Development of a network of branches. Branch network. Pros of using business scaling

Business development is often associated with the opening and development of a branch network. Every second owner of a company with branches notes that, regardless of the degree of their development, there are difficult moments, the solution of which using common sense does not lead to positive results.

80% of entrepreneurs say: “If you want to succeed, develop a network!” In order, on the one hand, to avoid typical and fatal mistakes and, on the other hand, to make such business development effective, the authors summarized their practical and consulting experience in this matter and presented it at a seminar on branch management.

The program takes place in a master class format. At the beginning of the seminar, the authors collect practical problems and hard-won needs of the students, then organize their discussion and development of solutions. This process is similar to practical consulting, since students receive answers to their questions and practical advice on creating and managing a branch network.

SRC Business School is your right choice!

Bonus for every participant!
1.5-hour consultation with Mikhail Serov and Eduard Ivanchenko. You can register with your manager.

At the seminar you will learn

• How to make a branch network development project more balanced and profitable;
• How to avoid common mistakes;
• What is the strategy of an organization with a branch network;
• How to organize the financial activities of branches simply and correctly;
• How to maintain a dynamic balance between the financial autonomy of branches and the centralization of financial management in the company as a whole.

The program is intended for managers of companies with an already operating branch network or those planning to create one: general and executive directors, development directors, heads of sales departments, financial directors or their deputies, HR directors, managers and specialists of control services.

Seminar program

1. Creating branches as a way to develop a business, assessing the correctness of the decision made

   • Analysis of the success of the project to open a branch network. Creation of a branch network on the map of main business development opportunities.
   • Analysis of the quantity and quality of resources available to the company. Analysis of competitive opportunities.
   • Sales representative in the region - branch with shipments from the center - branch with a warehouse - full functionality. When a branch becomes a subsidiary. Corporate center models.
   • Mechanisms for replicating the business of branches.
   • Taking into account the rules of business struggle when opening a branch network. Rules of Chinese strategy.



2. Key technologies for managing a trading company

   • Formation of an effective organizational structure.
   • Methods for transferring the corporate culture of the head office to the regional network.
   • The role of the branch director, his responsibilities and powers.
   • Typical mistakes when creating branches or identifying a “weak link” when analyzing the level of management development.



3. Branch personnel management

   • Specifics of interaction between the branch network and the management company: distribution of areas of responsibility and the role of the HR director and branch director.
   • Formation of the branch staff in accordance with the chosen method of launching the branch: by “landing force” from the head office, by the branch manager, by the personnel service of the parent company.
   • Features of building a compensation system taking into account the characteristics of branches.
   • Training of branch employees: when is it beneficial?



4. Organizational technologies for operating a branch network

   • Development of basic regulations for managing the work of branches.
   • Centralized and decentralized branch management.
   • Typical problems of interaction "Branch - Center" and ways to solve them.



5. Financial management in a branch network

   • Key differences in financial management in a branch network from a regular organization.
   • Connection of financial management of branches with the overall strategy of the company.
   • Features of financial strategy in a company with a branch network.
   • Managing limited financial resources when opening new branches. How to set priorities correctly.
   • Financial potential and financial reserves of the organization.
   • Features of the organization of financial accounting in the branch network.
   • Key financial reports, financial control points, communication with the automation system.
   • KPI (indicators) system for monitoring and assessing the financial performance of the branch. Financial information panels (dashboard).
   • Constructing a rating of branches based on financial indicators.
   • Features of budget management in an organization with a branch network: find 10 differences.
   • Proper organization of financial control in the branch network: control within the branch and control by the central office.
   • Risk assessment and risk management in a company with a branch structure.



6. Sales management of a geographically distributed organization

   • Analysis and formation of sales channels.
   • Organizational structure: who sells, the sales department or the branch network management department. How to combine branch sales with general management.
   • Stages of change in organizational structure depending on the degree of development of the branch network.
   • The role of a CRM system for sales management in a branch network (CRM, Customer Relationship Management).
   • An effective report on the implementation of the sales plan in an organization with a branch network.
   • Logistics technologies in branch management.



