It is not the strongest of the species that survives, nor the most intelligent… It is the one that is most adaptable to change”. Support for the thinking behind this quote (famously linked to Charles Darwin – 1) has been seen regularly in the media in recent months. Organisations with historically strong brands, long histories and intelligent leadership have run into difficulties from which they have not been able to escape.

The most recent of these has been Thomas Cook. Dating back to 1841 it was arguably the best-known name in travel and yet it is no more. Analysts (2) point to the company’s failure to respond to the rise of internet bookings (opting to invest in high street stores instead) as well as writing off £1bn from its less than successful merger with MyTravel. As we write, there are currently discussions about the group being bought and some shops and jobs may be saved but Thomas Cook will not survive in its current format.

Whatever the final decision about the reasons behind Thomas Cooks’ demise, the underlying problem was that the organisation was no longer fit for the challenges and opportunities in its sector.

“We tend to meet any new situation by reorganising…”

A response open to organisations when faced with a challenging situation is to reorganise. This can help them to find savings and efficiencies or become more innovative. But is simply reorganising the right approach? There is a famous quote, often misattributed to the Roman Petronius: … “we tend to meet any new situation by reorganising; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency, and demoralisation”. (3)

Changing the structure of an organisation, including the power / decision-making bases and redefining teams, can cause a lot of disruption. The distraction can impact the ability to deliver business-as-usual, as well as unsettle staff.

It can sometimes be difficult to know whether a reorganisation is the right way to respond and whether, having gone through the disruption, it will help the company survive the financial or market pressures they are facing.

When faced with the difficult decisions of where to make reductions, it is key to ensure that while helping to address a short-term financial issue the organisation is not left with a longer-term problem

…if the leadership structure and decision-making process impacts the ability to be innovative, then it is time to take a step back and review whether the organisation’s way of working and structure is fit for the future”.

In our experience the time for an organisation to review its structure or operating model is when the environment in which it operates starts to affect the viability of its business model. If its products or services need to change in order to respond to customers or market conditions, if the leadership structure and decision-making process impacts the ability to be innovative, then it is time to take a step back and review whether the organisation’s current way of working and structure is fit for the future.

We find that for an organisation to be in a position to meet the challenges and opportunities of the future they need to consider three critical components:

  • Be aligned to deliver on strategic goals
  • Have clarity over who is accountable for delivering those goals
  • Be agile so they can continuously adapt to the changing market conditions.

Getting all three of these components right will determine how successful the organisation is in being fit for whatever lies ahead.

John Lewis is another major brand that has been struggling in the difficult retail climate. In October 2019 it announced a restructure which will result in a significant change to the way John Lewis and Waitrose are led with a reduced senior leadership team. Comments in the press from their Chairman, Charles Mayfield show the importance to business of the three components we mentioned… “the lesson of the last two years is that we need more innovation, faster decision making and bolder steps to align our operating model with our strategy” (4).

 

Fitness regimes: getting ready for the future

Looking back over the past couple of years, OE Cam has identified three broad approaches taken by our clients to get fitter:

  1. Efficiency fitness – removing inefficiencies and duplication, in order to maintain margins and/or move more resource to the front line
  2. Regional fitness – becoming more responsive to local market demands by recognising regional differences in customer needs and wants
  3. Customer fitness – shifting the power from those managing process or product, to those who are accountable for understanding and redefining what is offered to the customer.

 

1. Efficiency fitness

Organisations with low margins that are under pressure often look at the costs within their business as part of their survival plan, aiming to align the organisation around a tighter, more efficient operating model.

When faced with the difficult decisions of where to make reductions, it is key to ensure that while helping to address a short-term financial issue the organisation is not left with a longer-term problem. If cost-cutting is done without due consideration the organisation could lose the ability to deliver key activities, find that people with key skills have the left the business or the cuts have been too deep. In these circumstances once the financial situation eases, the organisation may have to return to the recruitment market and bring back the skills needed to take the company forward.

The way we have helped clients deliver this in a sustainable way, is to work with the senior leaders of the business to identify:

  • What activities / services can we stop / reduce?
  • Where can we increase our managers’ span of control / reduce our management layers?
  • Where can we identify duplication of activity between Group and Divisional / Business Unit functions?

 

The savings we identified had the added benefit of providing opportunities to make people more accountable for more centralised, standard processes in order to make it more efficient. In addition, the removal of duplication forced the organisation to decide who is really responsible for decisions and processes, which has led to greater clarity on accountability.

