FEW LISTED companies see a new CEO and CFO arriving at the same time, but this was the situation as I joined TT Electronics in August 2008. We were charged with mapping out a new strategy for the group and creating a more cohesive electronics company by shaping the disparate collection of small companies that TT had assembled through acquisitions. The global banking crisis and severe recession was gaining force and this provided an additional challenge.
The first few months were spent doing a deep dive of the business, understanding its market positions, key customers and capabilities – a similar situation to what I encountered at Blue Circle and De La Rue. We laid out a comprehensive strategy to the markets in January 2009 and have since focused on relentless execution against this.
The primary task was to identify our strategic focus. We defined the heartland of the group as the components and sensors divisions, in which we were able to drive long-term value. Two further divisions were suitable for scalable development, leaving a dozen for disposal.
A key factor lay in defining a clear divisional structure and removing the silo-based culture prevalent across the group. The individual company MD layer was taken out and replaced by a global leadership team on a functional or business unit basis. The finance organisation was realigned as a business partner, active both in decision-making and implementation.
Another critical element was introducing new leaders who had appropriate experience and skill sets. An operating board was created: of the nine members – seven have joined the business in the last few years. Below this level, we needed to unblock the barriers to enable our key talent to shine through by offering people career progression and visibility.
We published performance indicators, driving behaviour internally and giving the analysts and investors a roadmap of where we were taking the business. The most important was to improve the operating profit margin from low single digits to a target of 8% to 10%.
To improve the business operationally, substantial costs have been taken out. This was mainly about addressing long-term cost issues and taking tough decisions to close down facilities. Working capital was reduced by dealing with the supply chain, adopting lean manufacturing practices and extending supplier terms, while sharpening debt collection processes. Net debt reduced from more than £120m to £24m at June 2011 through improving working capital, managing capex and proceeds from disposals.
Numerous other areas have been addressed, including sales, IT, risk management, pensions, dividend policy and bank financing. An active investor and City communication programme has also been implemented.
In any change management programme, it is imperative to be clear on your goals and relentless in their execution, paying attention to the detail as well as the big picture. Put the right leadership in place, so there is a team of people who share the same goals and can champion the changes. The scale and pace of change must also be calibrated to the organisational culture so you can carry the people with you.
Communication is key at all levels and in all forms. We have introduced quarterly webcasts giving all employees an opportunity to ask questions; there are regular town hall meetings on site; a new intranet has been put in place. I have also held two global finance leadership conferences in order to agree the vision and priorities, and we have spent a lot of time in the City setting out the value proposition and progress against the strategic goals, providing a platform for the business to grow and take advantage of internal opportunities. ?
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