People with the right set of skills, background and ambition have more career opportunities than ever. However, with so many opportunities comes the responsibility of taking a leadership role in your career. Understanding important factors such as strengths, weaknesses and values can open up more doors and accelerate employee achievements.
Perfecting Raw Talent
Although most people think they understand their own strength, they are often wrong. Discovering strengths helps decode where you “fit” within an organization. The best way to understand strengths is to track the decisions you make and determine the results several months down the line. You might discover that you have a natural ability to negotiate important deals or a talent for building rapport with key decision makers.
This technique isn’t new, according to the Harvard Business Review. It was developed over 150 years ago by a German theologian. The result of this practice is a deeper understanding of natural abilities.
As an employee begins to understand their own strengths, areas of weakness will become apparent. It might be tempting to try and “fix” these areas. People should however focus their energy on improving strengths. Perfecting raw talent will take employee skills to new levels, providing companies with better long-term results.
Taking a Realistic Look at Performance
Employee development should consider a variety of learning styles. An employee must also understand how they learn. Programs that are tailored to a single type of learning won’t be successful for everyone. For example, some people learn by taking notes. If they don’t write something down, the concept doesn’t stick. Other professionals learn by fleshing out concepts with colleagues. When an employee understands their learning style, they can get the most out of development opportunities.
Employees should also understand a few characteristics about their performance style to better find their “place” in the professional workforce. Some people work best as subordinates while others are natural leaders. For example, forcing a person who is a loner into a heavy team environment won’t be a natural fit and may even hinder performance for the entire team.
Getting a Value Fit
Employees who are most effective are an organizational fit with the company’s values. People should evaluate a company’s ethics and ask themselves “Is the company’s ethics a good fit with my values?” For example, the Harvard Business Review explains that after a merger an employee was promoted to become a human resources director. The director was responsible for selecting managers and executives in the company.
The employee strongly believed that promotions should come from within the company’s talent pool. The new company, however, believed that high level positions should be recruited from outside of the organization. After several years of frustration, the human resources professional become frustrated and quit. The employee would have been much happier if she selected a company with shared values.
Another example of a “value mismatch” is an executive’s disagreement on short-term and long-term goals. Although most financial experts believe these goals can (and should) run concurrently, at times they might conflict. With some companies, long-term goals trump short term results; however, other companies have the opposite strategy. This is a fundamental philosophy that employees should understand before signing on.
Finding the Right Place
Most people don’t know where they fit career wise right off the bat. People that are highly gifted don’t usually find where they belong until they’re well into their twenties. Employees can narrow down career paths by thinking about what isn’t a good fit for their skills. For example, a mathematician may decide that she isn’t interested in managing people. Employees who understand their skills are able to say “no” when offered positions that aren’t a good fit.
Piggybacking on Co-Workers’ Talents
The majority of professionals work with co-workers on some level. When working with a team, employees need to understand their teammate’s strengths and weaknesses. Employees can draw from co-worker’s strengths, making the entire team more productive. This is also true when working with a new manager. Being intuitive about their strengths and weaknesses will help you understand how they like to manage business, anticipate areas where you can help, and build better strategies.
Creating a Challenge
Often times, after two or three decades of working, professionals get bored. Finding new ways to use strengths can revitalize your ambition. Sometimes the change is as simple as working in the same capacity, but at a different industry. While other times, a professional may apply his strengths to an entirely new career. As long as you’re focusing on strengthening and growing your core talents, a successful career will follow. Talents are mobile and being the driving force in your own career will prevent you from veering off course.
Resource:
Peter F. Drucker. “Managing Oneself.” The Harvard Business Review, January 2005.
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Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 770.399.9512 or click here to email Mark.
Wednesday, November 11, 2009
What Makes a Leader?
