Posts Tagged ‘growth’

Recommended Reading – Summer 2015

Tuesday, May 26th, 2015

After another rough winter, summer’s almost here! We’ll soon be reveling in sunshine, hot temperatures and blue skies as we enjoy water sports, barbeques, and relaxing in a lounger or hammock with a good book. Here are some of the personal favourites we’ve selected from the various “best books in 2015” lists recently published on 800ceo read’s blog:

1.  The Rise and Fall of Strategic Planning
     Henry Mintzberg, Free Press

If you follow our blog you’ll know that Henry Mintzberg is one of my favourite strategic thinkers. In this definitive history, he argues that the term is an oxymoron – that strategy cannot be planned because planning is about analysis and strategy is about synthesis. That is why, he asserts, the process has failed so often and so dramatically. He unmasks the press that has mesmerized so many organizations since 1965: strategic planning.

Mintzberg proposes new and unusual definitions of planning and strategy, and examines in novel and insightful ways the various models of strategic planning and the evidence of why they failed. Reviewing the so-called “pitfalls” of planning, he shows how the process itself can destroy commitment, narrow a company’s vision, discourage change, and breed an atmosphere of politics.

Henry Mintzberg is one of the most brilliant and original management thinkers and a great Canadian.

2.  Family Business: Practical Leadership Succession Planning: Exceed Your Expectations
     Ronald P. Smyser, Abbott Press

Less than 15% of family businesses survive to and through the second generation of leadership.

Smyser’s book provides valuable insights which demystify and simplify the process of succession; help ensure continuing financial security for the founder and his/her family; and enhance the effectiveness and balance of professional and private life.

Some of the topics he covers are:

  • How ownership transition without a clear, practical leadership succession plan can decimate your business’s chance of survival.
  • The fifteen key causes of leadership succession failure and how to avoid them.
  • What the next generation really wants but won’t tell you and what you should do.
  • The issues around choosing one of your children to succeed you, and how to avoid them.

Whether you already have a family business or are starting one, “Family Business: Practical Leadership Succession Planning” is a must read.

3.  Fewer, Bigger, Bolder: From Mindless Expansion to Focused Growth
     Sanjay Khosla and Mohanbir Sawhney, Portfolio

When it comes to growing revenues, not all dollars are equal. In company after company that the authors worked for or researched, they saw businesses taking on more products, markets, people, acquisitions – more of everything except what really mattered: sustainable and profitable growth.

In many of these companies – large or small, from America to Europe to Asia – every quarter became a mad dash to find yet another short-term revenue boost. There had to be a better way. The answer lies in “Fewer, Bigger, Bolder”, a market-proven, step-by-step program to achieve sustained growth with rising profits and lower costs.

“Fewer, Bigger, Bolder” crosses the usual boundaries of strategy, execution, people and organization. Its framework shows how you can drive growth by targeting resources against priorities, simplifying your operations, and unleashing the potential of your people.

“Fewer, Bigger, Bolder” challenges the conventional wisdom about growth.

4.  Business Strategy: A Guide to Effective Decision-Making
     Jeremy Kourdi, The Economist

A good strategy, well implemented, determines a business’ future success or failure.

Yet history is full of strategic decisions that were ill-conceived, poorly organized and consequently disastrous. This updated guide looks at the whole process of strategic decision-making, from vision, forecasting, and resource allocation, through to implementation and innovation.

Strategy is about understanding where you are now, where you are heading and how you will get there.

But getting it right involves difficult choices: which customers to target, what products to offer, and the best way to keep costs low and service high. And constantly changing business conditions inevitably bring risks. Even after business strategy has been developed, a company must remain nimble and alert to change, and view strategy as an ongoing and evolving process.

The message of this guide is simple: strategy matters, and getting it right is fundamental to business success.

