Thought Leadership
01/05/2010: NexGen Advisors Featured in Chain Store Age
Why 'retail' isn’t a dirty word
With announcements of CEO turnover, bankruptcies and poor holiday sales numbers, the retail industry is no stranger to disparaging headlines. Moving into the New Year, the winners and losers -- those that come out of the downturn positioned for growth -- will be identified by the ability to generate profitable revenue. It will be critical for companies to keep selling, general and administrative expenses costs low so that the organization is as efficient and lean as possible. To many people, it may surprise them that some retailers do this better than most other companies. NexGen Advisors recently conducted a Global Organizational Efficiency Survey (GOES) to benchmark spans of control and management layers to determine a company’s organization efficiency. Our research, which included some of the biggest names in retail, was quite interesting. First and foremost, we found that over the past 18 months, most companies (76%) had already performed, or were in the process of performing headcount reductions to increase efficiency.
Yet, our data analysis of spans of control, the number of direct reports a manager has, and reporting layers, the number of layers as defined by the solid-line reporting structure from front line to CEO, indicates that 52% of the participating organizations are highly inefficient or “unhealthy.” Interesting enough, companies in the retail sector, were the best performing in the survey, ranking 1, 2 and 3 out of the 31 in total.
The importance of having a properly structured organization is paramount to a company’s success, especially in retail, as it can be a competitive advantage. We use an organizational efficiency (OE) index to determine the health of an organization. The OE Index is a metric that measures the efficiency of your organization structure based on rules, weightings and data. The following inputs are required to calculate the OE index:
The retail sector only had 10 layers, while the aggregated survey average was 15. Why did the retail sector bode better than the rest? There could be several reasons:
Companies in the survey that had a broad global footprint, had more layers and smaller spans than the retail sector. The companies in the retail sector were not global, rather, domestic in nature, with thousands of locations across the country. Our data shows that the more global a company is, the more management layers are typically found.
Another positive the retail sector has is its type of operations, which are mostly stores, with a standard layout, and a standard number of people required. The stores usually have one or two managers, with a large group of store sales help reporting into them. This helps drive the spans of control higher. The work force can also be “flexed” at any time given the type of workers retailers hire. They do have full-time equivalents (FTEs), but also a majority are part time, and can be “temporary” if needed during the high season. Having non-permanent employees does not show in the data and is not counted in the span and layer analysis.
The ability for the retail sector to keep their spans large and layers small, gives them a competitive advantage that is required in their business. Operating as efficiently as possible provides dollars to be freed up for investment in product and merchandising, which enables them to grow their revenue.
When interviewing the retail companies, we found they benefited from healthy spans and layers. Primary benefits are tangible and can be measured in dollars and metrics. The most prevalent primary benefits were:
GOES also found that the retail companies all reviewed spans and layers annually, with dedicated resources that linked this activity to process improvement activities. They set targets by function to achieve year-over-year improvements versus performing a one-time headcount reduction with blanket benchmark goals. To achieve an optimal organization structure, a company requires the right benchmarks, analysis and data. With this, they can create an organization that is efficient and agile, and will be a key factor to reducing cost and growing profit. This holiday season, the winners definitely include companies with the most efficient organization, and luckily, our survey shows retail is a winner.
Carla Zilka is the founder and principal advisor of NexGen Advisors, an operational restructuring firm. She has extensive experience in organizational efficiency, talent management and engagement, and sales. Zilka can be reached at carlazilka@nexgenadvisors.com.
Why 'retail' isn’t a dirty word
With announcements of CEO turnover, bankruptcies and poor holiday sales numbers, the retail industry is no stranger to disparaging headlines. Moving into the New Year, the winners and losers -- those that come out of the downturn positioned for growth -- will be identified by the ability to generate profitable revenue. It will be critical for companies to keep selling, general and administrative expenses costs low so that the organization is as efficient and lean as possible. To many people, it may surprise them that some retailers do this better than most other companies. NexGen Advisors recently conducted a Global Organizational Efficiency Survey (GOES) to benchmark spans of control and management layers to determine a company’s organization efficiency. Our research, which included some of the biggest names in retail, was quite interesting. First and foremost, we found that over the past 18 months, most companies (76%) had already performed, or were in the process of performing headcount reductions to increase efficiency.
Yet, our data analysis of spans of control, the number of direct reports a manager has, and reporting layers, the number of layers as defined by the solid-line reporting structure from front line to CEO, indicates that 52% of the participating organizations are highly inefficient or “unhealthy.” Interesting enough, companies in the retail sector, were the best performing in the survey, ranking 1, 2 and 3 out of the 31 in total.
