Collinson Grant helped managers match the cost of organisation and processes to projected demand.

Hong Kong Aero Engine Services Limited (HAESL) provides world-class aero engine and component repair services to many of the world’s most respected airlines that have chosen Rolls-Royce to power their fleet of Airbus and Boeing aircraft.

HAESL is a joint venture between Rolls-Royce plc, Hong Kong Aircraft Engineering Company Limited, which is a member of the Swire Group, and SIA Engineering Company. Collinson Grant was commissioned to review the company’s organisation, business processes, and costs.

The review was prompted by the accelerated retirement of the Rolls-Royce RB211-524 and Trent 500 engines, used to power Boeing 747s/Airbus A340s, and a gap before the introduction of the Trent XWB engine for the new Airbus A350 aircraft. Consequently, the business was facing a period of reduced volumes before an expected rise in revenues.

The aims of the review were:

• to understand the cost of the organisation and processes and match them to forecasts of demand between 2013 and 2016
• to pinpoint where to remove cost and improve profitability by highlighting opportunities to streamline processes and make them less wasteful, simpler, cheaper, faster, more effective, and consistent with good practice
• to exploit fully the capabilities of information technology systems
• to reduce duplication and inefficiency in management by improving the organisational structure and its managerial layers, spans of control, and costs.

The approach entailed work:

• to analyse the structure of HAESL
• to analyse the activities of the indirect staff
• to map processes with a team of HAESL’s managers in order to prioritise opportunities to reduce or cut out complexity and waste
• to introduce the ‘voice of the customer’ so as to question the merit and value of activities.

An activity value analysis (AVA) was completed after 55 interviews over eight days. The results described 16 processes and 174 activities. All interviews were conducted in English with two requiring an interpreter. An AVA data cube was available from the third week of the assignment to assist the project team with modelling the potential scale and impact of resizing the organisation by function or department. It provided the team with data on core, improvement and support activities; whether or not activities were related to volume; and process improvement projects.

The Collinson Grant team combined skills in organisational analysis with considerable experience of the aviation sector. Our consultants carried out a structural analysis which supported the AVA’s findings. Specific proposals were made to combine roles and departments, and the project team, comprising 10 middle managers, focused on process improvement work and found more opportunities for savings.

Because of the need to prepare for a short-term drop-off in business activity, it was essential to analyse the extent to which indirect activity was related to volume. Activities were tagged and mapped in the cube to the relevant segments of the indirect population. The analysis underwent a number of iterations to ensure acceptance.

An approved business plan was produced which highlighted:

• headcount by function/department and the reason for role reduction by cost driver
• a revised ‘to-be’ organisational structure with healthier ‘layers and spans’
• an implementation plan with a risk assessment, supported by a communications plan
• improved business controls for indirect headcount.

At its conclusion, the assignment produced a plan to rationalise headcount by twice the amount originally thought possible by local management, together with a leaner structure with clearer lines of accountability. We found that the indirect staffing requirements could be reduced based on volume-related changes, improvements in business processes, and organisational restructuring.

Richard Kendall, Chief Executive of HAESL, said:

“The results from the project met all of our expectations in terms of the opportunities for savings and the level of buy-in and collective enthusiasm to implement changes.”