Chaucer Quarterly Review Issue 4 EN
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This document provides a summary of key topics from a quarterly review issue including change management, mergers and acquisitions (M&A), benchmarking, and Russia. It discusses how change management can help organizations adapt more rapidly and engage employees during transitions. M&A activity is presented as essential for business growth but also highly complex, requiring swift benefit delivery. Benchmarking is portrayed as enhancing competitiveness by identifying problem areas and building confidence with facts about strengths and weaknesses.
Chaucer Quarterly Review Issue 4 EN
- 1. In this issue: Quarterly Review The Issue Four November 2009 1-2 Change Management 1 & 3 What Next? 3-4 M & A - now or later? 5 Benchmarking 6-7 ‘ The City’in the cross-wires 7 Russia Change Management Continued on page 3 Continued on page 2 Do you need Change Management? Everyone is talking about it – Sounds easy? Pragmatic, effective approaches are not quite as common as the moun- tain of“Change Management”literature may suggest. We all know that the business climate has changed significantly since 2008 and that organisations are cautiously approaching the future. Undoubtedly we are watching the new business order reassert itself before our eyes. This is represented by the collapse of organisations, growth of lesser known competitors and the widespread quantity of M&A activity.This is almost certainly‘round one’as organisations change in order to survive and prosper in the post recession era. One of the key differences appears to be business operations being undertaken with a leaner workforce and organisation.The critical- ity of maintaining ‘Business as Usual’ (BAU) irrespective of external or for that matter internal pressures will be paramount. This puts pressure on executive management to ensure change initiatives (large or small) are delivered in a timely and effective manner or the results will be clear to see… Over the last 30 years or so Project Management has become a well defined discipline characterised by ‘hard’ or tangible elements that we all under- stand; planning, risks & issues, cost control, reporting etc. In essence Project Management is that suite of tangible, repeatable tools and processes used to a greater or lesser extent (depending on the project in question) to effectively man- age that project. Project Management typically has some‘accountability’for the effect it has on BAU and this is represented, I believe, by a relatively new trend to describe business projects/ programs as a‘Change Program’. Nothing has fundamentally changed however, a change pro- gram such as; an organisational transformation, IT implementation, outsourcing etc. will bring about tangible change and it is of course the purpose of these projects to focus on the mechan- ics of delivering the change. Organisations often struggle with the complexity of change with the common mistake of fo- cusing on the mechanics of change (the what) at the cost of actually managing it (the how) leaving the organisations most critical asset – the people - bewildered and confused by the change. Worse still, without effective Change Management during a change program employ- ees remain apathetic, unengaged or even negative to the new approaches being introduced. This impacts‘business as usual’and productivity for the company – a situation that in pre-reces- sion was undesirable but post recession is potentially crippling. This is where the real value of good Change Management is unrivalled; organisations that use a structured Change Management approach adapt more rapidly and engage more effectively with the workforce.This engagement/management of change within the organisation will lead to an effective workforce both in the new operating environment and throughout the transi- Now, where were we, before we were so rudely interrupted? The lights are coming back on in Canary Wharf and The City, green shoots have been seen and the number of real projects is grow- ing, across many industry sectors.The backlog is becoming real again as profitability slowly returns, albeit with tighter budgets. Where to start? How to prioritise? – Our advice: travel two parallel tracks: Track 1 - Look across your organisation and externally Firstly remember: the world has changed - it is not the same place it was before the crash. The environment is different and so is your emerging organisation. The projects on your 3-4Q2008 list may no longer be required – or may have a changed in nature and priority. In the case of regulatory-mandated projects, there are short-term ‘musts’ but the world is changing underneath you. Best have a quiet discussion with your Head of Risk & Compli- ance to get a handle on the realities of living in a still-stressed environment and the medi- um term regulatory shifts being discussed. All Heads, whether of Retail,Wholesale, Manufac- turing, Operations or Services across all sec- tors, are facing new external market realities. These need drawing out into explicit bold statements that forge a new strategic vision on which future change can be based. Additionally in financial services, with or with- out elements of public ownership, the need to seriously demonstrate corporate social re- sponsibility is a mandatory element. What Next?
