Crisis Management – COVID-19 Crisis Learnings for CEOs

Insights to help you prepare and sustain your business during a business interruption

SynFiny Advisors has developed a series of Crisis Management Insights to help you strengthen and grow your business after having faced a major business interruption.  Our objective is to provide a framework that allows any business (no matter how big or small) to maintain focus while dealing with the multitude of distractions that take you away from your core business.   Our advisors’ share their seasoned experiences and “been there, done that” practical advice to not only survive but thrive in a crisis situation.

Many companies and organizations will be placed under significant stress during periods of major business interruptions arising from unexpected situations like natural disasters, civil unrest, massive business and economic interruptions. Examples include the 1997 and 2008 global financial crises, and most recently, the COVID-19 pandemic. This Insight provides business leaders with key guidance on what they need to do to sustain their teams and keep their business running through a major crisis.

Key Vulnerabilities and Concerns

With an impending crisis, it is critical for leadership to identify and reinforce areas vulnerabilities within their organization. These areas of concern may not be consistent from crisis to crisis; therefore, it is important to look at each crisis on an individual basis. Some common areas of vulnerability include:

  • Safety: Ensuring the safety of your team is the first priority, in particular those engaged in production and customer delivery. For COVID-19, sourcing of protective gear and safety equipment was a challenge, as well as preventive measures.
  • Organization: Be prepared to work differently. From unpaid leave, reduced staff and reduced wages to virtual work and supplier limitations, businesses must be flexible in the ways that they accomplish mission critical tasks. Waves of job, salary reductions and remote work can have significant impact on employee morale and engagement. While manageable, keeping motivation and team effectiveness upbeat will be more difficult in the long term. HR is a critical asset while navigating the legal and labor law aspects of these issues.
  • Cash: Good cashflow is essential to surviving a crisis. With rapidly declining revenues it is critical to tighten cost controls. And the cashflow issues are not restricted to your organization. Partners and suppliers with cashflow issues could also have an impact on your business.

How to Prepare

Identification of vulnerable areas is a great first step. The second step is to develop plans to reinforce vulnerable areas during a crisis. Some key considerations include:

  • Stay calm – Import stress and export serenity. Staying positive is not easy in the crisis times but CEO sets the tone and people are looking up to lead team and their reactions will be influenced by what they see and hear from them.
  • Develop a rapid response plan – Put actions in place to ensure your people are safe during the crisis. Reinforce operations for mission critical products and services so they are available during the crisis. Think through your critical processes, and in particular those that are unique/have limited number of people that can operate them. Each function needs to quickly evaluate its vulnerabilities and take action to address them via training, back-up support, creating job aids etc. Provide support for the local communities that you operate in.
  • Develop a communication strategy – Clear and consistent communication is essential to ensure that team members know how to behave during a crisis. While being open about the issues and choices is not easy and needs to be carefully managed, it ensures organizational continuity. Establish a daily emergency team meeting between management and the GM/CEO so up-to-date information (e.g., crisis situation updates, changes to organizational priorities and objectives) is communicated through the organization (up and down the chain of command). These communications also provide important “face-time” to the organization. Even when remote work is necessary, virtual technologies are widely available and easy to implement.
  • Focus on cash flow – Careful tracking of receivables, expenses, inventories, and credit limits is essential during a crisis. Approaching your banks, suppliers and customers in advance has helped to soften the blow and avoid the worst outcome.
  • Support key long-term partners/supply chain – While key focus of each organization is on ensuring its own physical and financial safety, providing support to the key long-term suppliers and customers can also be an important consideration. Forward looking businesses have developed programs to provide additional credit and/or discounts to ensure their supply and sales remain sustainable.
  • Learn from other regions – Tried and tested playbooks from other countries and regions can help provide a great foundation for managing a crisis. For companies with intercontinental manufacturing footprints, the key questions to ask are: When were they hit? How hard were the hit? Different geographies will have different answers to these questions.

Post-Crisis

Once your Rapid Response Actions are complete, the Leadership Team’s focus should shift towards post-crisis preparation. Some actions include:

  • Study trends in the marketplaces where you operate. Look for shifts in consumer behaviour and dynamics in out-of-home and in-home consumption.
  • Hold “Recovery Workshops” for your key teams to get them to focused and inspired about the future.
  • Focus on the Fundamentals –  Ensure You have a robust cash cycle and actions to preserve your cash balance.  Delay or avoid non-essential spending.

