Unlocking International Growth

An organisation’s ability to expand internationally will depend on the talent and strength of its leadership. Problems occur when boards ignore questions on resource and capability, opting to plough onwards, bewitched by the promise of growth.

Turning away from obvious opportunity is tough, especially in the current economic climate. And yet carrying on regardless has sent plenty of famous retailers and consumer goods companies crashing into the rocks.

The priority for any business, after assessing the size of the prize in a new market, is to look at the human factor and ask: ‘Do we have the people to execute the plan?’

Giles Daubeney, Deputy CEO of recruitment concern Robert Walters, has seen the business grow over the past 25 years from a single office to 54, spread across 26 countries. “It’s no good having someone up on high calling the shots with no knowledge of the local market − you can make grave mistakes that way,” he says.

“The most important thing is to have the right person to do the job. Not having enough people is one of the biggest constraints to growth.”

For large organisations, there needs to be clear decision making between HQ, regional and local operations. David Comeau, Criticaleye Board Mentor and former President for Asia Pacific at Mondelez International, saw the latter company transform from a country-focused set of independent operating units into a category-focused global organisation. “I think a lot of people struggle with this pendulum swing between how centralised or de-centralised a company should be,” he says.

According to David, it was critical to make changes as rules and responsibilities were not clear. “For example, there was a brand manager for Oreo in Latin America who thought they were growing the brand globally, but there was also a brand manager in each country. We hadn’t addressed how the local teams would be involved or how the new order was going to run; it was difficult to accomplish anything,” he explains.

“We worked with the countries to redesign the organisation and asked their opinion on the best way to accomplish what we were trying to do. Collectively, we designed a structure that would allow us to operate globally but still be effective on a local basis.”

This remains a hugely complex undertaking. Tom Beedham, Director of Programme Management at Criticaleye, warns: “It’s all too easy if you’re based in the head office to say: ‘These are our values and this is our culture.’ But the further out you go you may find the message has changed or the perception is different. Learning from peers about how to approach a new market before you enter will mean you are better prepared and can accelerate faster.”

GSK has been evaluating the make-up of management teams across various countries, explains Kris Webb, Senior Vice President of HR for Pharma across Europe, Emerging Markets, Asia Pacific and Japan: “We’re making decisions to ensure that what is happening in our businesses across the globe is aligned with the values of the whole company.”

Aside from the internal dynamics of organisational design, strategy and competency, companies must also navigate the risk of political volatility, currency fluctuations and rising labour costs – to name but a few. Yet the case for expanding internationally is evidently strong, not least because growth in many domestic markets remains challenging at best.

Mark Collings, Head of International for SME Banking at Santander, comments: “Businesses that trade internationally are more resilient than those that remain in their domestic market, and tend to see higher rates of growth.

“If you’re operating internationally you’re not dependent on one market, so if economic instability hits in one geography, you can rely on your presence in other markets to weather the storm. This can put you in a much stronger position and provide growth, even in uncertain times.”

Just don’t underestimate the importance of people and culture before moving into a new territory.

This article was inspired by the recent Criticaleye Discussion Group, Key Considerations for International Expansion, held in association with Santander.

By Dawn Murden, Editor, Advisory

If you’d like to share your experiences on international growth, please email dawn@criticaleye.com

Read more from Santander’s Mike Ellwood on the bank’s growth strategy

Don’t miss next week’s Community Update, which looks at the mistakes leaders make when communicating a company’s values.

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4 Tips on Improving Performance

Improving business performance takes strong leadership and immense effort, but neither will have impact if the company’s customers, staff and other stakeholders don’t believe in its future. A good leader will be able to create buy-in from everyone involved and use it to drive change.

When looking to bolster the performance of a company or division, Matthew Tait, Business Restructuring Partner at BDO, emphasises the value of communicating a clear strategy to all involved.

“One risk to recognise about businesses in distress is management’s tendency to lock the doors to the bunker. Despite the evidence, they can believe that no one sees what’s going wrong. Nothing could be further from the truth. Staff, customers, competitors, will know what is happening,” he says.

“A good turnaround plan needs to be agreed by the stakeholders as opposed to being imposed on them. You must understand what you need from each stakeholder – it could be time, funding, or a change in work practices. You also need to understand what the turnaround offers them; if it doesn’t give anything to key stakeholders then the turnaround won’t work.”