- 2. The Change Challenge Change projects can be large scale and complex: Impacting multiple dimensions of the business. Geographically/culturally diverse. Technically complex. Competing initiatives. The nature of the change can bring many challenges: Scope of the change. Visibility and pressure for results. Wide reaching staff and cultural issues. Chaucer can help: Managing Change Project/Programs Chaucer has extensive capability and experience in managing change projects/programs. Examples of where we can help include: Realistic strategic vision and goals. Flexible and realistic business operational design. Portfolio and programme planning. Risk management, cost control, assurance etc. Tried & trusted tools and techniques to ensure delivery. Chaucer can help: Change Management Chaucer has a wide breadth and depth of capability across the Change management life cycle. Examples of where we can help include: Understanding the change landscape. Resistance management. Change readiness and preparation. Sustaining and reinforcing change. Communication and engagement. Chaucer has expertise in managing change programs/projects and in performing specialist change management activities. The ChaucerWay© This document is confidential and may also contain proprietary information some or all of which may be legally privileged. It is intended only for employees of Chaucer Group* and access to it by any other person is unauthorised. It’s contents must not be disclosed, distributed, copied, printed, circulated or in any other way communicated to anyone not an employee of Chaucer Group Limited. If you receive this document and you are not a current employee of Chaucer Group Limited you must inform the sender immediately and delete or otherwise destroy all copies. *Chaucer Group or any Chaucer Group company or trading entity. Thisdocumentisforinternaluseonly ©ChaucerGroup2009 Change Management Process DeborahFeakins PhillipWallis 2 Change Management tion. Which is achieved by addressing the hearts and minds of the people impacted and provide continuity and support throughout the transition whilst ultimately supporting the Change Program maintain pace of delivery. Organisations will therefore maximise short term stability and longer term return on invest- ment. Companies that can effectively balance these two critical components (stability vs. change ROI) are going to be at a competitive advantage. The strong will flourish and the weak will continue to fall away. There are a range of articles, theories and pro- motional material that claim to understand Change Management however, they often do not really satisfy the needs of the reader. They look jazzy and talk confidently about Change Management but never really offer practical, pragmatic and most importantly effective activities, tools, processes and expertise to Manage Change for maximum benefit to the organisation. Chaucer Consulting’s unique broad experience brings together the two elements for delivering change effectively; we are recognised experts in project management but coupled with that we also have deep knowledge and practical implementation experience of delivering change management activities. Uniquely Chaucer understands and has practical tools and approach to deliver the “what” and the “how” of any change program. The delivery of ChangeManagementactivitiesisanareawhere Chaucer can contribute a significant amount to your business improvement projects. In much the same vain as‘The Chaucer Way’– Project Management (the proprietary meth- odology by which Chaucer offers its clients superior project and program management) Chaucer has developed, based on hands on experience delivering Change Management activities, a step by step, manageable, pragmatic, proprie- tary methodology for effectively managing change for our clients. ‘The Chaucer Way’ – Change Management This methodology is broken downintofivesimplestages and contains within it clear activities, tools and processes that combined with the experience and expertise of a Chaucer consultant can be utilised or adapted for indi- vidual project needs to make the difference. Please call us today to discuss your immediate Change Management requirements to access constructive, pragmatic support for your Change program/s. Change Management sounds easy now! Deborah Feakins & Phillip Wallis Chaucer has expertise in managing change programs/projects and in performing specialist change management activities. phillip.wallis@chaucerconsulting.com deborah.feakins@chaucerconsulting.com
