McKesson Inc. - Restructuring the European healthcare division of the 16th largest American corporation

McKesson Provider Technologies (MPT) is the technology arm of McKesson Inc, a multinational corporation with annual sales of $69 billion.

McKesson UK’s main business is providing outsourced IT services, particularly to different parts of the National Health Service. It was acquired in the late 1990s. Many of its managers and executive team had worked in the public sector. The company got into difficulty in 2002. Sales levelled out, and costs were not reined in.

We helped MPT to restructure the business. The aim was to obtain better returns in an increasingly competitive market. Our initial emphasis was on helping the local managers to analyse the core streams of work, determine how tasks were allocated and assess the profitability of different business units. Process Activity Analysis was used to generate reliable data. We devised and put in place a plan to reduce costs quickly while maintaining the ability to respond to new opportunities. In the negotiations and consultation, we had to take account of American accounting rules and UK legislation. Another complication was the complexity of the contracts of employment - a legacy of transferring employees from the health service. There were also a number of difficult cases to resolve that managers had failed to face up to. We achieved payroll savings of £3.8 million and finished the restructuring on time and within budget. With our aid, the business turned a budgeted loss of $7 million to a profit of $2 million in less than two years.