Archive for December, 2010

Execution – Flexibility In Practice

Wednesday, December 22nd, 2010

There’s been a lot written about the need to be flexible now that uncertainty plays such a part in the new normal. And, like so much else, it sounds like good, profound advice. Especially when you’re giving it, which, as strategy consultants, is something we have been doing for some of our business owner clients.

But, every now and then, life hands us a very practical opportunity to practice what we preach.

For example, for a number of reasons, I have to go to the U.K. at Christmas. For the first 5 or 6 years I did this my travel plans went smoothly. Last year I had a few weather related challenges coming back to Canada. Still, it was manageable.

But this year I have already been handed an opportunity to develop my flexibility – and I haven’t left yet!

I was supposed to fly out last Sunday night but, that morning, my flight was cancelled. Not a “biggie”, I reworked my strategy, developed an action plan and began to implement it.

I had to react quickly because there were lots of competitors also trying to grab the available seats. I had to alter my route, but I saw that as an opportunity to avoid Heathrow and the ongoing threat of bad weather there. And I may have saved a few dollars on the cost of the original fare. Bonus!

As in business, there were “knock-on” effects. But I rearranged the rental car and called in additional resources – my relatives. Their offers of help were gratefully accepted.

Now, it looks as if we (my wife is also scheduled to leave tomorrow night) are going to continue to have opportunities to work on our flexibility. Will our connecting flights be operating and will the roads on the final leg of our journey be passible? Then, in 10 days’ time, we have to get back home.

However like, I suspect, some of our business owner clients I find the mechanical aspects of being flexible – e.g. changing schedules or the start or completion dates of action plans or modifying budgets or forecasts – relatively easy.

But developing and executing an action plan to deal with the intangible aspects is more difficult. Chief amongst the intangibles in the case of my example is the impact on the person we are going to see – my Mother. She’s 82 years old, lives alone and her health is not as good as it used to be.

Reassuring (while not promising) her that everything will be fine and that we will be there for Christmas requires different “skills” than re-booking a flight or a rental car. Recent changes in her health have created new threats because she lives alone and mean that, while we’re there, we have to find new opportunities to provide support for her.

I find that responding to the requirements of being flexible is much harder when I’m managing people and their needs and expectations. I suspect that some of our clients find that too.

So perhaps being reminded that there’s more than one dimension to flexibility is the real lesson of the last few days. It’s an essential one because people are much more important than anything else.

And so my first New Year’s resolution is to bear that in mind when I work with our clients in 2011.

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3 Reasons Why Consulting Assignments Fail – Part 2

Thursday, December 16th, 2010

Earlier this week I talked about why I believe many business owners prefer a visit to their dentist to working with a consultant (See 3 Reasons Why Consulting Assignments Fail).

I mentioned the first of 3 reasons why I think assignments fail – Trying To Solve The Wrong Problem – last time. Here are the other 2.

• Reason # 2 – Failure to manage expectations.

If you don’t set expectations you can’t manage them.

I’ll begin with the money. The consultant has to accept the risks and estimate or quote a fee they can live with. The conditions under which the fee can be changed must be clearly understood by the client. Both parties must believe that termination conditions are fair. Most importantly, there can be no surprises. If there is even the possibility of additional charges the topic must be raised immediately.

If the consultant and the client don’t agree on clear, realistic goals and deliverables before the work begins, then neither will know what outcome the other really expects. The key word is “realistic”. The consultant has to avoid over-promising, which sets the stage for under-delivering. The client has to avoid asking for a $50 result on a $5 budget.

The assignment must be broken down into a series of steps or building blocks, each of which has clear deliverables. Each step must have a start and finish date.

When things get off track, and they will, the consultant must immediately draw that to the client’s attention. If the client is troubled by any aspect of the assignment she/he must bring that to the consultant’s attention. Alternatives must be proposed and agreement reached (no doubt involving compromise on one or both sides) on how to adapt and move ahead.

Phone calls, voice mail, email and ad hoc meetings are the communication tools we use most frequently. But they cannot replace regular face-to-face meetings, with a pre-arranged agenda and record of the follow up actions to be taken.

The consultant has to obtain the client’s agreement that the deliverables for a step have been met. There is no room for hesitation, if the client isn’t sure, the step is not complete.

• Reason # 3 – Changing the scope of the assignment in mid-stream.

It may be perfectly logical to make changes to the goal/deliverables of an assignment before it’s complete. For example, if new or unexpected questions arise as a step is completed it might be necessary to find the answers to them.

But it just as easily may not be. For example, deciding not to roll out a research project nationally based on input from customers in one Province, so that the money saved can be used for something else.

Even when changes are made for good reasons they may require time and other resources that weren’t considered in the original plan. Giving in to the temptation to complete more work with the same people usually results in underestimating the delays to the original assignment.

So both client and consultant have to objectively assess the impact and agree on the adjustments to the plan before making any change.

It’s certainly not fair to say that all business owners are anti-consultant. But it is fair to say that many have at least some degree of scepticism about what consultants can actually achieve.

When I asked some colleagues for their top 3 reasons why assignments fail, most said responsibility rests solely with the consultant. However, this can’t always be true.

But, unfortunately, it is true that we (the consultants) are often holding the gun when it shoots us in the foot.

3 Reasons Why Consulting Assignments Fail

Tuesday, December 14th, 2010

Let’s have a show of hands – everyone who enjoys going to the dentist put your hand up.

I can almost hear the response – “What, are you crazy? What a silly question”.  So let’s try another one and let’s make it a multi-part question.