5.  Business Strategy: Managing Uncertainty, Opportunity, and Enterprise
     J.-C. Spender, Oxford University Press

Emphasizing that firms face uncertainties and unknowns, Spender argues that the core of strategic thinking and processes rests on leaders developing newly imagined solutions to the opportunities that these uncertainties open up.

Drawing on a wide range of ideas, he stresses the importance of judgment in strategy, and argues that a key element of the entrepreneur and executive’s task is to engage chosen uncertainties, develop a language to express and explain the firm’s particular business model for dealing with these, and thus create innovation and value.

At the same time he shows how the language the strategist creates to do this gives the firm identity and purpose, and communicates this to its members, stakeholders, and customers.

Spender introduces these ideas, and reviews the strategy tools currently available from consultants and academics.

The book outlines a structured practice that managers and consultants might chose to follow, not a theory.

6.  Reinventors: How Extraordinary Companies Pursue Radical Continuous Change
     Jason Jennings, Portfolio

For most businesses, success is fleeting. There are only two real choices: stick with the status quo until things inevitably decline, or continuously change to stay vital. But how?

Bestselling leadership and management guru Jason Jennings and his researchers screened 22,000 companies around the world that had been cited as great examples of reinvention.

They selected the best, verified their success, interviewed their leaders, and learned how they pursue never-ending radical change. The fresh insights they discovered became Jennings’s “reinvention rules” for any business. The featured companies include Starbucks—which turned itself around by making tons of small bets on new ideas.

7.  The Moment You Can’t Ignore: When Big Trouble Leads to a Great Future: How Culture Drives Strategic Change
     Malachi O’Connor and Barry Dornfeld, Public Affairs

Culture not only affects how we think and behave, it’s the set of agreements and behaviors that drive how we act in groups and the decisions we collectively make.

Every organization now faces challenges it can’t ignore as new forms of work, communication and technology wreak havoc on the way we do things.

Malachi O’Connor and Barry Dornfeld provide powerful insights on how to confront the clash of old and new. They show how to ask the big questions that point the way to renewing a culture.

When people don’t know who’s in charge, are unsure of what their company identity is, and can’t get behind their leaders, they rarely have the ability or will to innovate.

Old ideas get rehashed. New ideas get squashed or lost. Initiatives that are designed to create an innovation culture or spur creativity go nowhere.

8.  Execution: The Discipline of Getting Things Done
    Larry Bossidy, Ram Charan, Crown Business

Finally – an old favourite – a book that shows how to get the job done and deliver results.

The leader’s most important job is selecting and appraising people. Why? With the right people in the right jobs, there’s a leadership gene pool that conceives and selects a strategy that can be executed, a strategy in sync with the realities of the marketplace, the economy, and the competition.

Once the right people and strategy are in place, they are then linked to an operating process that results in the implementation of specific programs and actions and that assigns accountability.

This kind of effective operating process goes way beyond the typical budget exercise that looks into a rearview mirror to set its goals. It puts reality behind the numbers and is where the rubber meets the road.

Putting an execution culture in place is hard, but losing it is easy.

For a full listing of best books in 2015, please visit http://800ceoread.com/

 

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

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ProfitPATH’s Top Ten Blogs – First Quarter 2015

Tuesday, April 7th, 2015

Lessons about successful business growth1.  3 Lessons About Successful Business Growth

Two books, published 19 years apart, yet saying similar things about a key aspect of successful business growth:
‘Built To Last’ was published in 1994. In it, Jim Collins analyzed 18 companies that he called visionary because they were the best in their industries – and had been that way for decades. Collins argued that the core values and enduring purpose of all 18 could be separated from their operating practices and business strategies. And that, while the former never changed, the latter changed constantly in response to a changing world.
In her book ‘The End Of Competitive Advantage’, published in 2013, Rita Gunther McGrath studied the performance of large, publicly-traded companies from 2000-2009. She found that only 10 of them grew their net income by at least 5% every year. All 10 had found ways to combine tremendous internal stability with tremendous external flexibility. McGrath argues that to win in volatile and uncertain times, companies must learn to exploit short-lived opportunities quickly and decisively. more

time for a change in the direction you are heading, focus on center of compass...2.  3 Times When You May Need To Change Your Strategy