7. Monitoring the work of a commercial organization with a developed branch network

   • More branches – more developed control system!
   • Two approaches to organizing control.
   • Divisions of the internal control system.
   • Complete outline of control units at three organizational levels.
   • Distribution of tasks between control units.



8. Basic issues of automating the activities of a trading company with a branch network

   • Standard 1C solution in each branch.
   • Work on one database located on a server in the central office.
   • Typical problems with automation when opening and operating a branch network.

09:30 – 10:00 - REGISTRATION
10:00 – 11:20 - First block of the program
11:20 – 11:35 - Coffee break
11:35 – 13:00 - Second block of the program
13:00 – 14:00 - Lunch
14:00 – 15:45 - Third block of the program
15:45 – 16:00 - Coffee break
16:00 – 17:30 - Fourth block of the program

Feedback about the seminar

Mokrov Alexey Alekseevich, Image Game LLC, Founder, Moscow

I liked the interactive nature of the seminar. I will apply management accounting, HR work, and organizational chart.

Anipko Sergey Viktorovich, Yugprom LLC, Deputy General Director, Essentuki

I really enjoyed the training. I received the necessary information. Now I know how to adjust my management of branches.

Andrey Vladimirovich Kokurin, Volya LLC, Head of the category formation department, Vladimir

The available analysis and forecasting tools, the system and structure of branches are explained.

Dorofeeva Olga Anatolyevna, Stalker-shop, Branch Director, Tver

Very competent teaching with examples and answers to questions for a complete understanding (income/expense structure, dynamics of indicators, promotion factors...).

Yuriev Alexander Nikolaevich, Moltrade LLC, Director for Development of Separate Divisions, Moscow

Thanks a lot. A lot of useful information in accessible language. This is the best seminar!

Bogdanov Andrey Yurievich, LLC "Europe", Deputy Director, Kursk

The topic of the seminar is very interesting, especially at the present time. Organization of the event at the highest level. In my work I would like to apply knowledge about planning and analysis of activities before opening branches, as well as competently analyze the financial stability of the organization.

Alferova Irina Nikolaevna, BiK LLC, General Director, Irkutsk

The organization of training, service and work of the manager of the SRC Business School are, as always, at the highest level. I liked the scale and depth of the approach to building a branch network. I have identified points of change in my work and plan to use a financial approach (modeling, risk management, etc.)

Dergunov Alexey Alexandrovich, Stroy City Retail LLC, Director of the retail network, Tuymazy

The training is useful because it systematizes existing knowledge and allowed us to learn a lot of new things about cost optimization. Gained knowledge on preparing branch reports.

Ivanov Valery Nikolaevich, ElekKom Logistic LLC, Director of Project Management, Cheboksary

Great practical seminar!
I suggest dividing the material into 2 blocks and giving each block for study on a separate day. I believe that two days are not enough for such a useful seminar.

Novikov Alexey Vyacheslavovich, Merida Plus LLC, Head of branch network development, Moscow

Bagadzhiyan Roman Surenovich, Bizon South LLC, Deputy General Director for General Issues, Rostov-on-Don

Good training for branch network managers. It’s a pity that not everyone had time to complete it, but the handout contains the full material. It would probably be better to extend the seminar by 3 days.

Oksana Aleksandrovna Maseykina, Budgeting Economist, Closed Joint Stock Company "Kyshtym Machine-Building Association" Branch "Kirovsk", Apatity

Thanks a lot! Very informative, I would like to see a similar program introduced for state transport companies.

Evgeniy Vladimirovich Stepanov, V1 Electronics LLC, General Director, Moscow

I confirm the high level of teachers in relation to the level of coaches at other Moscow schools that I visited.

Smirnov Alexey Alexandrovich, Bizon South LLC, Head of Regional Development Department, Rostov-on-Don

A good, useful seminar, complex things are simply stated.

Krutyakova Tatyana Aleksandrovna, CJSC "KMO", Kyshtym,

The training was useful, I structured my thoughts and knowledge, and found answers to questions that interested me.

