Should You Start Business Planning Now To Prosper When Lockdown Ends?

Although we’re likely to experience a difficult first couple of months of 2021 due to the latest lockdown, with the Coronavirus vaccination programme gathering momentum there seems to be light at the end of the tunnel as far as business is concerned.

Few companies or markets will be unchanged by Covid so I would argue that now is the time to start planning for whatever the new normal will look like once the vaccine has started to take effect and we can confidently look forward to rebuilding the economy.

Organisations will clearly need to take stock of their markets and whether they are still well placed to prosper or whether they need to adapt to survive and thrive. In our view now is a good time to do this and for companies to position themselves in the best way possible to hit the ground running when the restrictions come to an end. In HR we call such work ‘Organisation Design’ (OD), where you look at the market, your company’s structure and processes, plus what the future seems to hold and then consider what changes are needed to ensure the business is as competitive and efficient as possible.

CIPD describe OD as ‘the process and the outcome of shaping an organisational structure, to align it with the purpose of the business and the context in which the organisation exists’.

This entails analysing and adapting structures, systems and processes to gain competitive advantage. Organisations often combine OD with ‘Organisation Development’ work, which focuses on improving the culture and behaviour of employees as opposed to organisational structures and processes. This article would be too long if I covered both subjects today so I will cover Organisation Development in a separate post in the near future.

I recently read an analogy that to me explains OD perfectly – think back to the last time you filled a skip at home. If you’re like me you chucked stuff in depending on the order you came across it albeit with a bit of thought to build up the sides so you can fit even more junk in and hope the skip company don’t notice.

However, once the skip is filled you realise that half its capacity is taken by air and you could, with a bit of analysis, make some changes that will fill it much more efficiently.

It’s the same with business structures, systems and processes in that they evolve over time and every so often need reviewing to ensure there are as few air pockets as possible. You’ll never get rid of all of the air from the skip completely but with a bit of thought, analysis and planning most organisations can be significantly more efficient.

With the skip you have 3 choices: you can leave it as you can’t be bothered to change it and accept that you have wasted money and promise yourself you’ll do it better next time; you can review it, remove the contents and refill the skip more efficiently; or fiddle about with some items near the top to create a bit more space. It’s the same with business planning.

I would say that for most businesses, now is a great time to refill the metaphorical skip, especially before the economy (hopefully) roars into action in the spring when you won’t have time and may miss opportunities.

I have been on several OD courses over the years including with Henley Business school and CIPD and, whereas I find it a really interesting subject personally, the theories of how to do it effectively can start to become a bit tiresome and the conversations too academic with specialists outdoing each other to show how brainy they are rather than helping organisations with real world issues.

So, especially with ‘normal’ business owners and managers who don’t have a PhD in nuclear physics I find that keeping it fairly simple and relevant to the specific business I am advising works best and leads to outcomes that improve efficiency and, crucially, leads to outcomes that companies tend to stick with, not abandon when an issue crops up and all hands are needed on deck.

For me, the process starts with a robust and honest SWOT and PEST analysis. (Cue collective groans!) I have a horrible sense that this week’s article is now being deleted en masse while you look for something you don’t already know. But please bear with me.

Pretty much everyone has heard of this type of analysis and has done it in basic management school, but the reason it is still around is because it works. In my opinion the reason managers generally don’t use it is because they haven’t been shown how to do so effectively. Either that or their HR department has discovered an overcomplicated shiny new approach that only they are committed to!

Few managers and business owners I have spoken to were aware that in a SWOT exercise the ‘Strengths’ and ‘Weaknesses’ that are analysed should be limited to internal issues, and the ‘Opportunities’ and ‘Threats’ should relate to issues external to the organisation. Otherwise you end up confusing ‘Opportunities’ with the ‘Strengths’ and ‘Threats’ with ‘Weaknesses’ and cover the same issues twice.

