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Jul 13, 2012

Barloworld chief reflects on organisation’s far-reaching restructuring

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Barloworld|Caterpillar|Concrete|Industrial|Industrial Equipment|Testing|Training|Russia|Capital Equipment|Equipment|Equipment Giant|Industrial Conglomerate|Industrial Equipment|Logistics|Service|Services|Clive Thomson|Infrastructure
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The delivery of services in challenging environments, financial or physical, and the fulfilment of challenging contracts set companies apart in tough financial times, while the active manage- ment of changes to a business can effectively develop a company in challenging conditions, says industrial equipment and logistics company Barloworld CEO Clive Thomson.

Barloworld underwent significant restructuring and unbundling in 2007, changing from a multinational industrial conglomerate to a capital equipment and logistics-focused company.

In 2010, during the height of the global financial crisis, the company set itself the goal of tripling its market value by 2015 through incremental growth and niche or strategic acquisitions.

Thomson notes a critical component of managing change is a focused execution, specifically on incremental and achievable objectives, the involvement of employees and the development, recruitment and retention of core competence skills.

“Do not clutter your targets. Keep them focused and have measurable objectives over shorter timeframes to assess progress. Further, each division’s management must use the overarching concrete objectives to define measurable and aligned aims for that division.

“The execution of a strategy is what is mostly lacking in corporate restructuring. How do I position myself for growth? How do I change what people do from what they have always done to what the strategy demands?” he asks.

Different skills are often required to effect a change in strategy. This requires firm alignment between the corporate strategy and employee training, performance management and incentive rewards.

“Customers want to shift their risk to you. However, if you manage to deliver the services effectively and efficiently, you will also see commensurate returns for the increase in risks.”

In Russia, the company bought the earthmoving equipment giant Caterpillar dealership for R363-million in 2007. It took the company five years to generate returns in the territory, owing to testing conditions such as subzero winter temperatures and muddy summers that bogged down logistics. However, yearly revenue from the territory is currently about equal to the initial purchasing price, explains Thomson.

“You need a can-do attitude in management. You need to go out there and do what others cannot, which is what will set you apart.”

The risks in emerging markets, owing to difficult operating conditions and a lack of supporting infrastructure, are significant, but there are significant growth prospects for companies that can manage those risks and deliver successfully on contracts, highlights Thomson.

Clients will often demand that a contractor or service provider intimately under- stands their industries and the nuances across different territories. This necessitates a high level of technical skills from the contractor or service provider.

However, a company can deploy its tech- nical experts where they are needed and recruit local managers who have a good knowledge of the local conditions, languages and culture.

“Send your best Romans. Expatriates are ambassadors of your corporate culture; however, do not underestimate cultural differences and do not overestimate poten- tial synergies. In fact, there may be dysergies present that you may not have expected, which is why you need your best people and local knowledge,” explains Thomson.

Barloworld grew its share price from R43 a share in 2007 to R83 a share in 2011. Thomson was speaking as a guest at the Gordon Institute of Business Science in June.

Edited by: Martin Zhuwakinyu
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