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The quality of branch management is inversely proportional to the square of the distance to it. The further away the branch, the greater the mess. I once developed this formula for myself when I was the general director of several companies with a branch network. But Russia is a country of long distances, and so far many businesses cannot do without branches. We talk about our experience in this area in our new article.

The ticket and hotel were paid with a personal bank card. There is no other way. If you pay them from the company account, the kind soul from the accounting department will definitely “knock” at the branch, to his colleague, about my arrival. Out of purely Russian solidarity of workers in the struggle against the authorities. And then there will be complete “Potemkin villages” waiting for me at the branch. Even my personal assistant doesn't know I'm leaving. She was only told that I would “be gone for a couple of days.” You will know a lot - you will not have time to grow old.

Branch in Irkutsk, 9 am, Moscow time, respectively, 5 (this was before the re-cutting of time zones in Russia). The door is locked, no signs of biological life were found in the branch. I sit down on the windowsill on the stairs and wait. The first signs appear at 9:15, in the face of a lethargic young girl. I don’t know her by sight, and she doesn’t know me either. But since she unlocks the door with a key, that means she is my employee. I quickly walk right into her office, introduce myself, and enjoy the panic on her face for a couple of seconds. Her hand involuntarily reaches for her purse. It’s clear why - take out a mobile phone and send a distress signal to the rest of the Irkutsk crew. I politely but firmly ask her to turn off the phone (completely) and not take it out. I sit you down at the table and interrogate you. I make my own instant coffee from a jar. God, how can people drink such crap!?

The girl works as an assistant sales manager. It sounds proud, but in reality it is, rather, an operator processing client requests. I ask her about the current sales situation, listen to the traditional complaints about high prices and the availability (or rather, the constant absence) of popular goods in stock. In passing, I ask how she’s doing with product X, which we declared the product of the quarter and are trying in every possible way to promote among our clients. From the expression in the interlocutor’s eyes, I understand that she heard about the product of the quarter for the first time right now. From me.

As closer to 10, other employees arrive. They all enter the office, rosy-cheeked and well-rested, only to immediately fall into an amphibious stupor upon learning what kind of guest they have here. You can’t take away everyone’s phones, and it’s clear that someone has already managed to call Roman, the director of the branch. He flies into the office around half past ten, rumpled and disheveled, babbling some nonsense with his lips trembling with fear about meeting with a major client early in the morning. Even if he were simply silent, it would be obvious from the waves of sticky horror emanating from him that he was lying. And what else, in essence, remains for him? He takes me into his office (which, by the way, has a proper coffee machine) and I discover a thin but obvious layer of dust on my desk. Roman tries to joke that this is a consequence of his desire to “not sit in an office” and work in the fields, with employees and clients. But judging by the results of the branch’s work over the past six months, the main point of application of Roman’s professional efforts clearly lay outside our company.

I fly back to Moscow in sadness. It’s easy to succumb to emotions and fire the hell out of Roman, his boss Stas, who is sitting in Moscow, and all these operationists. But what will this change? Some Eduard or Vitaly will have to take Roman’s place, and everything will continue again. If the director of a company sees that his company is a mess, he has no one to blame but himself.

One of my subordinates, a top manager, liked to repeat - there are “cube people”, and there are “ball people”. The “cubes” need to be constantly kicked. After each kick, the “cube” rolls from edge to edge a couple of times to freeze again in a state of rest. It is enough to kick the “ball people” once, and they will roll for a long time in the appropriate direction.

Hiring "cubes" to the position of branch managers is tantamount to managerial suicide. The “cubes” will surround themselves with other “cubes”, only even more clumsy, and the branch will turn into an almshouse, which only sluggishly rejects the claims of Moscow and complains about life. But “balloon people” are not a panacea. Their energetic entrepreneurial spirit, coupled with the lack of round-the-clock control, sometimes leads to the fact that your branch has its own branch - as a rule, very effective, but, alas, not yours. For some time, such a “branch of a branch” works in secret mode, and then, one fine day (usually in the middle of the season), the entire team of your branch unanimously weighs anchor to take the slippery path of entrepreneurship. Together with your customer base, leaving you with only overdue “receivables”.

