Liam O’Shaughnessy expanded a thriving family business to successfully carve out a niche in the competitive pharmaceuticals and medical devices sectors. However, the downturn is now forcing him to look farther afield for business and to make hard choices regarding the use of staff
OVER THE PAST 40 years, Ireland has built a strong presence in the pharmaceuticals and medical devices sectors. Many of the large global players have operations here and Irish companies have done well out of providing them with goods and services.
Liam O’Shaughnessy’s engineering consultancy is just such a company. The business was set up by his uncle in the early 1960s to provide engineering design and construction management services to the agricultural and food co-operative sectors. When agriculture went into decline, O’Shaughnessy’s uncle had the foresight to seize the opportunities offered by the emerging pharma industry. By the time his nephew joined the business in 1990, it was a prosperous enterprise that focused on the pharmaceuticals sector and employed 15 people.
Liam O’Shaughnessy’s uncle retired in 1995 and he took over at the helm. Full of energy and enthusiasm, he went after new business aggressively and staff numbers had risen to 40 within two years.O’Shaughnessy began to target the medical devices sector in particular and, while he found that most of the technical and engineering support to major projects was supplied by big international consultancies, there were always small (but often quite lucrative) projects available for local companies if you talked to the right people.
O’Shaughnessy is a stickler for perfection and projects were always delivered on time and within budget. He also prided himself on hiring the best talent he could afford, so the quality of his company’s work was consistently excellent. Over time, the firm gained a reputation for having a team of bright, capable problem-solvers and this was rewarded by a steady flow of new projects. By 2002, staff numbers had increased to 52.
On occasion, O’Shaughnessy was asked if he could second one of his engineers to a client company to work on a particular project. As a result of these requests, secondment grew into a separate strand within the business. During the boom, it became a useful contributor to profits. ‘Losing’ his own staff for a period of time caused a certain amount of disruption, but O’Shaughnessy felt it gave employees a challenge and broadened their experience.
As his company is based in the countryside, he knew that attracting and retaining high-calibre staff was always going to be an issue. So he was anxious to provide his team with as much variety as possible to keep them interested and motivated. Another challenge facing any small company trying to win business from multinationals is getting on the approved vendor’s list. O’Shaughnessy felt that having his staff “on the inside” could only help with this.
The company thrived from the mid-1990s until around the middle of 2007, when he began to notice the first signs of a downturn. A number of projects were cancelled while even more were deferred and, as a precaution, he decided not replace two staff when they left. He also took the opportunity to meet all requests for secondments.
The swiftness of the downturn took him by surprise. He had never expected the pipeline to dry up so quickly. The company had a comfortable cushion of accumulated profits but he knew this was a dangerous way to prop up a business for any length of time.
As the recession tightened its grip, O’Shaughnessy reproached himself more than once for not being more pro-active about looking for new business during the boom. Within the past six months, however, he has put together a team to evaluate the talent pool and expertise within the company and to see what new business opportunities might be available within Ireland in related fields.
O’Shaughnessy has always been the principal salesman for his company but, with the fall-off in new business, he brought his technical staff together to emphasise that they too needed to become part of the sales drive. As the direct point of contact with clients, they were in the best position to keep their eyes and ears open for potential leads.
At the time, he thought they had grasped the importance of his pep talk but, as the months passed and few leads were forthcoming, he realised they had not.
He knows it is not possible to turn technical staff into salespeople overnight but, despite bringing in a professional sales trainer to help and offering the lure of a small bonus for new business leads, all efforts to to create a sales mindset have failed. Although it would add to costs at a time when cuts are more appropriate, O’Shaughnessy is now thinking of recruiting sales and marketing professional for the company.
To date, O’Shaughnessy has avoided making anyone redundant. He has encouraged people to take unpaid leave and offered them the option of part-time work. He is also financially supporting two engineers on full-time MBA programmes. To cap costs, he is now wondering if it might make sense to change professional staff from payroll to contract. He is concerned that this might walk him into a legal minefield, however. He would also like to change the job descriptions of some of the administrative staff to get them to cover more tasks but, again, he is concerned about the legal repercussions of doing so.
Over the years, the company has landed a number of overseas contracts (mainly in eastern Europe) on the basis of recommendations from its Irish-based multinational clients. O’Shaughnessy was chuffed with this success but never pursued overseas opportunities in a concerted way – mainly because he had no international business experience himself and was apprehensive about trying to enter new markets.
Now, however, he feels he has no choice. In addition he believes he needs to do this as quickly as possible because the pharma industry is already looking to emerging low-cost economies as potential locations for new plants and O’Shaughnessy wants to be in on the ground floor. He appreciates that there is a lot to do in setting up an overseas operation and he is in two minds about whether to seek the help of a consultant with expertise in this field or to try to cover the ground with one of his more experienced engineers. In particular, he knows he will have to build a profile for his company with the international decision makers in the pharma and medical devices sectors and, while his Irish contacts may help, it will still be an uphill task to make them take a relatively small Irish company seriously.
O’Shaughnessy recognises that this is going to be a time-consuming process and that he cannot be in two places at one time. He has always been a very hands-on manager and finds the idea of stepping back difficult to imagine. He has never been good at delegating and is more than a little daunted by the idea of someone else running his business.
Before this can happen, he will have to restructure the existing operation to create a proper management team.
At the moment, it’s a choice between hiring a professional manager or promoting an existing senior staff member to the position of general manager. Above all, he knows that he has to make decisions fast, as time is not on his side.
