The interim manager was commissioned by a listed group to restructure a well-known manufacturer of automation systems for the automotive industry (OEM & Tier 1).
The subsidiary employed 200 people in Germany and a Polish subsidiary and generated sales of EUR 30 million. The target company was posting double-digit negative EBIT every month. A previous restructuring attempt had already failed. In the event of insolvency, the OEM creditors' claims for damages would have hit the parent company in the high double-digit millions and damaged its reputation on the stock market. The company was ready for insolvency and was dependent on cash inflows from the Group.
The interim manager was appointed as CRO and CEO. After two months, the previous managing director was removed and the interim manager also took over his duties.
Initial situation: 90 percent of the projects were producing high losses
At the beginning of the mandate, the interim manager was faced with a very challenging situation: 90 percent of the 33 projects in the order portfolio were completely out of control in terms of costs and were making double-digit losses. Customers were withholding payments due to delays in plant acceptance and commissioning.
Trust among customers, suppliers and staff had been severely damaged. Employee turnover was now very high. Due to the loss of knowledge, the processing of projects came to a further standstill. In addition, throughput times and quality costs were rising, while productivity was increasingly falling. The costs for penalties and working capital were also growing uncontrollably. Customer complaints increased. The company had previously countered this by purchasing external labor and overtime. To make matters worse, the company was heavily intertwined with another sister company in need of restructuring in terms of orders.
Employees won over to the restructuring concept and staff turnover quickly and significantly reduced
A well-known German management consultancy had drawn up a restructuring concept shortly before the interim manager joined, which aimed to ensure an EBIT turnaround after one and a half years. The interim manager's first priority was to win over and motivate the workforce for the upcoming change process. As a temporary contribution to the restructuring, the interim manager implemented a significant flexibilization of working hours and the waiver of overtime pay. In return, the employees received a job guarantee. This enabled the proportion of expensive external labor to be reduced ad hoc by more than 20 percent. This equated to an impressive six-figure euro amount per month.
The interim manager increased the motivation of managers and staff through proactive and transparent communication. In regular formal and informal meetings, he provided information about the change processes and involved the employees. As a result, he was able to reduce staff turnover by more than 80 percent.
Lean processes increase delivery reliability and significantly reduce the number of complaints
In the next step, the interim manager placed previously half-heartedly initiated lean management activities at the heart of order processing. He developed relevant key performance indicators and reactivated visualization and store floor management. He drove forward the culture of continuous improvement processes and promoted Kanban processes in particular as a driver of development.
In the end, the interim manager succeeded in reducing the number of suppliers by 28 percent and negotiating extended payment terms. He was also able to conclude consignment stock contracts with ten key suppliers. Furthermore, the interim manager ensured that twelve suppliers could be replaced without friction for quality reasons. From then on, receivables management was proactively pursued independently of the customer.
The streamlined processes led to reduced error rates and an increase in delivery reliability of more than 65% in the last three months of the project. The number of customer complaints fell by 44% in the same period.
New capacity planning creates transparency and planning security
In order to further improve efficiency, the interim manager worked with the managers to revise capacity planning in another sub-project. Previously, upcoming projects and requirements (CRM funnel) and delays in commissioning had been insufficiently mapped. The new capacity planning created significantly more transparency, which forms a very good basis for forward-looking decisions.
Deintegration and outsourcing increase efficiency and reduce costs
In order to avoid further unplanned costs and delays in projects with the endangered southern German sister company, the interim manager, in consultation with the main shareholder, cut all projects that the site in North Rhine-Westphalia could not handle on its own in conjunction with Poland. He also relocated selected plants from North Rhine-Westphalia to Poland in order to benefit from the lower labor costs. This enabled a further reduction in expensive external labor at the German site and at the same time helped to reduce the interdependence with the southern German site.
Manufacturing costs recalculated and risk management introduced for projects
The interim manager also discovered that the calculation of manufacturing costs was incorrect. It was therefore necessary to revise the quotation and order calculation in order to be able to generate the newly defined target EBIT.
The interim manager also initiated a standardized risk management system for the project request status for the probability of technical, economic or capacity-related failure of a new project. Three months after the introduction of the new risk management system, based on a traffic light system, the managers and specialists were able to decide on the approval of a cost estimate and project acceptance themselves up to a point without the CRO's intervention.
26 of 33 legacy projects successfully completed and EBIT turned around to eight percent
The interim manager was able to successfully complete 26 of the original 33 legacy projects within the one-year mandate. All projects acquired during this time achieved the agreed target EBIT. EBIT turned around from minus eleven to plus eight percent.
The client and employees were very satisfied with the interim manager's work. Delivery reliability improved noticeably, error rates fell, customer complaints dropped to a fraction and the tied-up capital put the company in a better negotiating position with suppliers.
The interim manager involved the workforce in the restructuring processes from the outset and assigned sub-tasks to selected (management) staff. The managers and specialists gradually became decision-makers themselves. All current and upcoming projects with target/actual deviations of the KPIs and action plans are visible on the store floor.
