Business Operations

Service Provider Turnaround in the USA

The Situation

A service provider in the USA engaged IXPA’s partner in the States, Flow Consulting, to provide interim operations leadership to address a number of challenges.

Firstly, this was a family owned business acquired by private equity which was struggling to operate in the new environment with loss of local autonomy, shift to focus on EBITDA vs “checkbook finances” and other changes in control.

There were also undesirable trends in gross margin, cost containment, and cash management. Staff were not able to forecast or adequately explain causes of performance deficiencies and there was a lack of understanding of profitability of individual accounts and operations financials.

There was limited use of data to track performance and performance driver and poor internal business processes, which was resulting in performance issues across the business.

The Solution

Flow introduced an Interim Operations Leader with over 30 years of experience who performed the following tasks to stabilize and improve the organization:

Situation Assessment – Executed deep assessment through interviews, document review (contracts, policies, financial reports & statements, etc.), observations, and extensive interaction with staff.

Financial Analysis – Identified financial reporting shortcomings and outlined improved metrics. Led local team in collaboration with corporate finance to break out financials to more clearly indicate performance drivers, enabling the local team to respond appropriately. A key turning point was creating visibility to performance by account.

KPI Utilization – Initiated the use of Key Performance Indicators as a standard part of daily management and monthly operations reviews. Identified and implemented 13 KPIs that specify performance across the business and institutionalized a process for utilizing them.

Project Leadership – Created visibility to schedule and project-level financial performance. Implemented a Project Tollgate process enabling understanding of status and indicating adjustment needs.

Root Cause & Corrective Action – Developed and implemented a RCCA process to respond to issues raised during KPI review and Tollgate management. Trained the internal team in the process to ensure identification of root causes and implementation of corrective actions that ensure non-recurrence.

The Outcome

Improved Cash Management – Accounts Receivable KPI drove >15% reduction in DSO in <3 months, greatly reducing 30+ day past due invoices.

Margin Increase – Account performance improvement was driven by use of a Sales/Cost/GM KPI which showed profitability by client, redirecting resources to real vs assumed problem areas. A finding was that one client segment was unprofitable; this led to renegotiation with key clients resulting in margin improvement of 14% points moving accounts from unprofitable to profitable.

Project Status Visibility – Tollgate Process provided 1st clear picture of status of over 250 projects, highlighting multiple issues that were improved through required immediate action. Sample focus area: Data for 1st sales backlog report by project.

Resource Utilization Improvement – Application of Efficiency & Utilization KPIs indicated poor personnel utilization and enabled scheduling improvements reducing overtime and related costs.

Sustained Business Management – Effective KPIs, Tollgate, and RCCA ensured benefits well beyond the tenure of the interim leader. Education and institutionalized tools created the needed capability for continuous improvement based on data rather than “gut.”