Archive for 2013

3 Decisions Every Business Owner Has To Own

Tuesday, October 22nd, 2013

I saw an article last week which argued that there are 3 decisions that CEOs of corporations cannot delegate.3 difficult business decisions that must be controlled by CEOs

They are decisions about goals, allocating resources, and people.

That got me thinking.

My first reaction was that business owners are less likely than corporate CEOs to delegate these decisions in the traditional sense.

In other words, owners won’t allow their management teams to make decisions about these 3 areas without their direct involvement.

But then I realized I was wrong. There is one set of circumstances in which some entrepreneurs do exactly that.

When they first begin to work with a management team, some business owners believe they have to take a completely “hands off” approach, allowing their management team to make decisions about all aspects of the company.

That’s not delegation, that’s abdication.

And most of those owners take control again when actual results don’t match their expectations.

Coming back to my original train of thought, however, I do believe that entrepreneurs “delegate” decisions about goals, allocating resources, and people by omission.

They become immersed in day-to-day operations to such an extent that they don’t:

•  Regularly allocate time to set goals, review progress against them and make adjustments when necessary.
•  Allocate the financial and other resources to the initiatives, activities, projects that are going to have the greatest impact on the company’s future.
•  Deal quickly with situations in which they have the wrong person in a key position. That may be because they can’t admit they made a mistake putting the person there in the first place, they have misplaced loyalty to a long-term employee, or because they’re a relative.

It’s hard to have the discipline to regularly step back from the crises of the day to objectively review performance and plan for the future.

It’s also hard to find a technique or process that produces plans which can be turned into actions, which yield the results the owner wants.

And it’s really hard to look someone in the eye and tell them that they’re not doing what is required of their position.

But because something is hard to do is not a good reason for not doing it.

The article that got me thinking can be found here.

 

If you enjoyed this post you’ll also enjoy 8 Things That Hinder Growth.

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What’s The Best Strategy – Grow The Core Or Expand?

Tuesday, October 15th, 2013

Is there a right way – and a wrong way – to go about growing a business?Do you grow the core or expand?

There has to be, because some companies try to grow and fail.

I believe there is one thing that is common to all companies which grow successfully.

But businesses have to grow and succeed in a complex world where multiple, sometimes conflicting, factors are constantly at work.

One question we’re asked often is, should a business owner focus on growing the core business or expand into other areas?

The answer isn’t simply yes or no. It’s “it depends on how you do it”.

Be sure you know what has made you successful

Before looking for new areas to expand into, it’s essential to really understand precisely what has made the business successful.

We see business owners assume they know why their company is doing well all the time. But the wise ones look for verification of their own thinking before plunging ahead.

They get input from customers, suppliers and even peers, whose perceptions are invaluable. Those groups add a perspective which people inside the company simply cannot have.

Then the owners set aside time to think through what they’ve learned, discussing it thoroughly with their management teams and advisors.

Once they know what has given them their competitive edge, their core competencies in consultant speak, they can look for opportunities while greatly reducing the risk of making a mistake.

For example, if you’re great at customer service and being a high-quality producer, don’t try to become a low-cost value player.

Then use that to evaluate new opportunities

Opportunities can be evaluated by looking at their attractiveness and the probability a company can be successful. (Download our free guide here.)

A key factor in the probability of success is whether or not a company’s core competencies not only match the key requirements for success – but also exceed the strengths of its competitors. Clearly, opportunities that aren’t consistent with a business’ core competencies are too much of a stretch for it to be successful.

That’s when the business owner must be ruthless and just say no.

Otherwise those “opportunities” will become black holes of time, effort, and money and the company will likely fail.

Focus on the core and expand – but with care

We know that all products and services have a life cycle. So it’s important for a business owner not to rest on his or her laurels.

It’s important to strengthen, grow, and defend the core business by developing new products and services.

But it’s also important not to miss out on potentially great new growth opportunities.

Do it by understanding what you’re good at – and building on that.

 

If you enjoyed this post you’ll also enjoy Are Your Core Competencies Coming – Or Going?

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Have A Great Strategy? Are Your Employees Defeating It?

Tuesday, October 8th, 2013

Did you know that:Are your employees defeating your great strategy?

•  Less than half of your employees are familiar with your strategic goals¹?
•  And even the ones who are can’t list them?

How big a problem, for you as a business owner, is that?

Good question.

Goal alignment, or understanding how their work is impacting and shaping the company, leads to more engaged employees.

And only 30 per cent of workers are engaged in the workplace².

But what “real” impact does that have?

Well, another Gallup study found companies with disengaged employees had a 51 per cent higher employee turnover rate.