They usually try to solve the problem of managing branches in Russia in the following ways:

Free floating method

With such an organization of affairs, the branches and the central office are united, in essence, only by a common logo. The branch director (usually with a bonus tied to net profit) has the broadest powers in matters of prices, assortment, work with the client base, and so on. The advantage of this method is the flexibility of the branch, its ability to adapt to the local market. For me, this is a dubious advantage. Firstly, how can you implement any general strategy of the company if each branch operates at the wrong time? Having visited your branches, you will find that some of them operate in the luxury segment, and some are almost low-cost airlines. Some work with the corporate channel, others with the retail channel. Some sell paper clips and nails, others sell fur coats and bidets. Secondly, in the positions of branch directors, under such a system, it is precisely the “balls” that are knocked out and retained, in which an excessive abundance of powers often awakens an entrepreneurial spirit, with the consequences described above.

“Management company” method

This method consists of creating a monstrous and clumsy organization in the central office, which locks in any decisions, even minor ones, and blocks all reasonable activities in the branches. Any request from the field circulates for months between superiors in the management company, the time for making decisions rushes to infinity, and their quality drops to zero. It does not occur to the management company employees that they do not create surplus value, but they intensively create “surplus importance”, controlling branches where they are needed and not necessary and feeling like something like high priests under a deity - the general director. All the “balls” from the branches quit, realizing the futility of the fight against the system; only the worst versions of the “cubes” remain in them, for whom it is more comfortable not to do business, but to shift all responsibility to the “center”.

Conditional or direct franchising method

As a rule, such branch networks are created on the basis of large regional clients, who “stand under the name” of their Moscow (usually, but not necessarily) supplier and begin to sell his goods. In some cases, this is a conditional franchise - that is, partners in the regions use a common name, but work according to their own standards (that is, as they are used to), sometimes - a real one, that is, in addition to the name, the “regionals” must fulfill your requirements.

The second scheme is preferable, but for this you must have these same standards. If you are Dodo Pizza, you provide Dodo IS to your partners, and through it you control the franchisees (and then, alas, not all of them become successful). And if you don’t have standards (not concepts, but regulations and rules written on paper or in software code, reinforced concrete and inviolable), then you will have to be prepared for the unexpected. If every full-time employee of your company deep down believes that he is smarter than you (he’s just a little unlucky), then what does your regional dealer think about you? In practice, this means that no matter what you call him - be it a partner or a franchisee - he will always act in his own way. And the situation with their controllability will be even worse than when using the “free floating method”.

Middle way

After numerous trials and errors, I came to the only, as I personally think, acceptable model of interaction between the branches and the center. It is imperfect, it also has its shortcomings, if only because almost any “center-branches” scheme implies a matrix structure, and any “matrix” in the vastness of the former USSR works disgustingly. But all other options seem even worse to me.

