Drivers of an organisational turnaround

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Drivers of an organisational turnaround

Author: Dr. Grant Freedman

A COMPANY IN CRISIS

In 2003, we embarked on a process of consultation with a large Healthcare company.  The Healthcare company, registered as a separate entity, is wholly-owned by its parent company (which operates an entirely different business) and serves a patient base of some 32,000 employees of the holding company.

Relationships between the Healthcare company and the holding company had begun to deteriorate progressively, with the Healthcare company being perceived to be poorly aligned with the interests of the holding company and consuming cash resources for little value in return.  Allegations of poor human resources management practices, including favouritism and nepotism, began to emerge.  A forensic audit, commissioned by the holding company, revealed significant legal and business risks.

Faced with the prospect of failure of its healthcare business, the holding company replaced the management team in September 2003.  The new Managing Director was tasked with turning the company around…

A SUCCESSFUL TURNAROUND

By the end of 2007, the Healthcare Company had successfully repositioned itself.  Progressive reductions in operating costs had been achieved, involving labour reductions and the realization of economies of scale, efficiencies in consumable utilization and the costs of various services and contracts.  Several innovative changes were made to the manner in which patient care was provided.  The 2008 budget was almost R100 million lower than that of 2004, in real terms.

Along with the reductions in operating costs, significant improvements in service outcomes were recorded. Key results included lower admission rates, a significant reduction in the tuberculosis incidence, stabilization of employee absenteeism, reductions in ill health retirement and reductions in the death rate.  The company received external recognition when it won the 2007 ABSA Pan African Healthcare Award in the Global/Multinational category and was judged the overall winner in two categories – the Greatest Impact and the Most Sustainable work in the area of HIV/AIDS, Tuberculosis and Malaria.

RESEARCH INTO DRIVERS OF THE TURNAROUND

The Managing Director of the Healthcare company is conducting research on what variables had the greatest impact on this turnaround for his MBA thesis.  He identified 9 anatomical drivers and 8 physiological drivers (using Kotter’s (2001) eight steps for managing change) that the Executive Team (EXCO) responsible for the turnaround, felt had the greatest impact. In October 2008, we facilitated a focus group with the EXCO to investigate which of the 17 variables they felt had the greatest impact on a composite score for organisational, team and individual success.  The impact of each of the variables was determined by means of group consensus on a 9-point scale.

THE RESULTS…

10 DRIVERS WITH GREATEST IMPACT ON

COMPOSITE SCORE (COMPRISING 16 CRITERIA) OF OVERALL SUCCESS

IMPACT SCORE
1.      Empowering Others to Act on the Vision 102
2.      Restructuring the Organisation Based on Core Capabilities 100
3.      Following an Integrated Strategic Approach 98
4.      Consolidating Improvements and Producing More Change 97
5.      Utilising the Balanced Scorecard to Drive Strategy 95
6.      Strategically Repositioning the Organisation 93
7.      Adopting a Flexible Approach to Challenges 93
8.      Communicating the Vision 92
9.      Clearly Mapping the Strategy 90
10.  Forming a Powerful Guiding Coalition 85


DRIVERS WITH GREATEST IMPACT ON BALANCED SCORECARD PERSPECTIVES
Rank Financial Perspective Rank Customer Perspective
1 Restructuring the Organisation 1 Empowering Others to Act on the Vision
2 Consolidating Improvements and Producing More Change 2 Restructuring the Organisation
3 Strategic Repositioning




Rank Internal Business Process Perspective Rank Learning & Growth Perspective
1 Empowering Others to Act on the Vision 1 Empowering Others to Act on the Vision
2 Restructuring the Organisation 2 Adopting an Integrated Strategic Approach
3 Adopting an Integrated Strategic Approach 3 Building Core Competencies
4 Strategic Repositioning
5 Building Core Competencies


DRIVERS THAT TOOK THE GREATEST EMOTIONAL TOLL ON EXCO MEMBERS
  • Coming to grips with the implications of the strategic positioning of the company
  • Restructuring of the organisation (especially where downsizing was concerned)


DRIVERS THAT GAVE EXCO MEMBERS THE GREATEST SENSE OF PERSONAL ACHIEVEMENT
  • Successfully repositioning the company
  • Empowering others to act on the vision
  • Consolidating improvements to produce more change


DRIVERS THAT HAD THE GREATEST IMPACT ON THE EFFECTIVENESS OF THE EXCO TEAM
  • Utilising the Balanced Scorecard as a tool to cascade the strategy down the organisation
  • Communicating the vision to all stakeholders


DRIVERS WITH THE GREATEST IMPACT ON THE CREDIBILITY OF THE EXCO TEAM
  • Strategically (re)positioning the company (refocusing the business)
  • Successfully completing the restructuring of the organisation in accordance with the repositioning
  • Empowering others to act on the vision
  • Adopting a flexible approach when faced with challenges (a number of critical events were discussed, where the EXCO team had to modify/reverse their decisions in the face of changing circumstances)
  • Forming a powerful guiding coalition (the EXCO team in this case)


DRIVERS WITH THE GREATEST IMPACT ON THE EXCO TEAM’S LEARNING
  • How to let go and empower others to act on the vision (required progressively allowing the next levels in the company to go through the strategy development and team alignment process.)


CONCLUSION

Among many other observations, these results highlight, once again, the important role of people in effecting organisational turnaround.  There was significant debate about the relative importance of, for example, the Integrated Strategic Approach and Empowering Others to Act on the Vision.  The analogy was drawn to the flywheel concept of Porras & Collins (2001), where activities such as Strategic Repositioning, Restructuring the Organisation and Building Core Competencies start the process of turning the flywheel in a particular direction, but when people are empowered to act in alignment with that vision, the flywheel really gathers momentum and turns on its own.

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