In this way, the business can realign itself to its margin goals, and/or enable the organisation to redirect resources to its front line.

 

2. Regional Fitness

In geographically dispersed businesses, there is always the tension between seeking central control and efficiency versus adapting to regional differences in customer preferences.

Some businesses set themselves up with strong regional ‘fiefdoms’ with a focus on local markets. However, as a consequence, the regions develop their own customs and practices, so inhibiting the company to take advantage of rolling out corporate-wide initiatives or gaining national synergies.

However, there comes a point in their life when these businesses make the switch to a largely centralised, functional model in order to gain benefits such as product rationalisation and buying terms. And this works for a while. However, markets are now being confronted by two opposing forces – global operators gaining efficiencies beyond the UK or Europe, whilst at the same time an increasing customer demand for locally tailored / produced products and services.

In this scenario, firms do not want to go back to their old fiefdoms, however they do want to gain some regional influence into the way they make decisions. One answer is to align the commercial and operational teams regionally, to define common KPIs, and establish a rhythm of commercial operational decision-making that brings together different functions. Aligning the organisation with its modified business model can help balance the need for consistency with the need to respond to regional variations in customer needs and profitability.

Ultimately, such organisations could potentially go one step further and pivot completely to a Regional General Manager model, that operates within a strong functional framework. To make this final switch depends on the additional benefit exceeding any potential increase in regional costs.

 

3. Customer Fitness

Most markets are experiencing a far more discerning consumer, fuelled by the internet’s ability to offer greater personalisation of choice. However, the businesses that serve these consumers may well find it difficult to respond to these rapidly changing expectations, as their primary focus is traditionally on the profitability of a product, or the efficiency of a process. So how can these organisations ‘pivot’ and turn the tanker to orientate itself to focus more on the customer?

One route that we spoke about in our last journal is the introduction of a Chief Customer or Experience Officer to the Board (5). But it needs more than a change of job title. The role also needs to have the ability to gain insight into customers wants and needs, the authority to then define the customer proposition, specify the services and service levels throughout the rest of the business, and the ownership of customer relations in order to have a direct line to its customers that provides unfiltered feedback.

As a result, they started to evolve and develop customer viewpoint that helps protect the organisation in an increasingly competitive market, rather than being driven from the more traditional product or process perspective

With some clients the response is to develop an operating model where new and existing customer focussed roles are established with the accountability and power to drive the product and service development. As a result, they started to evolve and develop the customer viewpoint that helps protect the organisation in an increasingly competitive market, rather than being driven from the more traditional product or process perspective.

 

Conclusion: First Take a Step Back

The examples discussed in this article illustrate three different approaches taken to ensure the organisations can survive today’s pressures and be fit for the future:

Efficiency fitness – maintaining margins

Regional fitness – local market responsiveness

Customer fitness – putting customers at the centre

In each case, the first step was to step back and determine what was driving the need for change and therefore, what the reorganisation needed to achieve.

Having established the key drivers of change, the next step was to realign their new organisation to deliver their business strategy. This includes designing an organisation that is clear about who’s accountable for delivering goals and a model that responds more effectively to market conditions.

By carefully considering the three critical components: aligned, accountable and agile, our clients have positioned themselves to be ‘one that is most adaptable to change’ and therefore in Herbert Spencer’s view, more likely to survive.

 

gary.ashton@oecam.com

julie.brophy@oecam.com

 

References

  1. According to Wikipedia, the English biologist Herbert Spencer first used the term “Survival of the Fittest” in his book “Principles of Biology” (1864). Fellow biologist & anthropologist, Alfred Russell Wallace wrote to Charles Darwin in 1866 and suggested that Spencer’s term was a more accurate description for the mechanisms behind natural selection and Darwin agreed.  https://en.wikipedia.org/wiki/Survival_of_the_fittest
  2. https://realbusiness.co.uk/the-real-reasons-why-thomas-cook-failed/
    https://www.theguardian.com/business/2019/sep/23/thomas-cook-as-the-world-turned-the-sun-ceased-to-shine-on-venerable-tour-operator
  3. It would appear that Gaius Petronius Arbiter was in fact a writer, not a General. This quote is now thought to have been written by Charlton Ogburn in 1957 – not Roman at all.  “Merrill’s Marauders: The truth about an incredible adventure” in the January 1957 issue of Harper’s Magazine.
  4. https://www.independent.co.uk/news/business/news/john-lewis-waitrose-job-cuts-restructuring-rob-collins-a9128006.html
  5. The OE journal “Rewired: Evolving Mindsets” (May 2019)