EDET's June 6 Presentation

7/28/2019 EDET's June 6 Presentation

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the next frontier

What does Institutionalization really

mean?

A Paper presented at the

NextzonStanbic Ibtc SME Breakfast

SeminarBy

Augustine Edet

Co-Founder & ED/COO,

NEXTZONJune 2013


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NEXTZON BUSINESS SERVICES LIMITED www.nextzon.com

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An Overview of the SME Sector

Anywhere in the world SMEs constitute a significant part of the economy.From underdeveloped to developing countries to developed countries, SMEs

contributes 65% of GDP and 77% of total employment

Who are the SMEs: Any business with the following features in Nigeria is

grouped as SMEs

There are 17.284m of such business in Nigeria. 17.261m (99.87%) of these are

Micro business, 21.264k (0.12%) are Small businesses and 1.654k (0.01%) are

medium

SME is a critical sector of the economy. However the problem in

Nigeria is that there is a dearth of information about this vital sectorof the econom

Number of

Employees Asset Value

Micro 1 to 9 Below 5m

Small 10 to 49 N5 to N50m

Medium 50 to 199 N50m to N500m

Based On


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Our SME Sector is significant and important

A 10% increase (effort) in SME by stakeholders will translate into 9.5%increase in GDP

A Similar 10% increase (effort) in Corporates will only generate a 3.5% benefit

to the GDP The SME Sector employs a total of 32 million Nigerians and contributes 46%

to GDP

42% of the entrepreneurs in the Micro businesses are women

86% of entrepreneurs in the small and medium enterprises are men

GDP

%

Increase

New

GDP GDP

%

Increase

New

GDP

SME 650 10% 715 SME 650 650

Corporate 350 350 Corporate 350 10% 385

1000 1065 1000 1035

% Increase in GDP 6.5% % Increase in GDP 3.5%


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However there are serious issues

facing SMEs

Lack of Operating Business and strategic Plan Most lack strategy, business plan, marketing strategy, proper accounting systems and

some do not run their transactions through the banking system especially those in

retail sector

Lack of Corporate Governance

Require change in mindset; they have refused to separate ownership from management

Below optimal Capacity Utilization

Most are operating below capacity

Human Capital Capacity

SMEs are not able to access enough qualified personnel enough to satisfy their human

capital requirements

Need to position to attract qualified personnel and to manage businesses in aprofessional manner

Structure and Processes

Most SMEs do not have their process documented and structures

clearly defined and communicated

*See Recent Survey Report by National Bureau of Statistics (NBS) and SMEDAN


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Most of the Weaknesses can be fixed by

Institution of strategic management & planning

Proper corporate governance

Professional management separated from ownership

Right People & winning culture Sound business management structures, processes,

systems

Accurate Business Records and transparent financial

reporting

Management Information Systems

These are the ingredients of institutionalization. They make abusiness built-to-last, they make your business an institution


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Institutionalization: What and Why

What is Institutionalization?Various definitions; originates from the word

Institution or institutionalize:

to make into an institution.

An institution is defined as any familiar,

long established person, thing, practice.an established or organized society or

corporation.

Institutionalization is a process of

transforming a business into a company that

emphasizes best practice; a company that willsurvive generations and increase shareholder

value; a company where management, systems,

procedures and culture can be sustained with

little or no intervention from the founders".

Why Institutionalization?

To leave a legacy for the next generation and

ensuring succession

To unleash the full potential of the business

To professionalise the business To be ready for intensified regulation

To be ready for opportunities and growth in

the capital market

To be well positioned to attract good people

as talent becomes more scarce

To be positioned for better competitiveness To become more attractive to investors,

fund providers and lenders.

