Interim executives deliver real results, in real time, real quick. An interim is unique in the depth and breadth of experience they bring to bear. This allows an interim to see hidden value in existing products/processes/systems, implement actionable strategies and gain true alignment necessary to optimize the business. The interim will review the investments the company has made into processes, organizational structure and systems. This will lead to a focus on the areas which can be easily measured and might yield the quickest return on investment such as profits, systems and process efficiency.
Of course, the profit amount is derived by subtracting costs from revenue. Given this, one can increase profits by either increasing revenue or decreasing costs. So this naturally leads to an investigation into a number of segments of the P&L. A quick analysis can be made by benchmarking the percentages of each line item against appropriate competitors to see if there are any obvious gaps.
• If revenue per employee is below the average there may be an opportunity for price increases, a change in customers targeted, or performance issues of the sales team.
• If cost of goods is too high there is a need to look at the supply chain, labor costs, manufacturing efficiency and freight costs.
• Product mix should be reviewed to ensure the higher margin products are in stock and pushed by the sales team. Low margin products or loss leaders should be eliminated.
• Product return rates and service issues are another area to investigate. If customers are not happy with the products they will not place additional orders and the cost to keep them happy will continue to grow.
The idea is to quickly unbundle the P&L to identify opportunities for improvements in either top line revenue growth or reductions in costs.
A review of the systems needed to go from “Order to Cash” provides an organic view of how the company’s financial systems are operating. This means starting with the sales person pitching a product and then following that order through all the systems until the invoice is paid by the customer and the cash is in the bank. This methodical review will identify if there are any critical gaps along the way.
Sales – Is there a tool to track how many quotes are made per day, week and months by each sales rep? What is the close rate percentage by sales rep? Does one rep discount of off list more than the others? Is there a noticeable difference between territories in these key statistics?
Order Processing – Are quotes automatically converted to an order or do they need to be re-entered? What happens if there is no stock available? Does the system even show that? Is there an automated confirmation process back to the customer? How are non-standard or custom products processed? Is there a clear understanding with accounting for addressing credit issues so the order will not be put on hold?
Order Fulfillment – Does the sales order automatically convert to a pick ticket? Is the address clearly printed? Is the storage location on the pick ticket? Is there an automated packing list or invoice? If there is no stock available what is the process for reconciling the inventory records?
Invoicing – Does the pick ticket automatically convert to an invoice once the shipment is confirmed? How is the invoice delivered to the customer?
Accounts Receivable – Is there an aging report for overdue invoices? Is there a robust collections process? At what point is the sales rep brought into the process?
This is admittedly a small sample of the questions to be asked. The key is to really understand and challenge the status quo to ensure there is no gap in the system that prevents a smooth and orderly flow. Think of the childhood Mouse Trap game which allows the ball to go through various machinations until it successfully exits out the bottom.
It is also useful to dive deep into the key processes to identify improvement opportunities. The use of Lean techniques to reduce waste in manufacturing is well understood and implemented with varying degrees of success. A manufacturing organization should audit their Lean implementation results to see if all the benefits have been attained and whether the staff can be redirected elsewhere or reduced.
However, non-manufacturing processes must be assessed as well. Many of the Kaizen tools and workflow analyses will translate to administrative processes as well. Look for wasted steps, rework and busy work. Collect all the reports produced in a week and visit with the recipients. Are they just filed away for posterity or is a decision made based on them? Can the reports be combined, automated or eliminated?
Any process that has been unchanged for more than a year is a candidate for review. New technology and competitive pressures require constant challenging of the status quo. It may be necessary to bring in an outside auditor to review some processes to ensure they are optimal. The key is to create a culture that is willing to embrace change as the new norm. To be effective, the whole organization must understand that the status quo will no longer be acceptable. The company must grow, or be left behind by the competition.
Too often companies are in trouble not because they lack motivated, skilled, and dedicated employees, but because they are not focused and are trying to do too much. A key to optimizing an organization is to ensure there is complete alignment throughout the organization. Areas for the Interim to investigate include:
Boards – Does the business have a clear and focused strategy? Is it further defined in Mission and Vision statements? Are monthly and quarterly reviews used to assess progress with remedial action taken as needed? Is there a competitive compensation plan in place for the whole organization?
Executives – Is the leadership group acting as a team? Do they put the health and welfare of the company ahead of their individual functions? Are they able to challenge each other and reach workable compromises that propel the business forward? Have they turned the strategy into a workable plan and vetted it with the employees?
Employees – Do the employees have a clear understanding of the both the strategy and the tactics for the next year? Have they been empowered to execute the plan using their own judgement? When they are off course is there a system for monitoring and adjusting to new inputs from the real world?
Getting in alignment and staying there is the most important task of the executive team. They must work together to deliver a plan that supports the Board and shareholder’s mission and vision for the company. The Interim will assess the current alignment of the organization and report back to the Board. The Board must then decide if the issues stem from lack of communication, follow through or the skill set of the executive team.
Interim executives are a better solution than using a consultant or leaving a position vacant while a search for the right person is conducted. An Interim brings a fresh, unbiased review of factors driving organizational health and operational results. The Interim does not waste time or company resources trying to secure a full time job, but is driven by the opportunity to make changes which lead to a sustainable value increase for all the stakeholders of the business. By achieving rapid improvement, the Interim executive creates momentum for the recruited executive to build on when they come on the scene.