- 3. 3 What Next? M&A – now or later? Continued from page 3 Thiswillinvolvealessnarrowfinancialandshort- termist approach to shareholder value. Board andmanagementincentivestocreativeaccount- ing and focus on short-termism need changing1 . Strategic change programme solutions and cost pressures that compromise risk must be rebutted. Creative solutions are required – not creative accounting nor unacceptably in- creased operational risks. The challenge is to factor these into the governance and decision- making from board level downwards. Track 2 - Sharpen the tools of your trade: managing change Secondly, it’s time to go ‘back to school’ on change programme and project governance, particularly cost benefit analysis and stake- holder management for initiating change. Then the actual programme and project man- agement needs a re-think, particularly for large inter-related complex change. Remember that using any methodology without applying in- tellect is doomed to failure, or at least unnec- essarily high cost. Intelligent application is mandatory. Do not cut corners – cutting corners costs projects – but sculpt methods wisely to your needs, keep 20:20 programme vision and keep control. Not just leaving it to your managers and team leaders, but YOU! Individual accountability is several factors higher when the financial tide is still out and the wrecks are so visible. So where next with projects and pro- grammes? After a strategy review, the corporate priorities will be clearer. Stronger governance gates with sharper cost benefit cases will reduce the vol- ume of change to a manageable level. Rigor- ous up-front assessment will force out any programme or project element that cannot justify its existence. Remove these from the list rather than putting them lower down the pri- ority into the‘sometime never’category. Then focus on priority one and run them with your best people, or the best you can get; do not pay peanuts, even in the current weak economic climate; that is a disaster waiting to happen. Only buy quality. Then look forward to refresh- ing successful change. Companies merge, acquire and form JV’s for many reasons i.e. to grow, enter a new market, capture a bigger market share, etc. Companies also divest for similar reasons i.e. for cash that maybe needed to fund an alter- native strategy, to exit from a market, etc. It is important for any company that is making acquisitions to also have a clear and active di- vestment strategy. The diagram opposite is a hypothetical M&A journey but demonstrates what could and in many cases does occur over a period of time. Above graphic is an extract from; The Chaucer Way© – M&A Are you on an M&A journey? Maybe you are about to embark on one! M&A projects are often considered an essential component of a businesses growth strategy; it enables a strategic step change in the growth of a business and provides emphasis to focus on core business direction. However M&A projects can be highly complex: Impacting all dimensions of the busi-ZZ ness Involving geographically/culturallyZZ diverse regions Technically complexZZ The key to successfully realising an M&A strat- egy is the swift delivery of identified benefits and in retaining focus on delivery of business as usual. In today’s challenging market is it a good time or a bad time to be involved in M&A? The answer to this question depends on many factors. It is however important not to assume that there are bargains to be had because the market is depressed. This may be the case but there is still no substitute to progressing a possible M&A project in a structured and well planned way, defining in detail what has to be done. Due diligence, risk assessment and an in depth appraisal, properly tested, of the benefits and how quickly they can be realised must be completed. This is not to say things cannot be done quickly (maybe through more resource and longer hours) but cutting corners only leads to higher risk and inevitable failure. Another consideration is that an acquisition may appear cheap, a bargain, but in reality if you cannot dispose of the unwanted elements Roger Baker roger.baker@chaucerconsulting.com RogerBaker 1 Flying in the face of conventional wisdom. Financial World. 7 July 2009 Continued on page 4
- 4. Bob Lastlett bob.laslett@chaucerconsulting.com 4 MA – now or later? of the acquisition it could become a mill- stone. Sometimes a Joint Venture (JV) appears to be an ideal solution rather than an acquisition. There are many differing business drivers that would encourage a JV between two organisa- tions. Ensuring that these business drivers are well understood is key. Assessment of the market and identifying the correct partner is absolutely fundamental. When forming a JV it is also important to consider the possible or eventual dissolution of the JV. MAsuccessrequiresarealisticstrategy, design, rapid mobilisation, delivery pace and strong programme manage- ment. It must include: 1 Realistic vision and goals 2 Mobilising quickly - building merger/acquisition team capability 3 Managing people 4 Ensuring commitment of key leaders 5 Flexible realistic business operational design 6 Maintaining pace 7 Strong programme