Will you find out the name of this top global organisation?


Last week, the star-filled roadshow of the CEO of this global corporation has driven me to write a bit more about this enterprise. It is a business that is been turned around by the current management team (appointed in 2013).


Adapt or die?

Before giving you the name of this global enterprise, let me describe it to you in numbers and facts.

This business is a conglomerate, with 3 main activities.
The first is a tourism business, where they own and operate world-class, high footfall touristic facilities in Western Europe.
The second can be characterised as producing and selling intellectual content, and we could classify it as a publishing company.
The third is a financial services division, supporting the activities of the main two divisions and managing a very diversified portfolio of assets (cash but also equity, property and precious metals).

Today, this conglomerate has around 2,880 direct employees, another 2,000 indirect ones and has established franchises globally with around 420,000 sales representatives.
These representatives are in direct contact with the client base while the head office takes care of global marketing. This is like many retail or food franchises.
This corporation has a current addressable market of around 1.3bn consumers (around 18% of the total world population, probably similar to the number of Facebook users) across all continents, although it lacks operations in many countries.

'I can dream, can't I?'

I like three unique characteristics about the business which makes it very resilient and defend it against competitors.
The first, concerning the publishing division,  is that the cost of expansion is fully funded by the client base or by local governments. Growth is free!
This saves capital which can be used to upgrade the tourism facilities and/or reinvest into publishing content, which will in turn generate both higher revenues and larger client base.

The second attractive quality, again in the publishing division is that the content cost is very low. If you own a cable TV company, you need to spend a fortune acquiring content such as football or movie rights. For instance, in the UK, BT and Sky, two companies vyying for UK TV subscribers, will disburse £5.1bn over 2016-18 to broadcast the English Football Premier League. At the other extremity, Facebook has also no content cost since it is created by its users, which enables very high margins.

Another key characteristic of this organisation which has always amazed me is the incredibly flat structure: from the bottom-rung worker/sales rep, there are exactly 5 hierarchy levels.
Said otherwise, 4 promotions are enough to get you to the top job.
Academic background is less useful than what you deliver as a sales rep and manager of sales rep. For instance, the current CEO was briefly a nightclub bouncer before entering the organisation! However, anyone starting at the firm will commence employment at the bottom-rung of the ladder. Management positions are not given to outsiders.

promotion dilbertThe downside of internal promotion systems

Now, all is not rosy. Challenges for the organisation include replenishing the sales rep contingent, keeping costs under control at the head office level and increasing the size of the addressable client base despite heavy competition from a very commercially aggressive competitor (their clients often like to display the brand as part of their personal appearance, akin the Harley Davidson clients!).

Also, over the last few decades, the organisation suffered from unethical and illegal practices at many levels of the organisation, which were left unchecked and culminating in lost sales and loss of trust for the brand. This worsened the profitability of the conglomerate, which was not addressed by an aging management team.

In early 2013, the new CEO brought in top-levels consultants. KPMG helped implement International Financial Reporting Standards (IFRS) accounting standards to upgrade antediluvian systems. Ernst & Young helped review the tourism operations, with an emphasis of securing better conditions from suppliers.
Deloitte audited the financial services division, helping identify around €1bn of unaccounted for assets and €222m of liabilities! Moreover, McKinsey advised on the publishing operations.
Key hands-on managers were appointed to deliver a financial turnaround. The East-Australia division manager was appointed chief financial officer and has led to a return to profits in 2013 and 2014.
The client base is increasing again and more and more hopefuls sign up as sales representative, in particular in a number of countries where the corporation was previously barred from operating.
The current CEO is coming back from a roadshow in the US where he was a guest of honour of Barack Obama.

The Art of the Consultant: 'It's nine thirty.'

While I am not advocating the products of this corporation, I believe that any wannabe manager should study its corporate structure to gain some insight.

If you know the name of this global company and are the first to send it to me, I will be delighted to have breakfast with you. Next week, I will give you the answer. The last clue is this one: the current CEO is Argentine.

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