The implications of Brexit on operating models and organisational design

Sharon Platts

By Sharon Platts

14 Feb 2019

As organisations scramble to consider all the implications of Brexit for their business, it’s essential not to forget to consider how your operating model and organisational design may be affected by the UK’s departure from the EU. In the third instalment of our Brexit series, we take a look at how you can make a start in that area to ensure your organisation is ready for Brexit.

Brexit Chess Image For Brochure

Remove the fear factor

As clarity slowly comes to organisations around Brexit, the focus on operating model is only going to increase. It’s worth remembering that this scrutiny, as with any opportunity for change, is as much an opportunity as it is a threat.

If handled properly, Brexit provides organisations with the perfect reason to evolve their operating models and organisational design and ensure they are better able to cope with the complexities of modern business. Though unprecedented in its scale, Brexit is essentially just one of many evolutions in an increasingly changeable business landscape. If your organisation can adapt to weather Brexit, there’s a good chance it can handle anything the market can throw at it.

In the short term, while everything is in a stage of flux, it’s certain that agility is going to be an essential philosophy behind any operating model. But the questions get harder to answer as we move past the initial chaos of Brexit and things start to settle down.

Introducing POLISM

At Connor, we use the POLISM framework when considering operating models (see diagram below). Regularly used by the good people at Ashridge Business School, POLISM focuses on reviewing an operating model through six different lenses:

  1. Processes
  2. Organisation
  3. Location
  4. Information
  5. Suppliers
  6. Management systems

Let’s take a look at what you should consider when reviewing your operating model through each of those lenses.

Processes – take the heat out of your value chain

Your organisation’s processes will be manifold, so the first challenge when thinking about Brexit is to identify ‘hotspots’ in your value chain where Brexit has the potential to cause problems.

In a recent Twitter poll we asked:

“When thinking about #Brexit's impact on your organisation and operating model, which functional group do you think is most likely to be impacted?”

Our followers showed clearly that their primary concern is for manufacturing and service delivery. In many respects this is not unexpected; logistics, production, fulfilment and service delivery are most likely to be impacted by changes in the labour landscape that Brexit will bring. So though your value chain across the whole organisation will need assessing, it will likely pay dividends to focus particularly on your manufacturing and/or service delivery areas.

When it comes to that assessment, organisations that are ahead of the game will be looking at a set of criteria. Consider the impact on your processes of factors such as:

  • New legislation, trading rules, or both
  • The scarcity of inbound goods or materials to a value chain
  • The complexity of storage and onward transportation – especially relevant in industries dealing in highly-perishable goods
  • Which individuals hold responsibility and accountability for core processes

Organisation – “to expect the unexpected shows a thoroughly modern intellect.”

As we (and Oscar Wilde) have already mentioned, agility is key in a post-Brexit world. Indeed, any change – Brexit or otherwise – is far easier to overcome if the organisation is structured to cope with sudden change rapidly. That structure, at a basic level, should enable the organisation to evaluate and take decisions faster in the face of new information, and build in protections to mitigate any negative effects of unexpected events.

Think about:  

  • Bringing various parts of your organisation together in multi-disciplinary teams to solve specific issues and / or take advantage of opportunities more aggressively
  • Proactively building talent in areas where skills might be in high demand or short supply, such as data science, coding, or legal skills
  • Removing barriers to leadership in the organisation – specifically in terms of flattening structures and sharpening processes
  • Alongside these more tactical considerations, Brexit presents an opportunity to initiate a broader structural review, taking a strategic look at your options when it comes to organisational design. With the right organisational design in place, your organisation will be able to weather any storm – Brexit or otherwise.

Location – less about places than the people in those places

This is one of the more obvious factors to consider in the context of Brexit, of course. There are myriad ways organisations can be affected in terms of location. Consider:

  • Restrictions on movement are likely to create labour shortages, specifically in certain industries such as construction, healthcare, or hospitality
  • The ramifications of location strategy that are in progress now, or planned for the next five years, in terms of access to labour pools, access to markets and access to supply-side materials and services
  • A ‘brain drain’ of EU nationals could occur as EU nationals in the UK contemplate returning home. A recent survey by Indeed noted that since the referendum searches by EU nationals for jobs “back home” have increased considerably.
  • As your people move around – or change – do your processes need to change?