Also, the PEST, or PESTLE as we will cover in this article, is simply a structure to follow to identify the external Opportunities and Threats to the business i.e. it is part of the SWOT analysis, not a separate study.

I will go into more detail about SWOT and PESTLE later in this article, but to continue with my explanation of the process, the stage after SWOT is to decide what to do with the results of your analysis and make the required changes. This is where Organisation Design comes in. The most famous model that can be used for OD is the McKinsey 7S model, which many of you will have heard of.

I prefer to use the Galbraith Star approach which, as explained below, breaks the analysis into 5 logical areas. If you would like to discuss McKinsey or one of the other 5-6 well known theories an alternative please contact me, I love this stuff and would be delighted to discuss it with you.

Let’s consider the SWOT analysis further

Strengths and Weaknesses

These should be an honest assessment of the internal strengths and weaknesses of the organisation e.g. under Strengths what is your Unique Selling Point compared to the competition? Is it price, customer service, reliability, relationships or something else e.g. speed to market? This should then be broken down into specific things you do well.

With regards to weaknesses, think about what you receive the most complaints about. Is it that customers can’t get through on the phone, poor service, unreliable deliveries ….? Also what does your FD say you waste money on?

When assessing your strengths and weaknesses you should ideally involve the individuals who are closest to the coalface, such as staff who speak to customers and suppliers regularly and also HR who should have a good handle on any staffing issues. They will be able to tell you staff turnover rates in each department, the reasons people leave, absence rates, grievance subjects etc.

Focus groups and employee surveys are great ways of gaining valuable information for all of these areas, some of which senior management may not be aware of as they are too far removed from the day to day. 186hr can help with staff surveys. Contact us to see how we can help.

Opportunities and Threats

These are the external factors that affect your organisation and its ability to be an effective, successful, growing and profitable enterprise. External factors should be broken down using a PESTLE analysis as follows, and the resulting Opportunities and Threats considered as part of your action plan.

Political

The biggest political issue at present is likely to be Brexit but there will also be both national and local government policies e.g. the current business rates concession, or the chaos caused by councils adding unused cycle lanes to the main road into town, that will affect your business.

There will be both Opportunities and Threats from Brexit such as the certainty and BAU aspects of the Agreement with the EU but also the Opportunities for business and the Threat of increased competition from other parts of the world as we develop trade agreements such as the recent deal with Turkey.

Economic

The 2 big hitters here are interest rates and inflation but there will also be local economy issues to bear in mind. Interest rates are likely to remain low for a considerable period in my opinion to help consumers, business and also the government – not least because each percentage point increase in interest rates will cost the government an extra £22 billion a year servicing our £2.2 trillion debt (say it quickly and it doesn’t seem so bad!). As for inflation, it seems set to rise as the government and BoE try to inflate away the size of the debt compared to the size of the economy through Quantitative Easing.

On the other hand, the mandate of the independent Bank of England is to control inflation through interest rates so what will they do? It seems a little contradictory to me but maybe that’s why I am in HR and not an economist!

Unless you have access to lobbyists you won’t be able to influence these issues but clearly they will affect your business and you should be prepared for the likely impact and plan for the Opportunities and Threats that emerge, and change course as appropriate.

Social

It is difficult to know where to start with regards to the social changes that are likely in the UK over the coming months and years post Brexit and Coronavirus, but what is certain is that there will be significant changes and that they will lead to Opportunities and Threats to your business so social changes are crucial to your analysis. For example, what will be the effect on the retail sector of our changing shopping habits and the move from city centres to suburbs or even further afield? How will employees continuing to work from home affect your business in terms of employee management and also relationships with customers and suppliers?

Technology

Most companies will need a major review of how technology has changed the landscape for their business in recent months and years in terms of shopping habits, communication, effect on office environments, how to mentor and train individuals who work from home etc.

This time last year few of us had heard of Zoom (or ‘furlough’, I’m embarrassed to say) but, along with Microsoft Teams etc it is now crucial for a lot of companies and this will continue.