Changes to a well thought-out, well-crafted strategy shouldn’t be driven simply because it’s been in place 1, 3 or 5 years. A strategy shouldn’t necessarily be changed even if it isn’t producing results. In this situation I always look at how well (or badly) the strategy is being executed before I look at the strategy itself. So when should a company review its strategy? And what makes that review and any subsequent adaptation, revision or re-creation necessary? Here are three occasions. more

10 Commandments of Business Development3.  10 Commandments of Business Development

I’m not enjoying the after-effects of the 2007/2008 financial crisis. And I’m certainly not a fan of the banks, investment and other, which I believe were a significant contributor to the mess. But, while my wife may disagree, I like to think I keep an open mind. So when I saw an article talking about how Goldman Sachs grew from mid-tier firm to global player in a few decades I had to peek. John Whitehead, a co-head of the firm in 1970, wrote the following 10 commandments that guided their business development efforts. I love them. They’re full of common sense and they’re very practical. Written in 1970, these 10 commandments add to my belief that the basic, common sense principles of business never change. Here are 4 things that business owners today can take from them: more

4.  Adaptive Strategy – A Way To Profits In The New Normal?

Adaptive Strategy is an alternative developed by The Boston Consulting Group (BCG)¹. Here’s how I think it applies to owner managed businesses. Adaptive strategy is built on the 3 R’s required in a changing environment². Can adaptive strategy be applied in owner managed businesses? more

5.  6 Ways A Business Owner Can Influence Culture

I wrote last week about the relationship between Strategy, Culture and Leadership. As a result we’ve had some questions about how a business owner can influence the culture in his/her company. Here, in no particular priority, are 6 ways that it can be done. more

6.  The Difference Between A Strategy And A Plan

I want to talk briefly about what I think is one of the worst mistakes – confusing strategy and planning. Roger Martin wrote a post for the HBR last month in which he dealt with this very topic. I frequently hear business owners talk about the need to do “strategic planning” in order to create a “strategic plan”. Some talk – every year – about holding a “strategic planning meeting”. more

7.  6 Challenges Fast Growing Companies Face

I’ve mentioned Inc. magazine www.inc.com several times before. It’s a great resource. There’s a well-researched article in the current issue about 6 challenges fast growing companies face. They’re all about execution – and if the owner doesn’t deal with them well any one of them can be fatal. more

8.  6 Tips For Growing Your Business in 2015 – How to Use Them

I was asked a good question last week. “Loved your last blog post, Jim – but how do companies like mine do those things?” So here are some ways any business owner can implement the 6 tips in his/her company. more

9.  6 Tips For Growing Your Business in 2015

January is the month for New Year’s resolutions, freezing cold and, for many, a new fiscal year. Everyone wants to ‘do better’ in 2015 than in 2014 and, for business owners, ‘doing better’ is shorthand for growing. I don’t know how often, in the last couple of weeks, I’ve been asked something like “What are your top 6 tips for growing successfully”. The answer depends on a number of things. Here’s the rub. All 6 are much easier to talk about than do. But if you start on them now you can make some progress this year. more

10. 3 Reasons Why Strategy Isn’t Dead In The Water

I hate sweeping generalizations. Strategy is dead is one that I particularly dislike. To say that, it seems to me, is to say that it’s a complete waste of time for every company, regardless of size or industry, to have a strategy.
An article appeared in the Globe and Mail late last year, headline “Why Strategy is Dead In The Water.” It was based on an earlier article in Forbes magazine, headline “Is Strategy Dead? 7 Reasons The Answer May Be Yes.” We’d gone from strategy might be dead to signing its death certificate – in the space of two headlines. more

 

Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

3 Strategies – Good, Fast or Cheap

Tuesday, March 31st, 2015

When I first saw this picture a couple of weeks ago, I had a really good chuckle.Good, fast or cheap - which strategy will you choose to grow your business?