Crisis situations also present new business opportunities. These opportunities can come in the form of M&A deals for struggling organizations and enhanced government support.

Key Takeaways

  • Take time to identify key areas of vulnerability that present risk to your mission critical operations.
  • Reinforce vulnerable areas with additional resources and plans of action to keep operations running smooth during a crisis.
  • After plans are in place and running, shift Leadership team’s focus to post-crisis preparation. Look for opportunities to emerge from the crisis stronger than when it started.

Conclusion

SynFiny Advisors exists to bring talented “been there, done that” experience to bear on solving client problems. Each engagement results in measurable, pragmatic, and actionable recommendations. We assist in developing Business Process Transformation scenarios to survive changing economic conditions and minimize disruption to your organization and business partners. Our approach is very simple, we Define, Design and Transform. And in doing so, transform your business from ‘existing’ to ‘exceeding’.

Download and read the full insight here.

For more information, contact Jet Antonio (jantonio@synfiny.com) or Natalia Vinogradova (nyvinogradova@synfiny.com).

Other contributing authors to the “Crisis Management” series include the following:

skyscrapers

Building a Business Case for Source-to-Pay

Digital transformations are changing the ways that organizations do business. Strategic sourcing, order management, and payables have evolved from a functional exercise to a competitive advantage. And as organizations grow, so does the complexity of their supply chain, resulting in issues in the areas of decision making, compliance, and waste (monetary, time and potential materials). Leading Supply Management Organizations (SMO) are benefiting from improved innovation, faster speed to market, better cost optimization/value, more profit, increased productivity, improved cash flow, and better controls by implementing Source-to-Pay (S2P) strategies and technology-enabled automation into their procurement process.

Those new to S2P still face many challenges in the areas of supplier management, low-cost country sourcing, risk, compliance, etc. These organizations must maximize the benefits from the S2P model in the following ways:

  • Thoroughly understand the needs and spending forecast of the business
  • Extract the greatest possible value from regional and global supply markets
  • Build collaborative relationships with high-performing, strategic suppliers
  • Minimize supply risks
  • Obtain collaborative and corrective behaviors from the people who spend
  • Align strategy with business performance measures (e.g., cost of goods sold, working capital, cash flow, profit, shareholder value, market leadership and innovation)

Whether purchasing direct materials for manufacturing or indirect materials/services to support the finished product, a best-in-class SMO applies S2P strategies to all procurement decisions.

This translates to following key imperatives for S2P organizations:

Increasing Visibility: The most competitive S2P organizations are capable of connecting massive amounts of information and data from many sources, systems, locations, languages, and formats to create 360˚ visibility that supports a full range of strategic S2P activities (not just spend management).

Ensuring Compliance: Driving business performance means convincing employees to adopt preferred S2P processes, strategies, standards, and decisions. Compliance grows from a solution that combines aligned objectives, understanding risk, communication, collaboration, and consistent technology adoption.

Generating Savings: Minimizing costs/maximizing value can often feel at odds with other business objectives. S2P’s role is to make sure the results materialize in highly quantifiable ways. This could be hard savings to the bottom line or cost avoidance. This need had been poorly met from a S2P technology perspective, but the situation is improving rapidly.

What is Source to Pay (S2P)?

Chart of source to pay

S2P is comprised of two distinct parts of the procurement process: Source-to-Contract (S2C) and Procure-to-Pay (P2P). S2C includes steps of assessing business needs, industry/supplier capability, economic analysis, strategy creation, strategy execution, and strategy renewal. On the other side, P2P covers the transactional flow of an order including collecting master data (e.g., supplier, material, pricing, etc.), order management, product or services payment, and compliance. S2P automation refers to using technology to streamline all or part of the S2P process.

Requisitioning: The “need” is generated in 2 ways: by automatic inventory/demand replenishment or by users that wish to purchase goods or services. Automation allows the users to plan or complete the requisitions electronically, often selecting items from a catalog that they are permitted to order from.