Bright, innovative and persuasive leaders have the special talent of winning over employees and achieving unprecedented results. Being an effective leader, however, isn’t easy for everyone. Daniel Coleman first discussed the concept of emotional intelligence in the 1998 Harvard Business Review Article “What Makes an Effective Leader?” He studied 200 large companies and found that effective leaders didn’t just have toughness, vision and motivation – they also have a high level of “emotional intelligence.”
Even if an executive is highly trained and has bright ideas, they won’t make a good leader if they don’t have emotional intelligence, according to Coleman. Fortunately, companies can learn to identify these traits and help executives develop the skills needed to support emotional intelligence.
Identifying Emotional Intelligence
When searching for senior managers and executives, a list of skills such as strategic vision and ability to take initiative are tested. During these studies Coleman found that emotional intelligence is twice as important as the other factors used for identifying future leaders. It was also determined the higher the employee was on the organizational chart, the larger role emotional intelligence played in success. For example, David McClelland, a researcher of organizational behavior, found senior managers with emotional intelligence outperformed peers by 20 percent.
The Five Components of Emotional Intelligence
There are five components of emotional intelligence including: self awareness, self-regulation, motivation, empathy and social skills. Here’s a quick breakdown of each component.
Self-Awareness: People who are self aware have a high level of confidence, sense of humor about themselves and a realistic handle on their skills. They also have the ability to understand people’s emotions and moods and their affect on other people. A person with a high degree of self-awareness will be able to turn down a lucrative job offer because it doesn’t mesh with his professional goals and values. Having a high level of self-awareness allows individuals to be more focused on their career path and avoid becoming bored and uninspired in their work.
Self-Regulation: Professionals with this skill are generally trustworthy and have a high level of integrity. They’re also open to organizational changes and have the ability to adapt well. Think of self-regulation as the inner conversation in your head. For example, Coleman discusses an executive that is angry at his team for poor performance. A manager without self-regulation may pound his hands on the table and express his frustration. An executive with a keen sense of self-regulation, however, will explain his disappointment and move on to more productive conversations about why the incident occurred.
Motivation: People with this quality are highly optimistic, even when a company is facing difficult times. Professional motivation stems from reasons deeper then compensation and status. They’re also highly energetic and persistent in their work.
When looking for people with this quality, look for executives with a track record of seeking new challenges, overcoming obstacles and a sense of pride about their work. These people are constantly looking for ways to be innovative and improve performance.
Empathy: Leaders with a high level of emotional intelligence have the ability to empathize with employees, leading to better rates of employee retention. They are able to anticipate people’s emotional reactions and diffuse situations. A manager who possesses empathy considers employee feelings when making business decisions. It doesn’t mean that “feelings” are the only factor, but simply a consideration.
Social Skills: The final skill of people with emotional intelligence is a high degree of social skills. Having these skills allows people to be more persuasive and build highly effective teams. They’re also able to build effective networks and successfully create rapport with business associates.
For example, consider an executive with a high level of social skills. He is able to be friendly with business associates while persuading them towards the desired outcome.
Training for Emotional Intelligence
Since emotional intelligence is a precursor to leadership success, many people wonder if you can “teach emotional intelligence.” Emotional intelligence resides in the brain’s limbic system. These neurotransmitters are responsible for motivation, drive and impulses. Most training programs cater to the“neocortex” of the brain which focuses on analytical abilities.
Emotional intelligence can be taught by revamping training techniques. When conducting this type of training, focus on breaking behavioral habits that work against emotional intelligence. Take for example, a sales woman who doesn’t listen well and interrupts business associates. When teaching her emotional intelligence, feedback should be given when the behavior is occurring so she can reshape her responses. An executive who doesn’t have a high degree of empathy may be feared by subordinates. Practicing situations and receiving feedback can build a higher level of empathy and boost management ability.
When hiring executives, understanding their level of emotional intelligence can enhance your company’s performance. Developing these skills in existing employees can be beneficial as well. However, building emotional intelligence is only possible if employees have a strong desire to change.
Resource:
Daniel Coleman. “What Makes a Leader?” Harvard Business Review, January 2004.
