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Strategy & Structure

Strategy

Today's environment for companies in the paper and forest value chain is characterized by a number of challenges leading to further pressure in an industry characterized by notoriously low returns

Although most companies have defined their strategies or are currently undergoing a strategic review, it can be observed that execution of strategies provides a different picture.

A lot of companies — small and large — have had or still have a very wide focus in their business approach, holding more or less productive assets and offering products and services in a wide range of market segments or areas of the value chain.

Looking at the more successful companies (in terms of financial returns) in the industry, the following key success factors can be identified:

Based on these success factors, different strategy options exist depending on integration level, customer product and geographical focus of the company. A clear, differentiating and executable strategy is necessary to be profitable. StepChange Consulting can help you assess your current approach and help you tailor your future strategy to enable greater future success.

Process & Organizational Redesign

Process and organizational redesign is presently firmly established as a necessary evil in the industry. This is due to continued consolidation through mergers and acquisitions, implementation of best practices in supply chain management and reassignment of traditional functions.

Most pulp & paper companies are in the process of buying or being bought, with significant impact on the existing organizations. Molding the organizations into a single system requires a re-alignment of processes, organizations and resources.

Supply Chain Management has been a recent driver for reengineering business processes and aligning the organizational structure. A catalyst has been the need to overcome silo thinking and imbalances in the demand and supply value equilibrium.

The realignment of functions and organizational redesign is increasingly playing a role in the interplay between production, engineering and maintenance.

Success of the change initiatives is dependent on redefining processes, holding people accountable across functional silos, enabling information flow across departmental boundaries and unrelenting commitment from top management. Ultimately the new organization needs to be appropriately equipped to effectively and efficiently produce the desired output.

The implementation remains the biggest challenge. An inclusive approach needs to be taken for process and organizational redesign by the early involvement of employees to ensure understanding, acceptance and ownership. A new performance management framework must be implemented with top-down and bottom-up targets to reflect the new organization and measure its success.

The StepChange team can help in assessing your current organization, performance gaps and prerequisites for a successful change journey. After process reengineering is performed and roles grouped into functions, new organizational alternatives are developed and tested for the best fit.

We have the right experience to support the identification of capability gaps, prepare and conduct trainings and develop performance measurement systems, elements that are essential to the success of the change journey.

Performance Management

Operational day-to-day activities must be aligned with business tactics, which in turn must be aligned with the strategy and ultimately the vision of the company. Getting this chain right is a challenge.

Many views and approaches to performance management exist in the industry. Unfortunately, few generate the desired results, i.e. aligning the actions of an individual with the business strategy by supporting, measuring and rewarding his performance.

The key is to derive the personal and departmental goals from the company goals, measuring performance and introducing a structured performance feedback cycle. Defined goals should be meaningful to the individuals, measurable through agreed key performance indicators (KPIs), and traceable to an operational goal — and ultimately — company strategy. This holistic approach requires a loop of top-down definition of goals and metrics to give direction and avoid conflicting goals, as well as a bottom-up operational validation to ensure understanding, acceptance and realism.

A system that fits these requirements will not be off-the-shelf, but derived from the goals and culture of each organization and as such, is very much company specific. The challenge is not only in goal setting and measuring, but also in achieving understanding, adoption and institutionalization of the performance-management system at all levels of the organization. Every employee needs to understand his KPIs and agree on their relevance. They also have to be able to influence their performance. It is only then that companies can expect to get what they measure.

The StepChange Team can help to develop a suitable and pragmatic performance-management system, including the definition of appropriate performance indicators based on our customer's vision and company goals. In addition, we can give support in defining the appropriate or personal performance models and link the model to variable compensation components. Additionally we help our customers in building a sustainable performance feedback cycle.

Integration Management

Consolidation remains a key trend in the pulp and paper industry. While the price premiums paid in the mid 90s and early 2000s are becoming increasingly rare, there is still a very real issue around capturing planned & budgeted synergies. The pulp & paper industry has notoriously failed to capture these synergies. The main reasons quoted are misjudgment of cultural alignment, excessive internal focus, not taking tough decisions, lack of pre-merger planning and structured execution, and underestimating the role of communication, board sponsorship and early successes.

Half-hearted integration efforts have misfired resulting in parallel cultures, loss of market share, customer cannibalization, and high costs due to process redundancies even years after the acquisition.

Mismanagement of cultural alignment is cited as the number one reason for unsuccessful mergers. Lacking cultural awareness, fairness and sensitivity towards the needs of the acquired company leads to resistance and know-how loss. A typical mistake is premature staffing without taking stock of the capabilities of the organization being purchased. This error reduces the option of picking the best of both worlds. Caution should also be taken to avoid an exaggerated internal focus resulting in dropping the ball in terms of suppliers and customers. These risks can be mitigated by a comprehensive and structured planning of the post-merger efforts, including cultural and external assessments before the go-live date of the merger.

The first step to success is preparing a plan for the first 100 days, including value targets based on business cases, a tough time line, and milestones — defined integration structure and clear roles & responsibilities. Tough messages should not be kept behind closed doors. Implementation success will depend on sticking rigidly with the plan, staying focused on the original targets and taking the required decisions. Quick-win integration projects should be proactively selected, implemented and communicated to boost moral and add credibility. Following the first 100 days, more complex projects are tackled, but the same project-management structures remain in place. Communication is key to the level of buy-in for the changes. Dedicated communication teams need to be installed on the top level to both capture information requirements of the staff and to assess their mood and relay it back to management.

Succeeding in the first 100days and beyond will require strong sponsorship from the highest level of management, which will then take an active role in communication, motivation and success monitoring of the project teams against the originally defined targets. Tough decisions have to be taken fast to reduce levels of anxiety and demonstrate clarity of approach. It is essential that the integration process remains at the top of management's agenda to ensure continued impetus and to avoid slow down and a premature celebration of success.

Correctly planned and executed integration management is the key to substantial business value and to beating the poor average in the pulp and paper industry. Retaining focus and dedication during integration and focusing on the key areas is the secret to success.