Then I realized – it illustrated the key aspects of both strategy development and execution far more effectively than all of the books and articles ever written.

You’re a business owner, the company’s done well, but you know there’s room to grow and you know where you want your company to be in 3 years’ time.

To get there, you will have to do a number of things.

One of the most important is you’ll have to make choices.

You can be a low-cost provider, the cheapest supplier in town, low margins offset by high turnover.

To prevent those skinny margins disappearing, you will have to keep 2 things low:

•  The cost of making or buying your product or service. That will affect quality.
•  Your overhead – which means you won’t be offering the best delivery or support around.

So being cheap is OK but your service won’t be perceived as good or fast and you’ll be continually fighting to protect, or expand, your market share on price alone.

OR

You can differentiate your products/services by providing good quality, fast service or both. Lower turnover is offset by greatly improved margins.

•  Your cost of making, or developing, your product or service will be higher because you’ll use the best materials and skilled labour.
•  Your overhead will be higher too. Fast delivery requires competent people and good infrastructure; maintaining a reputation for quality requires research and development and innovation.

So you can be good, fast, or both but you’ll be well up the price range. Perhaps even in the wonderful world of premium pricing.

But you won’t be cheap.

OR

You can focus on a specific market, segment of a market, or niche and build the reputation for specialized knowledge and expertise.

In this case, you shouldn’t have to be cheap since your expertise should create the perception that you’re good.

If you’re really good, you can, to at least some extent, choose how fast you want to be. Why? – Because people will wait for the best specialist to fix their problem.

To wrap up, let me return to the point I made about the picture earlier – it’s taken me almost 300 words to say what it said in 26! And I’m sure I haven’t made you laugh once.

 

If you enjoyed this post you’ll also enjoy Want Your Company To Grow? Here Are 3 Words To Live By

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Your Company, Your House

Tuesday, March 3rd, 2015

I heard a wonderful metaphor a couple of weeks ago.To grow your business, think of your company as a house

Think of your company as a house.

The functional areas or departments – for example sales, marketing, operations, HR and finance – each represent a room in the house.

You can’t have a house without rooms and rooms have no purpose on their own. A house is not a home if it’s just a bunch of rooms.

The construction materials with which your house is built are, for example, peoples’ skills and experience; processes that enable the areas to function effectively; IT systems that provide data to manage performance.

Your culture is the mortar holding your house together.

What happens when we decide we want to grow? After all, as business owners, our main – if not sole – focus is on growth.

Growth can be achieved in 2 ways. By making one or more rooms in your existing house larger or by designing and building a bigger house.

1.  Making one or more rooms bigger

You can do this by, for example, adding more sales people to bring in more orders, or by launching a marketing campaign to generate more leads.

But making one room in a house bigger puts pressure on the other rooms. That has consequences. If you don’t believe me, try making one of your children’s bedrooms larger while making another one’s smaller.

As one room or area grows, everything else is forced out of proportion. You may even put pressure on the structure of the house and cracks will appear as the bricks and mortar strain to hold everything together.

A couple of examples of the business equivalent are tight cash flow, an increasing backlog of orders or losing good people.

2.  Designing and building a bigger house

Design and build a larger house and you grow, while structurally keeping everything in proportion.

How does this apply to your Company?

Designing and building a bigger house is equivalent to developing and executing a business strategy.

Each of the functions, or rooms, still has its own strategy. But they work in the context of, and by supporting, the strategy for the entire house/business.

If you involve your team in the design, the end product will be better and they’ll be more committed to getting it built.

I like this metaphor. What do you think?