1. If you do not have a full-fledged, real franchise, it is better to build your own network than an affiliate network. It’s faster and cheaper to build an affiliate network of branches, but you need to be aware that when you go on a joint long-term voyage with “partners,” you are entering into an alliance with people who have their own business interests that intersect with yours, at best, partially and temporarily . The best partner is a partner bound by a strict contract, which you most likely will not have without a franchise.
2. Building your own branch network without developing a strategy is like a skyscraper without a project. It is in the strategy that market goals in different regions should be defined, which will provide answers to many questions, ranging from the number and location of branches to the distribution of powers between the center and the regions. After all, organizational structure and authority are not needed on their own; they depend on the chosen strategy and serve it. In addition, the strategy necessarily involves resource planning - you need to understand at what speed you can open branches and what resources expansion will require. And do you have these resources?
3. There should be a management company in such a structure, but the management system is as “light” as possible, lean. The two main tasks of the management company are the development of methodologies, standards and requirements and monitoring their compliance. Employees of the HR department of the management company should not recruit branch employees themselves, but they should set requirements for positions, for documents, for a training system, for a motivation system, etc. Marketing managers of management companies may not explore local markets themselves, but collect macro data on the market, negotiate (through category managers) with large suppliers, and form an assortment matrix and pricing system. At the same time, local marketers must work according to their standards and methods. And under their control.
4. You need to get used to the idea that the lion's share of your time will be spent building a system, and not dizzyingly interesting business cases. As a rule, difficulties in the relationship between branches and the center are caused not by the abundance of tasks and issues, but by the low level of management culture. Most processes both within branches and between branches and management companies are standard, that is, amenable to regulation, simplification, and standardization. Or automation, which has been happening more and more often lately. Each conflict between a branch and a center should become not so much a reason for litigation, but rather an impetus for further customization of the system. The path is not easy and slow, but there are no other options. For example, after properly setting up the document flow, we were once surprised to discover that three lawyers in the management company were doing an excellent job with the entire flow of contracts and judicial issues, both the center and the branches. They just needed to hire a top lawyer with organizational skills.
5. Management company employees must get used to the idea that they will often have to see the world through an airplane window. And the point of these trips will be not so much to convey to the regional savages a spark of reason from the great and powerful central office, but to ensure that they understand the reality in which the branches live. So that the methods, standards and rules they develop are workable and feasible, and bring benefits.
6. Anything in the branch that can be outsourced must be outsourced. IT, cleaning, accounting (if it is not in the management company), security, equipment maintenance, etc. Otherwise, for every 6 computers in the branch there will be one system administrator for 30,000 rubles.
7. Modern technologies make it possible to solve many issues centrally. For example, even an extensive delivery network can be effectively managed from the center. But recruitment cannot be centralized (although we have seen such attempts).
8. Control is something you can’t save on. People in the branches tried to steal and deceive, they are trying and will continue to try. Not all of them, of course, but only an inexperienced Muscovite startuper can build a branch network, hoping to hire only honest and responsible people. But even here you need to understand that control is not only “former” officers and ferocious auditors with sadistic tendencies. First of all, this is the creation of rules and standards, and only then monitoring their compliance. The internal audit (controlling) departments and the “business assistance” services are called upon not to “nightmare” branches so that they do not suddenly forget about the presence of the management company, but to ensure that all rules are followed - be it maintaining client cards in CRM, holding tenders for purchases or accounting of goods in the warehouse was strictly observed.
9. In the distribution of powers between the management company and its branches, it will take a long time to find the “balance point”. On the one hand, there is a great temptation to centralize everything, on the other hand, companies like Mediamarkt do not just hand over up to 20% of the assortment to local directors, there is a rational grain in this. I am for “freedom by agreement”, when branches can take any initiative, and it should be encouraged, but must be agreed upon with the center in the course of quick and effective procedures.

But among all these measures, the most important is the development of a strategy. Managing a company with a branch network without a strategy is like managing the Titanic without maps and binoculars.

A large number of banks are developing their branch network in one form or another, including for the development of the bank’s payment system and its geographic expansion. However, taking into account the high costs of this process, today a developed branch network exists and is expanding only among the largest banks in the country 95
national significance. The development path of the payment system through
expansion of the branch network is used by precisely such banks. Let's take a closer look at the system of inter-branch payments. One of its features, which is of great importance from the point of view of the development of the payment system as a whole, is the presence in it of very significant reserves for optimization. This is due to the high flexibility of the technology for organizing such calculations and the practically unlimited possibilities in the use of modern information and telecommunications means. It is on these areas that banks focus their attention. There are many technologies for organizing interbranch settlements within one bank. Let us list the main ones: a technology based on working through a single correspondent account in the head bank (branches have their accounts only in the head bank),
“independent operation of branches through their own correspondent accounts with the Bank of Russia or other settlement centers;
combined forms of work, built on the basis of certain rules for the use of own correspondent accounts and accounts of the parent bank;
clearing technology for a system of inter-branch settlements (based on the offset of claims and obligations) according to one of the clearing models (both with and without preliminary deposit of funds, as well as other, more complex models)
The choice of this or that technology and its compliance with the real requirements and operating conditions of the bank significantly affects the state of the settlement system. Thus, if there is a high share of domestic payments, it is justified to build a clearing center based on a branch network. To enhance the centralization and controllability of processes, work is organized through a single correspondent account. Of course, the technology of work depends on the capabilities of telecommunications and information systems. There is also the problem of organizing intrabank settlements. Payments between bank clients within one bank, for example, the head office, and settlements between departments require optimization and contain reserves for it.

