Managing Growth In a Professional Firm: Falkner Wilks - Essay Example

Case Study Introduction The following report is based on the detailed analysis of the Falkner Wilks, which is an organization established by two chartered surveyors Clifford Falkner and Collin Wilks 12 years back for quantity surveying. Under the able leadership of Falkner and Wilks Company had grown to mid sized and well respected for quantity surveying practice. Its head quarter is in central London with a network of six regional offices in UK as well as four in Europe. Falkner Wilks presently have over 200 employees in various categories excluding its 21 equity partners. Falkner expanded its services range apart from quality surveying to project Management, design management, building surveying and maintenance and interior design etc. It is competing in the survey market for small project to large-scale projects. Until now Falkner Wilks commercial strategy was to offer high quality work for a premium pricing carrying the reputation for good quality work and reliability in terms of completing its various projects in time and to budget. But with the time as company progresses, market conditions force company to move and change accordingly. Company is facing challenges from various quarters such as direct competitors, increasing overhead costs and cost effectiveness, to retain talented staff, overall market conditions etc. Objectives: The main aim of the report is to analyze the present situations of the organization holistically so that the weakness and threat could be countered through rectifying weaknesses. The objectives of the report are to analyze and suggest the various measures that company should adopt to achieve the sustainable growth over a long period of time. The report will suggest various measures for the company to survive and grow according to the wishes of the partners. Discussion: Basically management of any organization is a cumbersome process. In the present situation globalization, information technology & communication moving and changing fast. So companies have to speed up their process of change. When Peter Senge (1996) the author of the book “The fifth discipline: The Art and Practice of Learning Organization” was asked that the most important issue is that face domestic and international business today, he said: “I would say the system of Management.” Basically, organizations not only had been affected by their internal environment but also by external environment. So always organization should have to be prepared for any environmental change and organization must promote to management of change, create culture of trust and willingness to change through communication, collaboration etc. Now we will analyse the company on the basis of certain factors. As we know that objectives are defined as the important ends towards which organizational and individual activities are directed. Objectives form a hierarchy. In the hierarchy every individual have specific roles and responsibilities. Every level has different objectives. It’s the organizations preference to use top-down or bottom-up approach. Now if we look at Falkner structure it looks like top-down structure but actually not performing like top-down structure. Equity and salaried partners were expected to bring their original clients with them to Falkner. Each Part of business operated independently and almost autonomously under the overall responsibility of a senior equity partner. Partners have to secure business and Cliff Falkner himself never turned away any business. Managers only learned to take care of technical know how. In general, partner who had first obtain the work continued to liaise with client throughout the completion of the project almost autonomously. So this type of situation creates very ambiguous roles and responsibilities. The organization is neither truly top-down or bottom up. Basically it is an ambiguous mixture and that creates problem to each equity partners, salaried partners as well as to salaried employees. Most of the partners who are out to contact clients and bring projects normally lacks day to day running of business and therefore need separate personal manager, which has been appointed to look after Human resources details, but in practice other partners continued with the process of staff recruitment and decision-making. So clear demarcation of roles and responsibility has not been practiced in Falkner. Even partners have different views in the area of financial planning; marketing plans, transfer pricing policy etc. Clearer reporting lines do not exists and each partner working his/her own way. As the partners grow in numbers, the decision-making becomes problematic. Even some partners do not want to listen about change in policy, strategy or structure. So the overall culture of the organization is anti/against change. Partners are not open to changing needs, conditions as well as changing roles and responsibilities. Most of the partners are willing to remain status quo rather than like to change. So change in the organization as well as in partners’ attitude, thought process is needed immediately. Modern corporate strategies and planning has to be implemented in Falkner Wilks to manage further growth. Planning is done in an environment of uncertainly. As the market situations becoming uncertain, strategies have to be formed to counter it. Strategy is defined as the determination of the basis