It also affects absenteeism. In the UK, employees who are engaged take 2.69 sick days on average, while disengaged employees are missing an average of 6.19 sick days per year³.

Getting the picture?

So, what do you do about it?

I’d suggest 3 things.

1.  Communicate, communicate and communicate.

•  Get representation from employees at all levels and areas involved in the development/update of your strategy.
•  Then spread the word throughout the company using town hall meetings; breakfasts or pizza lunches with one area at a time; and in one-on-one meetings. Repeat, repeat and repeat.
•  Insist your direct reports integrate their goals, and the goals of every single person in their area, with the company’s strategy. And that they communicate them as thoroughly as you are doing.
•  Do the same thing after each quarterly review.

2.  Use a project management tool, for example Basecamp, to track progress against each department or area’s goals. Open access to everyone so even the most junior employee can see what’s going on. Consider one of the talent or performance management platforms that are popular at the moment. We’re looking at several of them very carefully.

3.  Do the first 2 and it will be easier to figure out if, and where, you need additional people. You can use this insight to draft the job description so you hire the right skills and experience – and focus the new employee so they get up to speed more quickly.

These are some of the things we’ve been telling our clients for a long time now. So it’s always nice to see a higher profile third party saying the same thing.

______________________________________

¹ A recent study called “How Leaders Grow Today” conducted by Clear Company and Dale Carnegie
² “2013 State of the American Workplace: Employee Engagement Insights for U.S. Business Leaders.” Report on a survey by the Gallup organization.
³ http://www.forbes.com/sites/kevinkruse/2012/09/04/why-employee-engagement/2/

 

If you enjoyed this post you’ll also enjoy 4 Simple Styles Help Get Great Results……

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One Way To Destroy A Family Business

Tuesday, October 1st, 2013

Do you recognize this individual?Coddled offspring can destroy a family business

Well-dressed, well-groomed, drives a late model luxury car.

May be charming and pleasant. In some cases, however, they can be arrogant, abrasive and (over) confident.

Not yet, too vague? OK, here are some other clues.

He or she has:

•  Worked exclusively in their family’s business.
•  Reported directly or indirectly to a parent for most, or all, of their career.
•  Never received 360-degree feedback on their performance.
•  Been promoted beyond their capabilities.

In addition:

•  They’re paid above the market-based compensation for their position.
•  Their behavior is often outside the boundaries of acceptable value-based behavior of the company.

Now are you closing in?

At one time or another, professionally or socially, we have all met the coddled or pampered son or daughter.

Some might say they’ve been spoiled. I’m not sure it’s that simple.

Here’s the point. In the eyes of the doting parent they can do no wrong. But, in reality, they inflict damage on the family business. And the longer they are around, the higher they climb, the greater the potential for them to do fatal damage.

Non-family employees react in one of two ways. Those who need their income find ways to keep quiet and live with the situation. Those who are mobile move. Both outcomes hurt the company.

The only people who can fix this situation are the other family-owners and, possibly, long-term employees who have earned the deep trust of the business owner.

The owner/parent will not thank them for doing so. In fact the parent’s initial reaction can range from dismissive to very angry. However, if the parent doesn’t come to terms with the situation, they risk losing all of the family wealth tied up in the company.

What can be done?

We tell our clients to let their children go and work in another company before they start, full time, in the family business.

Ideally, they work in a corporation where they get honest, regular feedback about their performance. But another family business will do – provided 2 conditions are met. It’s using performance management systems and the owners are neither friends of, or related to, the owner/parents.

For the owner/parents themselves it’s a little harder. Getting perspective on their children’s, or other family members’, abilities and performance, from a third party the owner can trust to be objective, is the best thing. A member of an Advisory, or traditional, Board can be very useful for that. But a friend or long-term business advisor can fill the role too.

Final words

When over-protected children are asked to leave the family company they often find it a great relief. They know they were in over their heads.

Ironic isn’t it?

You can find the article that inspired this post here.

 

If you enjoyed this post you’ll also enjoy Why Conflict In A Family Business Is Bad For Strategy

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Let’s Hold Consultants Accountable For Results

Tuesday, September 24th, 2013

For a Scotsman, true accountability occurs when results are linked to compensation.Let's hold consultants responsible for results

So I’ve tried various ways of linking our payment to our performance for most of the 12 years that I’ve owned ProfitPATH.

Why? In addition to the one above, there are 2 other reasons.

First, the people we work with are all taking risks. If we are to be credible, why should we be risk exempt?

Second, when I worked in corporations I hated paying consultants before I knew if their recommendations would deliver the results I wanted. When I started ProfitPATH I swore we wouldn’t do that.

