Operational transformation for global service provider
A $9 million Mexican subsidiary of a $650 million global service provider.
This Mexican subsidiary was performing poorly after 12 years of being the market leader and demonstrating solid growth in Mexico. They couldn’t explain their misfortunes since their rates in Mexico were comparable to the rates charged to their customers in the United States, and their largest expense, which happened to be labor, came at an 80 percent discount across the border. They turned to our global services team for help. We assembled the necessary team, which included a bilingual consultant to serve on the project.
We began by analyzing the market, their personnel, and the company’s Mexican legal and operating structure. We also looked at the competitive advantages of the organization as a whole to see if these advantages were being leveraged accordingly in Mexico and whether or not there were local differences that needed to be taken into account. Finally, we conducted in-depth interviews with all management personnel and observed the day-to-day operations of the business in order to identify key opportunity areas. With this data in hand, we presented the issues and potential mitigation strategies to the management team.
Our analysis brought to light an array of issues that had to be addressed before the client could become successful. The fact that the client was still a market leader despite its troubles was a major plus. We outlined the areas that needed the most attention, including:
- The company lacked leadership and qualified staff.
- They experienced unprecedented turnover and lack of training at the operational level.
- Systems and technology
- The company used a different system for their accounting, payroll, and operations management, unlike their headquarters office which used an integrated ERP system for all its program needs. The implementation of a new system had begun before our arrival, so we stepped in and worked with headquarters personnel, their outside system consultants, and their local personnel to continue the implementation.
- On its way to becoming the leader in its field, our client developed its own proprietary technology to provide its services. This technology stopped making its way to the Mexican subsidiary due to a lack of care and control over the equipment, forcing them to operate with outdated and often badly damaged or faulty equipment.
- Policies, procedures, and controls
- The company lacked many formal policies, procedures, and controls — both administratively and operationally.
- Pricing and contracts for their services carried very few similarities from one client to the next.
- Costs were out of control across the board.
Ultimately, the system and technology that drove the client’s success since their inception was not being duplicated in Mexico because they lacked qualified personnel; the proper organizational structure; adequate systems and technology; and policies, procedures, and controls.
We devised a strategy for dealing with each and every issue that we identified. After our initial analysis and recommendations, the client asked for our help in implementing the plan we had outlined.
By the end of the engagement, the organization was barely recognizable. We transformed a badly managed, under performing, and inefficient organization into one that’s positioned to leverage its competitive advantages to become profitable and earn its way to becoming the market leader, rather than obtaining it by default.
The company's new management is working with a business plan and a budget for the first time in the organization’s history. After 12 years of operating losses, there’s an expectation of a 13 percent profit margin in the year following the project’s conclusion.
The timing for action couldn’t have been better for our client. During the implementation phase of our project, their two biggest competitors merged and began targeting Mexico as a growth area. We fully expect our client to not only hold but increase their market dominance in Mexico.
Toward the end of our assignment our client filled in the last piece of the puzzle by hiring a new managing director for their renewed organization. Here’s what he had to say as we transitioned him into the position:
"I’ve had the opportunity to work with some of the largest consulting firms in the world, and I never found a consultant that would get into as much detail as Plante Moran did. It was amazing to see how profoundly you knew every single aspect of the business"