long-term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals. Falkner’s long-term objective is to grow continuously and perform better and better. To achieve the aim of sustainable growth Falkner has to start with formulating strategic plan. Strategic planning process consists of Industrial Analysis, Enterprise profile, Orientation of executives, Values and Vision (Wilson, 1995), Mission (purpose), Objectives and Strategic Intent (Hamel, and Prahalad, 1995), Present and future external environment, Internal environment (Thomas, Pollock, and Gorman, 1999), Development of Alternative strategies, Evaluation and choices of strategies (Hamel, 1996), Medium and short range planning and implementation through a reengineering of the organization structure, leadership and control, consistency testing and contingency planning. To evaluate all these factors various tools like SWOT (Strength, Weakness opportunity & threat) analysis has been introduced for analyzing the competitive situation of the company (Thompson, Strickland III, 1996). In SWOT analysis, SW deals with internal environment whereas OT deals with external environment. Company strategies should form a hierarchy. Hierarchy of strategies follows like the top-level corporate level strategy, second level business strategies and third level functional strategies at department level. Michel Porter (1996, 1980) suggested strategy formulation by analyzing the industry, buyer seller position, substitute available, new companies and competitors. If we analyse Falkner’s situation in the market it is facing severe market competitive situation. Falkner’s strength is in its able leadership and they are the persons’ who are professionally qualified, technically skilled and having innovative ideas with right business orientation. Falkner wilks has proven reputation in the market for its good quality work and reliability in terms of competing projects in time and to budget. It has adopted and utilized information technology to assist in its’ work to achieve cost effectiveness and labour efficiency. Falkner’s manpower is technically very skilled and properly diversified. Falkner has inculcated lot of weaknesses in its overall system. The first and important weaknesses that Falkner experiences is its technically skilled employees and equity holder who are basically very knowledgeable people of their own field but they do not have any entrepreneurial or managerial training to manage the people (employees), clients and to lead a team or work as a team professionally. This basic weakness of equity partners who are the ultimate decision makers for the organization created problems and exposes the organization in competitive market. Decision makers in Falkner are too many in numbers and this results in clash of views. Most of the partners devote most of the time with their client and have less time for team management and proper deployment of resources. Employees feel de-motivated due to non-existence of clear-cut policies on Human resources and training. Every partner of the organization is working autonomously. This weakness, which has been cropped into the Falkner system, makes it vulnerable to external threats. The market for surveying is changing continuously and globalization and communication technology posing real threats to Falkner future prospects. Small surveying companies having lesser overhead costs put pressure on Falkner’s service cost where as larger surveying firms in the market having more resources at its disposal could capture market and Falkners talent pool by providing good package to Falkner’s employee. The ever-changing situation of the market put enormous pressure on Falkner’s growth. Clients are more aware of the situation and negotiate hard on costs and quality of services provided by Falkner. Equity partnership is being offered by the company to acquire large pool of talent. Newcomers are coming with their own original clients, which expand the customer base for Falkner. Diversification of business provides greater opportunities to Falkner wilks to sustain growth. So Falkner could chalk out its path of growth through analyzing the business strategy. Human resources is one of the most important resources for any organization and present organization is a service providing organization in which, Human resources takes ultimate importance. There are many factors, which affects staffing and could be categorized as external and internal factors. External factors like economic and competitive condition of the market and internal factors such as goals; task, technology, structure etc. are the deciding factors for organizations to employ the persons. Falkner recently recruited qualified surveyors and providing lots of facilities to them. A well-defined career path has been defined in Falkner’s HR policies. Falkner is providing them opportunities to become an equity partners. But after analyzing the overall aspects of HR policies in Falkners, we come to the conclusion that for day-to-day administration and maintaining proper staff records, job descriptions and other HR aspects, organization needs proper, well defined HR policies and a professional who could handle the complete HR system. Though Hazel Bentham appointed as personnel manager but she has not been given overall charge and in practice individual partners interfering into her duties and responsibilities. Clients’ management is also not properly and professionally managed. Falkner adopted IT and invested heavily in Networking and database