 

If you enjoyed this post you’ll also enjoy Sustainable Growth – How To Achieve It

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Business Growth – Hard Truths and The Way Ahead

Tuesday, February 24th, 2015

Every company runs out of momentum sooner or later.Hard truths and the way ahead - the importance of strategic planning

When it happens, it’s really frustrating and confusing for business owners who have overseen many years of steady growth. Discovering that the things that re-started growth in the past no longer work is hard to understand.

So is accepting that it’s not necessarily because of something they have not done.

When they come to terms with all of that, a bigger, harder step is waiting – realizing that they:

  • Have to do something they may never have done before – strategic planning – and they
  • May need help doing it.

Notice I say strategic planning, which is a process, not writing a strategic plan, which is a document that will lie unused from the day it’s completed.

Done well, strategic planning will help a business owner see the smartest way forward, while providing flexibility to adapt as more information becomes available.

Two things make strategic planning more important today than before.

  • The volatility, uncertainty, complexity and ambiguity (VUCA) that exists today, and
  • Accelerating technological changes, which have opened up opportunities to businesses of all sizes, in all industry sectors.

An article in Inc. magazine last year confirms the points I’ve made and reinforces 2 of the 4 things that I’ve said growing companies have to do to turn strategic planning into results.

Develop a Clear Growth Path

A good, old-fashioned SWOT analysis provides the foundation for a growth path.

It’s not something that gets people leaping around with excitement. But, done well, it helps a company get results by using its strengths to figure out the best opportunities to take.

That drives out what has to be done to close the gap between where the business is now and where the owner wants it to be in 3 years’ time.

Link it to Action

A number of things will have to be done to close the gap. They have to be prioritized so that those providing the greatest leverage for long-term success are completed first.

The top priorities are broken into very specific, measurable action/project plans and someone is made accountable for completing each one.

The action/project plans drive the goals for each of the 3 fiscal years. They are reviewed throughout each year and before the start of subsequent years – keeping flexibility in the strategic planning process.

Next time

I’ll give you some tips on how to run strategic planning off-sites.

 

If you enjoyed this post you’ll also enjoy Playing It Safe – The Enemy Of Business Growth

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

6 Tips For Growing Your Business in 2015

Tuesday, January 13th, 2015

January is the month for New Year’s resolutions, freezing cold and, for many, a new fiscal year.Tips to successfully grow your business in 2015

Everyone wants to ‘do better’ in 2015 than in 2014 and, for business owners, ‘doing better’ is shorthand for growing.

I don’t know how often, in the last couple of weeks, I’ve been asked something like “What are your top 6 tips for growing successfully”.

The answer depends on a number of things.

That said here are some of the things that the companies I’ve seen grow successfully have in common.

Those companies are:

1.  Very willing to try new things (innovate, adapt). However they don’t bet the farm. They do limited scale tests of new products and ways of doing things first. Ones that work are rolled out quickly; ones that don’t are killed – just as quickly.

2.  Always trying to be better – than themselves. They are continually looking for ways to, for example, improve their own quality, do things more quickly and become more efficient. They don’t compare themselves to others, they just want to the best they can be.

3.  Following a strategy or plan. They know where they want to be in 3 – 5 years but don’t expect to get there by following a straight line. They try to keep growing steadily in good times and in bad.

4.  Skilled at turning their plan into results. Knowing what success will look like makes it easier for them to set priorities and allocate the resources and funds to achieve them. They link every individual and every department’s work to the company’s goals and hold themselves accountable.

5.  Able to spot trends earlier than most of their competitors. They stay close to their customers and suppliers, monitor their competitors and watch for developments in technology.

6.  Working from a solid foundation. All of their core business processes – sales, marketing, operations, finance and HR – are tried, tested and automated wherever possible. They find, hire and retain smart people who are a good “fit” with their culture and values. They are fiscally cautious, never over extend themselves and can fund their growth.

Here’s the rub. All 6 are much easier to talk about than do.

