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It’s madness to re-structure a company that is not growing !

don’t try to fix stagnation by re-structuring: ORGANIsATIONAL PROBLEMS ARE MOST OFTEN solved by GROWTH. 

Some businesses are just coasting. This doesn’t mean that they are in a nose-dive, but simply that they are stagnating. Turnover is no longer improving, profitability is imperceptibly reducing, employees and the Owner/Manager are becoming demotivated (the two often go hand in hand).

When meeting business leaders in this situation, we find that they often fall into one of the following three scenarios:

THE OSTRICH

They stick their head in the sand and avoid the bigger problem. They manage immediate issues on a day to day basis. For example, they cut immediate costs – they might reduce staff hours here, defer an investment there – whereas very often the way to get of the rut is by increasing income and through growth. The general idea is that the business will just about keep going until the Owner/Manager retires. At which point they will take their dividend and leave their business to perish.

EVERY MAN FOR HIMSELF

This is another way of describing an ill-planned transfer of the business. Before the accounts deteriorate too much, and only too aware that « things aren’t what they used to be », the Owner/Manager may hope to find a (mythical) buyer: a person who is both willing to pay good money for a company that’s not going anywhere but who also is passionate about improving the business. Obviously, such a buyer is rare, especially with the increasingly professional nature of buyer networks. The best that can be hoped for is that the sale price will be reasonable for the buyer given the lack of (researched and) targeted prospects.

CHANGE everything

Sometimes the Owner/Manager decides to take drastic action. On the assumption that the stagnation of the business is down to a poor organisational structure, they restructure. And they might even call in a consultant to do this. Rearranging sales areas, separating reporting from accounting, merging companies, creating a holding company, changing the Marketing Manager, organising weekly meetings on digitisation because “it’s got to be done”. All of which gives the sense of making a fresh start, but is unlikely to produce lasting results.

Indeed, with a business that is not growing, changing the structure is usually about as effective as a chocolate teapot! 

It may be appropriate to restructure in certain instances, but in most cases it is treating the symptom rather than the cause and misdiagnoses the real reason for stagnation.

three key REASONS why businesses STAGNate

  1. lack of leadership in the sales department

We need to explain what we mean by that. Depending on the size of the business, the Sales Department may include one or several dozen people. It is rare that there is not a Manager or a Sales Director. And very often the one who heads the department is the most successful sales person. However, this doesn’t necessarily make them a good manager… but that’s another story, for another article.

The sales team may appear to be supervised, but in fact, over time they have settled into a comfortable way of working, made more comfortable if their objectives have not been realigned with those of the company. And instead of working to support company growth, they are looking after themselves!

  1. THE MARKET HAS evolved, BUT THE PRODUCTS OR SERVICES havE nOt

Let’s assume that your sales staff are determined, enthusiastic, well-trained, and well- managed. But there’s a limit to what they can do if the products they’re selling do not match those of the competition. They may have done 10, 5, maybe even 3 years ago, but the market has shifted. Standards have changed, consumer habits have evolved.

Take a typical example: your product is positioned mid/upmarket and has sold well, but the pressure of cheap Asian products means that customers tend not to see the difference in quality any more – even if there is one. They then turn away – little by little -from the most expensive products, unless they are offered a better service. The problem is identifying which service will make the difference.

  1. A need for FRESH AIR

It’s difficult for any Owner/Manager to maintain their enthusiasm. Over time, they have used up all their (good) ideas, and because they don’t have the time to get out to get some “fresh air” in other business circles, they begin to go around in circles in their company. They lose perspective. The Board of Directors may not be of any help in this essential task.

Read our article: A consultant sees what the Owner/Manager no longer sees, it’s the first thing they do to add value

The limitations of any SME are those of its Owner/Manager, and as it falls to the Owner/Manager to inspire all employees with positive energy, a lack of that energy will see the SME run out of steam.

Sometimes in the case of a family business: the different family shareholders may have diverging views on the future of the business: to make a sale to someone outside the family, or to transfer ownership to one of them? If so, which one? Or perhaps to build an overseas business? And consequently, few decisions are made and paralysis sets in.

Read our article: Family SMEs: advantage or disadvantage?

RECREATe a GROWTH DYNAMIC

Organisational problems are in many cases, merely the manifestation of an exhaustion of the vital impetus of a business – or its Owner/Manager.

Getting the company and its employees thinking about growth allows everyone to shift their focus from current problems and to become motivated by a future plan. As if by magic, everyone finds their place and the difficulties that seemed insurmountable become opportunities to move forward in a different and better way.

three KEY STEPS

  1. WRITE down THE STRATEGY TO BE FOLLOWED

This doesn’t mean 50 wordy pages, or a business plan with figures for everything. It can be simply a few lines summarising the vision and the direction that needs to be taken to achieve it. This seems straightforward, but experience has shown us that it takes work to choose the right path and clarify the discussion.

Read our article: Why SME Owner/Managers need a strategy.

  1. SHARe the STRATEGY WITH ALL employees

A plan will only be effective if shared with all, because each person in the business will then be able to take individual responsibility for it and act accordingly on a daily basis. It can be tailored to the size of the business and the levels of management, but the vision must not be modified, nor should any staff be excluded from it. If necessary, the strategy can be relayed by interim management.

Experience has shown that employees are far more motivated by an Owner/Manager who shares their vision and long-term development strategy with them, than by any change in the organisational structure. The business re-boots and productivity improves. Everyone feels reassured about the future, they come up new ideas for going forward, for promotion or training and day to day actions are focussed in the right direction.

  1. DEFINE COHERENT ACTION PLANS

A strategy without concrete action plans will remain ethereal and incomprehensible, and will not be carried out. This will reinforce the wrong idea that a strategy is not appropriate for SMEs!  Action plans must be drawn up and put in place for each major department/service of the business, and then – whenever possible – they must also be implemented at a more detailed level, where the employees themselves take responsibility for them.

And that’s it ! If you feel you’re stagnating, that you’re not advancing, don’t simply do something for the sake of doing it. Just be honest with yourself, use this article as a « sanity check » and ask yourself …

  • What’s your current position?
  • Determine the main reason for any stagnation
  • Work on your strategy and create action plans appropriate for your business

And above all, let us know how things go !

It’s madness to re-structure a company that is not growing ! – Wikane
Philippe Pichlak

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