--------------------------------------------------------------------------------
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 770.399.9512 or click here to email Mark.
Even if an executive is highly trained and has bright ideas, they won’t make a good leader if they don’t have emotional intelligence, according to Coleman. Fortunately, companies can learn to identify these traits and help executives develop the skills needed to support emotional intelligence.
Identifying Emotional Intelligence
When searching for senior managers and executives, a list of skills such as strategic vision and ability to take initiative are tested. During these studies Coleman found that emotional intelligence is twice as important as the other factors used for identifying future leaders. It was also determined the higher the employee was on the organizational chart, the larger role emotional intelligence played in success. For example, David McClelland, a researcher of organizational behavior, found senior managers with emotional intelligence outperformed peers by 20 percent.
The Five Components of Emotional Intelligence
There are five components of emotional intelligence including: self awareness, self-regulation, motivation, empathy and social skills. Here’s a quick breakdown of each component.
Self-Awareness: People who are self aware have a high level of confidence, sense of humor about themselves and a realistic handle on their skills. They also have the ability to understand people’s emotions and moods and their affect on other people. A person with a high degree of self-awareness will be able to turn down a lucrative job offer because it doesn’t mesh with his professional goals and values. Having a high level of self-awareness allows individuals to be more focused on their career path and avoid becoming bored and uninspired in their work.
Self-Regulation: Professionals with this skill are generally trustworthy and have a high level of integrity. They’re also open to organizational changes and have the ability to adapt well. Think of self-regulation as the inner conversation in your head. For example, Coleman discusses an executive that is angry at his team for poor performance. A manager without self-regulation may pound his hands on the table and express his frustration. An executive with a keen sense of self-regulation, however, will explain his disappointment and move on to more productive conversations about why the incident occurred.
Motivation: People with this quality are highly optimistic, even when a company is facing difficult times. Professional motivation stems from reasons deeper then compensation and status. They’re also highly energetic and persistent in their work.
When looking for people with this quality, look for executives with a track record of seeking new challenges, overcoming obstacles and a sense of pride about their work. These people are constantly looking for ways to be innovative and improve performance.
Empathy: Leaders with a high level of emotional intelligence have the ability to empathize with employees, leading to better rates of employee retention. They are able to anticipate people’s emotional reactions and diffuse situations. A manager who possesses empathy considers employee feelings when making business decisions. It doesn’t mean that “feelings” are the only factor, but simply a consideration.
Social Skills: The final skill of people with emotional intelligence is a high degree of social skills. Having these skills allows people to be more persuasive and build highly effective teams. They’re also able to build effective networks and successfully create rapport with business associates.
For example, consider an executive with a high level of social skills. He is able to be friendly with business associates while persuading them towards the desired outcome.
Training for Emotional Intelligence
Since emotional intelligence is a precursor to leadership success, many people wonder if you can “teach emotional intelligence.” Emotional intelligence resides in the brain’s limbic system. These neurotransmitters are responsible for motivation, drive and impulses. Most training programs cater to the“neocortex” of the brain which focuses on analytical abilities.
Emotional intelligence can be taught by revamping training techniques. When conducting this type of training, focus on breaking behavioral habits that work against emotional intelligence. Take for example, a sales woman who doesn’t listen well and interrupts business associates. When teaching her emotional intelligence, feedback should be given when the behavior is occurring so she can reshape her responses. An executive who doesn’t have a high degree of empathy may be feared by subordinates. Practicing situations and receiving feedback can build a higher level of empathy and boost management ability.
When hiring executives, understanding their level of emotional intelligence can enhance your company’s performance. Developing these skills in existing employees can be beneficial as well. However, building emotional intelligence is only possible if employees have a strong desire to change.
Resource:
Daniel Coleman. “What Makes a Leader?” Harvard Business Review, January 2004.
--------------------------------------------------------------------------------
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 770.399.9512 or click here to email Mark.
