I joined a small company one time that had two operating divisions that operated as completely separate entities other than a few corporate support functions. What was interesting about this was the fact that the main focus of the company (our core competency) was in the larger division making up over 90% of the company’s revenue.
The smaller division had significant challenges including a lack of management focus and needed lots of attention to turn it around. It was also located some 500 miles away from our corporate office.
The other challenge this division had was that it was a very capital intense organization due to costly equipment requirements to provide specific services that made it somewhat unique. It was truly a unique business and a desirable option for our company, , , but there were other challenges in the company that needed a very limited resource called cash.
As an executive team, we liked the fact that the smaller division provided unique services and we all thought that at some point this smaller division would become valuable complimentary services to our core business in the much larger division.
The challenge: Lots of potential opportunity but where and how do you focus your limited resources?
In my IT assessment, it was also clear that the technology needed to be updated, especially the business applications which had become obsolete as the small division grew.
We had limited resources, especially cash and capital to fuel the turnaround of our great little company with lots of potential, , , but also with a lot of existing challenges and need of attention from the management team.
We had limited management resources and both divisions of the company were under stress from poor management of the past.
I knew we could turn the small division around if we were able to focus dollars and experienced management attention to it. The problem was that both divisions needed immediate support in both capital and management attention, , , and we didn’t have enough of either to go around.
My recommendation was that we sell the small division and focus our full energy in establishing a firm foundation for what we believed to be our core business and what made up the bulk of our revenue, , , and what we believed was to be our long term business focus.
After much discussion and deliberation, that’s exactly what we did.
It’s important to take a realistic view of what your organization, or company can do. I know for certain that several of our managers could have turned the small division around. The question is at what price do we have to pay to do it. It’s a matter of evaluating your risk.
It was a clear decision for me in looking at the IT support issues and why I made such a strong recommendation to focus our limited resources on what was going to be most important for the future of the company.
Early on it was not a popular recommendation and was a difficult decision, but over time it became clear it was best for our company’s future.