Situation
- $1.2B Oil & Gas organization in the Europe region was unable to identify root cause of eroding margins
- Theorized the implementation of new segment structure, efficiency of service execution, and changing forex rates were impacting financials
- Performed an organizational restructure that created a new business segment by integrating product lines to offer turnkey services
- Won of a multi-year tenure that provided the ability to forecast operations and financials within the region out ~12 years
- As a result of these recent events, savings and growth were expected but not realized
- ~8-9% GM loss over five-month period (~$11M)
- SLKone was tasked with performing a forensic regional financial analysis to identify root cause for underperformance
Bespoke Solutions
-Performed financial deep dive, reviewing and correlating all impact variables to establish and test six hypotheses - Weakening product mix, activity decline, lag to tenure goals, misaligned organization, inflexible cost structure, and adverse forex impact
- Developed proprietary activity analysis tool to evaluate operations and related financial outputs at lowest possible level
- Provided insights into operational fluctuations that explained financial impacts at a level the business was unable to reach in the past
- Aligned actual performance to new tenure’s original forecast
- Quantified true FX impact through the development of local currency P&L and an agreed upon benchmark to measure variance in USD / local currencies over analyzed period
- Performed Fixed and Variable cost analysis for high impact categories and key industry trends
- Reviewed organizational structure utilizing spans and layers analysis correlated with financial data
- Provided recommendations for remediation based on Strategy, Operations, Financials, Structures, and Culture
Leading With Results
- Through proprietary tool developed by SLKone, previously unknown inefficiencies within specific events of the operations life cycle were identified allowing leaders to implore process / org solutions
- Organizational deep dive disproved misalignment theory, but highlighted alterative issues stemming from the transition that would positively influence operations and costs -Quantified true FX impact deemed the impact was immaterial (<10% of overall variance)
- Costs were proven to be insensitive to revenue fluctuations based on the performed analysis
SLKone recommendations based on findings noted:
- Revised S&OP ground-up discipline that cuts across all areas of the business
- Building of predictive algorithms and goal-seek functionality into operational planning mode
- Plan to implement a shift in the cultural mindset
- Discrete products pricing model update to be “gap-fillers” in the much longer horizon of integrated projects forecast
- Deploy identified structural changes to remove product line siloed operations
- Implement targeted vs. random organizational transition based on new tenure’s forecast