methods and on management to support services of construction management by providing complete design, management and cost advice services but Falkner has not appointed any IT fellow to manage these technological services in the organization. Similarly Falkner is not a learning organization because of absence of any provision for training and development separately. Falkner using learning on the job process and hiring technical people having specific skills required for specific contracts. Falkner has not included Training and Development as inclusive part of its policy. Though Falkner is known for its quality work and service but charging premium prices for it. In future this policy cannot work because of competition with other competitors, large service providers etc. Falkner present priority is to grab project and complete it but it lacks long-term sustainable growth policy. To improve quality it has to rely on the approaches like TQM (Total Quality Management (Puffer and McCarthy, 1996; Flynn, 2000). TQM involves the organizations long-term commitment to the continuous improvement of quality throughout the organization, and with the active participation of all members at all levels to meet and exceed customers’ expectations. This top management driven philosophy in considered a way of organizational life. If we analyse Falkner’s situation on the above definition we find many loopholes. Falkner does not have an independent unit or cell to handle customer quarries or short out their problems. Customer relationship is dependent on individual equity partners and their most of the time has been consumed to maintain it. Clients have problems in billing, fee collection because of absence of centralize control. Falkner is facing another crises of leadership clash. Partners have different ways to think and have different strategy for future partnership and structure. They all have different plans and strategies for the company. As we know changes are inevitable. Changes in economic environment and services requirements as well as clients need forcing the organization to change accordingly. The organization where change has been taken as the natural process and in-built in their organizational culture could welcome change and adopt to changing situations very quickly and finally move on the path of sustainable growth. Change process involves unfreezing, changing and refreezing. Lack of communication, uncertainty about future, apprehensions about loss of power etc. could cause resistance to change. The conditions of market in changing very fast but Falkner’s partners are not willing to change. Falkner partners opposed (resisted) Julia Plath (Financial Director) advice on transfer pricing policy and strongly resented about the idea of corporate strategy. They see no need to change as Brichall put it to Plath that “we are a firm. It is in over interests to make it work with targets and controls. Professional people don’t need reporting lines and instructional manuals; they know what is for the best without being told because they have been well trained”. This statement from very senior person told the intensity of resistance to change. This shows that they are not willing to follow any system or line of instructions. They are not open to learning and developments because, they know that they have all the knowledge. So in these situations if organization has to survive for long and grow, then they have to plan, adopt some strategies and implement it at the grass root level. Conclusion: It has been quite evident form the discussion that Falkner Wilks is an organization for providing quantity surveying and is performing well in the market but the change in market situation as well as expansion of the organization posses certain threats to their sustainable growth. They have certain weaknesses, which they have to eliminate. They are facing problems in running the organization in the present way. Change in the organizational structure, culture, HR Policies, plans, directions etc. needed for long term sustainable growth and development for the organization. Company equity partners and senior members have to make a consensus on the need for change so that the complete change process could take place. Recommendations: Conditions of market has forced Falkner to change accordingly. Equity partners must communicate within themselves and be unanimous about the need for change. When this happens the following steps could be taken to reorganize Falkner Wilks: Organization is basically consists of more equity partners so there must be informal type of structure having wide spans and strategic business units/departmentalization could be done according to specialty business. Structure must be kept as flat as possible with the mixture of Top-bottom with in each unit. Authority and powers should be clarified to every one and each and every one should have their own job chart. Roles and responsibilities for each and every position must be clearly defined. Organizational Culture must be adopted as an open one, which could grasp and remain flexible according to the condition and requirements of the market. Client should be placed at the top of priority and everyone should be pragmatic and accountable and company’s profit and brand should be the top priority. Business strategy should be framed according to market conditions and it should remain flexible in adapting to the situation as quickly as possible. People are demotivated due to ambiguous