THE EXPERT'S ADVICE
LIAM O’SHAUGHNESSY NEEDS to take a step back and realise that he has good reason to be confident. He has done a lot right and need not dwell on thoughts of failure. After he took over from his uncle, he took on more staff and increased the number of projects won by focusing exclusively on a high-value growth sector.
He also supported his teams with further education and secondments, all while using these contacts to boost sales further and improve the company’s reputation. He now has a potential team of mid- to senior management in further training and his own sales skills can be focused on new leads.
There seem to be two major sectors he can target for growth: new areas within the domestic market including renewable and sustainable energy platforms; and international pharmaceutical and medical device projects.
O’Shaughnessy needs to take stock of his ability to gain cross-referrals from existing and past customers, something which has already been achieved without any huge effort.
To develop a sales strategy, it is useful to analyse the core competencies of the team. What type of engineering is the company good at? What other areas is this also used in? Who are the key competitors in this space? What do they do well and not so well?
For instance, he could look at the projects he has completed in the medical device sector and isolate just how much of this experience could be used in other key construction projects, perhaps in utilities in the emerging economies around Europe and farther afield.
One suggestion would be to formulate a list of leads. This would include firms the company has received positive recommendations from and those that have already given international contracts. A follow-up campaign from O’Shaughnessy could yield strong positive leads which can be tendered for. This is not a quick process and he is right to consider the lost opportunity of the good times when this could have been done, but to instigate it now will not make huge demands on his time.
A second approach might be to look for a partner to resell services in countries or regions of interest. These agents, with appropriate controls and metrics, can yield leads and project manage tender processes, supported by his engineers. This is exporting his knowledge and hard-won experience and is a scalable proposition using a local workforce under his team’s supervision. As O’Shaughnessy has discovered, scaling a business or surviving through tough times sometimes requires delegation and refocusing to optimise everyone’s time and skills. – Alan Costello
ACRITICAL ISSUE now facing O’Shaughnessy is what to do with his staff, which are the largest cost in most businesses. O’Shaughnessy must seriously consider how expenditure in this area can be reduced. His decisions will determine the continuing success of the business or its failure.
There are a number of options. For example, he has encouraged people to take unpaid leave and to switch to part-time hours. He could also consider introducing pay cuts.
These represent changes to the employees’ terms and conditions. An employer and employee are entitled to renegotiate those terms and conditions, even to the detriment of the employee, as long as it is with informed consent and not under duress. The key to any such change is agreement. If agreement is not reached, an employee has the right to enforce their rights under their employment contract in a relevant court or tribunal.
O’Shaughnessy is also looking at moving his professional staff from payroll to contract. This would mean changing their status from that of permanent employee to employee on a fixed-term contract. The reason he may choose to do this is that, at the end of the contract, the employment simply comes to an end. However, while in theory it is possible for an employee to move from a permanent to a fixed-term contract, in practice this is difficult to achieve. The employee must be fully informed of the consequences of changing their contract (ie that they are possibly waiving their rights to remedies under unfair dismissal legislation). Also, an employee who moves to a fixed-term contract is still entitled to redundancy payments if the contract is not renewed.
Their length of service would be calculated back to the beginning of their employment as a permanent employee. In other words, there is no cost saving to an employer in the event that he has to make that employee redundant.
O’Shaughnessy also proposes changing the job descriptions of some staff, which would require them to take on additional tasks. Changing job descriptions is a contractual issue. Provided employees agree individually to changes to their assigned tasks, that is the end of the matter. Employees who are not willing to change their tasks are more problematic. In encouraging employees to become more flexible and take on extra tasks, O’Shaughnessy will need to explain the consequences if agreement cannot be reached. One would no doubt be a reshuffling of the business to ensure that tasks are done in the most efficient way, which could mean redundancies.
If O’Shaughnessy has to restructure these existing operations to create a proper management team, it may also lead to redundancies. In that event, he will have to apply a fair selection procedure to determine who will be made redundant. The criteria must be objectively defensible. He will need to satisfy himself that existing employees do not have the skills to undertake new roles in the reorganised business. – Duncan Inverarity
THE FIRM NEEDS to be positioned for its next wave of development. Deciding on the appropriate strategy is crucial. A strategy should be developed by him in conjunction with the management team. It should be focused and practical.
It needs to reflect the company’s approach to maintaining its presence in the Irish market, while simultaneously exploiting opportunities overseas. To succeed, the firm must capitalise on its strengths, in particular the positive recommendations from existing clients. Engaging in a new aspect of business, including entering new markets, will always involve risks. However, O’Shaughnessy and the team can mitigate these by researching the market, leveraging existing relationships and deciding which risks they are willing to take.
Once there is agreement on strategy, O’Shaughnessy must review his organisation structure to ensure it is appropriately aligned to deliver on the strategy. Necessary roles will include client relationship roles, operational roles and a senior role providing direction, leadership, motivation and management. The team may already have many of these capabilities but there may also be gaps. These can be filled by upskilling existing staff or recruiting new skills into the organisation, on a full-time or temporary basis.
At a macro level, O’Shaughnessy needs to drive the strategy and to facilitate this he will need to delegate some of his current workload. His role as a strategic manager requires him to build relationships in the Irish and overseas markets. His role in delivery should be one of oversight, achieved through the provision of succinct and relevant key performance information on the operations of the business, rather than through hands-on delivery of projects.
A change in strategy, realignment of the organisation and a change in management style will mean significant changes for all staff, both in their own activities, and in the environment in which they operate. The strategy centres on exploiting the firm’s strengths, maximising opportunities and providing clarity on the focus areas. To ensure that the objectives of profitable growth and key talent retention are achieved, he will need to manage the change through effective communication and consultation with key team members. – Dervla McCormack