Change can be worrying for anyone, but the greatest fear comes from not being informed about where it will lead. As Joe Berwick, Business Development Manager at Criticaleye, highlights: “A clearly communicated strategy is the cornerstone of any successful change programme, and it is the leader’s responsibility to ensure it’s well-received by all stakeholders.”

We spoke to a range of business leaders, each of which have been through a restructuring, to find out how they managed their stakeholders. Here’s what they had to say:

  1. Reassure Your Customers 

When Vanda Murray, Criticaleye Board Mentor and Non-executive Director at Bunzl, led the turnaround of conservatory provider, Ultraframe, where she was UK MD and Group Marketing Director, she knew all key stakeholders had to be involved. “You must engage with them on a meaningful level about what they need, what their issues are and how you will work together,” she says. “The core of the turnaround story should always be the same and it should be based on reality, but you will clearly want different messages for different stakeholder groups.”

One move Vanda made early on in Ultraframe’s turnaround was to reassure customers that the company was reacting positively to market changes.

“The competitor had copied the product and halved the price, the product wasn’t quite as good but it was good enough. Our customers were leaving us in droves; it was a critical situation and action needed to be taken very quickly,”Vanda explains.

“I spent a week on the road speaking with all of the top customers to really understand what was happening. I spoke to most of the senior people in the company and then modelled how it could survive. We made it very clear what we hoped the timeline would be and we told them about our milestones to show we were on track. That was really important for them.”

  1. Build the Right Executive Team

When Andrew Richards took over as Managing Director of Britvic’s newly acquired Irish operations, recession had just hit the country. “We saw a procession of poor numbers, poor productivity and a poor marketplace performance across almost the entire spectrum. The business was failing,” he explains.

Andrew realised that he needed a team fit to take the business through Ireland’s recession; that meant very honest conversations with his executives, culminating in five of the seven leaving the business.

“In my first 90 days, one of my goals was to assess the nature of the loadbearing team,” says Andrew. “When I arrived, the Britvic Group Chief Executive had confidence in the Britvic Ireland executive team we’d inherited, but as we spent time pressure-testing the plan it became apparent that a lot of people weren’t capable of making the journey.

“The first person to exit the executive team, which was within three or four months, was the HRD. He was very well intending but not capable of managing a progressive HR agenda, and he recognised that.”

This process needs to be maintained throughout the change programme – while it’s common to make initial changes to the executive team, continued assessment will ensure the team still carries the skills it needs as the business evolves. “Those who initially feel they’re engaged and involved can begin to lose the energy to continue,” Andrew explains.

  1. Restore Staff Morale 

Low morale will take its toll on any business in decline; it can blight productivity, stain your company culture and lead your best staff towards the door. While emotions are bound to run high, there are ways to improve things – the most important of which are openness and clarity.

“People know when you are being straightforward with them. I talked to the staff in small groups of their own teams, so they felt comfortable enough to ask questions. I was as honest as I could be with them about the changes that would happen,” explains Vanda.

The greatest fear for many employees will be redundancy, so it is important to ensure it is handled properly. “We allowed people to leave with dignity and their heads held high, as much for them as the people left behind,” says Vanda.

It’s also important to understand how cultures vary across regional and international operations. Bryan Marcus, now Chairman of JBR Capital, recalled his experiences while being CEO of Volkswagen’s Latin American financial services division, VWFS.

Tasked with the turnaround of loss-making businesses, Bryan says: “I was a Brit leading a turnaround of German-owned banks in Brazil and Mexico, so the cultural, regulatory and operational challenges were numerous. From my experience, the critical success factors were openness with shareholders, consistency with local stakeholders and to ‘walk the talk’ with the local management teams.

  1. Communicate With the Board

Having led the turnaround of an international division, Bryan is familiar with the complexities of dealing with a distant board, as he explains: “Having worked in a local corporate, one of the challenges I faced was being part of a global corporation with global standards. You need to manage the pressure from headquarters and meet shareholder expectations while creating the time and space for the transformation to take root locally,” he explained.

Andrew faced similar issues at Britvic Ireland and found face-to-face communication was the remedy. “Some of my group executives and board colleagues had less sympathy or understanding of the situation I was in,” he explained.

“One of the ways I tried to work through that was to get the Chairman and a couple of non-execs over to explain what we were grappling with, that’s how I tried to manage my stakeholders back at the group level. Once I’d got them on the ground to see the situation first hand, they started to understand the challenges better.”

