Norton Lilly

The winds of change┬áGlobal shipping agency Norton Lilly is eighteen months into a business transformation. CFO Jim Burton shares with Gay Sutton the secrets of managing change effectively. With a proud history dating back to 1841, Norton Lilly International is a well-known and highly respected name in the shipping industry. With offices in over 37 ports around the US plus others in Europe and the Middle East, it has grown to become North AmericaÔÇÖs largest independent shipping agency. Owned by H.W. (Win) Thurber III and John Rutherford, the company provides all services that shipping companies require when moving cargo to and from the US, whether it be clearing the goods through customs or contracting with stevedores and arranging the logistics of getting cargo to and from the port. It also manages all financesÔÇöpaying vendors, collecting the fee from shippers and remitting that to the carrier. ÔÇ£We are, in fact, acting as the accounting and operational arm for our carriers, in every port in which their vessels call,ÔÇØ said CFO Jim Burton.Burton joined the business only 18 months ago, tasked with analyzing the business and defining a transformation agenda that would move the company to a higher level of performance. ItÔÇÖs a task that he is eminently suited to, having worked with Ernst & Young for 25 years and more recently with turnaround and restructuring group AlixPartners. ÔÇ£To date, weÔÇÖve emphasized the restructuring of our business processes; that is, weÔÇÖve focused internally,ÔÇØ Burton explains. ÔÇ£We started by process mapping, to understand how we operate. The first thing I heard when I arrived was, ÔÇÿWell, weÔÇÖve always done it that way.ÔÇÖ The challenge has been to define the way we work, examine this under a lens and find better ways of doing it.ÔÇØAnother early gap Burton identified was that it was unclear who was accountable for what. ÔÇ£Everyone was accountable, yet no one was really accountable,ÔÇØ Burton says. ÔÇ£So from the process mapping exercise, we were able to define operational key performance indicators (KPIs), which weÔÇÖve now assigned out, along with expected levels of performance.ÔÇØAnother early step was to implement a scorecard platform, leveraging the newly established KPIs. Burton says, ÔÇ£I remember asking one of our guys ÔÇÿhow do you know weÔÇÖre meeting customer expectations?ÔÇÖ He said, ÔÇÿif weÔÇÖre not, theyÔÇÖll tell me.ÔÇÖ Well, that seemed a little too open-ended. We needed to more consistently define what we do and how we do it, and then proactively sit down with the customer to be sure what we do aligns with the contract and what they expected from us.ÔÇØSo far, the scorecard platform has been rolled out to two major customersÔÇöthe largest of whom is ANL-USLÔÇöof the Liner Division. ÔÇ£A weekly scorecard is sent to their senior executives. We then have a weekly operations call during which we review the status of each KPI, how weÔÇÖre performing relative to the target and what corrective actions should be taken.ÔÇØ Other early actions Burton undertook were to form an Executive Committee, who would be responsible for owning and driving the transformation agenda, and to review the capital policy. ÔÇ£I found there wasnÔÇÖt one. You could enter into new business contracts without the required due diligence having been done.ÔÇØ A new capital policy, now owned by the Executive Committee, states that, for project-related issues, if the Committee deems a project worthy of consideration, a detailed due diligence process takes place; the final decision is to be based on solid evidence of the value the project would bring to the business. For non-project-related expenditures, an AFE (authorization for expenditure) system has been implemented to ensure each business unit head sees and signs off on all requests and can therefore understand the impact of the expenditure on the targets.ÔÇ£Today, weÔÇÖre moving to eliminate the budget process,ÔÇØ Burton says. ÔÇ£Last year we introduced the idea of value creation. We calculated our internal cost to capital and established our proxy for value creation. Each business unit was given a 2008 margin [value] target. The behavioral shift toward value creation and away from budget negotiation and minimalization is beginning to take. As a result, weÔÇÖre going through one more budget and will then eliminate that process altogether. Our business unit heads will receive guidance on two factors: margin target and required top-line revenue growth. WeÔÇÖll trust them to focus on and challenge how best to maximize their performance.ÔÇØ In all of this, Burton wants everyone at the executive level thinking in terms of value creation. ÔÇ£While itÔÇÖs important to grow and serve the market,ÔÇØ he says, ÔÇ£not all growth is good growth. I want them comfortable in being able to distinguish between good and bad growth, relative to our value creation goals.ÔÇØIn parallel, the company is also focused on the people dimension. Burton has introduced method teaming as a way of matching the right person to the right job. The methodology is based on the fundamental premise that people can be classified into one of four basic profiles: strategist, project director, networker (i.e., account manager) or external qualifier (i.e., salesperson). ÔÇ£Whenever we attempt to staff a project or fill a job role, we first define the requirements for that role and then test candidates to help ensure we create the best fit between the role and the profile. In our organization, as in many others, weÔÇÖve had people playing out of position, which has led to a lot of frustration. TheyÔÇÖre good people, just in the wrong role. We now use method teaming to objectively assign people to the right role and build better teams.ÔÇØ The business transformation will be a long-term process, Burton believes. ÔÇ£Many change programs fail because people look at change as an event. They merely change a business process or implement a new IT application and assume theyÔÇÖve transformed their business. But real transformation requires changing the basic fabric of a business, across the dimensions of people, customers, competitive and company thinking.ÔÇØEighteen months into the process, Norton Lilly is seeing improvement. ÔÇ£One of the more important things weÔÇÖve accomplished is that now when issues surface, thereÔÇÖs little flailing of arms,ÔÇØ Burton says. ÔÇ£WeÔÇÖre able to objectively analyze the issue, isolate the root cause, determine whether itÔÇÖs within our control and deal with it. Financially, 2007 was our best year, and weÔÇÖre on target to improve even more this year.ÔÇØ Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} *┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *   First published December 2008