The Access Group

¶ … Access Group

Executive Overview:

The Access Group (TAG) is a consulting firm that has broken out of the previous consulting molds. Originally focusing on hands-on engineering and manufacturing consulting for manufacturing companies, the company has grown to include maintenance reliability services, architectural services, construction services, and has spread its wings to a more diversified clientele including their recent entry into the healthcare industry. The organization is led by company co-founders, Charles Hagood and Mike Brown.

TAG's past and current success has been the result of a variety of factors. A dedication to doing the right thing for their clients and a commitment to value added services has been an integral part of the phenomenal growth, for the organization. Despite the recession that began in late 2000 and was exacerbated by September 11th, TAG was able to continue its growth due to continued diversification. Diversification of services has been a cornerstone of their continued success in both their top and bottom line.

New opportunity is now knocking on TAG's door, in the form of entry into lean process consulting for the healthcare industry; however the primary challenge is how will the organization be organized to take advantage of this new opportunity, in the most efficient and effective manner possible? This challenge must be addressed as quickly as possible, in order to take advantage of the fact that there is very little competition for these types of services, nationwide, and none in the Southeast, where TAG is located. The sooner TAG is able to make this decision, and get this new facet of their business underway, the better. Early entry into a new market could help them secure their leadership position in the industry.

Problem Statement:

TAG's primary problem is one that most businesses would love to have, how to organize one's organization to take the fullest advantage of a new, and virtually unexploited, opportunity, while providing the highest levels of service to new clients, while maintaining the highest levels of service to existing clients, in a currently exploited industry. This is clearly the problem as TAG has undergone several evolutions of service offerings, as it has grown over the years. In some instances, they have handled this growth by simply expanding their current portfolio. In other instances, they have formed new organizations to address these new opportunities, such as with the formation of TAG Maintenance and Facility Services or their architectural and design service organization, TAG Design Services, LLC. In other instances, they have become affiliated with existing companies, forming a mutually beneficial relationship with the organization, such as exists with TAG's relationship with Jabezco Industrial Group, Inc. Part of the reason why TAG has been able to so successfully take advantage of these entrances into new industries is how they organized their company to address the opportunity. The same will be true of entry into the healthcare consulting industry. An appropriate organizational design will enhance TAG's other strengths, while an inappropriate design will only serve to way the organization's efforts down.

The immediate issue that needs to be address is how best to organize to meet this new opportunity. This has to be decided to even truly begin industry entry. Surely, efforts can be made under TAG's current consulting arm; however, if it is decided later on that it would be more effective and efficient to break off this facet, the change will only be a distraction to the success. This challenge is not only urgent, but also extremely important, for this very reason.

In addition to this challenge, there are secondary problems that exist for TAG. These include whether or not TAG should further expand their services into other industries, beyond their core manufacturing clients and the new healthcare opportunity. In addition, there will be a challenge of how best to manage this potential growth while still maintaining the organization's unique and quite effective culture. Although both of these challenges are important, they do not have the urgency of the primary challenge. Entry into other industries can be addressed after entry into the healthcare industry has been firmly established. Maintaining corporate culture will be a continual challenge for TAG as their company grows, whether they enter new industries or not.

SWOT Analysis:

Strengths:

TAG has many strengths it has called upon for its past and current success, as well as can continue to utilize to best take advantage of new opportunities. First, is TAG's history of success that they have and can continue to build upon. Their status as one of Music City's Future 50 companies in 2001 and 2003, along with their ranking of 15th fasting growing company in the mid-south, is evidence of this past success, along with their continual top and bottom line growth.

Hagood and Brown are also strengths for the organization. Both have proven themselves to be great organizational leaders with vision and dedication. Their moral standards, backed by their religious faith, holds their company to the highest standards possible, and this is valuable benefit to many of their clients. Their commitment to charitable causes, and ensuring their employees can also participate in charity, has set them apart from their competition. It is a commitment to do what is right and not necessarily what is easy that has helped grow their position in their industries.

Weaknesses:

Opportunities:

Significant opportunity lies in the expansion of consultancy services in the healthcare industry. The sad state of today's healthcare organizations, in general, means the industry is ripe for skilled consultants that are able to come in and show them how to reduce skyrocketing costs, increasing rapidly declining profitability, and maximize key resources including healthcare personnel, facilities and medical equipment. This opportunity is enhanced with the likelihood that many of the manufacturing lean processes can be converted for this industry.

Threats:

Threats for TAG lie in a couple of areas. First, economic uncertainty is always a threat to the organization. However, the company has been able to shield against this threat by further diversifying their services. In addition, the possibility of socialized healthcare is also a threat. Should healthcare facilities begin to fall under the direction of the government this may negatively affect this new opportunity. Lastly, increased competition. Although currently there is little competition for healthcare consultancy,

Case Data Analysis:

The rise of the challenge of how to organize their organization in an effort to best take advantage of expansion into consulting for the healthcare industry was based on TAG's previous expansion success. Had TAG not been successful in service expansion, such as the maintenance industry, or the architectural and design industry, they may be less likely to consider an opportunity to expand beyond their core service offering of consultancy to the manufacturing industry.

In addition, the state of the healthcare industry itself has been a catalyst to this opportunity. "Healthcare costs have risen at double digit rates for the past several years, creating a potential crisis for reimbursement. At the same time, profitability within healthcare has suffered" ("TAG"). Nursing shortages and inefficient hospital procedures all add to this need for a consultancy firm that can guide these healthcare organizations into being more efficient and therefore more profitable. and, just as their clients need to be organized in such a manner to promote efficiency and efficacy, so does TAG's new service offering.