situation within the organization. So motivate the employee, frame proper HR policy, and implement it properly with the help of professional consultant is the primary requirement. A separate IT and learning and training department should be formed and time-to-time employee must be trained according to the needs of the organization. This also motivates employees and reduces turnover rate and improves their efficiency and affinity to organization. TQM policy should be adopted and in overall organizational management it should be prime policy, which should be practiced. Organization must have a separate fulltime marketing arm, which must be headed by a professional marketing manager to bring business. Organization must have separate customer relationship management wing to take care of customers and their problems exclusively. Organization must have separate and exclusive finance dept., which could track its financial position and profitability as well as productivity. Overall organization must need well-oiled integrated system where all parts function smoothly and properly to make Falkner Wilks a successful and growing company. References: 1. Interview with Peter Senge in Quality Digest, November 1996, p.39. 2. Wilson, I. (1995) “Realizing the power of strategic vision,” in Arthur A. Thompson, Jr., A.J. Strickland III and Tracy Robert Kramer, edit. Reading in Strategic Management, 5th ed. Chicago, Irwin, pp. 35-55; Schoemaker, Paul, J.H. “How to link strategic vision to core capabilities,” in Arthur A. Thompson, Jr., ibid. Pp. 146-170. 3. Hamel, G. and Prahalad, C.K. (1995) “strategic intent,” in Arthur A. Thompson, Jr., A.J. Strickland III and Tracy Robert Kramer, edit. Reading in Strategic Management, 5th ed. Chicago, Irwin, pp. 56-76; Hamel, G. and Prahalad, C.K.(1994,1996) “competing for the future,” Boston, Harvard business school press, pp. 141-149. 4. Thomas, H., Pollock, T. and Gorman, P. (1999) “ Global strategic analyses: Frameworks and approaches,” The academy of management executives, February, pp. 70-82. 5. Hamel, G. (1996) “ Strategy as revolution,” Harvard business review, July-August, pp. 69-82. 6. Thompson, Arthur A. Jr., Strickland III, A.J. (1996) “Strategic Management,” 5th ed. Chicago, Irwin, pp. 36-46. 7. Porter, M.E., (1996), “ what is strategy?” Harvard Business Review (Nov.-Dec.): 61-78. 8. Porter, M.E., (1980), Competitive Strategy: Techniques for analyzing industries and competitors, Free press, New York. 9. Puffer, Sheila M. and McCarthy (1996) “ A framework for leadership in a TQM context,” Journal of quality management, Vol. 1, no. 1, pp. 109-130. 10. Flynn, B.B. (2000) “ The relationship between quality and other dimensions of competitive performance: Tradeoff or compatibility?” Academy of management proceedings, Toronto, Canada. Appendices APPENDIX-1. PESTLE Analysis (PEST analysis) The PESTLE acronym. Political Economic Social Technological Legal Environmental PESTLE Analysis is a simple technique, which can be used in a fairly sophisticated way, particularly when it is combined with Risk Analysis, SWOT Analysis, an Urgency/Importancy Grid and expert knowledge about the organisation and its external factors. PESTLE Analysis is normally used to help organisations identify and understand the external environment in which they operate and how it will operate in the future. I believe that a version of PESTLE Analysis can be used by the individual for personal development planning. Some people will argue that this is a use for which it was never designed and for which it may be inappropriate. My answer to that is to “try it, it does work for PDP”. The shorter version is a PEST Analysis – missing out Legal and Environmental factors. At the end of this document is an explanation of the use of PESTLE for organisational change. APPENDIX-2 Strategy - Analysing competitive industry structure Defining an industry. An industry is a group of firms that market products, which are close substitutes for each other (e.g. the car industry, the travel industry). Some industries are more profitable than others. Why? The answer lies in understanding the dynamics of competitive structure in an industry. The most influential analytical model for assessing the nature of competition in an industry is Michael Porters Five Forces Model, which is described below:   Porter explains that there are five forces that determine industry attractiveness and long-run industry profitability. These five "competitive forces" are - The threat of entry of new competitors (new entrants) - The threat of substitutes - The bargaining power of buyers - The bargaining power of suppliers - The degree of rivalry between existing competitors Threat of New Entrants New entrants to an industry can raise the level of competition, thereby reducing its attractiveness. The threat of new entrants largely depends on the barriers to entry. High entry barriers exist in some industries (e.g. shipbuilding) whereas other industries are very easy to enter (e.g. estate agency, restaurants). Key barriers to entry include - Economies of scale - Capital / investment requirements - Customer switching costs - Access to industry distribution channels - The likelihood of retaliation from existing industry players. Threat of Substitutes The presence of substitute products can lower industry attractiveness and profitability because they limit price levels. The threat of substitute products depends on: - Buyers willingness to substitute - The relative price