A good first step for any organisation is to evaluate the percentage of business-critical skills in your organisation that reside in EU nationals and in UK nationals. This will help you identify areas that require your attention most urgently.

Information Systems – protecting access, skills and innovations

There are three main concerns around information systems that your organisation should consider. The first of those is data and hosting.

Currently your organisation will be storing and processing customer, commercial, operational and legal data in data centres across the EU. Once the UK has left the EU, the transfer of data between the two bodies could become more complicated if the EU doesn’t find the UK’s data protection regime to be “adequate” (meaning it is “essentially equivalent” to the current EU regime).

Realistically this may be a far-fetched risk, given that at present the UK has transferred all existing EU legislation into UK law. But it’s something to watch as time goes on, and UK law potentially deviates from EU law. Special consideration will also need to be given to how your organisation processes the data of customers who are based in the EU, in a similar way to how US companies recently had to adjust their processes to comply with the introduction of the GDPR.

Second is access to the right skills. As mentioned above, there’s a risk that skilled EU workers will depart the UK after Brexit, which could face your IT vendors – or your own IT department -- with a skills shortage. With that in mind it’s well worth ensuring any IT vendors you work with have a robust plan to ensure service delivery in the face of these potential risks.

Finally, in the longer-term, your organisation will need to consider its ability to access innovative new products and systems. It’s unknown at present how the burgeoning UK tech sector will react to Brexit, but if it faces the same struggles predicted for other sectors such as healthcare, your organisation may find it needs to look harder to find new technological innovations that can help it stay competitive.

Consider working with incubators to formulate a strategy for identifying and evaluating technological innovations that can support your organisation post-Brexit. There are many incubators in the UK today; a few examples include such as Level39, Digiworkz, or The Bakery.

Suppliers – two heads are better than one

Beyond IT, your organisation’s wider supply chain should also be evaluated as the 29th March deadline approaches. Who are your most critical suppliers, and how do they fit in with your value chain?

There are three types of supplier to consider from a Brexit perspective:

1.      Those relating to trade between the UK and the rest of the EU

2.      Those relating to trade between the UK and countries outside the EU

3.      Those relating to domestic UK trade

Each of these different categories of supplier will present different risks to you after Brexit, and your relationship with them will need to change in different ways. Key risks to be worked through include the obvious around delays in shipments and border crossing issues. There are also wider risks to consider, including the impact of import / export controls; exchange rate fluctuation risk; and cost pressures – not just those associated with currency changes, but also as a result of the increased workload that Brexit will bring to cross-border supply chain.

One thing that is consistent, however, is the need to engage with your suppliers as early as possible. You may need to support them as they develop new and innovative commercial models and approaches to doing business.

Management frameworks and governance – the times they are a’changing

Finally, Brexit-ready organisations are beginning to consider changes to management frameworks, and the governance of their organisations both before, during and after transition. When thinking about these, it’s helpful to review a few core areas:

  • Your risk and compliance frameworks may need to change. Core processes and approaches may need to be updated, and policies reviewed and refreshed to account for the impact of Brexit. In line with some of the points around location made above, re-training and the re-deployment of staff may be necessary too.
  • You may also need to review internal audit teams and other internally focused functions, such as finance or HR, through the same lens as risk and compliance frameworks.
  • Clearly numerous legal and regulatory frameworks which currently organisations bind to will change – both during and after the transition period. Impact assessments need to be made, and patents, trademarks and design rights should also be checked for any forward impact.

In Summary – plan, test, succeed

We hope you’ll agree that the POLISM model provides a useful basis for assessing the impact of Brexit across key areas of your organisation’s operating model. As with so many of these things, the key to success is preparation and practice. To that end, many organisations we speak to are actively using war gaming and scenario planning techniques in support of Brexit preparedness. So get planning, and get testing your strategies, if you want to get ahead.

Of course, help is always on hand if you need it. At Connor we’re experts in helping organisations think through organisational design and Brexit impact mitigation. If you think it would help, we can offer a free introductory conversation to start your organisations thinking on this. To take advantage of this, contact Sharon Platts at sharon@connor.co.uk or on 01491 414010.

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