To guarantee sustainable growth


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the next frontier

Road Map to Institutionalization

June 2013


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Growth & sustainability through Institutionalization :Path to long term success A Process of Evolution

Getting from an unstructured business to an institutionalized business usually happens in phases

By Ngozi Edozien Chief Executive West Africa at Actis

Where isyour

companyhere?
http://www.linkedin.com/company/9309?trk=pro_other_cmpyhttp://www.linkedin.com/company/9309?trk=pro_other_cmpy


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Specific Steps for To Institutionalization

Corporate Governance Framework: Develop code of governance for board of directors (BOD) and

Management

Constitute a competent BOD/Advisory Board

Have Regular board meeting to review performance

Strategic Management Framework:

Develop a strategic planning and management process

Establish performance management system/process (Corporate and Human

Resources)

People, Continuity and Succession Framework Develop an efficient organisational structure (for now and for future) that

puts right people in right roles, helps identify talent gaps & fosters

succession planning

Develop and document policies, processes and procedures that ensures

transparency in financial transactions, human resource managementand operations


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Specific Steps for To Institutionalization

Business Processes and Record Keeping Document Processes, policies and procedure

Keep adequate record of business transactions, Prepare Financials to present

true position of the business.

IFRS compliance : This is compulsory for all businesses 2014

Design IT plan and strategy for automation of business processes

Develop a Business Continuity Plan including a Disaster Recovery Process

Branding & Communications and Customers acquisition

Develop and document a branding and communications strategy for the

business

Articulate strategy for improvement in customer service and customer

satisfaction

Performance management

Develop performance indicators framework (both financial and non-financial)

Set up a reporting system that ensures results can be monitored against target


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Characteristics of Great Institutions

How do great businesses look?

Demonstrate continual, observable progress and growth

Every step adds value

Little or no wasted motionplan the work and work the plan

Reviews/approvals are not gateposts, but critical enablers thataccelerate progress

Unflappable

Anticipates most obstacles

Deals gracefully with the unforeseen

Achieve targeted results, on time, on budgetno excuses

Appear effortlesseven when they are not


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Characteristics of Great Institutions:

Institutionalization Framework

Processes andRecord Keeping

Governance &structure

How do we position? ------ Direction

What principles willguide our approach? ---Professionalism

Human ResourceManagement

Strategy

Who would drive our

Processes? -----Sustainability

How do we Execute within budget? ----- Cost effective ExecutionFrom various studies, we

have identified 4 key areasany company that wants tooutlast its competitionMUST have in order for it tobuild to last. These 4 areasare


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Characteristics of Great Institutions:1. Corporate Governance and Structure

Corporate governance is a term that refers broadly to the rules, processes, or laws by whichbusinesses are operated, regulated, and controlled.

It is a frame work of rules and practices by which a board or director ensures accountability,transparency in a company

What you get: Reputation and Recognition

The practice of good corporate governance followed by firms will allow them to gain thetrust of the investors, bankers, the customers and the community at large

This image will help the company prosper in the long run and achieve its goals morequickly

The company can attract strategic partners that can be leverage on to grow the business IAS/TNT

Due to instituted corporate governance system F.G.N Okoye and Sons wasable to acquire 40% stake in IAS (a UK-based Cargo Airline). The companycontinued to improve its level of transparency and was able to attract world

top courier companies as partners. It was at one time A partner for FedEx, andnow partner to TNT


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Characteristics of Great Institutions:1. Corporate Governance and Structure

ExamplesKey Features

Punch News Paper: Built a cultureof commitment through governance.By showing transparency in career

path. Employees know they canbecome CEO. This commitmentmanifested when the company wasshut down by the military for over 18months, 80% of the staff resumedafter it was opened

They believed in the vision, theycould see through the vision

They have governance structure is centered aroundclearly defined roles and jobs (corporategovernance)

The roles and responsibilities of the boardof directors are clearly stated andcommunicated. And separated from that of

the management Remuneration basis is also clear and

documented for directors and formanagement

They instill their beliefs into a palpable culture- thatforms part of the core of their organisations-cultures that are so tangible outsiders dont need to

be told what they are- they can sense themintuitively. They build customer centered processes

