A case of reorganization and succession
The Problem
A well-established manufacturing company producing components for the automotive industry and other sectors. The company was founded in the early years following WWII and is currently run by the second generation of the founding family. The company enjoyed steady growth, relying solely on its own resources, until the 2008 crisis. Since then, it has seen falling revenues and years closed in loss, together with short-term financial distress. It shows all the limits of a classic family-run, product-oriented, inward-looking company. There is also an urgent succession problem. The company lacks the internal resources to turn itself around in the immediate future and to get back to growth and financial health.
The solution
The solution is made up of two phases:
- An audit, or check-up, to draw up and present a diagnosis of the situation, a roadmap and a business plan.
- The appointment of a General Manager with a technical / commercial background.
The check-up led to a General Manager being brought in for a period of several years with the following goals:
- To oversee the management of the company and to give it coherent direction and strategy
- To be the sole reference point for the owners
- To redefine the company’s strategy to enhance its competitive advantage over competitors and to leverage its differentiating features
- To redefine the business strategy with the aim of growing turnover on both domestic and international markets
- To reorganize the company’s processes to make them more efficient and more aligned with market standards.
Also, to give the company a managerial structure that will stand the test of time, ensuring continuity after the temporary management assignment.
Actions
1-Organization
- Review of organizational processes, redefinition of roles and tasks, design of a new organization chart for all positions.
- Start of a new chapter in industrial relations, working with the trade union representatives in both HQ and other locations, aiming at collaboration and shared goals.
- Introduction of target-related incentives for employees, linked to the achievement of company, departmental and individual objectives.
2-Commercial
- Launch of a CRM system to manage existing customers and prospects.
- Opening up of new business opportunities on foreign markets.
- Review of price lists and changes in sales management, aiming at better margins by product and by customer.
3-Administration, finance and control
- Implementation of a reporting system, with regular management accounts and year-end forecasts
- Startup of a system for the planning and control of short-term cash flow.
- Regular management meetings to analyze reporting data and to decide together what corrective action to take.
4-Manufacturing
- Transfer of manufacturing knowhow (formulae, bills of materials, production cycles) from technical staff to the information system.
- Deep review of plant and machinery maintenance programs to achieve greater production efficiency and a significant reduction of costs and scrap, together with better use of production capacity and improved quality of finished products.
Moreover, new quality certifications were obtained to enable the company to work with customers in high technology industries.
Results
Thanks to Contract Manager the company achieved:
- A 25% increase in revenues over the course of two years
- A 60% increase in EBITDA vs. pre-assignment levels
- A 50% reduction of debt and strengthened finances, with a more balanced medium-/long-term vs. short-term position
- Better conditions in which to manage the succession question