It’s relatively easy to link our fees to our own performance.

We make sure the deliverables are clear and give the business owner what they want. We also tell our clients that they can stop an assignment at any time without any financial penalty. Just pay us our fees up to that point.

Linking payment to our clients’ results is a little more complicated.

Why?

Because of the number of things we have no direct control over. They include, for example, everything from the economy (be honest, did you guess the last crash would come when it did) to how they arrive at the profit line on their income statement.

But just because it’s complicated, that doesn’t mean we shouldn’t try.

And so we’ve experimented with a number of things. Like deferring a portion of our fees until the outcome of our recommendation becomes clear; or linking part of our payment to the achievement of a result.

There are other ways to hold consultants accountable.

A client can, for example, refuse to act as a reference; or communicate their disappointment as widely as possible; or withhold part, or all, of the fees. But these are all post completion options.

Other alternatives, that we recommend, are frequent, regular progress reviews. When coupled with the “terminate at any time with no penalty” policy I mentioned above, these reviews carry some weight.

Holding us accountable is part of my wider belief that the management consulting industry needs to take some of its own advice. It has to change its business model.

Now Clay Christensen, author of “The Innovators Dilemma” and one of the leading thinkers about innovation, has weighed in. A Harvard academic, and former consultant with the Boston Consulting Group, he believes that the consulting industry is ripe for disruption.

He’s joined by Ron Ashkenas, managing partner of a consulting firm and academic at Berkley, whose article first set me off on this rant.

I’ve been convinced for years that change needs to happen. It’s encouraging to see thinkers of their caliber saying similar things.

 

If you enjoyed this post you’ll also enjoy Why You Need A Consultant With Hands-On Experience

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4 Rules For Succeeding In Business

Tuesday, September 17th, 2013
J.P. Lemann's 20 Rules For Succeeding In Business

Photo by Alan Marques/Folhapress

I’m ashamed to say that I’d never heard of him.

So I didn’t recognize the name of the man who partnered with Warren Buffett to buy Heinz earlier this year.

He’s Jorge Paulo Lemann. His company bought Anheuser-Busch in 2008 and Burger King Holdings in 2010 and his personal fortune is estimated at $17.8 billion.

So when he speaks, I figure it’s worth listening.

His “20 Rules For Succeeding In Business” were published recently – and the word “people” appears in 6 of them.

Here are 4 that can be applied by all business owners.

1.  “The main function of the heads of a business is to choose people better than them to keep the company going even without its leaders.”

Two phrases really stood out for me.

“Choose people better than them”. Some owners miss the point here. It’s not about hiring people who are better owners than they are. It’s about hiring people who are more knowledgeable/skillful at running an aspect of the business than the owner – so he/she can focus on doing what only she/he does best.

“The main function” means not when you’ve done everything else; not when you get around to it; and not because you have to. But because it’s the most critically important thing an owner can do.

2.  “Common sense is worth a lot and more than complex ideas. Simple is always better than complex.”

Wasn’t it Stephen Covey who said something like the remarkable thing about common sense is that it isn’t all that common?

A management team was discussing a recently introduced incentive plan. There was concern that they had not clearly defined the action which triggered the incentive.

To bridge 2 opposing views, splitting the incentive amount over several actions was suggested. This, in my opinion, made the value of the initial “prize” meaningless and added complexity to what needed to be a simple “do this and win” situation.

Fortunately they didn’t do it.

3.  “Always reduce costs. That’s something that is under your control and ensures survival.”

During strategy development – the SWOT analysis – we highlight the things business owners can’t control. Costs and expenses are 2 things that are under their direct control.

A constant focus on managing them, and making sensible reductions where possible, will go a long way toward success.

4.  “A big, challenging and common dream is essential, and it helps everyone to work in the same direction.”

Call it a Vision or call it by any of the other terms used in recent literature, what matters is to have one.

Note he says “common” dream. It’s something everyone in the company is invested in. That means they felt they had input and they understand what their part is in achieving it.

To see all 20 of Lemann’s rules go here.

 

If you enjoyed this post you’ll also enjoy A Vision – Is It Worth Investing The Time?

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Strategies That Get Results Are Developed By Thinkers And Doers

Tuesday, September 10th, 2013

The companies we work with are less complex organizations than those in the Fortune 500.Include strategy developers in the execution process for better results

But our clients can experience the same types of problems that the big guys face.

Here’s an example.

A gap between the thinkers and the doers

I read this week about the gap that exists in large corporations because the people who develop strategy aren’t the ones who have to execute it.

In most of the companies we work with, a gap like this shouldn’t exist. However, it does occur in some.