They develop clear consistent processes thatenhance decision making and also enhance theirability to create value ; and they constantly renewthese processes so that they are always serving the

right purpose, and always creating value


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Generation ofStrategic

Issues/Alternatives

Documentation ofNew

Plan/Strategy

Execution of NewPlan/Strategy

EnvironmentalIndustry, Market &

InternalAssessment/Analysis

Characteristics of Great Institutions:2. Strategy

Data Information

Intelligence

StrategyInstitutionalized Processes

You must have adequate intelligence about your business in order tocreate good strategy. You must know your numbers, competition,

industry, employees etc.


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Characteristics of Great Institutions:2. Strategy

Examples

Key Features

They have a clearly articulated strategy-explaining

who they are and where they aregoing?

how they are going to get there what they will do , what they will not do

They know their industry, They have a clearunderstanding of their competitors and whatit takes to beat them

They understand who their customers areand what VALUE means to these customers

They take steps to know their own internalcompetencies and refine/rebuild them so asto enhance their ability to execute theirstrategy and beat their competition

They encapsulate their strategies, andcommunicate it in such a way that it is

understood and owned by their people

GEs strategy to be No1 or No2 in their

chos en markets, and to f ix close or sel lany business that did not f i t into this

strategy;

Coca-Cola considers its competitors toinclude water- forcing it to come up withstrategies to help it effectively compete


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Characteristics of Great Institutions:4. People, Continuity, Succession

ExamplesKey Features

Chellarams founder built 11 internationalbranches including Nigeria withouttravelling out of India for more than twice.He engage right people, empowered them,even gave them stakes in the businesses.

Jack Welch of GE spent a lot of time onhiring the right people for the right job- heknew that doing this would make the workahead possible

Jack Welch spent time building his teamleadership capacity through GEs

Crotonville Academy.

GE built its rewards around a mixture ofteam and individual performance; took timeto understand its peoples abilities so itcould match its star players with areaswhere there were the biggest opportunities

They take pains to hire the right people;and try to ensure that they put the rightpeople in the right jobs

They build highly motivated, highlyeffective teams and spend time and effort

helping these people and teams develop

Their performance management systemsreward what they consider to befundamental to their company- whether it isentrepreneurship, team spirit, innovation,customer service

They build LEADERS at every level; andthey constantly ensure that they have apipeline of leaders so that they can managesuccession.

Their people are empowered to takedecisions


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Succession is a Key Pillar of

Institutionalization

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The real key in succession management is to create amatch between the organization's future needs and theaspirations of individuals.

The only way to keep talented people is to provide themwith growth opportunities that keep them stretching andfinding more promising opportunities they might findelsewhere.


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Key Issues in managing People

Recruitment;

Organizational structure;

Culture / shared values:

Trust;

Integrity;

Innovation;

Action- driven;

Commitment.

Performance driven system;

Rewards;

Succession planning.

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Business Processes and Record Keeping

Business processes are a collection of the ways various units, departmentsor divisions of a business contribute to its overall capability to add value.

Factors to Consider/Why Processes must be in place, documented,

followed and reviewed regularly:

Accuracy , Timeliness and Controls

Efficiency and Effectiveness; Customer centric

Reporting level and requirement

Good use of Technology and Automation

Keeping the Books

Keeping accurate records of is a critical and important part of a business process value

chain It is the only way to communicate your business with stakeholders (Employees,

Bankers, Investors, even customers)

Recording keeping is not only important for its primary purpose also, it has become

mandatory for all businesses to comply with IFRS starting from 2014

You have to start working on the Roadmap for the implementation of IFRS as early

as possible

Some Key Processes that mustbe Transparent

HR Processes Admin & Procurement Internal Audit Governance Financial Processes


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A process driven business

process driven Documented policies and processes for all units Workflow diagrams process manuals

Management, Unit and departmental structured meetings

Internal control mechanisms

Websites and media for information sharing and gathering

Customer feedback and Interviews

Performance appraisals and benchmarks

Use of proper/current software and hardware technologiesMicrosoft

office

Enhance communication via use of current tools - e.g. Outlook, internetetc.

