Automation Consulting Services: Business Structure Analysis and Development Recommendations

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Automation Consulting Services Business
Structure Analysis and Development Recommendations
Produced By
Darya Smirnow Huda Hamze Neil Gu Sunny Chan
2
Agenda

• Company background
• Problem identification
• Evaluation criteria
• Analysis of alternatives
• Recommendation
• Plan of action
• Conclusion
• Estimates in 1 year

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Company Background

• Technical consulting partnership specializing in
  factory automation for manufacturing firms
• Offices in Boston, Detroit, Philadelphia
  acquired office in San Jose
• Founding members make up the Executive Committee

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Company Background

• Each office is headed by a managing partner
  responsible for the offices operations
• Profits are shared proportionally to contribution
• Plans to open office in Europe
• Spirit of entrepreneurship is a key strength

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Problem Identification

• Inconsistent goals and procedures caused by
  decentralization
• No formal management system to track costs,
  capacity utilization, and business development
• Undefined role of the Executive Committee
• Lack of a long-term vision due to one-dimensional
  incentive system

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Centralization vs. Decentralization

• Inconsistency in procedures
• Inappropriate billing practices
• No guidelines for conduct
• Lack of unified business strategy
• Inefficient allocation of resources
• BUT
• Entrepreneurial spirit
• Doubled revenues each year

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Monitoring Systems

• Lack of criteria for project evaluation
• Consulting for manufacturing vs. service firms
• Ineffective allocation of resources
• No unified company strategy

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Monitoring Systems

• Little incentive to develop new client
  relationships
• Detroit
• Focus on small number of large clients 
• Next 2 months, 50 of current work complete
•  No new projects

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Monitoring Systems

• Expenses are consolidated on firm wide basis
•  
•   No incentive to reduce expenses

Boston
Philadelphia
Detroit
San Jose
Expenses
Salary Benefits
50
55
57
57
Rent Utilities
15
10
10
13
Supplies Equipment
17
16
19
16
Other
18
19
14
14
Total
100
100
100
100
Profit Margin
33
29
37
34
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Executive Committee

• Undefined objectives
• Little time allocated towards short-term and
  long-term strategic planning
• Difficulty measuring compensation and
  performance
• Tension between the Executive Committee and
  other partners
• Decision making
• Established firm culture office autonomy

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Incentive System

• Focus on revenue growth
• Lack of breadth in customer relationships
•   No incentives to reduce expenses
•  
• Individual office performance measures
•    Independent from company-wide performance
•   
• No targets

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Evaluation Criteria

• Maintain a rapid revenue growth
• Identify a unified company strategy to shape
  the culture of the firm
• Local autonomy and creativity
• Efficient allocation of resources
• Constructive cooperation and communication
• Effectively motivate and monitor performance

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Analysis of AlternativesCentralization vs.
Decentralization

• Centralize the firm by implementing rigid
  controls and a top-down organizational structure
• Leave firm decentralized but develop formal
  guidelines and a strategic objective via
  firm-wide discussion
• Leave firm decentralized but develop informal
  guidelines and strategic objectives via a
  top-down management approach

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Analysis of AlternativesMonitoring Systems

• Convert offices into profit centers to increase
  expenditure awareness
• Implement detailed budgets and sale targets
• Request quarterly office operations summary
  reports
• Implement a project evaluation criteria checklist
  
•  

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Analysis of AlternativesMonitoring Systems

• Implement a client prospecting system in order
  to monitor resource allocation and customer
  relationship development

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Analysis of AlternativesExecutive Committee

• Exclusive segregation of duties between
  managing partners and the Executive Committee
• Complete decentralization of the firm will
  allow to dissolve the Executive Committee
• Create an inclusive Executive Committee whereby
  partners can engage in firm wide strategic
  planning

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Analysis of AlternativesIncentive System

• Create balanced score card
• Bonus based on cost reduction and firm-wide
  performance 
• Organize firm-wide functions to maintain a
  sense of community among employees
• Promotions should be based on measures aligned
  with company strategy

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Recommendations

• 1) Exclusive segregation of duties between
  managing partners and the Executive Committee
•  
• Increases allocation of time dedicated to
  long-term and short-term strategic planning
•  
• Facilitates development of specific objectives
  that allow for performance measurement and
  appraisal
•        
•  
•  
•  
•  
•  

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• 2) Leave firm decentralized but develop informal
  guidelines and a strategic objective via
  firm-wide discussion
•  
• Allows for local autonomy
•  
• Facilitates firm-wide communication and
  constructive cooperation
• Aligns firm culture with its strategic
  objectives

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• 3) Implement detailed budgets and sale targets
•  
• Use variance analysis to engage in management
  by exception 
•  
• Reduce "Other" expenses by 4 of the Total
• Increase Utilization annual average to 85
• Maintain an average annual ratio of 
•         No. of clients served
•         ------------------------------     0.70
•        Total professional staff  
•  
•  
•  
•  

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• 4) Revise the bonus system to include incentives
  based on reduced expenses and firm-wide
  performance
•  
• Give out 50 of savings from reduced expenses
  as a bonus
•  
• Give out a bonus based on firm-wide performance
• Incentive system should be based on office's
  achievement of specific performance targets
• Revenue, utilization, No. of projects
  completed,
• No. of clients served
• Client satisfaction surveys
•  
•  

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Plan of Action    Phase 1 1-3 Weeks

• Conduct a series of formal meetings
•  
• Communicate the need for restructuring process
•   Outline steps and expected outcome
•   Collect feedback and address concerns
•  
•  
•  

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Plan of Action    Phase 2 3-9 Weeks

• Replace the managing partners in Boston and
  Philadelphia offices
• Outline the responsibilities of the Executive
  Committee
• Strategic long-term and short term planning 
•   Budget and sales target development
•   Office annual review of practices and
  performance
•   Incentive system revisions
•   Manager tools development

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Plan of Action     Phase 3 9 Weeks and Ongoing

• Use formal classroom style monthly workshops for
  training and communication purposes
•            
• Communicate strategic objective of the firm as
  an exclusively manufacturing company
• Train partners to develop and use management
  tools
• Focus discussions on ethical practices and
  long-term sustainability
• Solicit feedback from partners

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Conclusion

• Executive Committee manages its time and
  resources to address issues most critical to
  individual office's performance and company-wide
  development
• Individual offices cooperate to achieve
  firm-wide strategic objectives through local
  autonomy
• Performance appraisal is based on multiple
  measures which are aligned with the strategic
  objectives

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Estimates in 1 Year

• Double revenues based on firms past performance
• 6 increase in profit margins
• 2 reduction in expenses
• 2 increase in utilization
• 2 customer relationship breadth

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Q A
Thank You!