But if you start on them now you can make some progress this year. And if you need some help just give us a call…….

 

If you enjoyed this post you’ll also enjoy 3 Leadership Tips From A Great Scotsman

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Top Ten In 2014……

Monday, December 29th, 2014

The results are in!

Our top 10 blog posts in 2014 were:

1.   Adaptive Strategy – A Way To Profits In The New Normal? looks at an alternative strategy that is built on the 3 R’s (Responsiveness, Resilience, Readiness) required in a changing environment.

2.   6 Ways A Business Owner Can Influence Culture looks at the ways a business owner can develop a culture which will help increase operating profits and build shareholder value.

3.   6 Challenges Fast Growing Companies Face discusses the 6 challenges of execution which, if not dealt with, could prove fatal.

4.   3 Times When You May Need To Change Your Strategy explains when a company should review its strategy and what makes that review and any subsequent actions necessary.

5.   The Difference Between A Strategy And A Plan talks about the difference between strategy and planning and why it’s important to understand what these terms mean.

6.   6 Things We Can All Learn From Family-Owned Business puts forward 6 simple things business owners can implement to achieve better long-term financial performances.

7.  Use These 3 Tips To Make Your Next Critical Decision offers 3 things Ram Charan, co-author of “Execution”, says business leaders do when faced with a critical decision.

8.  5 Traits Effective Business Owners Share outlines some of the traits effective entrepreneurs have in common that contribute to the growth of their businesses.

9.  3 Reasons Why Consulting Assignments Fail and 3 Reasons Why Consulting Assignments Fail – Part 2 addresses the most common reasons why things can go wrong between consultants and their clients.

10. Strategic Planning – 3 Things That Are Wrong With It outlines how business owners make 3 mistakes that could destroy their company when they confuse strategy and strategic planning.

If you missed any of them, here’s another opportunity!

7 Ways to Hold Consultants Accountable Now

Tuesday, September 23rd, 2014

7 ways to hold consultants accountable nowMy wife will tell you I like giving other people advice.

That’s probably why I’m a management consultant.

But even consultants have to take some of their own advice – and change in order to grow.

For example, we must find a process for linking our compensation to our results in a meaningful way.

There’s no doubt this is hard to do. But that’s no excuse for refusing to try.

However, at the risk of making a huge understatement, it’s going to take time.

So, while we’re waiting, what can a business owner do to make sure the consultants they hire actually deliver results?

1. I talked about our own solution to linking compensation to results last year in a post called “Let’s Hold Consultants Responsible For Results”. It isn’t perfect, but it’s better than the traditional model.

2. Four years ago I suggested how owners can keep control when they work with consultants.

3. Around the same time I highlighted 3 reasons why consulting engagements fail. It’s really not difficult to avoid making them.

4. Look for consultants who have had practical, “hands on” experience operating a company. They have 2 clear advantages over consultants who have spent their entire career in consulting roles, as I pointed out in 2011.

5. There are also clues that you can listen for. Consultants who are effective tend to say certain things.

Here are 2 more things that I thought about this week.

6. Yesterday I was talking to a business owner who had been referred by an existing client. He asked if I would go out and meet him. I agreed immediately because that’s the only way to determine if there’s any chemistry between us.

Some people might consider the idea of “chemistry” to be foolish. But I can tell you from experience, that without it, the risk of a project failing increases dramatically.

7. Ask what success will look like. It’s more than just a description of what the consultant’s going to do and the services they’ll deliver. It’s about knowing how, when and what they will do to help you get the results you want.

Success, they say, comes not from doing one big thing well, but from doing many little things well. Perhaps change is like that too.

We at ProfitPATH, and lots of other consultants, are chipping away, doing the necessary things that will bring change to our business.

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Jim StewartJim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

One Big Reason Why Strategies Fail

Tuesday, September 9th, 2014

the main reason a strategy fails is based in how it’s executedI often argue that a strategy isn’t important.

