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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Five Ways to Shine as a NED

Comm update Face - 14 augustNon-executive directors need to be able to bring a touch of inspiration to the boardroom without having an opinion on everyone and everything. Yes, good governance, business know-how and a nose for risk are all essential skills, but what the chairmen of companies looking to grow the top line now want are NEDs who can provide powerful insights on emerging markets, innovation and strategy.

Call it the stardust factor, if you will. Criticaleye spoke to a range of NEDs to find out the qualities needed in order to stand out from the crowd…

1) Be Ready to challenge

“It’s not solely about supporting the executives; it is fundamentally about challenging them,” says Sir Michael Lyons, Chairman of The English Cities Fund and a Criticaleye Board Mentor. “The hallmark of a healthy company is one that is interested in the quality of its governance and the challenge provided by its NEDs. Actually, companies should be proud of NEDs who are a bit of an awkward squad.”

Every NED has a duty to fully understand a business. Vanda Murray, Non-executive Director at construction and support services company Carillion and also Chairman of alternative energy concern VPhase, comments: “You can only ask the right questions if you are well-briefed, know the people, have done your homework and kept up-to-date with information.”

You have to be involved and be able to really add something to the debate: being a good non-executive director is no longer enough. Glen Moreno, Chairman of education company Pearson, comments: “The most important thing is to get issues front and centre, focusing heavily on strategy, risk and change. Boards are increasingly better at having strong strategic discussions and that has changed over the years.”

2) Find the Primary Source 

To stay in touch with what’s going on in the business NEDs must make time to talk to people outside of the boardroom and although there may be some resistance from executives, you need to use your powers of persuasion.

After all, the more knowledgeable you are about the context for decisions, the more credible your judgement and input will be with the executives (plus there’s the small matter of your reputation to think about too).

Vanda says: “You need to do a number of visits over the course of a year because that’s the only way you can get a clear view on succession and whether the conversations in the boardroom are genuinely playing out operationally.”

3) Your Business Needs You!

Once you’ve established a portfolio career, managing your time becomes a skill in itself. Theresa Wallis, Non-executive Chairman of medical technology concern LiDCO and NED of a number of small-cap companies, comments: “If one company is going through a merger or other extensive challenges, it can be extremely busy. Likewise, for those who also have a busy executive role, the time needed for the NED roles can expand or contract enormously.”

Vanda says that people do underestimate the time commitment and urges caution when taking on multiple NED roles. “More than one may become demanding, whether it’s a transaction or an unforeseen issue, and you need to find enough time in the week to give extra days when required,” she says.

4) Be an Influencer

NEDs may have to be more punchy than in times gone by, but the old mantra remains true that it’s the executives who call the shots.

Brendan Hynes, who became Chairman at beauty and cosmetics designer Swallowfield in July following five years as CEO of drinks business Nichols, comments: “It sounds obvious but the biggest challenge is to remember you’re not the chief executive and that you retain your independence. You’re not there as a ‘yes’ man for the CEO; you have to bring balanced, independent judgement to the table which also means you have to listen a lot more than perhaps you did as a CEO.”

It’s about influencing rather than dictating. Vin Murria, Non-executive Director at AIM-listed renewable energy firm Greenko Group, and a recent NED appointee to the board of Chime Communications, comments: “You’re there to provide corporate governance capability, guidance, information and knowledge. But in the end it is the executives that are responsible for the business and they must do what they need to do for it to succeed. Being a NED can sometimes be frustrating, so it is important that you are comfortable with your role and that you remember you’re there for the greater good of the business.”

Aleen Gulvanessian, Partner at law firm Eversheds, says: “You need to challenge in a supportive and constructive manner – the nightmare NED is one who is always sniping at the executive. You have to be objective because as a NED you’re most effective when you’re independent and not too close to the business.

“The most important thing is not to try and say or do too much too quickly. As a NED it’s very important to observe and absorb the business before trying to make a difference. The worst type of board meetings are when everyone feels they have to say something or they’re not deemed to be making a contribution. Don’t feel you have to say anything unless you’re actually adding value.”

5) Know the Risks

The inherent dangers to a business have to be appreciated but not to the extent that it quashes the ability to respond to commercial opportunities. Cheryl Black, NED at Skipton Building Society, comments: “Post financial crisis, more is now expected of the NED in terms of risk and governance… there’s definitely a greater level of engagement required in the role.”

Brendan says: “You’ll need a firm grasp of what the key risks are in the business and whether they are understood. Is the commercial reward for taking those risks being sensibly evaluated and presented? Often in business, people are taking much bigger risks than they think and no one really understands their implications.”

***

On paper at least, the role of the NED hasn’t changed particularly in recent times (unless you’re a Remco Chair). But it figures that as business models are overhauled and strategies taken apart and reassembled, those individuals who can provide something different are going to be highly sought after and prized.

Besides, who on earth wants to be surrounded by mediocrity?

I hope to see you soon.

Matthew

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