26th June 2013, the day two giant IT Companies
merged officially and the market stopped tracking Mahindra Satyam and the only
entity continued to exist is TechMahindra.
This was the
day I took over a role as a Sr. Consultant in the business and process space to
contribute towards driving continuous improvement projects to enable free cash
flow thus improve the EBITDA (earnings before interest, taxes,
depreciation, and amortization) … one of the most critical measure of the company's valuation tracked in
the capital markets by the financial experts.
As a first
step we spent time with the business leaders who looked to maximize the return
on investments evaluate impact of operating the business on free cash flow. In
an environment of maximizing value, it was important to review all business
expenses and conduct a profitability analysis across all the projects. In so
doing we discovered at the project level the contributors who impact EBITDA,
which increases the value of your business and the ones who are pulling it
down. As a next step I and my team lead by the best of the leadership worked
hard to help understand sales, general, and administrative (SG&A) and look
to maximize those costs as a percentage of revenue.
It’s a known fact that High operating costs
lower your EBITDA… one of the things that I have done in the past is to quickly
identify all value enabling activities and digitize them those that will need
people involvement outsource them to low cost channels. I carry a very strong
philosophy from my past experience that my people will work only on the value
added tasks and process rest all value enabling tasks be outsourced and kill
the non-value add. The first few suggestion made people hesitant to entertain
the idea of lowering operating costs because they immediately equate it with lying
off employees. It took quite some time to educate the crowd that there are a
lot of other ways to lower your operating costs without reducing staff. Could
be as simple as turning off your machines and lights to save energy, wastage of
food and the network usage to start with the journey of Lean following the
principles of HoShin KanRi and go with the policy implementation.
Ideas and
best practices picked up from the experience of the past helped spin a quick
fix just do it kind of projects around Cycle time improvement that directly
impacts billability. Two teams were given tasks to build the six sigma culture
as a DNA in the organization. 8 – 10
leaders in a consulting role attached themselves with each business group.
I owned the
entire set of support functions and kicked off the improvement path by checking
for areas of inefficiency that can be corrected with new policies and
procedures … focus was to be lean and quick on the solution front without
spending a lot of time on data collection and data analysis, because it’s a
known issues to all just an as is process / value stream map is good enough to
identify waste and eliminate it strengthening policies and procedures.
Wing to Wing
financial analysis of each support function opened a wide set of opportunities
to focus up on… Cab usage, arrival pattern and employee commutation costs were
identified to fix asap and then engaged a team from facilities to pull down the
power tariff and work towards improving efficiency on energy usage. Companies
like GE and Philips were consulted and engaged in the solutioning and implementation
of ideas.
Visa Cycle
time and Air Travel was another big ticket item that was looked at. No doubt
that a growing company will have a growing spend on the travel and the ticket
prices are equally volaitile, but there were a lot of opportunities like
blocking the ticket 6 hours in advance, reducing approval cycle time w.r.t.
travel request, choice of travel class (Economy / Business), Travel mode like
Air, Road or Train, effective use of technology like telepresence and video
conferencing, strengthened planning to reduce the last minute cancellations,
overcome date changes in travel. Policies governing around international travel
and the per diems associated etc… accounted a good round of savings.
Infrastructure
spend was another big-ticket item on the list which owned a lion’s share of the
budget, with growth comes the overheads related to network and datacentres,
storage and spend on TSP. Reducing the call volume and number of service
requests was another area that improved productivity, reducing the approval
cycle time and simplifying the approval matrix made the operations lean.
Projects
were spinned around DSO… days out standing … the accounts payable and
receivable cycle time, employee reimbursements, finance ERPs, invoicing defects
and delays and wing to wing cycle time at the collections front added more
savings and directly impacted the bottom-line which was an icing on the cake
resolving quite a good amount of issues related to the cash flow.
Optimizing
the wing to wing resource supply chain and hiring cycle time, enabling ease
w.r.t. joining formalities made life more comfortable adding at least 35 days
of additional billability and improving the revenue stream added a new flavour
all together to the program.
While you
have read the positives and the things done we encountered a situation where
like any other company the execution looked bleak, as long as there was focus
things were moving and as the focus shifted there variation crept in. IT
Systems and structures did not help much. Performance targets were poorly
defined we lacked insights into the long term levers, while the near term
picture looked great there were concerns around the sustainability and long
term results were questionable.
This is a
time when we looked like being exhausted with the ideas and best practice
picked up from the market and most of the things already implemented, there was
nothing new to identify from a cost optimization whereas there were a lot of
opportunities around cycle time improvement that will lead only to notional
cost compared to hard savings that could impact the bottom line.
It was a time to rethink on what I was actually doing,
initial enthusiasm and quick fix projects from the past experience will not
help in the long term and I need to now strike the right balance between
targeted reductions, re-allocation and re-investment in areas that can driver
higher overall expense productivity over time. It was very important to
establish benchmarks that are truly “apples-to-apples” and start looking at highly-granular
spending breakdowns; more importantly clear understanding of the strategic,
tactical and organizational “drivers” of world-class cost structure performance
is something I started to focus up on.
Days passed by and a
series of brainstorming session threw light on prioritizing the strategic
goals, relooking at the degree of centralization and empowerment to local
teams, funding mechanisms, vendor rationalization, realigning roles and
responsibilities, hierarchy … head to tail ratios, opportunities of outsourcing
as a new set of projects to focus up on in the coming year….
While the first year was a
cake walk with quite a good amount of savings making the bottom-line healthier
and reaching the set goal, it’s in this coming fiscal that a lot of people in
raising eyebrows to ideas being brainstormed and extending surface level …
people involved at middle and lower management feeling insecure as soon as
talks w.r.t. outsourcing and role rationalization were being discussed …
nonetheless a lot of support from the Sr. Management is adding a lot of
confidence to the program and the determined will and focus is helping me
overcome all hurdles and moving forward to accomplish the goal… truely a great expriance and awesome company to work with :-)
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