Far too often the CFO and Controller have been too distant and remote when a reorganization is proposed. If anyone is to talk sense to the board and senior management team, it has to be the CFO. This article will explore the full costs of such an exercise.
A major reorganization is as complex as putting in a new runway at Heathrow Airport while keeping the airport operational. The steps, the consultation, the dynamics, and so forth are as difficult. The CFO needs to ascertain the costs of such an exercise. To assist, I set out what typically happens in a reorganization.
Loss of key staff in the third- and fourth- tier management ranks. There is a period of chaos, where staff members are disillusioned and many key staff in the third – and fourth – tier management ranks walk out the door with a golden parachute and straight into employment elsewhere.
Dysfunctional management teams. A reorganization can leave you with the also – rans, and the piranhas (those nasty individuals busily burying hatchets in all those around). The talented staff moving on to fresher pastures often with a nice payout.
Higher costs as ex-employees come back as contractors. The bedding – in process starts to kick in somewhere between the seventh and twelfth months. The completion of all the redundancies takes longer than expected and, yes, more than a few will come back as contractors at a higher cost. These costs must not be ignored.
Consultants’ fees will increase. Consultant’s costs will go through the roof, as you will need help with counselling staff, the culture change and communication.
Designing a new logo, letterhead, signage and stationery. Look back to the last time these were done for a reasonable estimate.
Extra recruiting assistance is required as all staff affected will need to reapply for their position, additional HR resources will be used up.
Property leases. Releasing the property that will become surplus can take up to 24 to 36 months especially in an economic downturn.
About 24 months after the reorganization was announced, productivity is back to normal; thus for the duration you effectively have been going backward. In the 24 – to 36 – month period advantages may kick in provided that the reorganization has been successful.
When faced with a situation where the business is contracting, there are a number of options you need to explore before undertaking a reorganization and have everybody reapply for their jobs:
Discuss the issues with the affected operational units and ask them to find new initiatives that can help part fund their salaries. Often there are a number of income generating possibilities that have not been explored.
Can you redeploy the staff and buy some time so staff members have time to seek further employment while employed? This is a managed staff reduction process and will save a huge amount of money on redundancies, while, at the same time giving your staff an opportunity to find employment. This option is unlikely to be available in a major recession.
Working with the human resources team design a voluntary redundancy program. This has some downsides, as you can’t directly target staff members with lower skill sets.
As a CFO, you should never underestimate the long – term impact of downsizing staff. Wherever possible, I believe the CFO should argue that it is better to fund the shortfall out of retained earnings. The cost of firing and rehiring, when added to the public relations disaster it creates, often is much higher than holding on to the staff.
By my calculations an organization with 500 full – time employees that is contemplating dismissing between 50 and 70 staff members would be no worse off if the staff members were kept on and redeployed, where possible, for up to two to three years.
Analyze the last downsizing performed in the organization so you have a benchmark cost available
Email me (email@example.com) and I will send you a checklist to put you off a reorganization and a spreadsheet to work out the hidden costs of dismissing staff
The quote is from George Harrison’s song “Any Road” and was no doubt influenced by the dialogue between Alice and the Cat in Lewis Carroll’s brilliant book “Alice’s Adventures in Wonderland”. The statement is very profound. With the current fixation on immediacy we are frequently confusing being busy, pushing texts and emails around the stratosphere, with forward momentum. Never have we been so active, yet so stationary.
I attended a key note address delivered by Dr David Keane, who was a fellow speaker at a conference. His talk was about “The Art of Deliberate Success”. He asked a question ‘What do you consider success means to you?’. This is a question we should be asking ourselves . Keane pointed out the importance of having clarity, priority and execution working together. Where you have clarity and prioritization working, but execution missing, you become stuck and are not making progress toward success. The sweet spot is where the three collide. Jim Collins called it “Your hedgehog”;:meaning you were untouchable.
Jim Collins in his “Good to Great book” had three circles when looking at success from an organisation’s viewpoint. The three circles are as relevant to us as individuals. The Collin’s circles remind us to look and focus in an area where we can be a world expert. This is not as hard as it sounds providing you look for a very specific area relevant to your experiences to date and one where you have already made some progress. Find an area which is free from competing experts and get your 10,000 hours into that space as soon as possible.
The second circle is passion. Where passion and being a world expert collide is an agreeable place to be. Work and play merge together. The last circle is economic demand. It is not only practical to focus on something that others are happy to pay for it is commonsense.
I attended a life skills course several decades ago. It was called turning point. It lived up to its name. It was the first time I was exposed to the power of the subconscious and its ability to pursue a target. If we have a vision of what success looks like, a treasure map in other words, then we will travel towards it.
For a treasure map you need an A3 page, where you set out how you envisage success will be like with your life partner, your family, your friends, your health, your hobbies, your career and your retirement savings. State the goals and glue pictures to help you visualize the outcomes you seek. The more pictures the better, pictures from magazines and journals are an excellent source, (e.g., If you want to be fitter, then a picture of a person similar to you with the body shape you aspire to., If you want to practice yoga daily then a picture of a person, like you, doing yoga, etc.). My first treasure map had a picture of a particular motorbike, a BMW 100RS, which is reasonably rare. Two years later I owned the exact replica of the bike in the photo, even the same paint combination. Read any self- help book and ask any achiever, and they will tell you that visualization is the key.
I discovered the book “The Winner’s Bible” while browsing in an airport bookshop. It resonated with the concept of treasury mapping, albeit in a different way. The concept being you have a folder with inspirational sayings and the goals you have set for yourself. Each day you pick-up your Winner’ Bible and read the pages that resonate that day.
In every workshop I ask one question “Who has made a recruiting decision they have lived to regret?” Every manager puts their hand up. The carnage caused is relived in their facial expressions. Why does this happen so often?
This one day KPI workshop reﬂects the work from David Parmenter’s 3rd edition of Key Performance Indicators. David believes there are fve reasons why corporate accountants and their peers, who are responsible for designing and reporting KPIs, should revisit their KPIs: To distinguish those measures that report performance summarizing collective action from those that report progress at a team level – the latter is where change occurs To measure and report performance in a way that enforces action To eliminate the measures that are destroying value and encouraging inappropriate activities To understand the seven characteristics of KPIs that will increase performance To embed a methodology in their organization that will leave a lasting legacy
This one day KPI workshop reﬂects the work from David Parmenter’s 3rd edition of Key Performance Indicators. David believes there are five reasons why corporate accountants and their peers, who are responsible for designing and reporting KPIs, should revisit their KPIs: To distinguish those measures that report performance summarizing collective action from those that report progress at a team level – the latter is where change occurs To measure and report performance in a way that enforces action To eliminate the measures that are destroying value and encouraging inappropriate activities To understand the seven characteristics of KPIs that will increase performance To embed a methodology in their organization that will leave a lasting legacy
Whilst most corporate accountants are aware of the revolution of Lean and its positive impact on private, government and non-profit sectors, few have realized the profound impact it has on the accounting function. Adopting Lean finance team processes will reduce the cost of the finance team over time and will improve job satisfaction for all team members. Attendees will gain insight of how to speed up reporting (month-end reporting, annual reporting, board reporting), improve processes (forecasting, planning, accounts payable) and adopt Lean techniques to improve team performance (Scrum, Kanban, one-page reporting). Participants will also receive a number of electronic templates and comprehensive reading material to speed up the change process, valued at £120.