturing sites? If a product has several manufacturing forms and it needs to be produced from 3 sites (one that will do the tabs, another the liquid and another the suppositories), what do you think will happen if different sites update their local xls files but there is no a central unified system to put this info? What will be the impact on the people working in the corporate functions that need to collect and present the total combined figures of the three sites if there is no system in place to deliver this info?

How do you think a person responsible for presenting to the board the progress of repricing project will feel, if business development says that we have agreed that a 10% increase will be acceptable by the customer under the condition that the OTIF level of site X will be at 98%, but the manufacturing site has an OTIF of 90%. And therefore business development wants to report this as a successful negotiation that should count against their target, but the manufacturing site argues that since my OTIF level is not 98%, the price increase cannot be reported?

The expected outcome should be that the most competent people will start leaving the company, or if they stay they will soon become demotivated. Because an unrealistic and aggressive business plan, can lead to healthy environments becoming toxic. And people in toxic environments either leave, or stay and suffer from burnouts.

Especially, if targets are unrealistic in terms of figures and timelines, and a change in mentality and culture is required, people will most certainly be affected. And as the saying goes, the number one asset is your people…

And don’t forget that for good or bad, most people are reluctant to change…

So, if there are no procedures, systems and tools in place, to support the change in strategy and culture, if you don’t give time to people to adjust, asking them to deliver immediately, is something that cannot work. At the end of the day its all about people. People will deliver results, people will meet targets, people will talk to customers, people will do the job. Driving them crazy is stupid.

Considering the above, if?organizations do not empower their people, if they do not motivate them, by giving them the right tools and resources (and also hierarchical power in certain cases), then they lose them (either physically or mentally).

And if they lose them all, they eventually collapse…