 THE STRATEGISTS ARE COMING! (part 2) Bucharest - October 15, 2007 – The Romanian business community is slowly getting used to the idea of using outside management consultants. Local companies are reaching a stage in their life cycle where they need to professionalize their management and operations. And larger size leads to increased complexity. Also changes in the external environment increase the need for internal changes. Why is that? First of all, due the changes in the Fiscal Code, in particular the introduction of the flat tax and the high prison sentences for tax evasion, more and more companies are forced to pay their taxes. In other words, tax evasion will become more difficult. This in itself is bringing many companies on the brink of bankruptcy, as they have never learnt to compete in an economy in which fiscal laws were actually applied. Secondly, EU accession will further increase competitive pressures, as goods from other EU countries are flooding into the country. Goods, and to a lesser extent services, that are both cheaper and of better quality. The result can be equally devastating for most Romanian companies. By and large, Romanian entrepreneurs/shareholders have two options. They can continue to do business the way they always did; skim excess cash flow from the company until the company most probably goes bankrupt. The second option is to fundamentally change the way they conduct their business. This means creating a finance and accounting department based on Romanian and/or international accounting standards, creating a clear and coherent business strategy that will give them a sustainable competitive advantage, investing in upgrading the company, divesting non-core activities, hiring well paid people, etcetera. And even then, not all companies will be able to survive on their own and will need a (foreign) strategic partner to do so. Most companies will not be able to do this on their own and they will have to look for professional support, most likely an outside management consultant, who can help them sort things out and make the right decisions. Traditionally, Romanian entrepreneurs have been wary of external consultants for several reasons. First of all, most of them are self-made men who have build their business on their own and in their own way. Asking outside advice almost seems like a sign of weakness. But it isn't. It is a sign that the entrepreneur/manager understands that the times are changing and that he has to change as well, if he wants to survive in the years to come. Secondly, consultancy costs money. Having to pay for "professional services" is another thing entrepreneurs/managers have to get used to. Ok, paying for a lawyer or auditor is one thing. There is usually no way around them, as the law requires certain services, although you can often question what value they actually create for your company. But having to pay for management consultancy, a service that goes right into the heart of your business, is another thing. This is where another mental obstacle comes in. Hiring a management consultant means you have to share fundamental information about your company and the way you do business. And that's not easy. Once you have decided to hire a management consultant, the next problem occurs. Who to choose? Historically, the big accountancy firms, already present in Romania since the early nineties, have more or less claimed this territory. Although their core business remains auditing, they also have expertise in adjacent fields such as financial consultancy. It is only since a few years that we see big international strategy consultancy firms like the Boston Consulting Group (BCG) and McKinsey show interest in the Romanian market, mainly driven by large restructuring and privatization projects in the field of financial services, energy and utilities and telecom. Their core business is consultancy services in the field of strategy and general management, in which they are considered world-wide leaders. Many of their business concepts are taught at leading business schools and executive management programs around the world. They have the know-how and expertise to make companies more competitive. Strategy often gets little attention in today's must-do environment, in which the focus is on how to do things rather than on what things to do. Increasingly demanding financial markets, shareholders and corporate boards are putting enormous pressure on CEO's. Everyone wants immediate results, especially following the downfall of the dot-com companies. Today's wisdom is eyes to the detail and head well out of the clouds. Execution is king. Yet the fundamental rule of business success hasn't changed: Sustainable competitive advantage drives value creation. To achieve lasting superior results, you need a superior business model and superior product differentiation.
In a previous article I discussed why entrepreneurs "fail to scale", that is, adapt their leadership capabilities to their growing business' needs. This is in my opinion not so much one of leadership personality as of approach. A leader who scales is able to let go of habits and skills that have outlived their usefulness and adapt to new challenges along the way. No one teaches entrepreneurs to deal with people objectively, to think strategically, to create loyalty within a diverse work-force, and to impress customers and investors. These capabilities derive from experience that the entrepreneur/manager may not yet have. No wonder so many entre-preneurs fail to become leaders as their businesses increase in complexity. This is especially true in Romania, where CEO's are often very young and have never experienced a downward business cycle. Without these skills, most CEOs fall back on what has worked well for them before - even though these old approaches often don't fit the current problem. In his quest for help, the entrepreneur/manager can choose from 2 different types of consultancy. The first option is what is called "board room consultancy". The board room consultant is usually someone who has extensive previous experience as a manager. He is a counselor who can help top management make the right strategic and managerial decisions by discussing strategic issues with them on a regular basis. The choice for such a counselor is very personal one and trust is the most important trade mark. The second option is to hire a management consultancy firm with a solid reputation to help top management with specific strategic issues*, ranging from developing a new business strategy to restructuring the present organization. Here it is important to first ask yourself what exactly is the problem you need help with. If it is an operational problem, say ITC, accounting or HRM, there are specialized companies around who can help you find a solution. If it is a more strategic issue, involving the mid- to long term future of your company, the choice is more difficult, as there aren't too many firms around who have real expertise and experience in this field. Whatever you decide, make sure you chose on merit. After all, it is about the future of your company!
***
Bucharest Consulting Group offers consultancy services in the field of strategy and general management to local and international medium-sized and large companies in Romania. For more information contact: |
|
|||||||||||
|
