Family-Owned Business Challenge
Client: Family-owned manufacturing company.
This small manufacturer had grown over the last 30+ decades into a solid company. The family actively worked in the business while leadership was handled by an outsider. The oversight was accomplished by a corporate board composed of the family, asking key questions. Unfortunately, business began falling and losses mounted. Questions by the board were meet with weak answers and then little, if any, actions. Their customer base was stagnant and dependent on a fair amount of overflow work from competition. They had just experienced a significant loss year and the trend was continuing.
A family member, who had been playing a passive leadership role of president, began to take an active role. It had been decided to implement EOS from the book Traction by Gino Wickman. The board / family wanted to provide as much support as possible to the leadership move and engaged with SPC Consulting.
Initially, we met with the founder and president to discuss their perspective on the situation and specific requests. We agreed to begin with a tour and visual assessment. It was clear from the onset that something was amiss. The atmosphere was tense and negative. From here we began to create a detailed picture of the company. We accomplished this by using two tools that are very effective at determining root cause in these situations. The first was a series of interviews with all of the staff and some casual conversations with various people on the production floor. The second step was to conduct a business physical (evaluation). This is a comprehensive audit of all key functional areas of the company and supporting relationships including commercial banking status.
Areas that needed to be addressed:
- Organizational changes
- Sales function improvement
- Financial budgeting
Since the company had begun to implement the EOS system, we helped them continue the implementation and used the framework to support addressing the three key elements identified.
We recommended a change in the organizational chart and clear definition of duties, like EOS. Once this was accomplished, it was clear that a team member was significantly impacting the culture in a very negative manner. Though there was a high level of fear, we moved to terminate that team member and improve the atmosphere within the organization. The change was so dramatic that suppliers remarked at the change to a positive atmosphere the following week. Much to the owner’s delight, no “skeletons in closet” appeared. With this change in place work began to enhance and improve the team’s strengths.
Next, we began to address the sales function. One major misstep was to suspend traveling to the customers when the financial challenges arose to limit expenses. As you can imagine, this action strained relationships with the customers. We reviewed the markets served and looked for opportunities to gain new business. Additionally, we implemented a “pipeline” tracking system to maintain visibility of all opportunities so the management team could direct support appropriately.
Finally, we worked the accounting function to build a functional living budget. This allowed them to see on a monthly basis how they were doing with the management of expenses and sales trends as well as P+L. While you might be inclined to think this is a rudimentary step, I assure it is not. Many businesses today do not have a functional budget to aid them in the everyday running of their companies.
Today the company is improving and gaining some new business. Profit is still elusive but hovering around breakeven. Now the challenge is a top line issue and not far from achieving solid profitability. The team is more hopeful and many of the systemic issues are being attended to regularly so that they do not get out of hand. More opportunity remains and the future is bright.