Requisition Approval: An approval policy should be in place, which may include no approval below certain dollar limits or manual approval by budget/functional owners. Once a requisition is raised, it follows the approval release policy before being converted to a purchase order (PO) and sent to the supplier.  Manual approval processes have proven ineffective, as approvals are often not obtained or obtained after-the-fact due to time constraints. Automation allows for these requisitions to be routed electronically, following a decision (approval) authority matrix that ultimately reduces approval time. Most applications now allow approvals to be done from an email on a mobile device.

Issuance of Purchase Orders: Once a requisition is approved, a PO is issued to a supplier. Automation allows POs to be efficiently sent electronically with acknowledgments and proposed changes being returned electronically from the supplier.

Receiving Invoices: In traditional organizations, invoices are still mostly submitted by suppliers on paper via mail, then manually entered.  In automated AP departments, invoices can be received electronically via email in PDF form, via e-invoice, or via a third-party network.  Paper, PDF, and e-invoices can be swept up and scanned into the workflow using Intelligent Data Capture (IDC) and routed for goods receipt and or approval.

Matching Invoices: Once received, invoices should be matched to POs and receipts so that suppliers receive payments on time.

Issuing Payments: A combination of electronic payments, direct funds transfer, automatic bank account reconciliation, and Procurement cards (P-Card) are quickly increasing the volume of payments processed electronically. This steadily reduces the number of checks many organizations issue and reduces fraud risk and escheatment work.

Quantifying the Benefits of S2P

Hackett benchmarks  suggest that a world-class S2P strategy will increase business results for companies by:

  • Lowering PO process costs by nearly two-thirds
  • Reducing order-to-pay cycle times
  • Increasing payment-on-time to suppliers
  • Increasing user and supplier satisfaction
  • Doubling PO and Invoice management capacity for each FTE
  • Reducing FTEs required to manage each billion dollars of indirect spend by half
  • Increasing cash flow
  • Converting Accounts Payable into a profit center

Reviewing each of these benefits in detail highlights the impact an S2P strategy can have on a business.

1. Impact on compliance

Informational chart about source-to-pay

Best-in-class companies (91% + spend under management) with an implemented S2P solution show orders and spend are compliant with contracts, resulting in reduced maverick spending and minimized consequences from any maverick buying practices. Compliance policies drive users to the company’s purchasing channel of choice to ensure that the negotiated savings show up in the bottom line. For channel compliance and spend visibility, including assignment to the department or budget center where the spending resides is critical. Too often, senior executives want to insulate their organization from the need to comply and thus become the root cause behind why E-S2P, E-Invoice, and E-Pay policies do not work.

2. Impact on Transaction Processing

Manual PO processes are characterized by human errors, inaccuracies, and rework.  Automating approvals, escalations and triggering events ensures that POs are expedited quickly. Furthermore, finding goods and services is easier when supplier catalogs and product information are available online and responsive to searches. APQC performance benchmarks show that S2P automation has a significant impact on the total cost resulting from procurement cycle time.

total cost of procurement cycle

3. Impact on Transactional Processing Cost

Automation lowers transaction costs for PO and invoice processing, reducing the administrative overhead of the S2P organization. According to APQC and IOFM studies, organizations that implement e-invoicing and significant automation can realize a potential savings of 80% in processing cost per invoice.

Chart of Cost Per Invoice

4. Impact of S2P Automation on early payment discounts

While the use of e-payments is on the rise, companies are only capturing 19% of discounts offered to them by suppliers in return for early payment. Ardent Partners suggests that companies in the top quartile of performance, which adopt early payment discounts, realize discounting participation rates nearly four times as high as bottom quartile performers.

5. Impact on FTE

APQC says that a top-performing organization with implemented S2P solutions can operate with a headcount of 16 and 36 Finance/Accounts Payable FTEs per billion dollar spend respectively.

Source to pay procurement cycle chart

chart of finance function FTE per $1 billion revenueCreating a New Savings Wave – Linking

An S2P system may provide the monitoring and compliance checking capabilities without involving a spend analytics solution. However, spend analytics tools integrated with contract management and S2P systems can generally do much more sophisticated types of analysis, monitoring, and compliance checking. This increases efficiency, improves cash management, reduces inventory requirements, and slashes maverick spending. This often represents a process and prevented overpayment savings of 2-5% in many organizations, but the largest contribution of a properly implemented S2P system is a centralized, clean, data store that provides a solid foundation for spend analysis, which offers savings opportunities in the 5-15% range while enforcing the negotiated savings.

