How to recognise the urgent changes your business needs

The pandemic hit more to those companies that did not adequately visualize the impacts that would be generated by Covid-19. They made untimely and improvised decisions, generating a negative effect on consumer´s experience and compromised their position in the market. On the other hand, those companies that had the visibility of the effects generated by the change, are now a step ahead.

Covid-19 reached Latin America and impacted the region and the rest of the world with an epic force, putting all the economic sectors and companies of the most diverse industries to the test.

The point is that when an organisation has a correct and periodic indicator diagnosis, changes are not usually alarming news, but are always visible on the horizon. There are specific signs that all CEOs should understand as alerts or inefficiencies which may start a change process:

1. Negative impacts on key business indicators

2. Increase in the client dissatisfaction level and loss of customers (complaints and claims)

3. Incomplete, inaccurate and imprecise reports for timely decision making

4. Low morale among workers and therefore, increased staff turnover

5. Drastic changes in profitability

In addition, managers can collect early warnings of internal and external signals of change that are constantly being generated by:

Key indicators:

Key indicators are those that help evaluate if we are doing what is required to create, realize and preserve the company´s value over time. We can classify them into three:

  • Key Performance Indicators (KPI). For example, companies dedicated to commercial transport of people in airplanes, trains or buses, might consider key performance indicators income per kilometer, miles traveled, or number of passengers per trip.
  • Key Risk Indicators (KRI). In the case of a company that operates various foreign trade transactions with other countries, exchange rate risk may be common. Therefore, it is necessary to monitor the dollar exchange rate behavior as a risk exposure indicator (KRI) in order to consider short-term effects. This can give the administration scope to take preventive measures.
  • Key Control Indicators (KCI). An example of this indicator is the number of serious accidents in a factory, the number of customer complaints, or the value of fines applied by an authority.

Corporate governance bodies

Corporate Governance bodies such as the Board of Directors, Audit, Ethics and Risk Committees, and the periodic meetings of the CEO with its team, provide good practice due to the specialised analysis and experience of those who make up these bodies.

Institutional assurance system

Institutional assurance such as Comptrollerand Internal Audit, among others, constantly expose areas of opportunity to make vital changes for the company. An example is Internal Audit in a bank, which can detect that means to operate accounts electronically such as devices, credit or debit cards are being delivered without the necessary control measures. This can lead to millionaire fraud to the detriment of the company. Another example is how proper hotline management can reduce staff turnover, saving significant amounts of money for recruitment and training.

An efficient way to create a culture of change within organisations is to have constant monitoring of these indicators and assiduous communication with key stakeholders. There are also tools that facilitate this process. The comprehensive health diagnosis of your business covers fundamental aspects related to corporate strategy, business model, process alignment and the organization's ability to operate at the level of technology, people, finances and resource access, efficiency operational and administrative management.

In turn, there are other more specific observation and correction mechanisms such as the evaluation of the strategic process and the business model in the face of changing market conditions, the use of technology to improve performance evaluation, assurance system assessment, financial performance rates and organisational climate and leadership evaluation.

The pandemic exposed those companies that were not prepared for transformation in general, be it technological, adjusting to changing consumer habits, distribution logistics, regulations, government measures or the way of operating their businesses, among so many options.

Some managers see change as process improvement or innovation when the change could be a requirement to be competitive or to create sustainability within the business. For example, as technological changes usually lead to larger investments, sometimes these are not evaluated correctly and are postponed "for a better time" that never comes. This is the case of many department stores that forced their migration to electronic commerce overnight, generating a negative impact on the consumer´s experience and compromising their position in the market. On the other hand, those companies that had a good response to the effects generated by change, are now a step ahead.

The truth is that the testing situation of the pandemic is providing great learnings for companies of all sizes and sectors. An enduring and important lesson remains – which is the need for CEOs to have visibility on key business indicators in order to take the necessary actions in a timely manner.