International family businessRescue of the American operations
A large German family business, supplier to the automotive industry and represented at 19 locations worldwide, was worried about its American subsidiary: sales slumps, quality and delivery problems, most recently a loss in the high millions. The management there was obviously not up to the task.
As the sole managing director, I was entrusted with bringing the lost daughter back – back into the group of my client’s otherwise very successful locations that were concerned with the highest quality performance. The most urgent task was to stabilize the financial situation and at the same time win back the trust of the customers.
Together with a team of managers and employees, I implemented the turnaround roadmap. Processes and procedures were restructured, key figure systems set up, preventive maintenance and stringent supplier management introduced. At the same time, it was necessary to solve quality problems and thus meet customer expectations. For this purpose, the quality systems were optimized and the company was certified according to the IATF quality standard. An unprecedented tour de force – which, however, lifted the company back into the group of top providers.
In addition to its production in the USA, the company also had a plant in Mexico. Actually, the processes should have meshed smoothly; in fact, collaboration between sites was disastrous. In order to build mutual understanding and trust, we initiated a “cultural exchange” between the plants: we sent American employees to the plant in Mexico and, conversely, brought Mexicans to the USA. This created transparency and mutual respect – and the Mexican plant was successfully integrated into the processes.
After almost two years, at the end of our mandate, the American subsidiary is on the right track: the company has been operating for three months without a loss. The number of employees fell from 350 to 270, while sales increased by more than 20 percent. The remaining employees are motivated and the customers have included the company again in the group of high-performing suppliers.
Start-up in Mexico:in the black after 12 months
A German supplier was planning a new factory in Mexico, and dispatched an engineer across the Atlantic to manage the project. We were brought in as a business partner.
The business brief ranged from procurement, via logistics and IT, to controlling/finance. However, the greatest difficulty was the Mexicans’ very different mentality and work ethic. In hindsight, our success was down to two decisive factors:
Firstly, the right management team. Anyone can buy machines and computers; it’s the people who make the difference! We sent an American and two additional Germans for the top management. The HR director was Mexican.
And secondly, well trained employees. Once we had taken on the first 30 workers, we sent them straight to a factory in Europe for three months. There they not only learnt about the technicalities of the manufacturing process, but also assimilated the culture and team spirit. On their return, they became the propagators of the factory’s philosophy of quality, thanks to which it was to go on to win a large number of awards from automotive customers in the subsequent years.
The factory was set up within a year. We started up production and were profitable a short time later. A powerful system of financial control, tailored to local conditions, and strict quality management were key.
Mechanical engineering SME:leap in profits thanks to target costing
A medium-sized mechanical engineering company, 200 employees, brought us in to implement cost-cutting measures. Our analysis identified the main problem: the products were too expensive. We proposed reducing the cost of the products by means of target costing.
Initially, there was strong resistance. The engineers defended the machines that they had developed. They feared that any simplification would impair quality. A typical conflict: the technician strives to deliver the best possible technical solution, while the philosophy of target costing is only to make the product as good as the customer actually needs it to be.
We invited a customer in, who had purchased the company’s machines for many years. In a moderated discussion with the engineers, he explained what he liked about the machine, what he didn’t like – and which features he could quite happily do without. That put the cat among the pigeons! The developers were absolutely horrified. That wasn’t true, they argued: it had to be an isolated view.
It was only when more customers confirmed the results that the developers had a change of heart. Since they were technically brilliant, they had no difficulty in “slimming down” the product, and presenting the first prototypes just four months later. Now, all those involved are proud of the result: a 17% reduction in the costs of the product line.
Interim CFO at a plant engineering company: if the project controlling fails …
Satisfied customers, successfully completed projects – the engineering manager of a plant engineering company had a reputation for doing a good job. The figures were all the more sobering once we had introduced a functioning project controlling system: not one single project had made a profit!
When we took on the role of interim CFO, various changes were afoot. The company, a subsidiary of a foreign group, had just received an order worth EUR 140 million, three times more than usual. At the same time, the group’s head office decided to outsource the accounting to India. The accounting processes had to be reorganized, and proper project controlling introduced.
The financial review showed that, although the controller had the basic indicators he needed, his reports were more or less ignored in the day-to-day business, because they were long-winded and the figures were difficult to visualize. As a result, the project managers were agreeing to almost any request for modifications, without realizing that they exceeded the budgets. Satisfied customers at the expense of profitability! To bring the projects out of the red as quickly as possible, we introduced an effective claim management system.
Safeguarding the new structures and thus the company’s success also required personnel decisions. Part of that was our own successor: since the interim mandate expired after a year, the company had to identify and recruit a new permanent CFO.
Lean management at an industrial services provider: the quotation process in the spotlight
The processes in industrial companies are often very complex – and it is all too easy to lose sight of the big picture. A typical example: a chemical complex, where the profitable manufacturing of gas marine engines had for years concealed losses in other sectors. The problem only came to light when the engines business suddenly collapsed.
The company sought support with identifying where the losses were being made and with optimizing the processes. That’s where we came in. We initiated a classic lean management project, and optimized the most important business processes. To embed the successes, we defined key performance indicators, which are controlled and managed via a “KPI cockpit”.
The greatest potential was found to lie in a process which no one had initially thought of: the quotation process. Each quotation was taking engineers the equivalent of up to ten person-weeks. There was great surprise when we calculated the conversion rate: within a few years, the ratio of quotations to orders had fallen from 80% to 25%.
A special working group was tasked with the quotation process. Amongst other things, it developed 14 criteria, which in most cases provide a simple, yet sufficiently reliable, recipe for estimating a price. The result: the time spent on producing quotations fell from an average of eight person-weeks to just two.
Restructuring an automotive supplier:the Brazilian butterfly
Disorderly and neglected, finished and half-finished products were strewn all around the factory site: impossible to deliver quality in such conditions! This was a Brazilian manufacturer of automotive safety components, with 1,400 employees and annual sales of EUR 170 million, the subsidiary of a German automotive supplier.
When a product recall cost millions, and caused untold damage to the company’s image, the parent company in Germany took action. It sacked the Brazilian manager of the factory, and we were called in to “put the house back in order”.
Our analysis showed that there was considerable need for restructuring. However, the top priority was to motivate the managers and workforce again. A decisive tool that we selected was a balanced scorecard, tailored to the company’s situation, which made it possible systematically to involve a large number of employees in developing and implementing the targets. This broad-based strategy came off – the process of change was accepted. One employee had the idea of calling it the “butterfly” project. “At the moment we are still an ugly caterpillar,” he said, “but when we are finished, everything will be beautiful and colorful.”
Two years later, the factory was back in the black. And its biggest customer, a leading car manufacturer, even honored it with a “quality award”. Managers and workers, together with their families, celebrated with a big, colorful party on the factory site: the butterfly had emerged!