and performance of substitutes - The costs of switching to substitutes Bargaining Power of Suppliers Suppliers are the businesses that supply materials & other products into the industry. The cost of items bought from suppliers (e.g. raw materials, components) can have a significant impact on a companys profitability. If suppliers have high bargaining power over a company, then in theory the companys industry is less attractive. The bargaining power of suppliers will be high when: - There are many buyers and few dominant suppliers - There are undifferentiated, highly valued products - Suppliers threaten to integrate forward into the industry (e.g. brand manufacturers threatening to set up their own retail outlets) - Buyers do not threaten to integrate backwards into supply - The industry is not a key customer group to the suppliers Bargaining Power of Buyers Buyers are the people / organisations who create demand in an industry The bargaining power of buyers is greater when There are few dominant buyers and many sellers in the industry - Products are standardised - Buyers threaten to integrate backward into the industry - Suppliers do not threaten to integrate forward into the buyers industry - The industry is not a key supplying group for buyers Intensity of Rivalry The intensity of rivalry between competitors in an industry will depend on: - The structure of competition - for example, rivalry is more intense where there are many small or equally sized competitors; rivalry is less when an industry has a clear market leader - The structure of industry costs - for example, industries with high fixed costs encourage competitors to fill unused capacity by price cutting - Degree of differentiation - industries where products are commodities (e.g. steel, coal) have greater rivalry; industries where competitors can differentiate their products have less rivalry - Switching costs - rivalry is reduced where buyers have high switching costs - i.e. there is a significant cost associated with the decision to buy a product from an alternative supplier - Strategic objectives - when competitors are pursuing aggressive growth strategies, rivalry is more intense. Where competitors are "milking" profits in a mature industry, the degree of rivalry is less Exit barriers - when barriers to leaving an industry are high (e.g. the cost of closing down factories) - then competitors tend to exhibit greater rivalry. APPENDIX-3 STRATEGIC GROUPS AND COGNITIVE MAP AND GSS (Group support system). APPENDIX-4 The Value Chain framework of Michael Porter is a model that helps to analyze specific activities through which firms can create value and competitive advantage.   The activities of the Value Chain Primary activities (line functions) Inbound Logistics. Includes receiving, storing, inventory control, transportation planning. Operations. Includes machining, packaging, assembly, equipment maintenance, testing and all other value-creating activities that transform the inputs into the final product. Outbound Logistics. The activities required to get the finished product at the customers: warehousing, order fulfillment, transportation, distribution management. Marketing and Sales. The activities associated with getting buyers to purchase the product, including: channel selection, advertising, promotion, selling, pricing, retail management, etc. Service. The activities that maintain and enhance the products value, including: customer support, repair services, installation, training, spare parts management, upgrading, etc. Support activities (Staff functions, overhead) Procurement. Procurement of raw materials, servicing, spare parts, buildings, machines, etc. Technology Development. Includes technology development to support the value chain activities. Such as: Research and Development, Process automation, design, redesign. Human Resource Management. The activities associated with recruiting, development (education), retention and compensation of employees and managers. Firm Infrastructure. Includes general management, planning management, legal, finance, accounting, public affairs, quality management, etc. Creating a cost advantage based on the value chain A firm may create a cost advantage: by reducing the cost of individual value chain activities, or by reconfiguring the value chain. Note that a cost advantage can be created by reducing the costs of the primary activities, but also by reducing the costs of the support activities. Recently there have been many companies that achieved a cost advantage by the clever use of Information Technology.   Once the value chain has been defined, assigning costs to the value chain activities can perform a cost analysis. Porter identified 10 cost drivers related to value chain activities: 1. Economies of scale. 2. Learning. 3. Capacity utilization. 4. Linkages among activities. 5. Interrelationships among business units. 6. Degree of vertical integration. 7. Timing of market entry. 8. Firms policy of cost or differentiation. 9. Geographic location. 10. Institutional factors (regulation, union activity, taxes, etc.). A firm develops a cost advantage by controlling these drivers better than its competitors do. A cost advantage also can be pursued by "Reconfiguring" the value chain. "Reconfiguration" means structural changes such as: a new production process, new distribution channels, or a different sales approach.   