Case 92: We need to deconstruct to build the right

What hides false leadership?

Panorama

Unsettling Calm

When we arrive at the company, we come across a harmonious environment. The behavior of the officials appeared that everyone was in the right place, at the right time, doing the right thing. We were directed to the room of the only man who showed some uneasiness: the largest shareholder. After the greetings and the praxis presentations, we heard the concerns of the first man from that temple of prosperity.

He told us that his company, a 40-year-old supplier of raw material for the manufacture of plastic products, had a great volume of sales and was market leader, but the profit margin was reduced every fiscal year. “We are in a quiet situation but we need to improve,” he said, not wanting to express his excessive apprehensions to those who thought him “stressed” for no particular reason. Everything was going according to plan, since, according to the commercial director, the flattening of the banks was a matter of survival, because, in addition to the unfair domestic price competition, a world leader was entering Brazil offering even more aggressive prices.

Diagnostics

Boutique cost and commodity performance

After two visits and detailed market evaluation, we prepared a preliminary survey of the management processes that involved the main departments. We found that the company was a leader. But leader in what? In a segment dominated by small businesses that, as our potential customer, supplied raw material for the manufacture of household goods. That is, our president was the leader of the “backyard” business owners. It was considered the leader by visualizing a restricted universe of performance, which involved a small market share, despite having the technical capacity to serve industrial segments with higher added value that demand products of excellence.

Armed with this initial diagnosis, we set out on a new meeting with top leadership. We set out our evaluation, highlighting a broad market vision, in tune with the company’s technical and productive capacity. We pointed out that they were leaders in terms of volume, multi-segment, that is, there was no such acclaimed leadership.

We stated that the company was not aligned with its own know how. They had at their disposal, and paid for this, technology and highly specialized professionals to develop the best products, while the performance of the commercial area was limited to the small segments of low performance requirement. The company had a boutique cost and was in the commodities segment. In summary, we showed that if there was not a strong job of market repositioning the result would be the liquidation or maintenance of “leadership” among the more than 400 competitors, many of them informal. Faced with irrefutable data, the three shareholders hired us to show us how to “do differently.”

Deconstruction begins

Misconduct or incompetence?

Committed to bringing practical solutions that directly reflected on winning new businesses and satisfying profit margins, we began to work. Despite some resistance, we had free access to administrative and commercial processes. After all, we needed to understand how a company with potential to serve the national industrial park and international engineering corporations was limited to ensuring volume at the expense of quality and product excellence.

The first discovery came: in the area of supplies, we found orders for purchases of noble raw materials, but the suppliers delivered raw materials. A finding that could have an explanation: undue behavior of employees and administrative incompetence.

In an alert position, we choose caution as a work priority. In parallel, we analyzed the commercial area, where we found representatives committed to “take orders” of large volumes for hundreds of small customers. When we cross information, we are faced with an embarrassing situation: the involvement of senior officials and suppliers in irregular purchases. Given this, we requested a meeting with the three shareholders in our office, an invitation accepted promptly.

Solutions to change time

Secret meetings, scare and indignation

At the meeting, with reports, we exposed the data collected, which immediately caused the shareholders to hold employees with little or no power to maintain an irregular structure so tightly tied and organized. Without commenting, we explained that the scheme was to maintain the retail sale so that there was no requirement for high technical quality product, which supposedly should have been produced with the raw material paid and not delivered by the supplier. Looks crossed, showing surprise and disbelief. From that point, we asked for confidentiality until we could identify those involved. Our visitors were not yet ready to hear what we had to reveal. We scheduled a second meeting, also in our office, after two days, which we deemed sufficient to assimilate the initial blow.

On the appointed day and time they came back less defensive, willing to settle the case as quickly as possible. Skillfully, we said that the problem required certain cautions and firm decisions, because we were able to prove the direct performance of the vice-presidency and the commercial and technical directorates. First came the shock and soon after the indignation. As a vice president, twenty years ago in the position, was he able to take part in a collusion to take personal advantage? To this and other indignant questions we answered that now the best way would be to dismantle this structure, bleeding that immobilized the company at a cost of about 15% of the gross nominal value deviated, and build a prosperous and solid future. Approved proposal, we go to the solutions.

The collapse of a collusion

At meetings held outside the company, we present and discuss a profound administrative and commercial restructuring. First we needed to “clean the house”. Based on advice from the consulting firm, shareholders removed the vice president with as little trauma as possible. In parallel, we replaced the commercial and technical directors, and the entire team of representatives was renewed.

To undo collusion with people outside the company, we negotiated directly with vendors who promptly accepted our proposals to remove employees and adopt tighter order and delivery rules. We reposition the company in the market and open the doors for export. The absence of corporate governance, which facilitated unethical behavior and mismanagement, was met by the creation of a strong and active board of directors.

In a short time, our client conquered the market of the great national industries, reduced its productive risk and physical expenses, expanded its production plants, reached historical profitability – from 8% to 19% – and recently opened the capital in the Stock Exchange. We fulfilled the challenge of “doing different” and the president assumed the real leadership, which always had the right.