Right-sizing

Right-sizing is about optimising the respective proportions of resource allocation within a business to improve its sustainable future performance relative to forecast demand.

It should only be attempted after a review of performance to plan, within a market context. It may emerge that a measure of ‘up-scaling’ or ‘out-sourcing’ is called for. Sometimes, bigger may be better, but not always, depending upon the objectives and Management’s capacity to manage either growth or acquisitions.

The strategic review we advocate need not be an expensive exercise, depending upon what KPIs (key performance indicators) or operating controls & budgets have been adopted. Even if there is no firm plan, a review should produce one, in summary form, so that any right-sizing that may be called for is approached in a focused way in pursuit of refreshed and sustainable long range objectives.

Lothian Associates uses proven methods to help SMEs assess their ‘weight and shape’ and to point them towards the range of measures that they may need to implement in pursuit of meaningful improvements. The way to start is to begin.

As an SME leader, you are responsible for preventing your business from going ‘out of shape’. Our 10 point challenge to help you do so is as follows: 

• Have you set appropriate KPIs for your business and do you take prompt corrective action when performance departs materially in crucial areas?

• Are your limited resources best directed to achieve the desired results?

• Have you kept pace with any significant shifts in your core markets?

• Do you understand, and are you managing, your most crucial limiting factors?

• Do you have any material imbalances in the use of labour, space or capital?

• Have you benchmarked performance against like-sized sector competitors and considered why your relative sales levels, margins, costs or profit per employee may be materially different to the norms in your sector(s)?

• Are your sales or gross margin mixes moving unexpectedly and do you track material changes?

• Do you routinely keep on top of ‘under-weight’ and ‘over-weight’ areas as a rolling plan towards progressive ‘right-sizing’?  

• Do you legislate for waste reduction and do you motivate staff to make practical suggestions to help your business achieve sensible savings?

• Do you have access to experienced external help to ensure that you don’t over-react to your first ideas/instincts, and to ensure that you don’t forever put off what may become urgently needed action?

Back