Monday, November 9, 2009
Leadership Challenges: Tackling Organizational Change
No business can survive the long term without change. Human nature, however, is resistant to change. The ultimate test of a good leader may well be the ability to guide change. Whether you’re a CEO dealing with corporate financial issues or a senior manager with new innovative ideas, implementing change isn’t an easy task. But John P. Kotter, retired Harvard Business School Professor and author of Harvard Business Review article “Leading Change: Why Transformation Efforts Fail,” points out that taking the right actions during this time is essential. Creating urgency, recruiting a coalition and avoiding organizational pitfalls can be the difference between either the failure or success of an organization.
Creating Organizational Urgency
In order for change to be effective, you must first create a sense of urgency. Having cooperation at all levels of an organization will provide the momentum needed to achieve the desired result. According to Kotter, over 50% of companies fail while implementing change from a lack of urgency.
A true leader must work quickly to solicit support within the organization. By examining market and competitive realities for potential crisis and untapped opportunities, leaders will be able to back up the need for change. Presenting facts like the anticipated revenue loss if the changes aren’t made or the impact of new competition in the market can help persuade others to get on board. Sometimes it may be advantageous to have an outsider such as an analyst, consultant or customer deliver the information. Whether delivered internally or by an outsider, the message that needs to be delivered is that the status quo is far more dangerous than the unknown. This message will ramp up urgency and create a more immediate requirement for change.
Forming a Team of Advocates
Once managers understand why change is needed, they must communicate the message within the organization and get others on board. Creating a “coalition” will put more force behind your efforts and provide the momentum needed to move the changes forward.
The coalition should be a group with a shared commitment and enough power to lead the transformation. The core of the group is typically made up of senior management members. Because reform generally demands activity outside of protocol, a coalition can also include board members, customers or even union leaders. The coalition should be made up of people with strong expertise, experience, reputations and relationships. The members will work together as a team to evaluate the company’s challenges and opportunities. Companies without this powerful coalition are at risk of losing momentum and getting stuck.
Once the coalition is formed, members should work closely to create a clear vision to direct the change. It will need to be more than numbers and should describe the goals and outcomes of the proposed change. The vision needs to be easy to understand and appealing, so when communicated to others, they will buy into it. This vision will eventually evolve into the strategy for the implementation of change.
Ramping up Communication
Effective communication is vital to transformation. Communication isn’t as effective when only coming from a few individuals. The corporation needs an army of people delivering the message through all existing communication channels such as emails, speeches and employee newsletters. It is also important to remember that communication comes in both words and deeds. If members of the coalition “walk the talk” and embody the new corporate culture, the message will be more credible and powerful. This will provide employees the confidence needed to get on board and devote their energy to making the change possible.
Getting Rid of Obstacles
Employees will become frustrated if the new changes have obstacles. Managers must work hard to remove any obstacles and help employees maneuver around unanticipated problems. Otherwise employees may become irritated and resistant to the changes.
Be careful of managers who don’t support the vision and become roadblocks for employees. This can create a sub-culture that is working against the changes. It can also create a “toxic” environment by building resentment between employees and upper management.
Taking Small Steps
Transformation takes time, but people want to see evidence that the changes are producing results. If this evidence isn’t presented within 12 to 24 months, people may jump ship and start to work against the required changes. Remind managers and employees about positive results that are happening because of their hard work. This should help keep the momentum in place.
While it may be tempting to celebrate at the first sign of improvement, be careful not to declare victory too soon. Doing this may actually hinder your company’s momentum and slow down progress. People that have been fighting for change will back down and lose their sense of urgency. Keeping the sense of urgency high will help your company continue to move forward.
Even for the best leaders, change is difficult to accomplish. It can’t be achieved by one person working alone. Assembling a team and keeping your momentum strong will help win over more employees and provide the energy needed to successfully implement change. As employees witness the success of the changes, even opposing employees will begin to join your team and work towards moving the company to the next stage of success. Further, your company will be able to handle shifts in the market, competitors and technology while your rivals struggle to adapt to change.