Legal

With the Brexit Agreement it seems most laws will continue pretty much as before, and hopefully the government will feel we have enough to contend with due to Covid and Brexit and won’t introduce drastic changes in the near future. But clearly, actual and potential legal changes need to be factored into your analysis along with existing laws that have affected your business but haven’t been fully considered.

Environmental

This did not even figure in the original ‘PEST’ model but is undoubtedly one of the most important aspects that will only increase in prominence in the years ahead. Public opinion is massively shifting towards environmental factors being important to individuals in all aspects of life, especially amongst the young, and this will increasingly influence which companies they choose to do business with.

Adopting high quality Environmental, Social and Governance standards are now a real opportunity to gain competitive advantage but also a huge threat to many businesses e.g. if your main product is supplied in single use plastic bottles, or is shipped from Argentina on a gas guzzling ship when there are local alternatives available.

The SWOT and PESTLE analysis will evidently result in a huge amount of valuable information that should form the basis of your action plan, and can help you formulate or adapt your structures, systems and processes through targeted OD initiatives. Any changes, and also any decisions not to change, must either enhance or protect the business strategy – which may in itself need to be reviewed following the events of 2020.

Once you have reviewed the current strategy to ensure it fits the post Covid, post Brexit world the question then is whether you have the capacity to achieve the strategy in your current form. This should involve ‘gap analysis’ where you compare the strategy i.e. ‘where we wish to be’ with the results of the SWOT analysis that tells you ‘where we are now’. The gap between the 2 should form the basis of your action plan.

The Galbraith Star

As stated above, my preferred model to add structure to all this, and analyse Organisation Design requirements is the ‘Galbraith Star’, where the following 5 areas are explored to identify where the gaps are between where you wish to be and where you are currently:

Strategy

Expanding on the above, once the SWOT and PESTLE analysis is complete, the organisation should define clearly what the post Brexit post Covid strategy is. It would normally be to prosper by excelling in one of 3 areas:

• Provide the best service possible
• Offer the best price
• Differentiate itself by being a niche provider (e.g. by offering a specialist product range that is difficult for others to replicate).

It is rare for a company to be able to excel at more than one of these 3 strategies at any one time for obvious reasons but it is possible to move between them depending on market conditions and the competition e.g. if a competitor is using loss leaders to build market share at your expense, rather than reduce your own margins you may switch to giving the best service as the competitor struggles to deliver their increased sales and loses customer loyalty. Or you may decide to reduce your product range to purely the most profitable products thus becoming a niche provider.

Structure

Many SMEs develop initially via a spider web type structure, where the entrepreneurial business owner personally controls relationships with various internal and external stakeholders in order to achieve success, with the strategy in their head rather than written down and shared with the team. This approach can work really well in the initial stages of a company but at some point a little more structure is needed, especially when employing more than a handful of staff, or the business owner will become bogged down with detail and increasingly less effective.

For more mature companies there are various types of structure that may be appropriate,  and challenging the status quo to ensure the current structure is fit for purpose is a crucial part of Organisation Design work.

Most organisations’ structures are based around distinct functions or departments such as Sales, Marketing, HR, Finance etc. Alternatively, a geographical approach may be more relevant with regional offices in separate locations or countries, each with duplicated functions that serve that geographical area in a more focused way than a central Head Office would.

There is also the product based structure where the focus of departments is around individual products or types of products e.g. B2B, B2C, industrial, commercial, residential etc. Finally, structures can be focused on supporting specific customers e.g. separate teams for key customers combined with general departments for groups of smaller customers.

In truth, most companies operate a matrix type approach that combines 2 or 3 types of structure but it is worth looking at whether recent changes to business conditions means that the current structure should be reviewed.