In this case the gap is not caused by the separation of responsibility for developing and executing strategy. It’s caused by a strategy development process that isn’t sufficiently inclusive.

In our clients, the business owner is responsible for both developing strategy and ensuring that it’s executed.

Arguably, everyone else is responsible only for execution. And their responsibility is very often limited to only the parts of the strategy that directly affect them.

The owner can:

a)  develop the strategy by him or herself, or

b)  involve her/his management team, or

c)  involve the management team and key players from all parts of the company.

In the companies we work with, the gap occurs when the owner opts only for alternative a) or b).

Disadvantages of having a gap

There are several disadvantages of excluding key players.

•  They are the people who have been intimately involved in executing all of the strategies that have been developed in their past, either with their current employer or in other companies. As a result, they know what is involved in making a strategy work, in getting results. They can provide valuable input at the development stage, even nipping impractical strategies in the bud before time and resources are wasted on them.

•  If the key players understand the reasoning and logic behind a strategy it will help them make the right decisions and best choices when circumstances change (as always they do) during implementation.

•  People are more committed to a course of action when they’ve had a part in developing it. So the key players are more likely to keep persisting in the face of difficulty.

An example of how to prevent the gap

One of our clients had a workforce of 300 unionized employees, spread across the Province. When it came time to renew the strategy, the General Manager invited 10% of the workforce to participate in the process.

The representatives, chosen by their teammates, were expected to represent their areas in the sessions and to provide feedback when they went back to work units.

The quality of the input the representatives brought with them and the value they added to the discussion and debate was quite remarkable.

 

If you enjoyed this post you’ll also enjoy 5 Reasons Why I Love Execution

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Are You Fit For Growth?

Tuesday, September 3rd, 2013

This week’s guest is Dick Albu, the founder and president of Albu Consulting, a strategy management consulting firm focused on engaging and energizing leadership teams of middle market private and family business to formulate robust business strategies and follow through on execution of key strategic initiatives.

 

As we talk to current, past and prospective clients, they readily share their concern regarding achieving profitable growth. Their concerns center on the uncertainty surrounding economic policy that is creating business uncertainty and dampening economic growth. They are also finding it challenging to shift their focus from reducing costs (for the past 5 years to survive the recession) to driving sales growth. Yet, these same leaders realize their organizations will be facing headwinds for some time and need to move forward with a growth agenda.

The companies we spoke with are not alone in their concern in achieving profitable growth. According to a recent Booze & Company survey Fit for Growth (Survey) – only 17% of the 197 companies surveyed are prepared to achieve sustained profitable growth. The realization that most companies are struggling, represents an opportunity for those willing to prepare for growth by taking a more deliberate approach to developing and implementing their agenda. The Survey created an index based on assessing companies in three key areas:

1. Strategic clarity – clear set of strategic priorities supported by strong capabilities, a product portfolio aligned to the strategy, and a presence in critical markets.

2. Resource alignment – investment in key capabilities, targeted cost reduction, and continuous improvement initiatives aligned to strategy.

3. Supportive organization – Effective and timely decision making, strong leadership, and a supportive culture.

The first area addresses strategy, and areas two and three capture a company’s execution capability. Strategy and execution were given equal weights in the index to acknowledge their shared impact on performance.  In addition, the Survey compared index values to total shareholder returns (TSR) and found that companies with high index scores generally scored higher in TSR performance. Essential to a company having a high index value was scoring well in all three areas, highlighting how these three areas reinforce one another, resulting in higher overall performance.

The evidence is compelling. Being Fit for Growth can lead to sustained profitable growth. So how do you go about determining if you are Fit for Growth? Booze & Company suggests starting by answering these three questions:

1. Do you have clear priorities, focused on strategic growth, that drive your investments? You might not have clear growth priorities if you feel you have too many conflicting priorities, or your leadership team is not aligned when asked what things the company does well.

2. Do your costs line up with your priorities? Are you allocating resources to priorities effectively and efficiently? You may be able to improve your allocation of resources if high-priority projects are missing milestones because they do not get appropriate attention, or department annual budgets are only based on prior year.

3. Is your organization set up to enable you to achieve your priorities? Your organization may not be fully supporting your growth agenda if incentives are motivating people in ways that actually undermine the behaviors needed to achieve growth priorities, or most suggestions are being rejected causing people to be afraid to take calculated risks.

Get fit for profitable growth by answering the above questions and take steps to get better in the three areas of Strategic Clarity, Resource Alignment, and a Supportive Organization.

Is your organization Fit for Growth?  We would be interested in hearing about your experience. Give us a call.