Resource:
John P. Kotter. “Leading Change: Why Transformation Efforts Fail.” The Harvard Business Review, January 2007.
--------------------------------------------------------------------------------
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark.
Creating Organizational Urgency
In order for change to be effective, you must first create a sense of urgency. Having cooperation at all levels of an organization will provide the momentum needed to achieve the desired result. According to Kotter, over 50% of companies fail while implementing change from a lack of urgency.
A true leader must work quickly to solicit support within the organization. By examining market and competitive realities for potential crisis and untapped opportunities, leaders will be able to back up the need for change. Presenting facts like the anticipated revenue loss if the changes aren’t made or the impact of new competition in the market can help persuade others to get on board. Sometimes it may be advantageous to have an outsider such as an analyst, consultant or customer deliver the information. Whether delivered internally or by an outsider, the message that needs to be delivered is that the status quo is far more dangerous than the unknown. This message will ramp up urgency and create a more immediate requirement for change.
Forming a Team of Advocates
Once managers understand why change is needed, they must communicate the message within the organization and get others on board. Creating a “coalition” will put more force behind your efforts and provide the momentum needed to move the changes forward.
The coalition should be a group with a shared commitment and enough power to lead the transformation. The core of the group is typically made up of senior management members. Because reform generally demands activity outside of protocol, a coalition can also include board members, customers or even union leaders. The coalition should be made up of people with strong expertise, experience, reputations and relationships. The members will work together as a team to evaluate the company’s challenges and opportunities. Companies without this powerful coalition are at risk of losing momentum and getting stuck.
Once the coalition is formed, members should work closely to create a clear vision to direct the change. It will need to be more than numbers and should describe the goals and outcomes of the proposed change. The vision needs to be easy to understand and appealing, so when communicated to others, they will buy into it. This vision will eventually evolve into the strategy for the implementation of change.
Ramping up Communication
Effective communication is vital to transformation. Communication isn’t as effective when only coming from a few individuals. The corporation needs an army of people delivering the message through all existing communication channels such as emails, speeches and employee newsletters. It is also important to remember that communication comes in both words and deeds. If members of the coalition “walk the talk” and embody the new corporate culture, the message will be more credible and powerful. This will provide employees the confidence needed to get on board and devote their energy to making the change possible.
Getting Rid of Obstacles
Employees will become frustrated if the new changes have obstacles. Managers must work hard to remove any obstacles and help employees maneuver around unanticipated problems. Otherwise employees may become irritated and resistant to the changes.
Be careful of managers who don’t support the vision and become roadblocks for employees. This can create a sub-culture that is working against the changes. It can also create a “toxic” environment by building resentment between employees and upper management.
Taking Small Steps
Transformation takes time, but people want to see evidence that the changes are producing results. If this evidence isn’t presented within 12 to 24 months, people may jump ship and start to work against the required changes. Remind managers and employees about positive results that are happening because of their hard work. This should help keep the momentum in place.
While it may be tempting to celebrate at the first sign of improvement, be careful not to declare victory too soon. Doing this may actually hinder your company’s momentum and slow down progress. People that have been fighting for change will back down and lose their sense of urgency. Keeping the sense of urgency high will help your company continue to move forward.
Even for the best leaders, change is difficult to accomplish. It can’t be achieved by one person working alone. Assembling a team and keeping your momentum strong will help win over more employees and provide the energy needed to successfully implement change. As employees witness the success of the changes, even opposing employees will begin to join your team and work towards moving the company to the next stage of success. Further, your company will be able to handle shifts in the market, competitors and technology while your rivals struggle to adapt to change.
Resource:
John P. Kotter. “Leading Change: Why Transformation Efforts Fail.” The Harvard Business Review, January 2007.
--------------------------------------------------------------------------------
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark.
