New Market 

The company was targeting a new emerging market.  A prestigious customer asked for additional work to be carried out on an engineering consultancy project that had already been completed.   

Having queried whether there was enough remaining budget to carry out the additional work, I was told that we should do it free of charge regardless of costs as it was a very important customer.   

Securing a prestigious customer in this new market was an achievement.  The additional work requested was limited and it made sense not to charge the customer for it.   

However, no budget had been set to carry out the original project and there was no reliable system in place to find out how much had been spent.   

Rapid Growth 

Subsequently the company successful won several large projects in this market from demanding customers in China, Korea and India.   

For most of these projects, a budget was not formally agreed before finalising a fixed price with the customer.  Once projects started, it was very difficult to track costs as the timesheet system recording the engineers’ time on projects did not work reliably.   

These large projects ran concurrently and were micro-managed by a single engineer who was focussed exclusively on delivering technical work to the customers.   

In the absence of internal processes there were no regular reviews, nor any estimations of the remaining work and costs to complete each project.   

The sudden influx of large projects required the rapid recruitment of new engineers.  The nature of the work was such that it was not possible to recruit people already experienced in this new market.  New recruits needed extensive internal support and guidance.   

All engineers reported directly to the engineering manager who was very busy travelling and delivering projects himself, and did not have the time to support his direct reports and train the new recruits.   

Consequences 

Without simple internal systems the company quickly ran into difficulties.   

The quality of the technical work carried out was inconsistent due to the lack of training, and due to the absence of clearly defined methods and procedures.  This led to dissatisfied customers, costly re-works, project delays, and negative cash flow.   

The absence of careful budgeting and monitoring of spend made it difficult to identify unprofitable projects 

Due to lack of experience and without a robust method to estimate the revenue earned by each project, revenue and profit were significantly over-stated in the first year, leading to a sharp reduction the following year. 

As a result, a drastic reduction of internal costs was required to protect the viability of the company in the short term and redundancies became inevitable. 

Actions Taken 

Teams of engineers were created for each technical discipline.  Team Leader roles were defined and advertised internally.  Experienced and motivated engineers applied and were appointed to generate detailed technical work methods and procedures, train new joiners, and check the quality of the work performed.   

A new reliable and easy-to-use timesheet system was introduced.  Team Leaders were tasked with ensuring all engineers submitted their timesheets accurately and on-time every week.   

Simple project management processes were introduced, covering all stages from proposal preparation to project initiation, delivery and close out.  New project managers were appointed and trained, with emphasis on meeting contractual obligations with the customer and on taking actions to protect the project margin and cash flow.   

Regular monthly reviews were organised for project managers to report progress and provide updated estimations of the work and costs to complete.  This provided a robust basis to report revenue.   

The introduction of these simple systems enabled the company to grow fast and become a leader in this new market.   

Lessons Learnt 

With hindsight the analysis of the company’s issues and the actions taken may now seem obvious.  However, it was not obvious at the time when everyone was overwhelmed by the demands of the new market.  In fact, there was a lot of reluctance to introduce any new system or structure.   

The key success factors were essentially: -

• The recognition by the business owner of the need to get help from an independent party. 

• The analysis of the business issues and the actions put in place were devised and implemented internally within the business instead of being imposed as ready-made solutions.   

Need for Help 

In this example my role was to analyse the situation, enable the discovery of solutions and drive the implementation.   

If you are experiencing similar issues with the rapid growth of your business and you would like to explore how I could help you, please send a message to herve@jardon.co.uk and I will come back to you.