As someone who has been retrenched, I can understand the stress, fear, anger and uncertainty that those on the receiving end of a retrenchment notice feel.

Qantas has recently announced staff redundancies totaling 6000 employees, just one of many major companies and industries grappling with the sharp, global economic downturn.

I know no executives who enjoy the process of releasing long serving, loyal and hard-working employees, it is rarely an easy process. This is the hardest step a senior executive will have to take in their career, but a necessary one if they are to give the business any chance of surviving.

A simple fact is; if you are looking to the future, you must be able to survive the present.

However, the cost reductions achieved through redundancies, is just the first step. As layers of management and staff are removed the impact across the organisation’s governance structures can be significant.  What can often occur with rapid and unplanned redundancies, is confusion and resentment. Simple things like delegations become compromised through consolidation of roles, critical segregation of duties is not possible, or production of key management reporting is not reassigned. For this reason, management must remain alert to the unintended consequences on all aspects of the businesses processes, but especially the systems of internal control and the activities that underpin key management reporting.

Brooke has developed a version of the MIT-90 model that helps to identify the critical success factors for a business.  The Brooke Management Operating Model that helps explain the way events in one area will impact on other aspects of the organisation through the interrelationship that exists across these 5 fundamental components of any organization.

The model highlights that change in one area or aspect of a business cannot be viewed in isolation, if there is a change in jobs or skills, Management Systems, Business Processes, Information and Technology and Values and Behaviours will be impacted.

As all experienced senior managers know, the next 6 to 12 months is about ruthlessly driving operational efficiency to achieve the lowest possible variable costs and eliminating not recoverable or non-essential fixed cost, wherever possible all while keeping a keen eye on your front line services and keeping promises of the customer experience.

Once these outcomes have been achieved, it is essential that management does not lose sight of the processes developed to support the business over the past 30 years of growth (minus the GFC interruption). This is a key step to ensure the three tiers of governance – Strategic Level, Management Level and Operational Level are reset, to reflect the organisations current circumstances.  When significant staff reductions at the Operational or Management level occur and these impact fundamental internal control systems, these structures must be reassessed and tested to ensure they remain appropriate, operational and effective.

There are three key steps that all organisations should undertake following any significant change in their business, be it through redundancies, or change in the business model;

  • Assess the impact on your governance processes
  • Determine the most appropriate governance structure to ensure the business’ fundamental activities can still be delivered – appropriate segregation of duties, complete accurate and timely reporting, completion of all key operations, both strategic and tactical
  • Establish a process of continual reassessment of the appropriateness of the governance structures. Once growth does come back, and the organisation changes to take advantage of this growth, it is essential that management remain vigilant to the impact on their risk appetite and governance structures that enable the business to capitalise on this

Engaging a governance expert to help guide you through the process will help ensure management remain focused on the business’ key activities, and that the review and response is completed thoroughly and quickly and meets the needs of the organisation.

I would welcome discussion relating to governance or operating model considerations during this period of significant pressure and change.  Please contact geoffbrown@brooke.global