Finance Club – Session I

19th July, 2019

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Finance Club: Core Team
• Qualification: MSc (Economics), BE
(Chemical Engineering), CFA Level II
• Domain: Private Equity, Investment Banking,
Equity Research
• Firms: ART Capital, IIFL Institutional Equities,
JPMorgan
“I feel understanding Finance is crucial for solving some of the most
critical problems that we face, not just as individuals but also as a
society and country”
Shreyank Jamar
President
• Qualification: B.E(Hons.) Mechanical, BITS-
Pilani
• Domain: Venture Capital Investing, Prop
Trading
• Firms: Venture East, Capstone
“I got hooked to finance since my sophomore year in undergrad. Having
worked mostly in the financial markets as a prop trader, I strongly feel
that finance is the backbone of all businesses and the breadth of
opportunities that finance as a career choice offers is enormous”
Gautam Palukuri
Alumni Relations Cooridnator
• Qualification: CA, CFA (USA)
AIR in CA Inter (4th) and Finals (19th)
• Domain: Transaction advisory services,
corporate taxation and treasury
• Firms: Ernst & Young
“My experience in financial due diligence exposed me to the financial
analysis and transactions. I realized that at the end of it it’s a game of
money and finance is closely tied with all business activities”
Divyanshu Chokhani
Vice -President
• Qualification: CA
• Domain: Financial planning and analysis,
Accounting and Audit ; Business development
and marketing
• Firms: Bunge India Private Ltd. , Snackible,
Pricewaterhouse Coopers
“I am passionate about finance because it has a touchpoint with all
other business functions and is an integral part of any strategy.”
Ruchika Khemka
Marketing & Communications Coordinator
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Finance Club: Core Team
• Qualification: Masters in Economics, BITS • Qualification: CA
Pilani
• Domain: Financial planning and analysis,
• Domain: Risk Accounting and Audit ; Business development
and marketing
• Firms: Credit Suisse
• Firms: Bunge India Private Ltd. , Snackible,
Pricewaterhouse Coopers

“I just Love the dynamics of the daily challenges that the field of finance “I am passionate about finance because it has a touchpoint with all
offers” other business functions and is an integral part of any strategy.”