Dick can be reached at 203-321-2147 or RAlbu@albuconsulting.com. For more information on Albu Consulting visit www.albuconsulting.com.

 

4 Decision-Making Tips for Business Owners

Tuesday, August 27th, 2013

Often, when I read something in a book or a book review, I think “Oh that’s just common sense.”Common sense isn't common practice in decision-making

But then I remember one of Stephen Covey’s famous sayings, “What is common sense isn’t common practice”.

What brought all of this to mind?

A discussion of the 4 steps in the decision-making process identified by Chip and Dan Heath in their recent book “Decisive”.

Can they be applied to business decisions? You bet. Are they practical and useful? I really think so.

Here they are.

1.  Widening your options. Psychologists have found that very often people focus only on one alternative when making a decision.

A business owner, for example, receives an unsolicited offer to purchase her business. At first, there may appear to be only 2 options – sell the company or tell the buyer to go away.

But, after more thought, the owner realizes she has other options, for example, to sell only part of her equity, or to look for other buyers and start a bidding war.

2.  Reality test assumptions. Confirmation bias occurs when we like 1 alternative more than the others and start to look for things to support that alternative.

For example, the owner thinks, “I really like this candidate for the VP Sales position”. That thinking can prevent him asking, “Is this person the right fit for the team?” or “Is this person’s experience relevant to our situation?”

3.  Attain distance before deciding. I often ask clients, “Do you really have to make that decision now?” And, many times, they don’t.

Waiting until closer to the deadline may allow more information to emerge – which has to make for a better choice. Note, however, that this is different from avoiding making a decision.

Even sleeping on a decision allows the owner to get some mental distance from what may be an agonizing set of choices.

4.  Prepare to be wrong. I’ve been working a long time. But I’ve yet to find someone who can accurately predict the future. No matter how thorough the analysis before a decision is made, it can still go wrong.

There are studies which say that even when doctors are certain they’ve made the correct diagnosis, there’s a 40% probability they could be wrong.

So why not have a contingency plan waiting in the wings? Why not, for example, take out some insurance and do some limited scale testing before a national rollout?

Do the 4 steps seem like common sense? They do to me.

But I know that I, and the business owners we work with, make these mistakes.

Which is why they aren’t as common in practice as they could be.

You can read the review of the Heaths’ book here.

 

If you enjoyed this post you’ll also enjoy Winning Business Ideas from “Kinky Boots”…….

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Want Your Company To Grow? Here Are 3 Words To Live By

Tuesday, August 20th, 2013

“We’ve grown from start-up to over $10 million in 6 years. We think we know why but I want to be sure I really understand why. Help me figure it out.”3 words your company should live by to keep you in business

A few weeks ago, a potential client said almost exactly those words to me.

In the 16 years I’ve been working with business owners, I’d never heard anything like it.

It’s the opposite of what many entrepreneurs say and do. Normally they’re very confident that, because they’ve been successful, their company will continue to do well.

More recently, I met with another owner. The revenues in her company have halved.

To her credit she’s trying to find a solution, trying to find a way out of the industry that has matured and declined on her watch.

“Just find me ideas,” she said, “I don’t need advice, we know how to be successful”.

An interesting contrast, don’t you think?

Then, the other day, I saw something interesting that pulled it together for me.

From their earliest days, we teach our children 3 important words – stop, look and listen. We tell them to do it before they cross the road or do anything else that could cause them harm.

As adults, we lose sight of the lesson. Ask the shareholders of Polaroid, or Kodak, or DEC – or Blackberry.

Stop, look and listen – it can keep you in business.

No matter how well things are going, take time out from the day-to-day operations of your company.

Let’s face it, if things are going that well, there’s no reason you can’t take one day a month, or even a quarter, to think about the future.

Look outside the walls of your office or company. What’s happening in your customers’ industries? How do they use your products or services? What alternatives are they looking at?

And what’s happening in your industry? What’s the worst thing that could happen? Do some contingency planning.

Listen – surf the web, find out what’s trending in your industry. Attend some events; what are the rumors about competitors? What are your suppliers saying? What are your contemporaries thinking about the economy and the availability of funding?

The companies I mentioned earlier weren’t blindsided by threats they couldn’t have seen coming. They failed to react to market changes and new competitors that were around for some considerable time. No one came from out of left field with no warning.

Their leaders fell so deeply in love with their success that they were unable to overcome the blinders they put on their own thinking.

Stop, look, listen or risk seeing your success swept away.

The “something interesting” I saw the other day can be found here.

 

If you enjoyed this post you’ll also enjoy 6 Tips for Protecting Your Long Term Success

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