Hands up everyone who enjoys hiring; OR working with; OR even sitting down at a networking lunch next to a consultant.

I’m prepared to wager money (not a statement to be taken lightly when made by a Scotsman) that the response was similar. In fact the only variable in my mind would be how many more people prefer their dentist to a consultant. Why is that?

The answers to that question range along a scale. At one end we have business owners who are not really sure what, if anything, the consultants they hired actually achieved. At the other stand the entrepreneurs who hired consultants to do something – like increase sales or generate more leads – and it didn’t happen.

If we could be objective about the topic we might be able to agree that it’s not always the consultant’s fault when things go wrong. But it is true that we (the consultants) are often holding the gun when it shoots us in the foot. There are a number of reasons why that is the case. Here are 3 of the more common ones.

1. Trying to solve the wrong problem.

Let’s use the example of increasing sales or generating more leads.

When sales drop a common reaction is to assume the problem lies with the sales people. So the solution is to train them in appointment making, presentation and/or closing skills.

The same thing happens when leads begin to dry up. The assumption is that, if we have marketing campaigns, they aren’t working. And if we don’t have marketing campaigns we need some.

The next step for the owner is to start talking to either sales training or marketing consultants.

Let me use a medical analogy to explain what happens next. Let’s say you have a sore shoulder. Your family doctor sends you to see a physiotherapist and a surgeon. Odds are the former will suggest physiotherapy – at least for a start. But the surgeon will probably suggest surgery to quickly solve the problem before it gets worse.

Why does this happen? In 9 cases out of 10 it’s not because the physiotherapist and surgeon are driven simply by wanting to make money. It’s because most of us – for the best possible reasons – are predisposed to see a need for that which we know. And if the symptoms – whether they relate to medicine or business – fit, we react accordingly.

But every now and then the problem isn’t that the sales team’s skills are weak or that our advertising campaigns don’t work. The real problem is that our competitors have introduced more advanced technologies offering more features/greater value. Or it’s that they have adopted innovative processes which have reduced their costs, allowing them to reduce their selling prices.

Sales skills training or introducing creative social media campaigns are simply not an effective response to those problems. And adopting them is the result of faulty analysis – by both the business owner and the consultant.

If you were going to let a surgeon cut your shoulder open the odds are that you would get a second opinion before letting him/her begin. Why would you not do the same with a critical business problem?

I’ll talk about the second and third reasons why consulting assignments fail in my next post, later this week.

Selling Price of Your Company – Goal or Output

Thursday, December 2nd, 2010

A statement early in Larry Bossidy and Ram Charan’s book (see 5 Reasons I Love Execution) caught my attention. They say that “increasing shareholder value is an output, not a goal”. I’ve always said that increasing the value of your company is 1 of only 2 rewards for being a business owner i.e. it is a goal.

But, when I thought about it, I realized the logic really runs like this.

• The income a company generates from its operations, on an ongoing basis, represents the real value of the business to a purchaser.
• Which is why the value of an owner managed businesses is determined – most frequently – using a multiple of operating income.
• So, if management find the right strategy and execute it well, operating income will increase.
• As a result of that, all other things being equal, the value of the business will increase.
• The goal, therefore, is to find – and execute – the right strategy. Do that and owner/shareholder value takes care of itself and is, in fact, an output.

This is true regardless of whether the shareholders are a small group of family members or the public at large.

Around the time that I read Bossidy and Charan’s statement I attended an excellent seminar at the accounting firm SB Partners LLP called “Preparing Your Business for Sale”. One of the partners, Trevor Hood, a CA and CBV, explained clearly and thoroughly how businesses are valued. He finished by listing 2 sets of variables, 1 of which is under the control of management, which affect a valuation.

When I looked at the controllable variables later I realized that all of them related – directly or indirectly – to strategy. For example, markets, customers, competitive superiority, technological innovation, human resources, production and operating systems are all components of strategy.

Many of the other variables under management control – e.g. documenting policies and procedures, financial reporting, managing gross margins and costs/expenses, building an effective management team – are fundamental to successfully executing a strategy.

Even the variables Trevor correctly described as uncontrollable – economic conditions, industry trends, legislation etc. – all have to be considered during strategy development and/or business planning.

At about this point all of this thinking became very satisfying. Trevor’s variables are amongst the areas we focus business owners on when we work with them to build value in their companies. And since our whole purpose in life is strategy development and implementation – strategy made practical – it was all very reassuring………..

Then I saw an article, “Sell the Business, Sail into Retirement,” on the Globe and Mail web site. It talks about the number of businesses that will change hands in the next few years as the baby boomers retire. The article quotes a survey, which says that selling will be the most popular exit strategy.

But, the author goes on; activity is down, not up. Why, because although valuations have gone down because of the recession, owners’ still expect to get the prices that applied 3 years ago. (We encounter this “expectations gap” quite regularly.) But the good news is that low interest rates and easier lending conditions are pushing valuations back up.

We’re not sure that we buy into the comment about easier lending conditions – yet. But it is possible that it will happen in time for, or to coincide with, the boomers’ retirement.

So, what does all of this mean?

If it’s time to sell; and if valuations are going up; and if value is an output, or result, of a good strategy effectively executed then business owners need to demonstrate that they can execute better than ever before.

All of which reinforces the point that execution is, at the very least, a big issue for businesses today; it is the major job of the business owner/leader and it is a discipline which, if mastered, will give a business competitive advantage.

I’m glad we’re in the strategy business!

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