Normally, the Value Chain of a company is connected to other Value Chains and is part of a larger Value Chain. Developing a competitive advantage also depends on how efficiently you can analyze and manage the entire Value Chain. This idea is called: Supply Chain Management. Some people argue that network is actually a better word to describe the physical form of Value Chains: Value Networks.  Book: Michael E. Porter - Competitive Advantage APPENDIX-5 The General Electric Business Screen GE Business Screen Matrix The General Electric Business Screen was originally developed to help marketing managers overcome the problems that are commonly associated with the Boston Matrix (BCG), such as the problems with the lack of credible business information, the fact that BCG deals primarily with commodities not brands or Strategic Business Units (SBUs), and that cashflow if often a more reliable indicator of position as opposed to market growth/share. The GE Business Screen introduces a three by three matrix, which now includes a medium category. It utilizes industry attractiveness as a more inclusive measure than BCGs market growth and substitutes competitive position for the originals market share. So in come Strastraegic Business Units (SBUs). A large corporation may have many SBUs, which essentially operate under the same strategic umbrella, but are distinctive and individual. A loose example would refer to Microsoft, with SBUs for operating systems, business software, consumer software and mobile and Internet technologies. Growth/share are replaced by competitive position and market attractiveness. The point is that successful SBUs will go and do well in attractive markets because they add value that customers will pay for. So weak companies do badly for the opposite reasons. To help break down decision-making further, you then consider a number of sub-criteria: For market attractiveness: Size of market. Market rate of growth. The nature of competition and its diversity. Profit margin. Impact of technology, the law, and energy efficiency. Environmental impact. . . . and for competitive position: Market share. Management profile. R & D. Quality of products and services. Branding and promotions success. Place (or distribution). Efficiency. Cost reduction. At this stage the marketing manager adapts the list above to the needs of his strategy. The GE matrix has 5 steps: One - Identify your products, brands, experiences, solutions, or SBUs. Two - Answer the question, What makes this market so attractive? Three - Decide on the factors that position the business on the GE matrix. Four - Determine the best ways to measure attractiveness and business position. Five - Finally rank each SBU as either low, medium or high for business strength, and low, medium and high in relation to market attractiveness. Now follow the usual words of caution that go with all boxes, models and matrices. Yes the GE matrix is superior to the Boston Matrix since it uses several dimensions, as opposed to BCGs two. However, problems or limitations include: There is no research to prove that there is a relationship between market attractiveness and business position. The interrelationships between SBUs, products, brands, experiences or solutions is not taken into account. This approach does require extensive data gathering. Scoring is personal and subjective. There is no hard and fast rule on how to weight elements. The GE matrix offers a broad strategy and does not indicate how best to implement it. Appendix-6 Core competency model: A Core Competency is a deep proficiency that enables a company to deliver unique value to customers. It embodies an organization’s collective learning, particularly of how to coordinate diverse production skills and integrate multiple technologies. Such a Core Competency creates sustainable competitive advantage for a company and helps it branch into a wide variety of related markets. Core Competencies also contribute substantially to the benefits a company’s products offer customers. To develop Core Competencies a company must: Isolate its key abilities and hone them into organization-wide strengths; Compare itself with other companies with the same skills, to ensure that it is developing unique capabilities; Develop an understanding of what capabilities its customers truly value, and invest accordingly to develop and sustain valued strengths; Create an organizational road map that sets goals for competence building; Pursue alliances, acquisitions and licensing arrangements that will further build the organization’s strengths in core areas; Encourage communication and involvement in core capability development across the organization; Preserve core strengths even as management expands and redefines the business; Outsource or divest non core capabilities to free up resources that can be used to deepen core capabilities Common Uses Core Competencies capture the collective learning in an organization. They can be used to: Design competitive positions and strategies that capitalize on corporate strengths; Unify the company across business units and functional units, and improve the transfer of knowledge and skills among them; Help employees understand management’s priorities; Integrate the use of technology in carrying out business processes; Decide where to allocate resources; Make outsourcing, divestment and partnering decisions; Widen the domain in which the company innovates, and spawn new products and services; Invent new markets and quickly enter emerging markets; Enhance image and build customer loyalty. Read More