More on the topic Development of the branch network and internal settlements:

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Even if you opened some branches primarily to provide your customers with a certain level of service, and these specific branches do not generate profit, the company's overall profit should increase. If your profits are not growing, then you are spending completely useless effort, time, money and other resources.

The work of the branch must be controlled.Only when you have the technology to control the work of your central (main) company, then you can think about scaling using federal networks. If you operate manually, the branch will not bring you profit, pleasure or competitive advantage. It will most likely spoil the image of your company in the face of your consumers and take your money.

The branch network should not be the only distribution channel.

If you think that it is enough to build a branch network, and everything else will not matter, you are mistaken. There are territories where it is unprofitable to build branches.

You're missing out on profits if you don't use other channels.
If your goal is not to feel self-esteem from the fact that you have 50 branches open, if you want to make money from them, then it makes sense to count for each territory and choose the method that brings greater efficiency

Technology for building a branch network

Preparing to open branches is the same as creating a franchise. The only thing is that the beneficiary of this franchise is you yourself.
You must have regulated business processes for the activities of the head office, these are processes such as: production and provision of services, sales, marketing, purchasing and logistics, personnel management, operational management of the enterprise, control and reporting. This is the main condition for scaling.
If you don’t have an understanding of how you build business processes while your main company is in manual control, and at the same time you open branches, then that’s it, this is a quick and painful death for the branch and your company as a whole.

Sales, sales management

If you do not have an automated process for managing and tracking sales, for example, within the framework of the increase or decrease of the customer base, turnover and profit in the context of product categories, sales channels, suppliers, etc. – that’s it, goodbye. You definitely won’t be able to control sales in third-party territories, and the branches will be unprofitable.
Moreover, a sales management tool is not as important as having a clear control system. For example, one large federal company with 60 branches successfully managed sales, financial analytics using only Excel!. And thanks to the regulation of activities, at that time it had been on the market for 20 years. They, of course, incurred additional costs due to the fact that they had about 10-15 people processing this analytics
So, automation is a big plus, but without regulation, it doesn’t matter what tool you use to automate it.

Implementation of budgeting throughout the company structure

This is the most important element of managing the structure and control of sales and expenses. If you don't have budgeting, then you are left with two options - either spend a significant portion of your time manually managing branch expenses (trying to analyze and confirm every action on every purchase of everything, including office supplies), or leave these decisions to the branch managers, provoking them if not for theft, then for uncontrolled purchases that are excessive in quantity and/or quality, deliberately increasing the share of the cost of your goods or services. Therefore, budgeting should be mandatory.

Branch structure management

For this, a division is created that monitors the implementation of the budget and other indicators, filters for itself and resolves routine issues, and only a small part of them, which it does not have the authority to resolve, is forwarded to your level.
This structure is engaged in the planning and development of branches. Provides you with analytics of the activities of branches at a specified frequency, and with it proposals for the development of the branch network. This is the purpose of the unit that manages the branch structure.

Launch of a new branch

A very complex process. From selecting premises to searching for personnel. You must equip your employees with a completely clear list, a checklist describing each step in opening a branch in a certain sequence, with a schedule for launching each facility, necessarily with responsible persons and deadlines.
Generally speaking, opening a branch is a classic project management task. You write down tasks, connections and dependencies, milestones.
Analysis of the market in the selected territory, assessment of the economic feasibility of opening a branch, selection of branch management and other personnel if necessary, selection of location, launch of a marketing campaign, training of branch management to the standards of the basic processes that you have already prescribed, purchasing equipment for the office and retail space. Beginning of work. These are large stages of the project to open a new branch.
After which the specialists of this division will be able to open branches, like making pies.