Conclusion

As companies across the globe are increasingly counting on Source-to-Pay strategies to deliver on savings, it’s imperative to not only develop a strategic outlook towards its supplier management initiatives but also to back its strategies by ensuring its savings initiatives are realized. By automating all or most of the components of the S2P process, organizations will increase visibility into its procurement process resulting in increased compliance and direct impact on the targeted savings.

About the Author

Larry Williams

Larry Williams

Partner & Source to Pay Leader

Larry Williams has been a partner of SynFiny Advisors, a business consulting company, for the last 2 years. Larry brings 40 years of Supply Chain experience in Engineering, Project Management, Production Management, Purchasing/Procurement/Accounts Payable/Shared Services, and Acquisition & Divestitures. For 12 years he had global ownership for the P&G Accounts Payable Solutions managing +$50Bn of Payables across 176 countries. He also led the innovation and deployment project portfolio and provided operational support to four regional S2P Service Centers. Larry spent the last 3 years with P&G leading the Procure-to-Pay area for large, global acquisitions and divestitures. Larry holds a degree in Mechanical Engineering and is certified as a Lean Six Sigma Black Belt.

tall buildings

Building Blocks to Creating a Successful Shared Services Organization

Most larger companies today have put in place some kind of Shared Services organization, be it a small, local group or a large, global structure. However, just creating a Shared Services organization is not enough in and of itself. This paper will address the key building blocks to help ensure that a Global Shared Services group is as successful as originally envisioned when the commitment was made to implement such a change.

Shared Services are defined as “consolidating non-core (back office) support services, and delivering these from centralized locations to provide lower costs, higher quality/reliability, standardization and harmonization of processes, and a flexible services delivery platform from which to leverage growth or manage business’ constriction” (from the Shared Services & Outsourcing Network Organization).

Many large companies have implemented a Shared Services organization in an effort to achieve the benefits mentioned above. However, not all of those implementations have gone smoothly, particularly global implementations. There are some key fundamental building blocks a company needs to have in place before implementing a Global Shared Services structure to ensure it delivers on its promise.

Foundation of Successful Shared Services

We believe there are 5 key design elements that build upon each other and are necessary to create a successful Global Shared Services organization. They are:

  1. Common Chart of Accounts/Definitions
  2. Standard Policy
  3. Common Work Processes
  4. Solutions and/or systems
  5. Separate Shared Services Organization

1. Common Chart of Accounts/Definitions

The first step is to standardize the Chart of Accounts and any Defini tions related to the internal work processes that will be moved to the Shares Services structure. More specifically:

  • Standard Chart of Accounts means one set of common cost elements used in all internal financial reporting, and the definitions and the application of those definitions is also consistent throughout the company.
  • Standard Definitions applies to activities in areas like HR, Real Estate and IT. For example, a standard definition for travel expense versus relocation expense, or how floor space is attributed to Business Units (BU’s) throughout the company.

calculator and pen laying on financial documents

The organization that is responsible for Corporate Policies should also be responsible for creating and maintaining the Standard Chart of Accounts or Standard Definitions. For each function, that will likely be a group in their global or corporate organization. So if there is a Corporate HR group, then they should own driving the common definitions for all of the appropriate HR terms, as well as all of the global HR policies. If everyone isn’t using the same definition for certain activities, then it’s going to be extremely challenging to create standard policy and common work processes.

2. Standard Policy

Once a standard Chart of Accounts and Common Definitions have been created, then the same global or corporate functional group should lead creating standard global policies for each of the internal processes that are part of the Global Shared Services transformation. However, they should also involve the BU’s and the Global Shared Services organization to ensure the policies allow for work processes that are implementable, efficient and effective.

Also, if the policies are not being followed consistently, it will be important for the functional head of that process to provide their visible support to ensure compliance. If people aren’t following the policies, the Shared Services transformation will not achieve its breakthrough improvements.

3. Common Work Processes

Once the Common Chart of Accounts and Definitions, and the Standard Policies are in place, the next step is the development and implementation of well thought out end-to- end work processes. The documentation of the current and future state work processes is critical. It needs to be laid out in a clear and concise manner, so the transition to the Global Shared Services structure is delivered in the most effective and efficient way possible. It also needs to clearly identify the key deliverables, as well as ownership and accountability of key inputs and outputs. Ideally, the key deliverables will be documented via Service Level Agreements (SLAs) that are agreed to with the customers during the design phase, when trade offs between quality, cost, speed and compliance are evaluated.