It’s the benefits a strategy delivers – more profit, increasing the value of a company – that are important. They put more money in the owner’s pocket.

To reap those benefits the strategy must, of course, be successful.

A strategy can fail for many reasons.

It could just be a lousy strategy. But that happens less often than you might think.

Even a poorly conceived strategy can deliver results – if it’s executed with focus, energy and passion.

I believe the main reason a strategy fails is based in how it’s executed.

For example:

  • There’s no link between the strategy and the actions which have to be completed if it’s to be successful.
  • Most people don’t know what the strategy is – and the part their job has to play in making it successful.
  • People, at all levels, do know what their role is – but there’s no accountability if they miss targets.

Some examples are less evident.

One in particular is quite insidious. It goes like this.

After intense discussion, the owner and management team reach a consensus on the strategy for the next 3 years. Everyone goes off determined to do the right things to execute it successfully.

However, since much of their time is taken up with running the business day-to-day, after a while, that begins to affect their perspective.

And that gradual, subtle change in perspective can have a major impact on the execution of their strategy.

It is possible to detect it and fix it. But that requires the discipline to do 2 things.

First, hold regular strategy review meetings. Second, keep the agenda off day-to-day stuff, and on measuring progress toward the 3-year goal.

Any shift in perspective can be spotted by asking one question. “Are all of the projects being discussed integrated/aligned with the strategy we chose for the next 3 years?”

The odds are there will be some drift.

That’s because the company is made up of people. And people tend to have their own priorities, concerns, agenda, and goals – which may be directly opposed to the next person’s. In the face of day-to-day pressures, people find it hard to keep the whole company perspective in mind.

But it can be restored – and one big reason why execution fails can be easily avoided.

If you enjoyed this post you’ll also enjoy Strategy Execution – How You Do What You Do

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Jim StewartJim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Family Businesses Outperform – Until Disputes Occur

Tuesday, August 5th, 2014

“Once families turn to lawyers and courts, it is very difficult to restore trust in a family”.rebuilding trust in the family business after disputes occur

Now there’s an understatement.

Did you know that family businesses account for two-thirds of all businesses in the world and about half of the largest companies in the United States?

I didn’t.

I did know that studies done in a number of countries indicate that both public and private family companies:

  • Perform, on average, significantly better than non-family businesses.
  • Are stronger financially, have higher stakeholder loyalty, live longer, and are more trusted by the public.

All of that said, do a Google search on Market Basket.

That, and an excellent article by John A. Davis, will tell you everything you need to know about the ‘dark’ side of family business.

When things go wrong they often go spectacularly wrong, to the extent that an otherwise healthy business is broken or collapses.

Here’s the rub – it usually has nothing to do with their business strategy – and everything to do with people and human nature.

Here are some highlights of the Market Basket situation:

  • A shareholder agreement that didn’t have a clear-cut buy-sell process or a mandate to manage disputes privately.
  • Some family members taking a stewardship approach (growth for future generations, take only affordable dividends).
  • Others taking an investor approach (good dividends and increasing stock valuations).
  • Ongoing bitterness about the outcome of a 4-year court battle – which finished in 1994.

Who is losing out in this situation and others like it?

Everyone involved – customers, employees, suppliers and, of course, the family members themselves. Disputes like this destroy wealth.

I’m glad to say that we haven’t seen too many situations like Market Basket in the past 13 years. But where we have, they’ve been most memorable for the depth of antagonism between the family members.

Can anything be salvaged from these situations? Yes, but in our experience, everyone involved loses something, often a great deal.

Can trust be rebuilt in the family? Apparently it is possible.

Davis goes on to describe some of the things the family Board chairman did to rebuild unity and family commitment at Clark’s shoes, a venerable, old British company.

That, and my suspicion that the number of family companies that become involved in disputes that are as intense as the one at Market Basket is relatively small, gives me hope.

 

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

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

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