Organizational Design Effectiveness

Organizational Design Effectiveness

Ricardo Strategic Consulting (RSC) conducts an independent review of client business to support return to profitability and growth.

Challenge

A client investing in production expansion and growth initiative over the past five years experiences an unexpected revenue decline resulting in net losses. The client requests RSC to perform an overall assessment of the business unit’s operations to identify areas of improvement and provide solutions to support a turnaround plan. The short-term plan focuses on returning the client to profitability, while the long-term plan focuses on future revenue growth opportunities.

Approach 

RSC works next to the client's leadership team to review its business plan and turn around objectives. RSC then engages departments to understand working-level processes, roles, and responsibilities, product lines, manufacturing capabilities to identify gaps and opportunities.

RSC's approach to short-term turnaround is to:

  • Engage all major departments in an initial discussion through Voice of Business interviews and casual conversations to understand underlying issues including areas where formal process diverges from actual practice
  • Through initial discussions and RSC observations, identify areas for in-depth evaluation including
    • Project management process from initial client quote to end of production
    • Project handoff and transfer of responsibility between departments
    • Project quoting process
    • Raw material purchasing and storage
    • Product pricing strategy
    • Product portfolio and plant utilization
  • Following review, summarize the current state of the business and provide a short-term plan that aligns with turnaround objectives 

To support long-term growth, RSC’s approach is to:

  • Conduct high-level landscape analysis of competitors, technology trends, regulatory and trade policy driving the industry
  • Perform a competitive assessment to identify the client’s value proposition and key differentiators
  • Review current product lines to separate high value vs. unprofitable products
  • Identify new technologies and products to support future growth targets

Recommendations

After evaluation of the client's organization and capabilities, RSC recommends actions to return the business to profitability and create future revenue growth. Below is a condensed sub-set of recommendations.

Short-Term Recommendations 

  • Empowerment and ownership: Provide business unit independence from corporate influence in managing decisions that have direct impact on profitability while being held accountable for meeting performance objectives
     

  • Internal responsibility and accountability: Define RACI charts for key business areas and hold stakeholders accountable for inputs and performance in their respective areas of responsibility‚Äč
    • Reporting and Finance: Conduct independent assessment of project lifetime profitability to support go, no -go decision and allow comparison between projects to identify opportunities
      • Actively manage financials throughout life of the project
  • Quotation process: Establish ownership of the quotation process throughout program life with project management office oversight to ensure consistency across projects

  • Purchasing process: 
    • Revise the process to include economic factors when forecasting prices to better hedge commodity risk
    • Use OEM standards of approved material specifications to consolidate raw material purchasing and build leverage with supplier

Long-Term Recommendations

  • Consolidate product portfolio to match company size 

  • Build a core portfolio from current products based on market potential and product attractiveness

  • Invest in identified new technologies expected to become key growth drivers in the industry through investments, partnerships or joint ventures

Results 

RSC identifies opportunities to achieve a 30% revenue increase over the next 6 years through current product line consolidation and expanding into new high-value product lines.

RSC highlights the importance of fixing identified organization issues to support the return to profitability before moving towards new investments and growth initiatives.

RSC provides economic guidance to manage procurement of market-priced commodities that represent major cost element affecting client profitability.

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