We recommend having one group centrally, led by the Process Owner, but with representation from the Policy team, the Shared Services Centers, IT, and the BU’s, develop work processes that are consistent with the policies, while also assessing efficiency and effectiveness. The starting point should be the current work processes. However, the Process Owner should look across all the BU’s to identify best practices for each work process, so when the work is moved to the Service Center, it’s using the current best approach (best here meaning the appropriate balance between quality, cost, speed and stewardship).

two women in an office writing on a white board

Unfortunately, most companies jump straight to replacing costly systems when implementing a Shared Service structure. However, before making any system changes, it is important to align on the optimum Process. Once that has been determined, then one can began to look at making system changes that enable the implementation and automation of the agreed to best practices. Putting systems in place before Policy and Processes have been finalized is like putting the cart in front of the horse……it will only lead to rework later on.

4. Solutions and/or Systems

The first step in developing the appropriate systems and solutions is to identify the current work process and system for each service that is going to be part of the Shared Services transformation. As mentioned previously, this often requires involving the people doing the work today. Once the baseline process and system are established, then work should commence with the team to identify the best overall approach and what additional improvements could be made, including opportunities to remove any redundancies, eliminate non-valued work, and minimize the number of times humans have to enter any data.

Also, one should utilize the work process and the systems experts to identify any watchouts associated with any changes. It will be especially important to have the IT experts participate, because sometimes the system itself may have limitations that need to be taken into account. Or conversely, the standard solution that comes with an “off the shelf ” system may be the simplest solution to execute and the easiest to maintain going forward.

5. Separate Shared Services Organization

In order to have a successful Global Shared Services organization, it is important that it be separate from the other organizations. That’s because:

  1. It is going to have different goals and measures then the rest of the organizations in the company.
  2. It is a services organization with a focus on internal customers, so its mindset will probably need to be a bit different than the rest of the company.
  3. It needs to be objective about what is best for the company overall, versus having any potential bias if it remains within one of the other organizations.

If the Global Shared Services group is going to be large, then we recommend that the head of this group report directly to the CEO, again to have the ability to make decisions that are best for the company overall, and not be biased by other groups within the company. If the Global Shared Services group is going to be small, then the services could report up through Corporate or the Functional Head that offers the most services within the Shared Services organization. However, if a company is trying to drive value from having a Shared Services structure, then we would suggest going with a larger Global Shared Services group reporting directly to the CEO.

Summary

Many companies have created Shared Services organizations over the past few decades, some more successfully than others. In this paper, we have discussed what we believe are 5 key building blocks for implementing a strong Global Shared Services organization, which in turn will allow the organization to deliver the desired savings, quality, speed and stewardship benefits. Note also that each of these 5 elements builds upon the others. So if you skip one of the building blocks, it will negatively impact any downstream elements, ie. if you don’t have common work processes, then it will be difficult to achieve any significant productivity improvements within the Global Shared Services organization. The 5 building blocks all fit together. As such, it’s important to execute them in the right order and involve the right people/organizations in order to have a successful implementation.).

About SynFiny Advisors

We value experience. Our advisors leverage decades of Fortune 50 experience in financial planning & analysis and shared services design and operations to deliver breakthrough solutions for our clients. This collective experience has been distilled into a proprietary consulting methodology that enables our advisors to quickly apply their experience to the specific objectives of our clients, leading to faster and longer lasting value creation.

For more information please visit synfiny.com.

Our Shared Services Practice

Christian Lee

Partner and Shared Services Leader

Christian has 30+ years of industry experiences, including 27 years of experiences in engineering, manufacturing operations and procurement. He has over 10 years of experience in procurement shared services from strategy, design, execution to operations. He has also spent many years in leading small to breakthrough process transformation projects. In the past 7 years, Christian has been leading consulting engagements with clients such as Johnson & Johnson, Coty Inc., Mars, and Wendy’s on procurement shared services design, execution and process improvements. Christian is also a Lean Blackbelt Certification candidate. Christian has BSEE degree from Michigan Technological University, and MBA from Boston University. If you have any questions, please contact Christian Lee, Managing Partner and Shared Services Practice Leader at SynFiny Advisors at cclee@synfiny.com.