Data mining and security

Note and minute taking at all meetings


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the next frontier

NEED HELP?

TALK TO NEXTZON

WHY?


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We are Serial Entrepreneurs

We are not just an advisory firm, we are entrepreneurs like you

Over the past 8 years we have incubated, built and invested in

over 40 early stage businesses (from idea to growth stages).

Some have failed, some have succeeded, some are making

progress

We have lost money, we have made money, we have learnt theropes. We know what works and what does not work

See a list of some of our current investments with stakes valued

at over $20m:

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Some Businesses we Invested In

SEE MORE IN OUR CORPORATE PROFILE


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Milestones

One of the NominatingPartners on the NIGERIA

FAST GROWTH 50 which isan initiative to identify the

50 fastest growingcompanies in Nigeria

promoted by ALL WORLDNETWORK (involvesrenowned strategies

Michael Porter) and TheTony Elumelu Foundation.

A Franchisee ofthe IFC BusinessEdge & SME ToolKit for capacitydevelopment of

SMEs.

One of the NominatedAdvisors to SMEs on theNigerian Stock Exchange

initiative for the re-launchof the Alternative

Securities Market toenable SMEs access theStock exchange for long

term growth funds.

Provided businessincubation and SMEadvisory services to

over 40 SMEs,directly contributing

over N2billion($13million) in

technical assistanceto the SMEs;


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Milestones

Providedmanagement consultingservices toover 400clients

Recently commenced a strategicalliance with one of the top tenglobal management consulting

firms based in the United Statesof America with 30 offices around

the world, with a view tocollaborating on specific joint

projects focused on providingservices to organizations andgovernments

Collaborated with otherinvestors and fund

providers to promote andnurture start up ventures

valued at N337million

($2.5million) as at 2008,which grew to N1.5billion($10.7million) in 2011, withcurrent cumulative value

of about N2.6billion($17million).

Has become one of the very fewventure companies in Nigeria

with a focus on start-up and earlystage businesses. In this regard,it is noteworthy that based on the

Companys unique and

pioneering business incubationconcept, the World Bank under

the MSME project donated a take-off grant in 2006 to support the

take-off and capacity building forthe Companys incubator.

Directly and indirectlyattracted over N7billion($49million) in cash and

sweat investments into theseenterprises and has

facilitated the creation ofover 390 jobs with about 363sustained and a potential of

about 7,000 additional jobswaiting to be created by

these enterprises in the nextfew years


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Other Areas we can help with

Expansion Services. This shall include: Assistance in setting up new business lines

Existing product enhancement

Export development

Regional & international expansion

Training & Capacity building/development

Such as the IFC Business Edge curriculum of which Nextzon is

certified to run for growing businesses. These will cover diverse relevant

business areas. Detailed curriculum provided.


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Need some support? Next Step

Contract Signing

Nextzon and prospect agree on service requirement and deliverables.

Roadmapdevelopment

Nextzon and prospect to agree on urgent

and immediate actionsRoadmap and steps to be agreed

Diagnostic

NEXTZON will help analyse the currentbusiness situation

And provide a report on areas that needattention

Intention

Register Name, email, industry, revenue and headcount

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For further Information

7/6/2013

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Wale Ogunsola0813-573-9764

[email protected]

Contact

Nextzon Business Services

33a Bishop Aboyade Cole, VictoriaIsland, Lagos, Nigeria

Tel: 01-279-8256, 0803-705-4504www.nextzon.com

Location
mailto:[email protected]://www.nextzon.com/http://www.nextzon.com/mailto:[email protected]


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the next frontier

THANK YOU!

EDET's June 6 Presentation

Documents

Transcript of EDET's June 6 Presentation