Alternatives and Evaluation of Alternatives:

There are four main alternatives that TAG may wish to consider when addressing the primary challenge of how best to organize their company to take advantage of entry into this new industry. The first alternative is to organize such that operations fall under the current manufacturing consultancy branch, perhaps as a separate division. The second alternative is to establish a new organization, much as they did with their maintenance and architectural divisions, to address this new opportunity. The third alternative is a combination of the first two, allowing for initial control of the new services to fall under the established manufacturing consultancy branch, and then, when revenues dictate, establish it as it's own organization. and, the fourth alternative is to simply not pursue the opportunity at all.

Allowing the healthcare consultancy opportunity to be under the control of the established manufacturing consultancy organization offers several benefits. First, less capital will be required for start up. Second, overhead expenses will be minimized and they will be better able to take advantage of other economies of scale. and, third, there are experienced marketing personnel who would likely be well-suited to help grow this new division. However, the main drawback is the likelihood that should one organization become so large, as is likely with this new industry, TAG may lose their personal corporate culture that has been such a value to the company.

The second alternative offers the benefit of allowing the manufacturing consultancy organization to remain focused on their core competencies. It also allows for a diversified branch to remain smaller and thus more likely to maintain TAG's corporate culture. However, capital investment will be higher, costs will be higher, and it may be more difficult to benefit from past TAG consultancy experience.

The third alternative offers the initial benefits of the first alternative. It also allows for focusing on core competencies and maintaining a smaller organization to promote personal corporate culture of the second alternative. However, this option will have a disruption as the organization changes to an autonomous entity that may be counter-productive.

The fourth alternative of no entry has the benefit of not subjecting TAG to the risk of a new industry entry. However, without this risk, it has the downside of not offering any potential reward. It also does not allow for further diversification of TAG, which has served it well during leaner economic times.

Recommendation:

It is recommended that TAG pursue the first strategy of forming a healthcare industry division under the auspices of the original TAG manufacturing consultancy body. In this way, TAG can maximize the benefits to be had with this growth opportunity. By creating a separate division within the organization, it should allow for both the manufacturing and the healthcare sides to focus on their core competencies and continue to meet the needs of their clients. It is possible to minimize the risk of losing key TAG culture, by focusing on mission statements, vision, continued correspondence from Hagood and Brown supporting this culture, and policies and procedures.

While Charles recognized that there was money to be made in consulting, he decided that he wanted to create a firm that offered clients more hands-on "practical application" consulting balanced with engineering services. He began writing a business plan that reflected his approach to engineering consulting.

TAG focused on bottom line solutions to manufacturing costs and engineering services. While compiling the industry research for their business plan, Charles and Mike had established that there were few if any consulting firms that specialized in the type of manufacturing consulting that they intended to provide, which included engineering and manufacturing consulting with a "hands on" focus.

So they began to refocus their marketing efforts to grow their cost-cutting services, in which they helped companies institute lean enterprise "related services that target an operations value stream by maximizing throughput, reducing lead times, improving quality, improving customer response time, and reducing inventory levels." They also moved more heavily into plant relocation consulting given the number of companies relocating or consolidating.

In an effort to continue to diversify their services and rebound from 2001, Charles and Mike formed TAG Maintenance and Facility Services (TMFS) along with Paul Casto, a former executive with Floor Daniel Corporation. Casto is a degreed Engineer with an MBA and an MS in Maintenance Engineering and brought 20+ years of experience with him.

In June 2004, Charles Hagood and Ken Lasley, a licensed architect in 40 states, became the major shareholders in a new company to provide architectural and design services. "TAG Design Services, LLC (TAG DS), a multi-state licensed a/E firm, provides a full range of Project Management and Architectural/Engineering Services in most all industries.

Previously, TAG had referred this type of work to outside firms. Mike Brown only owns 5% of this new entity, as he is starting to look toward retirement sometime within the next few years. Charles owns 45% given he is younger and has numerous contacts in industries that could use such services. Lasley is regarded as one of the best in designing manufacturing and distribution facilities, and his reputation brings his business with him. Past clients of Lasley included Wal-mart, Boeing, and numerous Japanese auto suppliers. TAG DS also compliments the relocation segment of TAG, since most companies are relocating from an existing facility to a new one, by providing a true "turn-key" approach.

Jabezco Industrial Group, Inc. is an affiliated company in Jackson, Tennessee that can provide construction, contractor, and installation services for TAG clients.

It had taken three years after 9/11 for the capital intensive part of their business to come back. It is projected that 2004 will be the first year when their original capital intensive engineering consulting projects, plant relocation services, and their consulting in "lean enterprise solutions" will concurrently be making profits for TAG. The company employs six full-time project managers at TAG, plus one in TMFS and TAG, with either Mike or Charles assigned to every project to oversee the project managers plus consultants all over the U.S.

TAG's customer base is made up of primarily mid-sized manufacturing facilities or smaller divisions of Fortune 500 companies. TAG's competitive advantage is that they leverage their relationships and subcontract with other firms to become one single source for the manufacturing industry's needs. TAG has the ability to manage a client's total project with one point person instead of many.

As Charles said, "most clients want one neck to choke, but hopefully that will never happen." Approximately 85% of TAG's business is from repeat clients, which matches their business philosophy of developing long-term relationships with clients.

Charles and Mike both personally make a point to stay in touch with their clients.

Regular contact is also maintained through quarterly newsletters mailed out to over 5,000 people. While these newsletters provide the standard type of information on the services they offer and other articles of interest to their clients, Charles has added his own touch to reflect the TAG culture and to help them stand out in the minds of their clients.