management and assurance These MA projects have included: MergersZZ AcquisitionsZZ Joint Ventures (JV’s)ZZ DivestmentsZZ JV DissolutionsZZ Post Merger Integrations (PMI)ZZ Initial Public Offerings (IPO)ZZ They have ranged from multi-billion $ global deals to country specific individual business unit divestments. The Chaucer Way© – MA is Chaucer Con- sulting’s unique methodology (including tools and techniques) for the management and successful completion of MA projects and programmes. It is based upon the experience together with the knowledge and expertise gained in MA within the oil and gas, petrochemicals, chemi- cals, power generation, water utilities, financial services and pharmaceuticals sectors of indus- try throughout the world. Chaucer Consulting has been involved in circa 50 MA projects over the past 20 years. Chaucer has been involved on both the ac- quirerandthedivestingsidesofMAprojects as well as having been involved in multi- country, cross-border and multi-business MA programs. BobLaslett
- 5. WEEK 1 WEEK 2-3 WEEK 4-5 WEEK 6 WEEK 7-8 Develop baseline for you chosen areas Analyse process and com- pare from other sources Identify Gaps , prioritise changes Develop, review agree improvement plans Identify quick wins for delivery Entrench benchmarking and best practice sharing in organisation’s planningIdentify other candidate areas to sample – validate their relevance Identity areas that can be review using existing models Internal and functional Capture models appropriate to environment Examine gaps between current and desired levels – review practicality of delivery In Industry ModelsIn Identify prioritis opriate DeborahFeakins deborah.feakins@chaucerconsulting.com 5 Benchmarking – it’s a natural thing! As the advert for gocompare.com once said, ‘Comparison is a very natural thing!’ We all want to know where we stand in re- lation to our competitors and to the rest of our industry. More so in this recession than ever, competi- tion is intense but how can you be sure of your competitiveness? Has demand fallen away because of the downturn? Are you losing your shirt to your competitors without even knowing it? Benchmarking gives you these answers. Benchmarking enhances your competi- tiveness Identifies problem areas – eliminatesZZ the guess work - shows where cost savings can be achieved Builds confidence – removes emotionZZ andreplaceswithfactsaboutstrengths and weaknesses – shows where you should compete and where you are already ahead Ensures your change budget getsZZ maximum return on investment Creates a competitiveness culture –ZZ challenges people to work smarter not harder Minimizes reinventing the wheel – al-ZZ lows cross industry fertilisation to really shift gears for your business What is benchmarking? There are many styles of benchmarking, de- pendent on industry and approach, but they fall into 4 broad categories: Internal:ZZ Measure one function against another (e.g. account opening for savings against account opening for loans) Functional:ZZ Measuring equivalent functions often across industries (e.g. compare bank savings account open- ing against new electricity customer’s account opening) External:ZZ Comparing specific defined benchmark measures against direct competitors – the most powerful, but the hardest to achieve accurate re- sults Industry Model:ZZ Models such as Ca- pability Maturity Model (CMM) in the software industry rate a capability against a 1-5 scale At their core, all benchmarking aim to achieve one outcome – improved performance! They all follow 4 basic principles: 1. Consistent measures – you must com- pare apples with apples. This gives you the evidence on which to base your discus- sions. This first principle is the hardest to get right. 2. Establish a baseline – Measurement from the start is vital to see if you have pro- gressed. The baseline and ongoing meas- urement obviously must use consistent measures. Otherwise it is not possible to compare improvements 3. Anonymity – Especially for external benchmarking. Often these are conducted via a neutral 3rd party. Internal anonymity is also of great value as it permits candid discussion. 4. Understand what you will do with results – Is this measurement for its own sake or do you want use this tool for im- provement? If you outline the objectives of benchmarking from the start – it will be clear to everyone what return you want from the work. Benchmarking can become a very expensive activity if it is allowed to become unstructured. However, when companies have focused on their outcomes and followed the principles above, the results have yielded excellent re- turns for minimal outlay. Many organisations have found that they do not necessarily have to look outside their own company – by comparing one in-country op- eration with another, for example, much in- sight can be gained and competitiveness im- proved. How Chaucer can help? At Chaucer we recognise that it can be difficult to get the benchmarking process underway. We can help by delivering a rapid start and quickly bringing our experience of developing the measurement process to bear on the problem. Once underway we can support you through- out the process of gathering data, identifying the gaps and any under-performances and then delivering the change process to meet your objectives. This low cost approach ensures that the Benchmarking project will be able to deliver significant value from the outset and lead you directly to your organisation’s weaknesses and the right solution. Typical Benchmarking Engagement