Whichever type of structure is best, most UK companies operate a hierarchy to ensure clear responsibilities, although a matrix type structure can also work e.g. for a large IT project. In recent years hierarchical structures have tended to become flatter, which increases personal responsibility and motivation but can stretch managers’ responsibilities too thin and will only be effective if the right processes are in place. If that has that changed in your organisation due to the pandemic then reporting lines may need to be reviewed.

Your analysis may result in a decision that you need to change the structure and this may involve making redundancies. 186hr have devised a free guide which gives you the basic steps needed. We also produce a detailed Practical Guide with telephone support for those who would like extra help.

Processes

In most organisations there is low hanging fruit e.g. processes that have ‘always been done’ but no longer add value. This analysis is an opportunity to challenge such practices and if they can’t be shown to add value then stop doing them and see what happens!

As part of its analysis the organisation should also consider whether it has the capability to carry out the required processes effectively and efficiently and if not, either change the process or acquire the appropriate staff and other resources to make it happen.

One of the areas to consider in the ‘process’ section of the analysis is how to measure results and success of any changes. Measuring financial results and performance to target and comparing them to how things were previously is fairly straightforward but such results can be influenced by myriad factors so analysis of which actions were effective, or not, can help. Clearly the costs of the changes also need to be analysed so key metrics can be examined such as Return on Investment and Return on Capital Employed.

Rewards

All employee rewards should be designed to influence employees’ behaviour and ensure they achieve what the organisation needs them to. They should reward the behaviours specified in the Job Description, which will lead to everyone being clear what is required and how they will be rewarded if they achieve this. Plus maybe the consequences if they don’t! (how to manage poor performers is a topic for another day but please contact us if you’d like to discuss it sooner).

Changing bonus schemes and other employee incentives can be tricky but the company is perfectly entitled to decide what behaviours and outcomes it wishes to reward, and to change them as the business develops and grows – or as it shrinks and becomes more of a niche player. Contact us if you would like to discuss this further.

People

Obviously people are the key to achieving the strategy in most organisations. Ideally the organisation will have competent people in every role with a clear structure and all processes, rewards and goals aligned with the company strategy. Sadly this is not always the case but good quality Organisation Design analysis will help.

Once the strategy and structure have been decided as described above it is quite a straightforward HR task to introduce new Job Descriptions and devise targeted Key Performance Indicators and ways of changing and measuring behaviours and outcomes to ensure the required results are achieved e.g. setting clear goals for employees, all designed to encourage them to behave in the way described in the JD. You may even consider a competency framework.

One of the most important ‘People’ aspects is considering how your employees will react to ‘change’. As you will be aware, people often find this uncomfortable so it is crucial to communicate effectively throughout the process.

Implementing change is difficult. Remember the human response to change and how we fight it (I’d advise you to read the excellent short story ‘Who Moved My Cheese’. It will only take a couple of hours but it is a great story that covers the subject of change brilliantly).

The ultimate ‘People’ goal is for employees to be engaged at work, committed to the company and its strategy, and motivated to achieve it. Do this well and you may even achieve the holy grail of synergy, where the return from the group as a whole is greater than the sum of the individual contributions.

Finally regarding People, in addition to analysing hard results as explained above, organisations may wish to also gauge how individuals are feeling throughout the process via staff surveys and focus groups.  Or they can make a difference simply by showing empathy and recognising that these times are unsettling and unnerving, and reassuring the team that they are appreciated and everything will be ok.

So that is a brief summary of my interpretation of the Galbraith Star approach and how HR can support organisations to work on Organisation Design. As an alternative, please contact us if you would like advice on using the highly acclaimed McKinsey 7S model. Briefly, Mckinsey identified 7 factors, or elements, that must be aligned if an organisation is to perform well. They are Strategy, Structure, Systems, Shared values, Skills, Style and Staff. 

Good luck. As always, please don’t hesitate to contact us if you have any queries.

My thanks to published OD research and course notes from CIPD and also course notes from the excellent professor Nick Kemsley at Henley Business School.