Prabeen Kumar Ghadia Shobhit Saxena

Events Coordinator Learning and Development Coordinator

3
Personal, Business and Environmental Factors Influence on Erik Weytjens’ Decisions and Actions
Personal
Factors
• Long Term Plan: Revolved around
returning to consulting and McKinsey but
motivated to acquire some line
management experience
• Inspiration: Had lot of respect for Luc
Cloetens for his management and
leadership skills
• Motivation: Believed that being involved
in a turnaround process would be an
excellent learning opportunity and
personal challenge
Impact
 Knowing that he can go back to a career
with McKinsery and consulting as a whole,
Eric Weytjens would have large appetite
to take risk and to make critical decisions.
 These decision would be critical for
survival of Sabena and many would be
reluctant to make such decisions as it can
potentially go wrong and lead to further
damage
 Also, being part a highly publicized
turnaround plan would give critical
management skills and confidence which
he can leverage for his career in consulting
Business
Factors
• Profitability: Operating losses in last 7
years with accumulation of large debt and
depleted equity
• Take-off plan: Focused on restructuring,
equity infusion, driving profitability along
with cost cutting measures such as
reduction in workforce
• Management: New leadership attracted
by the enormous challenges of turning
around Sabena
• Strategy: Focused on differentiation
instead of cost as the company was
overstaffed and inefficient
Impact
 He will receive support for his decisions
from new management as they have
similar motivation to join Sabena and will
take extra-ordinary steps for turnaround
 However, with limited liquidity, his decision
criteria must incorporate cost-benefit
tradeoff and should generate quick and
positive ROIs
 All the decisions taken by him would need
take consider the new positioning of the
company as an airline known for the
quality of its product and reliability of its
service
Environmental
Factors
• Unionization: Animosity between
management and unions
• Government: Provided last round of bail-
out and agreed not to interfere say day-to-
day operations
• Macroeconomic Environment: The
company has faced the impact of the Gulf
War on airline travel, declining economic
condition in many countries it served and
strong price competition
Impact
• Laying off 10% to 15% workforce would
receive backlash due to unionization,
hence, plans to cut workforce would
involve significant negotiation with unions
• With Government deciding to separate
itself from daily operations, Erik and senior
managers will be able to make decisions
which are most optimal for the business
• However, with no future bail-outs, major
decisions have to be unerring
• With negative macro-economic factors, it
would be much harder for Sabena to
recover and would need to drive the
changes within the company instead of
relying on economic environment
4
Situation at Sabena Catering
Despite being a critical division , Sabena Catering organizational structure had major weaknesses which promoted
unionization and disrupted productivity
Weaknesses
Unionization
 Workers at Sabena Catering were represented by
three politically based labor unions
 Upon joining, employee was required to select a union
to be his or her representative
 Employee could call out strikes if they felt they have
been mistreated
Vulnerable to Strikes in Other Divisions
 Strikes in other divisions had the potential to affect
operations at Sabena Catering
Lack of Diversified Revenue / Economies of Scale
 Sabena Catering sold it services to other airlines
whose flight originated by Zaventem Airport, however,
it represented only 30% of total work
Non-Core Work
 Catering also supplied pilot’s maps, cabin documents
and other regulatory forms to Sabena flights
originating in Brussels
Shift-based Working Hours
 Employees worked in fixed 8 hour and 15 minutes shift
instead of productivity based schedule
Impact & Possible Solutions
Unionization
 With an atmosphere of labor-management distrust, Sabena experienced frequent
strikes which could last long. As products were so prone to spoilage, even a minor
stoppage could lead to significant loss. This gave huge bargaining power to
unions who were willing to exploit workers for their own goals
 Godfroid’s goal to create customer value, control cost and create pride in the
company faced huge barriers in the form of Unions
 Godfroid should weaken the power of unions by leveraging political attention
Sabena is receiving as well as educating its workforce about his plan to bring the
company back to profitability
Lack of Diversified Revenue / Economies of Scale
 The performance of Sabena Catering was heavily dependent on Sabena Airlines.
For the division to be profitable, it should diversify its revenue streams and reduce
the exposure to Sabena Airlines
 Godfroid should push for Zaventem Airport as a hub which would allow Sabena
Catering to serve diversified customers. It would also promote Economies of
Scale as more large airlines becomes its customers
Non-Core Work
 Performing non-core task reduces efficiency which cerates a barrier to profitability.
Sabena Catering should focus on its core offerings and non-core activities should
be given to other department or outsourced
Shift-based Working Hours
 Fixed working house can potentially discouraged focus on productivity
 Godfroid preference was to give people clear targets, let them operate as they
saw fit and to reward those who performed well
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Addressing the Problems in Dishwashing Department
Issue
o Dishwashing area at Sabena was continuously backlogged
o There were significant delay in processing of trolleys containing unconsumed food and refuse which led to piling up of dirty carts
o Delays were caused due to frequent breaking down of dishwashing machines
o Blame Game among dishwashing department and maintenance crew with no one taking responsibility and significant tension among the two
departments
Plan of Action for Erik Weytjens

1. Perform Deep Dive Assessment of Situation

o Firstly, Erik would need to gather more information about the situation which would include studying the entire dishwashing process and discovering the
flaws that has led to such situation. He would need to have a detailed inspection to assess whether it is fault of dishwashing department or the
maintenance crew or any other division and the magnitude of change that is needed to overcome this situation
2. Resolve Conflict Between Teams
o Before any changes to the process is proposed, Erik would need to interact with member of both the team and ask them to cooperate. He would need to
promote open dialog between the two parties and convey to them the importance of their collaboration for the entire organization. Instead of issues
raised to unions, Erik would need to resolve the conflict between the two team himself and have them on the same page
3. Implement Any Changes Needed
o After identifying the root-cause of the problem, Erik would need to implement changes to the process which may include giving more responsibility to one
team or certain changes in the entire process or even some kind organizational restructuring
o Additionally, he can consider capex in the form of new machines if breakdown in machines are expected to continue
4. Optimize and Streamline the Process
o Furthermore, Erik would need to see any measure that can possibly optimize the process. He can implement necessary tools and checks in place which
ensures there is no delay in the dish washing process
o Also, he can either form a new team or assign additional responsibility to existing teams that operates in late night to clear any backlog in dishwashing
5. Development of Manuals and SOPs
o He would need to develop a formal guideline for the entire process. Manuals and SOPs should be developed after taking inputs from both the teams.
o Strict accountability measures based on KRAs should be implemented.