- 6. 6 The UK government’s July consultation paper, presented to Parliament by the Chancellor1 has now closed for public comment and we await the new FSMA legislation and regulations this autumn. The first new regulatory changes are being announced as we go to press – a far- reaching overhaul of UK liquidity regulation, with enhanced systems and control requirements, granular and more frequent reporting. 1 Cm 7667 Reforming financial markets July 2009 So the target is in the cross-wires: “It is clear from the global scale of this finan- cial crisis that there needs to be a major re- form of the way that banks are managed and how they are regulated, throughout the world.” Lord Turner’s review and the de Larosiere report have both been accepted by the UK Government and their recommendations form the core of the paper. Actions are already starting. The FSA’s Supervisory EnhancementZZ Programme (SEP) is increasing its re- sources and deepening its skills base in risk assessment and mitigation, su- pervision and enforcement. More thorough vetting of potentialZZ bank board members. A code of practice on remunerationZZ and bonuses to ensure consistency with risk management. Compliance with ten principles ofZZ governance, performance measure- ment and remuneration, to be report- ed annually to Parliament. Sir David Walker’s review on corporateZZ governance to confirm increased su- pervision. So what is expected? 1. A new Bank of England, Treasury and FSA Council for Financial Stability, chaired by the Chancellor, to analyse and examine emerging risks to financial stability – both systemic and specific firms – and to co-or- dinate any regulatory action or interven- tion required. It could be the Bank of England and Treasury officials who arrive at your premises to over- see your books 2. Strengthening the FSA’s powers in pru- dential supervision, greater attention to system-wide risks and providing explicit legal authority to carry out duties and take action to support financial stability in the UK, in Europe internationally with re- cently announced“technicians devoted to good regulation and supervision, inde- pendent of apparent national interests.” That could mean direct intervention into your organisation at home and will mean increased overseas operations supervision and reporting 3. Enhancing the FSA’s rule-making powers from‘just’ consumer protection to‘own ini- tiative variation of permission’ and inter- vention powers, specifically: a. Enforcement powers in relation to authorised persons and firms, to pros- ecute market abuse, and extended in- formation-gathering powers. b. A power to suspend individuals or firms for misconduct c. A power to penalise individuals who perform a controlled function without FSA approval. d. Anextendedpowertotakeemergency action to place restrictions on short selling and require disclosure of short selling. Additionally, to allow the FSA to make rules regarding a permanent disclosure regime for short positions in UK stocks. 4. Bringing new financial instruments and services into scope –including firms cur- rently outside the regulatory perimeter. It is expected that the unregulated sector will disappearorfurtherrelocateoffshore.Beware - some consultancies may over-egg the re- quirements of compliance! 5. ExpandingtheroleoftheFinancialServices Compensation Scheme (FSCS) in the ways they demonstrated capabilities in the emergency period last year, particularly acting as the point of contact and paying agents for depositors internationally. And requiring contingency payment plans by all deposit-taking firms. 6. To better educate consumers including a new National Money Guidance Service from 2010, funded from an increased FSA levy. At the banks’ cost? 7. Swiftandeffectiveredressfortheindividual, through the Regulator, the Financial Ombudsman Service (FOS) and the Courts, although the primary objective is that firms compensate the consumer voluntarily. a. Redress through the Regulator – The FSA could enforce redress on an in- dustry-wide or firm-by-firm basis, with powers broadened from breaches in FSA rules to areas ‘where the FSA has regulatory responsibility.’This includes payment services and could extend to breaches of contract and general law, far beyond authorised persons. Avoidance of such impacts requires major reviews of skill and training levels in opera- tional roles far below the approved persons level. b. Redress through the Courts – two new methods are being discussed: i. Collective ‘class actions’, approved by the FSA, through which similarly ‘The City’in the cross-wires Continued on page 7
