Don’t have the budget or resources?
Then it’s time to start asking the hard questions.
We Don’t Have the Budget or Resources:
It’s a common complaint, especially within SMEs when they see the sorts of costs typically associated with getting an external consultancy to help them through a major transformation. So I want to walk you through some of the options and examine what things can really look like if yours is a Small or Medium Enterprise facing this dilemma.
So let’s begin by asking what sort of budget you might have? Now I know that’s an open question but here’s a way of considering what it probably ought to be.
In the first instance you may have some rough idea of the value of an impending transformation if it goes reasonably well. Be realistic, not optimistic – it will stand you in good stead when weighing up the costs and benefits. To help, let’s walk through a case study of a fictitious company Bizness Limited. (Just to confirm – at the time of writing no such business was actually operating under this name.)
With 150 full-time equivalent employees being paid an average of £22k per year including on-costs, that’s a crude wage bill of £3.3 million. Irrespective of industry one would expect the sales turnover perhaps to be around 3x that figure. So we’ve got a medium-sized business turning over approximately £10 million. Profits are going to be modest – there will be overheads, raw materials, premises and other items eating into the cake. Also they only want to allocate limited resources to any major change.
What are the risks of starting a transformation – maybe one that is intended to improve margins by 10 per cent over several years?
Well clearly that outcome has a value in the range of 10’s to 100’s of thousands of £’s per year. So some investment is clearly warranted. But how much and how is this investment going to be protected by ensuring the required outcome gets delivered?
Enter the ACE TRANSFORMATION PARTNERSHIP (ACE) who are offering to come on board with their team and help BIZNESS get to the finishing line. They have their own proprietary programme for doing this kind of thing and would expect to have a team on-site for at least 3 months.
Using industry figures (at today’s prices) they are likely to be charging their consultants at around £1k per day and a minimum size of the team is likely to be at least 4 people. The maths are quite simple – that’s £20k per week for 13 weeks or a total bill of £260k. With no guarantees that things will either finish on time or deliver as expected.
BIZNESS aren’t too sure about this approach especially when they consider their budget and so they want to consider an alternative. They look for an Interim Management Agency who can find a single individual to come on board and see things through. With fewer specialists at the helm it might take quite a bit longer – so they budget for a 6-month assignment,
INTERIMS R US (IRU) say they have just the man on their books – at a price. They are going to want £1,500 per day to place their Mr Jones. So for 26 weeks that’s an estimated bill of £195k. Still no guarantees and there is no evidence that Mr Jones has any particular expertise in creativity or innovation when it comes to Business Transformation. He has a CV full of projects carried out for other businesses in the same industry. However when probed it is revealed he never did the initial diagnostics to work out what the underlying problems were that needed the transformation solutions in those cases. He was always parachuted in to pick up existing projects and get them over the line. At first glance it seems easier on the budget but there will be more drain on internal resources.
Finally there are DIGITAK – a digital solutions specialist who propose switching the business onto their proprietary software that, they say, is a state of the art solution and will drive out costs. They will do the whole thing for £250k initially but then there will be annual service and licence fees going forward. Fewer internal resource implications but a budget commitment running far into the future.
So there’s the dilemma – a six-figure sum in each case with no real certainty of delivery. No prospect of any great innovation to make the step change worthwhile and no guarantees that things will deliver on schedule. Besides that, the first two options (ACE and IRU) aren’t really innovative. Then the Digitak solution only gets to be better at what is already being done. Oh, and by the way, there is unlikely to be any great knowledge transfer from any of them to allow BIZNESS to do things themselves next time around.
With a business transformation of this scale even the timescales quoted are aggressive. It might take much longer and be hugely more complex. However it does give a feel for the likely costs of hiring external resource and the questions that poses.
BIZNESS need to beware of middlemen. There are a lot of organisations that hold themselves out as change or transformation management consultancies but a fair proportion of those are actually specialist employment agencies who have a lot of contractors on their books. The agencies themselves have neither specific expertise nor methods to deploy. In turn the contractors (or even interim managers) tend to be project specialists. Sadly they are very rarely skilled at doing the root cause analysis and stepping right back until that is fully sorted out. The project world is full of “getting on and doing” using various proprietary methods along the way. Finding somebody who can actually oversee absolutely everything from initial analysis through innovation to execution and delivery is pretty near impossible.
However solving the wrong problem might as well be solving no problem or may be causing even more. So BIZNESS need to take control and make sure they get this right first time.
One way to do that is to commission help in digging to the root cause. Simply using some external help for a week or two might be a good idea. That’s not going to take a cast of dozens and so potentially a couple of people over two weeks from ACE would get things in the open. That’s still going to be a bill of £20k and the solution design has yet to be worked through.
So, still thinking about BIZNESS, ask yourself on a scale of £20k – £600k where would you expect the external costs to end up? Now how does that relate to your own organisation?
Pretty much the same? Maybe a bit higher? How sure are you that this investment would be worthwhile?
