Redirecting the focus of a company through change management can test a CEO’s powers of persuasion to the limit. John Courtney, chairman of Strategy Consulting, a business strategist to both private and public companies, regularly encounters management teams who only make changes when the going gets tough.

Redirecting the focus of a company through change management can test a CEO’s powers of persuasion to the limit. John Courtney, chairman of Strategy Consulting, a business strategist to both private and public companies, regularly encounters management teams who only make changes when the going gets tough.

Rather than being reactive, Courtney believes directors and CEOs should actively set targets and develop plans throughout the financial year, regardless of a company’s performance.

‘This is the major problem for most companies, particularly SMEs – they are not clear about where they want to get to,’ says Courtney. ‘It’s all woolly: “We want to get bigger, grow more and have more profits,”, but [directors] are not very clear about how to get there.’

For Courtney, you need to step back and assess what direction your business is going in: ‘Unless you have your basic plan sorted out, how are you going to make money? All companies, even start-ups, should review their business strategy once a year at the very least.’

Richard Law, chief executive of AIM-listed software company GB Group, endorses this type of approach. After becoming CEO in 2002, he saw that although the business was ‘operating in a nice area’ and generating turnover of around £10 million, the market ‘had become saturated’.

At this time, GB Group specialised in taking postcodes and house numbers and using this information as a rapid data capture tool. ‘When I took over I saw that there was not much potential for growth.

‘I thought that if we took the technology and existing database and repackaged it for a different market it would provide significant opportunities. So we looked for potential ways to use the software to provide a different service.’

Fake IDs

Law explains that around this time ID fraud started to hit the headlines as advances in desktop publishing meant the production of high-quality fake ID became easier.
‘In 2002 we said it would be inconceivable that paper-based evidence would continue as it was without it being replaced by electronic processes, which could bring the time down to seconds [when authenticating ID],’ notes Law.

After teaming up with telecoms giant BT, the decision to branch out – GB Group still provides its original data capture offering – has allowed the company to move to a position of strength. Two-years ago it launched URU, which enables companies that supply any form of credit contract to quickly check the veracity of the information provided by the potential customer.

‘From a standing start, the last half year produced £2.5 million of sales from URU,’ says Law. He expects £6 million for the full year. Revenue for financial year-end 2006 is just short of £13 million.

It’s an example of a CEO driving change through a company and, like Courtney suggests, not allowing the business to be stuck in a rut. ‘You’ve got to have something better than the competition or you won’t sell it,’ says Law.

As for how he persuaded GB Group’s employees, customers and stakeholders to be confident about the proposed changes, Law says it’s important to consider how to articulate a new plan. ‘You need effective communication plus longevity. So sit down and work out what you want to achieve,’ he remarks.

Earlier this year, recruitment practice Executives Online (EO) released the Challenge of Change, which surveyed opinions on change management from 200 businesses across the UK. Anne Beitel, marketing director at EO, acknowledges change management encompasses a range of skills from specific training and role definition,
such as the implementation of an IT system, to altering a company’s culture and addressing levels of employee satisfaction.

‘There is a huge range of areas and very little consensus on definition,’ says Beitel. In her opinion, it relates to changes which are ‘bigger than just a couple of steps forward from where you are today’.

According to the survey, the biggest drivers of change for businesses were increasing efficiency (20 per cent), cost reduction (17 per cent) and looking for a competitive advantage (14 per cent).

This contrasts with the previous survey carried out in 2002, where the emphasis was on increased competition (94 per cent), new technology (91 per cent) and changes in legislation (87 per cent), closely followed by the emergence of the internet (82 per cent).

Beitel believes this suggests that, whereas companies were previously focused on expansion, they are now concentrating on cost reduction and maximising profitability. ‘Companies are failing to look at the horizon to anticipate what is coming next and are looking too inward,’ she warns.

A common mistake made by companies when introducing a programme, the survey found, was failing to integrate new employees with different working practices (17 per cent).

Beitel observes that leadership or tone at the top is crucial for success. She notes that, increasingly, the people given the task of implementing change are at lower levels of an organisation, such as middle management. This is, says Beitel, a mistake.

‘They may not have the necessary power and scope and may need to run things up the corporate flagpole in order to get things accomplished. That really limits the level of success for what they are trying to do,’ she says.

Leaders required

It’s a classic case of having to lead from the front. This was the case when Alan Parker arrived as chief executive of restaurant and hotel operator Whitbread in 2004. He soon identified the most profitable brands and revised the strategy to squeeze more revenue from the top performing businesses while offloading non-core assets.
The FTSE 100 listed company’s latest interim results show that total sales are up 8.6 per cent to £696.5 million, while profit after tax climbed £136.0 million from £100.8 million.

Nevertheless, management is still keen to reduce the group’s assets, having recently agreed to sell US diner chain TGI Friday’s. Anna Glover, a spokeswoman for Whitbread notes that, ‘We don’t own the brand; we franchise it so it’s not really a core asset for us.’

Like Whitbread, professional support services provider Mouchel Parkman has adapted its business strategy to maintain a competitive edge. The company originally traded as Mouchel and Parkman, two separate listed businesses, before merging in 2003.

Both carried out civil engineering projects across the globe, but since the merger, Mouchel Parkman has established long-term strategic partnerships with local authorities and councils. The role involves managing public services such as roads, buildings, schools and rail lines.

Changing the strategy was essential to the company’s growth, says chief executive Richard Cuthbert: ‘As consulting engineers, doing risky projects all over the world was good fun, but we didn’t make a lot of money. It was the sort of business that was exposed to the economic cycle.

‘If you were engaged in one big project it could make or break you, depending on whether it went well. Equally, you could have a good run in one part of the world and then things came to an end and you moved on.’

The shift to strategic partnerships appears to have paid off. Shares at Mouchel Parkman are trading at around £3.90 each from £1.30 when the merger took place, while turnover is £375 million – a significant increase from £225 million in 2003.

For Strategy Consulting’s Courtney, UK management teams should take note of companies like Mouchel Parkman and Whitbread. In his words, such companies achieve success by constantly updating their strategy. Nevertheless, he insists even the most vigilant board should expect a few setbacks along the way.

‘You can still make wrong decisions, but if you continually monitor your business strategy you can see if something isn’t working and make changes quite quickly,’ Courtney says.