- 7. 7 Chaucer has provided assistance to such clients and banking outsourcers on operational out- sourcing and its regulatory compliance. So what happens next? The current public consultation – including the major financial firms, our clients – has now ended, so we await further announcements and draft legislation for the next Parliamentary session. We can expect further regulations to be drafted throughout the autumn, winter and spring 2010. It will be a busy time and Chaucer will keep you informed….and help you comply at as low an operational cost as consistent with the risks involved. affected consumers can enforce their rights to redress.This would incentivise firms to settle early. It may also require a new financial services alternative dispute resolution body (and enabling legislation.) ii. A collective redress mechanism, giving the FSA the power to appoint a nomi- nated qualified representative to pur- sue a representative action through the courts. 8. Areasfordiscussion–thesearepolicyareas in which the government ‘is seeking to engage in wider discussions and consulta- tion before presenting firm proposals.’ There is steel within the velvet glove here: a. Managing systemically significant firms – individual large, complex and interconnected financial institutions. i. Each must prepare its own contin- gency plans for action in times of fail- ure, including actions relating to de- positors. (The government also wish to strengthening crisis management and depositor protection across the EU, via a single point of contact in the firm’s ‘host’ state and harmonising de- positor guarantee schemes.) Chaucer can help with these operational banking contingency plans ii. Each will have stricter regulation and supervision, including more stringent capital requirements, liquidity man- agement and supervision. This may be an FSA ‘audit team’ in-house at the bank. There will need to be infor- mational and procedural responses by the bank. b. Accesstosimple,transparentproducts, without complexity and volumes of small print. Chaucerhashelpedwithsuchproductdevel- opment and associated operations design. c. Improving governance of building so- cieties (‘mutuals’) and the sharing of operating functions on the European model where there are shared operat- ing models for treasury services and back office functions. Roger Baker roger.baker@chaucerconsulting.com RogerBaker ‘The City’in the cross-wires
- 8. 8 Russia GrahamBartlett Graham Bartlett is the Head of Chaucer Consulting in Russia. He and his family have had an association with Russia since 1996. Much of his time is spent travelling across the 11 time zones that make up Russia, meeting and supporting new and existing clients anywhere from Kaliningrad to Kamchatka. Graham and his team have worked on many business change and business performance projects including European and International programs for major global enterprises. Chaucer Consulting has worked for many clients in Russia and the CIS since 2002. The many consulting assignments successfully executed by Chaucer have included projects and programs in oil / gas and petrochemicals, manufacturing, banking and financial services, utilities, engineering and construction. Chaucer provides management consultan- cy for clients including but not limited to: Strategy Implementation.ZZ Mergers AcquisitionsZZ Design/Delivery. Project Program Management.ZZ Enterprise Risk Management.ZZ Change Management.ZZ Operational IT Excellence.ZZ Business Transformation.ZZ Strategic Procurement.ZZ Graham Bartlett can be contacted directly on +7 903 237 8713 or by email graham.bartlett@chaucerconsulting.com or through the office at: Chaucer Consulting LLC BC Metropolis, Building 1, Leningradskoye shosse, 16a, 125171, Moscow , Russia. Telephone: +7 495 777 0122 Chaucer’s unique expertise and experience in project and program management has pro- vided the basis for the successful delivery of difficultandcomplexbusinesschangeprojects to the significant benefit of many Chaucer cli- ents during the past 22 years. Chaucer has also worked on many large cross border Merger, Acquisition and Joint Venture programs. Chaucer Consulting has provided support to companies and organisations throughout Rus- sia and the former Soviet Republics including Ukraine and Kazakhstan. Chaucer’s consulting assignments have been both varied and complex, including specific country projects as well as pan-region and global programs.