Whether you meet your stakeholders in person or build a rapport from afar, it’s imperative that you earn their confidence. As Matthew explains: “You need to have a trusted starting point otherwise people will hear the same messages reiterated but never believe it.”

And as much as you may want it, widespread improvements won’t happen without the belief of others.

Read more on managing your staff through a turnaround and rebuilding a business.

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Turning Your Executives into a Team

Only the CEO can set the tone and tempo for the top team. If there are secrets, hidden agendas or delusions of grandeur, then you probably know who’s to blame. By contrast, if the senior executives support one another, are willing to share ideas and bound by a common goal beyond quarterly targets and personal ambition, there’s very little they won’t be able to achieve.

In some ways, the ultimate goal of a CEO should be to make themselves surplus to requirements. As steward of an organisation, their ideal legacy could be described as having forged a cohesive team that is relentless in its focus to do the best for its customers, employees and wider stakeholders. Plenty of barriers exist in terms of making this happen, such as:

• An over-riding fear of change, caused by insularity of thinking
• The senior leadership team failing to sufficiently challenge both each other and the CEO
• Executives ‘dropping down’ to address day-to-day issues, rather than thinking about the bigger picture
• Domineering, command and control style CEOs.

Susanna Dinnage, Executive Vice President and Managing Director for Discovery Networks UK & Ireland, comments: “Everyone needs to feel responsible and accountable. We should feel a sense of failure if someone says: ‘Well, this doesn’t involve my area, so I won’t provide input.’

“Executive teams are about collectively owning the direction and growth of the business. Responsibility for a functional area is a given – without the framework of a clear strategic direction you run the risk of silos, poor effectiveness and even dysfunction. A united and ambitious executive team is a huge competitive advantage.”

Steven Cooper, CEO for Personal Banking at Barclays, says: “If they don’t share the same goals and values, they won’t want to support each other, which is pretty unpleasant.

“If someone has strong values that aren’t aligned with the rest of the team then you probably need to remove them.”

Tom Beedham, Director of Programme Management at Criticaleye, says: “First and foremost comes the alignment of the executive team. They need that shared focus to motivate and bring them together.

“In the simplest terms, this will be to work together to deliver the strategy and achieve success for the business.”

The freedom to put across a different point of view cannot be underestimated. Paul Willis, Managing Director at Volkswagen Group UK, comments: “I’ve seen too many examples in businesses where people get wedded to their own ideas… They fall in love with them and nobody can say a bad word. That is not the sign of a high-performing team.”

There has to be two-way, open conversations. Beverley Eagle, Head of HR at Veolia Water Technologies, comments: “There are those who listen and those who wait to speak. You can see people who are desperate to get their point across and therefore they’re not really listening.

“People are put in an organisation because of their expertise and knowledge and therefore should be given the opportunity to express that. You need to utilise [everyone’s] skills and experience.”

Moral compass 

The CEO has an ongoing responsibility to keep their senior team honest, making sure they are collaborative, willing to learn and ‘right’ for the business. Paul Matthews, Chief Executive for the UK & Europe at Standard Life, says: “A team needs a CEO who is focused on humility and long-term delivery… it means sometimes taking a step back and letting other people lead.

“Other times, when things are difficult and no one wants to put their head above the parapet, that is when a good leader [steps up]… It’s also [important to be] open when you are wrong.”

Sir Brian Bender, Criticaleye Board Mentor and Chairman of the London Metal Exchange, says: “There’s an assumption that if you pick a group of highly-motivated people, they will just work together well but actually we’re all different… you need to invest time in building the team.”

It’s hard work and takes excellent interpersonal skills. Steven says: “It comes down to understanding what’s going on, supporting each other and also having a bit of social time; being open and candid with each other.

“If you don’t share what’s going on, you end up in situations where people go off doing their own thing and keep it hidden. It’s not great from a business perspective and it’s a really unhealthy dynamic.”

Ultimately, building and developing the executive team is a constant work in progress. Vanda Murray, Criticaleye Board Mentor, Senior Independent Director at manufacturing company Fenner and Non-executive Director at distribution and outsourcing group Bunzl, says: “Getting the right team to deliver the strategy is a prerequisite to a successful outcome… strategies change and evolve, so you might need new skills along the way. In fact, it’s probably certain that you do.”

If the leadership team is moving in the right direction, they will possess the ability to think about strategy and how the business can achieve its objectives faster.

In other words, what they’re supposed to do.

I hope to see you soon.

Matthew

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