Ivey Publishing
Ten Ways for CEOs to Turnaround SOEs
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10 pages
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Ivey Business Journal
The state-owned copper miner Codelco is the largest contributor to the Chilean treasury and has helped the Latin American nation prosper through the global financial crisis. Notwithstanding the Chilean government’s prudent austerity measures and savings, it has deprived Codelco of much of the profits needed to increase competitiveness and production capacity, and has not addressed the firm’s inefficiency and lack of productivity. After examining this state-owned enterprise (SOE), this article describes ten best practices to turn around SOEs. 1. An agreement between the state and the SOE. 2. Cut through the old arguments for and against change. 3. History, relationships, and causality matter. 4. Transforming an SOE is more about execution than strategy. 5. The CEO can only manage what he/she measures. 6. The most sustainable turnarounds focus on both revenue and cost. 7. Arrange performance metrics to encourage value creation. 8. Empower functions that allow the “little things” to be done well. 9. Ensure that the ability to innovate is dispersed across the SOE. 10. Accept the fact that there will never be complete agreement. Most SOE mergers and acquisitions of the past decade have occurred in a resource-grab phase that has resulted in bloated, inefficient organizations, where acquiring SOEs export bad practices to acquired companies. As this article contends, moving to a talent-grab phase furthers the end point of acquisition strategy (efficient asset management), makes SOEs appear less threatening, reduces resource myopia, and matures an SOE’s management philosophy.
General Management/Strategy
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