Revenue is Vanity, Profit is Sanity by Richard Cronin

Whilst your organisation has been successfully growing the business, are the controls and processes that were originally implemented, still fit for purpose?

The news feeds and press are rife with companies suffering from major challenges, potentially serious enough to put the organisation out of business, along with many smaller firms in their supply chains. The most recent sad demise of Carillion, being a prime example.

People say that these challenges can be traced back to one or two badly contracted or managed deals, at an aggressively competitive moment in time.

The issues normally build over a period, as firms focus on the next deal and less attention is spent reviewing and planning the onboarding of a new win. Furthermore, client and service needs change, the supply chain evolves, newer technologies are launched, and the political and regulatory landscapes are constantly developing.

Most of these market movements, which affect a business, are seen by the executive team and accessed as they arrive, but how these changes impact a contract and business unit over time are often not always reviewed and understood. How an organisation’s governance is adopted and managed consistently, across a growing business structure, by a changing management team, can be very difficult. Especially when assessing these changes against a backdrop of multiplying corporate complexity and increasing geographical locations over many years.

The bigger and more complex an organisation becomes, the harder the challenge is for the executive team to effectively manage and control the wider business.

Ask yourself these questions:

  • How many of your business units quantify or understand an individual client’s profit margin or contract risk?
  • Are you actively reviewing your current client contracts and assessing whether these reflect the existing services provided today and whether these properly support your clients and the services delivered, whilst at the same time, safeguarding your organisation?
  • When was the last time reviews were conducted of the contract escalation procedure, individual roles and responsibilities, the current structure and the management tools and processes?
  • Do you know whether the governance and audit controls put in place have stood the test of time?

Growing a business is always difficult; the market is competitive and when trying to win new work and deliver against agreed plans, there is substantial pressure on the executive and management teams, which filters down through the rest of the organisation. All of this makes it easy to understand how a large and successful firm can suddenly wake to the realisation that the existing contracts that have worked for many years and supported their business growth, have changed and evolved, and therefore turned into the contract that may trip the organisation over.

In order to keep a tight control on profit margins and agreed deliverables, it is imperative to have short interval controls in place, so the operational performance drives the financials on a day-by-day basis. Otherwise, you simply look at spreadsheets and reports at the end of each month, see there might be dips in performance, but have no real understanding of what is causing the problems and how to remedy the situation. Equally, it is very easy for large organisations to get stuck in the weeds and not see the wood for the trees, which is why specialist external support can add significant value in helping corporations achieve their aims.

 

The Business Transformation Network brings you this article in partnership with Balcroft.

Richard Cronin founded Balcroft, an operational consulting firm, four years ago by bringing together a group of highly-regarded, former C-level executives from FTSE/Fortune 500 type firms to combine their experience and transform organisations.

To ensure delivery, any benefits Balcroft signs up to deliver are guaranteed, it is passionate about transferring skills to achieve sustainability and employees don’t operate out of an office, to keep its carbon footprint low and so it doesn’t pass unnecessary overheads on to its clients. 

Balcroft has supported the Sunday Times in recognising the most improved Best 100 Companies to work for and Women in the City, a highly respected, award-winning organisation that promotes, recognises and rewards female talent.

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