Control over the current activities of branches

It should be regular, carried out according to many parameters, but you should not be involved in this control! You should connect only when the benchmarks diverge from the standards. Never evaluate a business on average. It must be assessed on a branch-by-branch basis. Each division or store must compile its own financial indicators as well. You must have indicator control points.

Key budget items

In order for you to be able to assess in advance the profitability or unprofitability of a division, budgeting is used. You set them a sales plan for the next year, you collect budget calculations from them. Moreover, you make maximum demands.

Fixed expenses:

• Rent, communications, stationery, communications, consumables and more than 50 items!
• Repair
• Variable expenses (bonuses). Your sellers receive bonuses.
• Marketing budget
• Shopping plan. Purchase of inexpensive items (less than 20 thousand rubles), which do not require control and approval of each.
• Investment plan. Purchase of expensive items (more than 20 thousand rubles). For example, repairs, re-equipment, construction, purchase of transport.
• Each position must be coordinated with the relevant departments of the head office.
• An investment plan is characterized by a calculation of return on investment.

When you are planning an investment budget for opening a branch, you should separate investment and operating expenses. In the course of its activities, the branch must not only cover its expenses and bring in the planned profit; its income, as a separate item, must recoup the investment within the planned period of return on investment.

Minimum set of indicators for monitoring the activities of a branch:

• Sales figures:
  • in value terms, by periods and areas of activity
• Client base indicators:
  • number of new clients
  • total number of clients
  • market share
  • etc.
• Production figures
• Economic and financial indicators.

Scheme of interaction with the parent company

There are two directly opposite principles here. Each of which has its own pros and cons.

A branch is an independent subject of economic activity

• The head of the branch has the powers of the general director:
• Separate current account
• Agreements with clients and counterparties are concluded by the head of the branch
• Independent tax reporting
• Self-employment

Everything is fine, it works great, but you run the risk that a particularly smart, gifted director will look and say “why am I actually working for someone else’s uncle?” and will copy this activity, create his own company, completely taking your technology and production process, and engage in similar activities.

Branch-separate division:

• The manager does not have the powers of the general director; in fact, he is responsible for the implementation of the sales plan. Essentially, this is a remote negotiator. A very extreme case is when he does not have the right to sign contracts.
• No separate current account
• Agreements with clients and counterparties are concluded by proxy
• Tax reporting is carried out by the head enterprise

But in this scheme everything is much worse. You suffer indirect losses due to the slowness and clumsiness of this control scheme.

Pitfalls of branch management

Loss of control. If you do not have business processes and especially control processes in place, then your branches will definitely operate with very low efficiency. Most likely, they will simply imitate the activity and demand a salary for it. Duplication of branch BP execution.
You have to increase the capacity of the head office in order to carry out the processes that need to be carried out by the branches. Engage in maintaining additional documentation, correspondence with clients and a host of other processes. The question arises: why do you need such a branch at all?

Another option is hidden duplication of processes. The head office employees do not exactly do the work for the branch employees, they simply check every process performed by the branch employees.

Double, triple, etc. control.

If the company is seriously bureaucratic (I have met companies that had 7 levels of management. From the general director to an ordinary branch employee there were 7 levels of management!). This suited the business owners - they received their planned profit. But the flow of management documentation simply did not leave time for branch employees to actually earn money.
How this all usually happens: The General Director gathers the directors of the areas and sets tasks. They return to their offices, gather the heads of the departments subordinate to them, and broadcast this task. They do the same with the heads of departments included in their departments. It turns out that one branch manager or his employee receives assignments from 10 points of the head office on the same topic, but transformed into the areas of responsibility of the assigners of these assignments. And the entire branch urgently, abandoning current activities, is obliged to complete all these 10 tasks.
Sometimes the owners of a company deliberately begin to pit divisions against each other. Sales people with production people, production people with marketing people, marketing people with logisticians, and the director gets a kick out of it. There are such management styles.
As a result, there are no sales. Including in branches.

Risks of implementing a scaling system by opening branches

• High cost of investment.

Opening a branch, even taking into account the implementation of all the previously listed nuances, is an expensive thing. And if at least one of the key points is missing, costs can increase several times.

