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Published: April 1, 2000

 
 

Strategic Rollups: Overhauling the Multi-Merger Machine

Just as essential is a strong, consistent HR policy. It is hard to see how this can be achieved if it is not designed during Stage 1 and implemented early in Stage 2. Trying to get dozens of companies to focus on the same agenda and ensuring that people throughout the organization are treated equally are not easy tasks. Common HR policies (including those involving health insurance, retirement benefits, hiring delegation, and salary structures) must be designed and implemented.

Ultimately, competing as an institution requires more than a new structure and operating model. It requires a culture that aligns the organization around a common vision yet provides for the adaptability required to fuel continuing growth.

Executing against all these dimensions can be a tall order. But it certainly can be done, as Sysco, Quest Diagnostics, Quanta Services, and Verio have shown.

Turnaround Solutions

Pity the executives at a troubled rollup. The share price is plummeting. Much of the information that management needs is unavailable, and the data it does get can't be trusted. The financials never seem to get better, and executives in the field point to lots of market-based reasons why this is happening, although competitors seem to be doing fine. Rivals aggressively target customers of the ailing company, warning them it might not survive. The best salespeople leave. Morale spirals downward.

Management launches dozens of initiatives to straighten things out, but results are distressingly slow. It re-budgets and re-plans, hoping to get a better understanding and control of what is going on. But the results don't improve much.

Our research suggests there are four fundamental problems that keep most troubled rollups like this one troubled—but there are also solutions.

The first problem is lack of priorities—trying to fix everything at once. When the head office unleashes 15 to 20 initiatives, people in the field react in one of two ways. Either they try to do everything and get stretched so thin they accomplish nothing, or they conclude that people in the head office are naive and have little practical understanding of the business, so they ignore the directives and, in effect, hunker down.

Solution: Identify the key elements of change and push very hard on them. Don't serve up more than six to eight major initiatives.

A second common problem is logjams. In many rollups, the field management has come from a small-business environment. It's easy for the rollup leaders to forget the limitations this imposes on the management team; these people are accustomed to doing everything themselves. This can bring an entire change program to a halt.

Solution: Narrow the scope of the change to the key priorities and assign several people to drive the programs through. No one person should have more than two major initiatives to drive. This will vastly improve the odds of success.

A third problem is wrong answers. Management is so intent on changing that it moves too quickly and puts in place programs that actually drive financial performance downward. A distributor that miscalculates inventory carrying costs, for example, adds more inventory and builds bigger or more warehouses than are required. Another distributor reduces its field sales force as it moves to national accounts, only to find that its local service levels deteriorate and customers begin bailing out.

Solution: Major bets may require fast action—but never without adequately analyzed solutions.

The fourth problem we see frequently is the wrong approach to change. Re-budgeting and stretching of local management, especially former owner-operators, will not yield performance improvement. Targets do not help people improve their performance if they don't have the knowledge that will allow them to respond to the challenge. Targets in such cases only add to the frustration level, in the head office and in the field.

 
 
 
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Resources

  1. Keith Bradsher, “A Breakdown on the Sales Lot,” The New York Times, December 15, 1999
  2. Peter Elkind, “Waste Management: Who’s Driving the Rig?” Fortune, September 27, 1999
 
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