Time to Start Asking the Hard Questions
The very first question in any business transformation has to be WHY? Why is it needed? What is the pain that is being felt and where is that coming from? None of the external providers are specialists at doing this bit and yet it is by far the most important piece of the whole.
One reason that it tends to get overlooked is that by the time external consultants are involved the management has already decided in principle what they want to do. It’s a big problem and very few external consultants are successful at addressing it. They don’t want to upset the client relationship by appearing to go back over old ground. Yet that is precisely what they should be expected to do. There’s nothing like a bit of objective insight in working out what comes next. (I recall an instance in Central Government where Accenture offered to do precisely this for a major transformation programme but the senior civil servants responsible turned them down and charged ahead with another consultancy delivering the wrong solution to the underlying problem. It ultimately failed to deliver a satisfactory outcome and cost £millions along the way. It’s an all too familiar tale.)
Next, as the owner of the business transformation, you should be digging deep to find out just how innovative the proposed solution might be. A white label version of what all the competition has isn’t exactly going to be up there with the award winners. Just how is this transformation going to be truly transformative? What will set the results apart from (and hopefully above) the competition?
To compliment this you should be asking about how much bespoking of standard components is expected. The answer should be as little as possible verging on none at all. You don’t want to be paying to reinvent someone else’s wheels. Rather you should be working out how you get your team to use those wheels to best effect. It’s rather like Formula 1. Ostensibly all the cars are pretty equal – that’s what the formula aims to achieve. So it is then down to being innovative in the pits or devising great race strategies that puts one team way ahead.
I’ve seen plenty of business transformations that have tried to do precisely the opposite and without fail they have crashed and burned. The waste of time and money is verging on the criminal and yet it goes on time after time. Oddly some of the bigger players never seem to learn the lessons for next time around. That is no way for an SME to behave. Instead you should sneak through on the inside of the bend and leave the competition wondering what happened.
A Strategy For Success
The first step in this strategy is to take your time. If transformation is urgently required then by all means do something radical to buy time. However assuming that isn’t the case, then get the planning right from the very start.
I’m quite used to being asked questions by CEOs about how soon things are going to deliver. They NEVER ask if their teams are doing the right things to begin with. That’s a foolish approach to life and in my view those behaving like that don’t deserve to be at the head of the business. Instead, refuse to be rushed. As they say – get all your ducks in a row before starting. You will have a much less stressful time thereafter because you will know why your team is doing what it is doing and how that is going to deliver the outcomes described.
Spend the Budget Wisely
Easy to say but what does it actually mean in this instance? Well spend a modest amount on getting the right transformation tools in place. Invest in getting your people to use creativity in their analysis and design of a solution. Neither of those items are going to cost the proverbial arm and leg. However they will help get your teams onside and fully behind what the transformation needs in order to be executed effectively.
Also make sure that you put adequate stage controls in place to stop the scope of the transformation creeping to cover other items that weren’t included in the solution. It happens all the time and yet is relatively easy to stamp out as long as you have the right governance in place.
You shouldn’t expect your people to be project managers who do things by the book. In fact in the past I tended to avoid hiring so-called project professionals whose main claim to fame was being accredited by a professional body. That may sound bizarre but the truth is that they get hung up on bureaucracy when what you want is pragmatic delivery and an ability to communicate with all around them. Yes, you want evidence of understanding project method to deliver an execution phase. No you don’t want acres of Gantt charts and a project office sprawled across half a floor of the building. So tread a fine line when selecting people on this score. One exceptionally good senior project or programme manager is worth paying for. Don’t pitch for the cheapest – they are cheap for a reason!
Be prepared to bring in the external resource to learn alongside your own people about how to get the creativity right. That way you won’t find them dismissing things out of hand later down the road when your team has probably come up with something the project manager hasn’t encountered before by way of a solution. There’s always the risk that an outsider will think “I’ve done this before so we’ll just do the same again.”
Overall you should be trying to build a collaborative team – no doubt with a little external assistance. Keep the focus on why you are doing things. Over time you will find that pays dividends as ordinary folk will know what track they should be on and will soon bring up short those who are straying.
Doing Most of it Yourselves
This would be anathema to many consultancies but the truth is that most organisations possess much of the talent required. What they lack is either the conviction to go ahead or more likely understanding of the framework within which to operate. Both of these items can be acquired at modest cost.
If you need to replace people at their usual day-job because they have moved to the transformation then that’s an easier (and safer) temporary hire because the people already around will help them fit in to business as usual. Besides that it will be a lot cheaper than consultants’ day-rates! It also means that when the transformation team eventually disbands the people in it will have a place to go back to and take with them a much enhanced knowledge of new processes or products and can apply that going forward.
Conviction about what to do will come from going through an analysis and design phase with a little external guidance. The delivery framework is pretty mechanistic and can be picked up without the need for a proprietary method from the likes of ACE, Digitak or anyone else.
If you would like to discuss how we can help on both these dimensions, then contact us for a free consultation. We excel at getting the root causes understood and building suitable governance frameworks to deliver appropriate solutions. So let’s start the conversation.
The author Rob Wherrett can be contacted at https://robwherrett.com/contact/
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