Vol 11 Issue 1
Harvesting The Low Hanging Fruit
Creating Profits and Cash in the Tough New Business Environment - Part 2 of 5
Making Your Management More Efficient and Effective
In Volume 10 Issue 6 we defined a new reality for owners of privately held business - a new reality that needs to be mastered to achieve owners' financial goals. This new reality is defined by:
- A significant reduction in the capital available to smaller businesses
- The prospect of significantly higher taxes
- A flattening of demand for products and services
The new reality implies that 'growth' is going to be much more difficult to attain. If growth is going to be difficult in the future, how do owners create the type of financial performances that will give them a return on investment from their businesses? If capital is going to be scarce, how do they generate the cash flow necessary to have healthy businesses? The answer is to become more effective and efficient in their business operations. Many businesses have places where they can improve substantially - what we call "Low Hanging Fruit."
This is the second of five issues of The Podolny Group E-Letter that discuss where "Low Hanging Fruit" can be found. This issue discusses Management Effectiveness. As discussed in the last issue on the subject of marketing and sales, there are often gaps in Management Effectiveness - gaps that when filled, can lead to substantial opportunities for increasing profits and improving cash flow.
Your Managing Effectiveness Test
Here is a short test that that will tell you a lot about the effectiveness of your managing process.
- Does everyone in your organization know what are the measures of success in your business?
- Are they clearly in sync with what will need to be done to produce the results you want for your customer/client, for your organization, and for you as the owner and manager?
- Do your key managers have clear responsibilities and authority?
- Do they have clear performance goals that both you and they agree upon?
- If yes how are these measured and what happens when performance falls below expectations?
If you answered "no" to most of these questions, there's bad news and good news. The bad news is that your business is not operating at its highest level of effectiveness, which means that you’re losing profit and cash flow opportunities. The good news is that there is an opportunity to change and win additional profit and cash flow.
Are Your Managers and You On The Same Page? Maybe You're Not Even In The Same Book
Let's be honest. If I were to go to your business and interview 20% of your people at random, how many would be able to clearly and accurately state what you consider to be the measurement of success? For that matter, can you honestly state it? And if you have measurements for success, do they integrate what you're trying to achieve for all the stakeholders in your business - customer/clients, suppliers, employees, your accomplishment goals as the owner, and your goals as a shareholder who needs a return on investment?
We work so hard each day. Each day seems to have so many actions that need taking care of. But, without a clear understanding of the outcomes we want, how can we expect to achieve them? How can we expect our people to work toward them? And, how can we create a logical management process that ensures the outcomes we want?
Don't Make It Complicated - A Simple Means of Starting Down The Path of Management Effectiveness
As in each of the areas covered in this series, if you have identified this - the area of management effectiveness - as "Low Hanging Fruit" for your company, it is important to accept this axiom:
"Keep it Simple"
Improving management effectiveness is not subject to a quick fix. It is a result of changes in attitude. A steady approach, consistently delivered, that also wins over your team, results in better long-term results than dramatic change that is retreated from as soon as there is pushback in the organization. The key to harvesting the "Low Hanging Fruit" of managing effectiveness is starting and maintaining a change process. Here are some steps to start this process.
- Clearly Define Your Goals - this should include your goals for each stakeholder group. They should be realistic and easy to understand. Be sure to include making a profit and improving cash flow! No other goals get served without these being accomplished.
- Vet the Goals with Your Management Team - Be sure that you get their input and really listen to them. Integrate their good points and reach a consensus. You may very well have team members who are not going to buy into your new approach. You will need at this early stage to simply take note of this and seek the optimum buy-in you can get.
- Determine (with your Team) Each Manager's Responsibilities for Achieving the Goals - Now have your team (and you!) think through how each area contributes to the accomplishment of the goals. It’s a really good idea to have this put into writing. Make sure that each manager is in agreement with the definition of his or her own responsibilities.
- Prepare to Allow Each Manager Real Authority - This is a hard one because it means you have to have some faith in their capability and judgment. It’s okay to start small and slow. You can set lower limits within which they can make decisions initially; but, if you don’t actually follow through by letting actually make these decisions, you will never achieve your objective of having clear responsibility and accountability.
- Start Working an Accountability Process - Don't worry about performance metrics just yet (we will discuss this in Volume 11, Issue 2). Work on getting each manager to commit to you what they intend to perform and when they will perform it. Give them free rein to do what needs to be done. Follow up when it is time to do so! If performance has been achieved, set the next one. If it hasn't, problem solve with the manager and revise the target. The mere act of doing what you said you would do (letting them determine their performance and then following up on the appropriate date) begins to establish accountability.
It's A Process
As management teams begin to take responsibility and accept accountability, they become your partners in achieving the desired company goals. This never happens overnight and, in fact, never stops. As an owner the key is to be consistent and patient. Small steps consistently applied will allow you to change your management culture so that it becomes grounded in self-responsibility and self-accountability. Such a culture drives improved results for your stakeholder and for you!
Don't Go It Alone
Instituting such changes can be a challenge. If you think that more proactive assistance is what will help you break through to making change, The Podolny Group has helped businesses across the country make the changes they need to become more effective. We’d love to talk to you.
The Podolny Group provides business owners with rapid diagnostics that can identify your low hanging fruit and the actions you need to take advantage of it. Lower profits and lower wealth accumulation are not predestined in this new economic order if you are willing to act.