A web-design company has enjoyed dramatic revenue and profit growth since it threw out its old staffing structure and made itself more client-friendly.
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Entrepreneur: Tim Fouhy, Co-Director
Company: Reactive
Business: Web design and development
Founded: 1997
Employees: 24 full-time, 1 part-time
Turnover: (2005 - 2006) About $3M
Head office: Melbourne; Other offices in Sydney and London
Contact details: +61 3 9415 2333
The Reactive Story
A chat over lunch in 2005 with an old friend led Tim Fouhy and Tim O'Neill, co-directors of the web-design company Reactive, to rethink their business structure.
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Key learning points:
- Organisational structure - Is your current structure a cobbled-together legacy of the past or the most efficient way you can operate?
- Implementing change - Allow plenty of time to make - and evaluate - changes in your systems.
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The friend praised the team-based staff structure at the large multi-national insurance company where he worked. Fouhy and O'Neill wondered whether that might also work at their smaller operation. A year later, they have a new structure that has made clients and staff happier and increased profitability.
Fouhy and O'Neill met while they were studying computer graphic design at Wanganui Polytech in New Zealand. After graduating in 1996, they moved to Melbourne to work as web designers on Sausage Software's website. Nine months later, they founded Reactive, with Sausage as their first client. Fouhy, who was then 21, says: "We didn't over-analyse it, we didn't have a business plan - we just went for it."
The Challenge
Restructuring how the company works.
The Solution
Reactive's old staffing structure was typical of most web-design businesses: a new project would come in and a team would be pulled together from the available staff. When one project finished, staff would move on to another.
But if a satisfied client came back wanting more work from the same team, it was not possible - those staff had already been reassigned. Fouhy says: "There were a lot of frustrations; clients wanted the same team. Staff members were frustrated by losing ownership of a project."
Fouhy and O'Neill started their restructure by mapping which staff had worked with which clients on each project. Fouhy says: "It was a complete mess; there were lines going everywhere." They tried again. This time they divided the staff into teams comprising a project manager, a designer and two developers. Each team was allocated particular clients. Fouhy says: "It seemed so much simpler; there were just four straight lines."
Four core teams were created plus a floating team that could assist other teams when required. The whole process took 12 months: three months of planning, six months to implement and another three months to refine. Each team has its own name such as the Go Team, the A Team and Team Danson (a tribute to actor Ted Danson).
"The transition phase from the old to new structure was difficult because there would always be so many active clients and projects," Fouhy says. "Until we managed to get all projects and clients aligned with their new teams, we couldn't really gauge how it was working."
Fouhy says that if they were starting the restructure again, they would do a few things differently:
- Test how different personalities work together before assigning them to a team; and
- Spend more one-on-one time with each team to help them with any problems.
"In essence we were creating micro-businesses within our business," Fouhy says. "We could have invested more time with the teams educating them on business fundamentals."
During the year of the restructure, Reactive suffered below-budget growth. Fouhy says: "We weren't chasing new business; we were just concentrating on ensuring we got this structure right." An incentive scheme based on chargeable hours has been introduced to encourage continuous improvement.
Fouhy says Reactive is still refining the program and will revisit it every six months. "Our first incentive was a skiing trip to Queenstown for the whole team and their partners but the feedback was that not everyone likes skiing." Incentives are now based on feedback about what motivates people; beach holidays and larger computer monitors are some of the prizes.
The Result
The new structure has simplified resource management and made the company more efficient. Team members know their projects and the clients inside-out.
In the first financial quarter since the team-based structure was refined, Reactive's revenue grew by 84% and profit increased by 109% compared with the same quarter in the previous year. Fouhy says: "Each team is focused on exceeding its revenue goals, making them more proactive in developing and selling new ideas back to client."
Fouhy says the restructure has proven to be more cost-effective for Reactive's clients. "There is a new level of efficiency. We don't need to bring people up to speed on projects for existing clients."