The importance of having a properly structured organization is paramount to a company’s success, especially in retail, as it can be a competitive advantage. We use an organizational efficiency (OE) index to determine the health of an organization. The OE Index is a metric that measures the efficiency of your organization structure based on rules, weightings and data. The following inputs are required to calculate the OE index:
The retail sector only had 10 layers, while the aggregated survey average was 15. Why did the retail sector bode better than the rest? There could be several reasons:
Companies in the survey that had a broad global footprint, had more layers and smaller spans than the retail sector. The companies in the retail sector were not global, rather, domestic in nature, with thousands of locations across the country. Our data shows that the more global a company is, the more management layers are typically found.
Another positive the retail sector has is its type of operations, which are mostly stores, with a standard layout, and a standard number of people required. The stores usually have one or two managers, with a large group of store sales help reporting into them. This helps drive the spans of control higher. The work force can also be “flexed” at any time given the type of workers retailers hire. They do have full-time equivalents (FTEs), but also a majority are part time, and can be “temporary” if needed during the high season. Having non-permanent employees does not show in the data and is not counted in the span and layer analysis.
The ability for the retail sector to keep their spans large and layers small, gives them a competitive advantage that is required in their business. Operating as efficiently as possible provides dollars to be freed up for investment in product and merchandising, which enables them to grow their revenue.
When interviewing the retail companies, we found they benefited from healthy spans and layers. Primary benefits are tangible and can be measured in dollars and metrics. The most prevalent primary benefits were:
GOES also found that the retail companies all reviewed spans and layers annually, with dedicated resources that linked this activity to process improvement activities. They set targets by function to achieve year-over-year improvements versus performing a one-time headcount reduction with blanket benchmark goals. To achieve an optimal organization structure, a company requires the right benchmarks, analysis and data. With this, they can create an organization that is efficient and agile, and will be a key factor to reducing cost and growing profit. This holiday season, the winners definitely include companies with the most efficient organization, and luckily, our survey shows retail is a winner.
Carla Zilka is the founder and principal advisor of NexGen Advisors, an operational restructuring firm. She has extensive experience in organizational efficiency, talent management and engagement, and sales. Zilka can be reached at carlazilka@nexgenadvisors.com.
01/05/2010: NexGen Advisors Featured in Talent Management Magazine
Talent Management Perspectives
Published January 2010
Are You Missing Key Capabilities When Assessing Talent?
Carla Zilka
Many companies today have adopted Session C, GE's rigorous performance management process that includes a "nine block" for ranking employee performance and a "bottom 10" for getting rid of talent that fell in the bottom 10 percent of the nine block.
What may be missing from this equation is a talent strategy called "4D" — which was developed by NexGen Advisors and includes four dimensions — that is critical to the future of any business and talent management process.
Implementing the following steps can help a company identify not only employees who will be future leaders, but also employees who may not be future leaders but are nonetheless integral to driving growth and allowing the business to operate efficiently.
High potentials and these employees are very different, so managers should think twice before using a standard nine block that may not give them the full picture of the company's human capital strengths and weaknesses.
1. Performance: This piece of the equation is usually weighted the most and has the most focus. It is simply: How did the employee perform against goals and objectives? It's rather straightforward and represents the "current" state of an employee's performance. The key here is to see consistent performance year over year.
2. Promotability: The "future" aspect of the equation is the promotability factor. If the employee has consistent performance year over year and exhibits the competencies the company has identified as critical to the business, then the employee has a high chance of being promoted or moving up the career path. A big mistake companies make is to only have one career path, which leads to managing people. Companies must have a career path for experts (technical, scientific, engineering, etc.) in order to have a promotability factor that does not include managing people. Not all employees are good at managing, but they may be highly proficient at their discipline.
3. Growth: In today's economy, one of the most important skill sets is the ability to grow a business. As revenues plummet and margins compress, companies need to look at ways to grow the top line. Whether operationally, by reducing costs to increase profit, through innovation of products and services or through expanding in new markets and regions, growth is the name of the game. Companies that excel at this will ultimately win over competitors.
4. Risk: The other side of the equation is risk. Most people are aware of how crucial it is to assess financial risk when managing a company, but how many understand it's a crucial ingredient when assessing talent? Another factor to consider is the loss of legacy knowledge when long-tenured employees are laid off. Unless a company has a knowledge management database, they lose this valuable knowledge forever, which in turn can hurt productivity and business continuity. It's often easy to understand the impact to a business when it loses a strong leader, but the risk of losing a plant manager can also have a similar impact.
Talent Management Perspectives
Published January 2010
Are You Missing Key Capabilities When Assessing Talent?
Carla Zilka
Many companies today have adopted Session C, GE's rigorous performance management process that includes a "nine block" for ranking employee performance and a "bottom 10" for getting rid of talent that fell in the bottom 10 percent of the nine block.
What may be missing from this equation is a talent strategy called "4D" — which was developed by NexGen Advisors and includes four dimensions — that is critical to the future of any business and talent management process.