• It is imperative to have a high organizational culture at the head office.

Business processes, indicators, control - all this must be implemented initially. This is not an easy thing to implement, because it requires a change in the attitude of all persons in the company, including owners and top management, to these actions.

• Leaving the activities of branches to chance.

If there is no control system, then you can only evaluate what is happening in the branch based on the final financial indicators. Moreover, branch managers will always find a lot of serious reasons why such indicators were obtained, and why it is impossible to obtain a better result.

• Low efficiency of remote departments.

If there are no regulations for business processes and control, work productivity will be worse than none! People don't like to work. It’s no secret to any business owner that hired employees don’t want to work. If there is the slightest opportunity not to work, they will take advantage of it, and no positive motivation will force them to spend more personal energy than necessary.
Just because you're good at running one store or one division doesn't mean you'll be good at running a chain of stores. The way the staff works with and without your personal presence makes a big difference.

• Theft by managers of remote departments.

Those who have the right to operate independently can find many ways to include their income in costs. If there are fuel costs, then this is a golden topic. You can also earn a pretty penny on any other service that the company uses. You can even create your own service company and provide services to your branch. Since there is more than one service, this results in a significant increase in wages.

• Problem with hiring qualified personnel in branches.

When hiring employees for a branch, we mostly encounter people who are sitting out the storm. Such employees do not have their own point of view on the development of the branch and always agree with what you tell them.
Even if you were able to find an initiative employee, as a rule, his qualifications leave much to be desired. If at the same time you do not have a training program, there are no regulations for the processes by which personnel must work, and there is no personnel development program, you will not be able to ensure that this employee quickly begins to benefit your company. Unless you can compensate for this to some extent with mentoring.
But if you have these three things, then you hire any adequate employee and after 2 weeks he begins to produce the results you expect.

Problems when using dependent branches:

• Low speed of decision making

Before signing an agreement, you need to explain why it is beneficial and convince the boss at the central office that this is a good condition. Naturally, your boss will think about this proposal for some time, because the boss has 10 more people like you. And after some time he will make a decision. It's good if it's positive. And your client can change his mind ten times during this time. If they sign the contract for a month, then how long will the delivery take?

• The influence of personal relationships with head office employees on the speed and composition of decisions

If the chief accountant doesn’t like you, then your payments, which he confirms, will take a very long time.

Pros of using business scaling:

• Access to end consumers
• Full control over the sales process and customer base
• Maximum margin among other schemes
• Possibility of selecting the best employees for the head office.

You can motivate them and take them to your place. Moscow companies use this all the time. Business elevators in large companies work because it is cheaper to hire a person from the region, and he will actually work for an idea, for food, than to find someone among Muscovites who will look 120 more times at what you offered them there.

Examples of implementation practices:

I would like to give examples of companies that have successfully solved the problems of forming a branch network.

• Express delivery (B2B services). The company has been on the market for 25 years and has 60 branches. For some reason, the company refused to automate sales, and for 25 years it grew along with the market.
• Trade in finishing materials (B2B and B2C). The company has been on the market for more than 15 years. At that time it had 18 branches. It has developed quite successfully, except for the last 3 years. 18 branches is not 60.
• Trade in mobile phones and gadgets

How to avoid the risks of using a branch structure:

• Regulation of key business processes of the head office before the creation of the structure
• Implementation of budgeting throughout the company structure
• Creation of a branch structure management unit simultaneously before the opening of the first branch
• Calculation of a feasibility study and business plan for opening a new branch
• Development of a complete set of detailed regulations for each step of opening a new branch
• Development of a reporting system for the activities of the branch, necessarily using proactive indicators and indicators of the quality of process execution
• The remuneration system is directly related to the fulfillment of performance standards
• Planning and control of budget execution for each branch
• Implementation of automation systems for sales management (CRM) and project, task and assignment management
• Regulation of subordination and document flow

Watch the video…

Victor Anisimov.
Expert in increasing sales and business development,
Senior Managing Partner, Agency "Increasing Profitability and Management of Business"