Successful Change: 2 People You Need; 4 Things You Can Do

Objective: How to ensure change, big or small, is accomplished successfully despite operational challenges.

Initiating change is only half the battle won; sustaining that change till the finish line and getting the desired outcome is when you win the war. Accomplishing the change needs disciplined relentless pursuit in the face of everyday operational tasks and requires a culture which embraces and promotes change.

Change can be big and disruptive in the form of adding new product lines, implementing new technology, venturing into unchartered geographies, outsourcing functions and other major shifts in operations. These changes cut across the organization horizontally and demand a significant realignment of people, process and technology. Further, the span of these changes run across multiple years, undergoes executive turnover and has to be performed in conjunction with day to day operations. No wonder that most research shows that only 35% of the transformation change initiatives accomplish what they envisioned.

Incremental changes are limited in scope and duration and are improvements instead of transformations – such as making format changes to PO and vendor invoices for better sync. Unlike few and far between big changes, however, the incremental changes are continuously happening in the organizations at any given time.

How then can we ensure that change, transformational or incremental, stays its desired course despite day to day operational commitments and challenges?

Two people you need…

These recommendations if adopted and practiced over a period of 3-5 years will seep into the DNA of the organization and bring a cultural shift.

Dedicated Leader: Once the executive buy-in is obtained for change it is essential that the baton is handed over to a leader who is committed and owns the change. This leader is responsible for ensuring that transformational or incremental changes carried out across the organization are successfully completed. The Dedicated Leader should not have significant day to day operational responsibilities to ensure the focus and commitment. He/she will be working with the operational leaders to handhold, support and continue the momentum.

A strong leader is essential to lead the change. Bringing change is not for faint hearted as no change happens without its due share of push backs and teething challenges. There will be initial nay-sayers who will complain about anything they can come across. The Dedicated Leader has to ensure that they stay firm despite all the pressure.

Change Champions: The execution for change has to happen at the operational level, at the shop floor and it is imperative that one of their own team members is championing that change. The operational player(s) who are enthusiastic, open and ready to embrace change, their operational day to day workload should be reduced and they should be made Change Champions, agents and ambassadors of change. Their operational expertise will be a huge plus when communicating change, they can speak operational language.

Change Champions will help to counter any negativity and misconceptions about the change then and there. They will be go-to person for the functions in case of any doubts. They will bring in to the Dedicated Leader on-the-ground realities of how change is being perceived and any course correction if things are getting derailed.

… and four things you can do

Relentless Communication: You cannot overcommunicate the message for change. If your throat gets soar after repeating same stuff umpteen times, you are on right path. Communication is the key to ingrain the culture of change in the heart of the organization. The need for communication does not stop on ‘announcements’ of projects. If you want people to continuously look for optimization opportunities, you need to continuously stress upon that need.

Comprehensive communication plans detailing out ‘What, When, Who, How and How often’ should be prepared. The message must be objective, simple to understand, easy to share and leave no room for ambiguity. Townhalls, posters, workshops, banners, events whatever it takes to get the message across and get the buy-in, is worth it.

 

Measure the Change: The journey of change is monitored with milestones of performance. Divide and quantify the total change effort into small quantifiable milestones. Showcase the performance charts at visible places, so that people can see how their efforts to embrace change is adding to bottom line. For a cost savings project, showcase $$’s saved and $$’s to be saved.

Celebrate Milestones: To keep the teams motivated, especially in transformation efforts when the change spans over years and conflicting priorities can derail it, milestones will help to know where and when you stopped and what roadmap you have to walk to finish the change.

Goals and Rewards: Don’t stop at just measuring the performance, incorporate them into annual goals. Organizations should recognize and reward change champions and operational players who exceeded expectations in adopting the change. During performance reviews help them understand that doing business as usual is expected, thinking and working outside the box will help them get exceeding expectation ratings.

For making change effective, transformational or incremental, incorporate above recommendations into your daily operations and you will soon see culture changing. Adopting the changes may not be easy at first because change does not happen in the comfort zone. Everyone wants it so long as it does not affect their sandbox. Organizations must strive to bring a culture where change is seamlessly ingrained as part of their daily work and not as one time stretch.