Implementing the following steps can help a company identify not only employees who will be future leaders, but also employees who may not be future leaders but are nonetheless integral to driving growth and allowing the business to operate efficiently.
High potentials and these employees are very different, so managers should think twice before using a standard nine block that may not give them the full picture of the company's human capital strengths and weaknesses.
1. Performance: This piece of the equation is usually weighted the most and has the most focus. It is simply: How did the employee perform against goals and objectives? It's rather straightforward and represents the "current" state of an employee's performance. The key here is to see consistent performance year over year.
2. Promotability: The "future" aspect of the equation is the promotability factor. If the employee has consistent performance year over year and exhibits the competencies the company has identified as critical to the business, then the employee has a high chance of being promoted or moving up the career path. A big mistake companies make is to only have one career path, which leads to managing people. Companies must have a career path for experts (technical, scientific, engineering, etc.) in order to have a promotability factor that does not include managing people. Not all employees are good at managing, but they may be highly proficient at their discipline.
3. Growth: In today's economy, one of the most important skill sets is the ability to grow a business. As revenues plummet and margins compress, companies need to look at ways to grow the top line. Whether operationally, by reducing costs to increase profit, through innovation of products and services or through expanding in new markets and regions, growth is the name of the game. Companies that excel at this will ultimately win over competitors.
4. Risk: The other side of the equation is risk. Most people are aware of how crucial it is to assess financial risk when managing a company, but how many understand it's a crucial ingredient when assessing talent? Another factor to consider is the loss of legacy knowledge when long-tenured employees are laid off. Unless a company has a knowledge management database, they lose this valuable knowledge forever, which in turn can hurt productivity and business continuity. It's often easy to understand the impact to a business when it loses a strong leader, but the risk of losing a plant manager can also have a similar impact.
6/09/2009: Organization Efficiency Survey
NexGen Advisors announced today that it has signed an agreement with APQC, a premier benchmarking organization, to launch a cross industry Global Organization Efficiency Survey. This survey is the first of its’ kind, and is considered extremely significant due to the markets lack of accurate up-to-date detailed benchmark data on the subject. Given the economic climate, and the desire for companies to become leaner and more efficient, this survey comes at the perfect time for companies to get a factual view of how their structure is helping or hindering their business performance.
The GOES Survey will be open for participants to sign up beginning June 15, and will close July 27. It has a scientific focus, with the goal to understand the efficiency of company structures by examining reporting layers and spans of control in midsize to large organizations. The survey will include multiple industries around the world with employee populations of 1000 or greater, and target revenues of $1B or more.
Read more here...
NexGen Advisors announced today that it has signed an agreement with APQC, a premier benchmarking organization, to launch a cross industry Global Organization Efficiency Survey. This survey is the first of its’ kind, and is considered extremely significant due to the markets lack of accurate up-to-date detailed benchmark data on the subject. Given the economic climate, and the desire for companies to become leaner and more efficient, this survey comes at the perfect time for companies to get a factual view of how their structure is helping or hindering their business performance.
The GOES Survey will be open for participants to sign up beginning June 15, and will close July 27. It has a scientific focus, with the goal to understand the efficiency of company structures by examining reporting layers and spans of control in midsize to large organizations. The survey will include multiple industries around the world with employee populations of 1000 or greater, and target revenues of $1B or more.
Read more here...
4/28/2009: Download "NexGen Back to Basics"
Download here our special on Continuous Improvement with:
- Strategy and Tactics : Ensuring that your strategy can gain you what you hope for
- 10 Steps for Lean Success : Making Lean Improvement work for you
Download here our special on Continuous Improvement with:
- Strategy and Tactics : Ensuring that your strategy can gain you what you hope for
- 10 Steps for Lean Success : Making Lean Improvement work for you
4/17/2009: Dressing Down the Business Model
NexGen Advisors Featured in IDD Magazine
Every day there are news reports of corporations across the nation facing the challenges of surviving in today's challenging economy, with consumer goods and the apparel industry being among the hardest hit. As companies experience increased pressure on their bottom lines, they react by employing short-term cost cutting measures.
From layoffs to site closures, the country has seen well-known companies struggle to manage expenses and costs, with reactive cost-slashing becoming the norm. These initiatives will yield an immediate impact in savings, but is this enough to keep companies afloat until the economy stabilizes?
The answer is "no."
Read more here...
NexGen Advisors Featured in IDD Magazine
Every day there are news reports of corporations across the nation facing the challenges of surviving in today's challenging economy, with consumer goods and the apparel industry being among the hardest hit. As companies experience increased pressure on their bottom lines, they react by employing short-term cost cutting measures.
From layoffs to site closures, the country has seen well-known companies struggle to manage expenses and costs, with reactive cost-slashing becoming the norm. These initiatives will yield an immediate impact in savings, but is this enough to keep companies afloat until the economy stabilizes?
The answer is "no."
Read more here...