Monday, September 14, 2009
Increasing Efficiently: Is Your Company’s Framework Working Against You?
Even if a company hires the most talented individuals, ineffective processes and procedures will hinder a company’s prosperity. In addition, having a rigid structure that doesn’t respond well to change can limit a company’s ability to grow. Mastering a few strategies for managing disruptions in processes and procedures can give your company a competitive edge.
Finding Organizational Fit In Employees
A company can increase their success by devoting resources to finding the right person for the right job. Even if the person is highly capable with an impressive background, if they aren’t a good match for the organization, the effects can be felt across the entire company. Work closely with managers to develop a list of desirable employee characteristics. Also, potential employees should have the potential to grow within the organization.
Understanding Your Company’s Strengths
According to the Harvard Business Review article “Meeting the Challenge of Disruptive Change,” there are three critical factors that influence success:
1. Resources. When evaluating resources, don’t just look at technology and equipment. Expand your thinking to your company’s branding, current customer base and success with vendors.
2. Processes. When considering your processes, evaluate your company’s current communication processes and framework to determine if it’s formal or less formal. Determine if the current style is still a good fit for your company and if it can accommodate new products and services – or will it bog down the process, and hamper efficiency? Once you’ve identified areas that need improvement, you can create an action plan for change.
3. Values. The last factor that helps a company understand their strengths is analyzing corporate values. Values aren’t just the core values posted on your company’s website. They extend further than this. Values include how employees operate during their daily tasks, how they handle customers and prioritize daily tasks. As a company grows, it becomes increasingly important that employees are trained to operate in a way that fits the company’s values and strategic vision. Organizational values should not just be listed on paper. They should become a part of the company’s culture.
Maximizing Your Strengths
Once your company has fine tuned the resources, processes and values, it is time to focus on identifying opportunities for innovation within your company. For example, in the Harvard Business Review article “Meeting the Challenge of Disruptive Change,” Merrill Lynch introduced the Cash Management account. This development allowed clients to use checks to tap into their equity accounts. Merrill Lynch marketed this feature to customers and the response was positive. Finding ways to provide customers with new innovations, while capitalizing on your company’s strengths and values, will allow you to create more opportunities for revenue. Also, make sure that your company has a framework that allows frequent innovations.
Fostering Innovation
Although the majority of innovation is positive for a company, at times, it can also be disruptive. For example, new innovations that go unnoticed by customers create a disruption. Many companies do not have a process for dealing with these disruptions. Creating strategic plans to deal with these issues will help your company handle these challenges better.
Creating Successful Teams
When refining your company’s processes and procedures, consider forming a team dedicated to the new challenge. The size of the team will depend how well the innovation fits within the organization’s current framework. For example, if the new innovation doesn’t fit well within your framework, consider hiring a larger team to manage the task closely. These individuals should be recruited from other business units across your company. However, if the innovation is a good fit within the current structure, create a very small team within your company’s current employee base. Each player on the team should have a specific function to move the idea from concept to market.
Enhancing Capabilities Through Acquisition Activity
When looking to purchase capabilities, companies often acquire a new company. However, during this process, senior managers should evaluate the company processes and values. For example, according to the Harvard Business Review article “Meeting the Challenge of Disruptive Change,” if an organization has been purchased solely for its process and values, it shouldn’t be integrated into the parent company. This will jeopardize the new company’s processes and values (which is why you purchased the company in the first place). Instead, allow the business to function as a stand alone company.
Taking the time to evaluate your company’s processes can get rid of roadblocks and frustration, allowing your company more opportunities to grow and prosper. Making changes to ensure your company has the right processes and procedures in place will support innovation and your company’s core values.
Resource:
Clayton M Christensen and Michael Overdorf. “Meeting the Challenge of Disruptive Change.” Harvard Business Review, March-April 2000.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark. .
Finding Organizational Fit In Employees
A company can increase their success by devoting resources to finding the right person for the right job. Even if the person is highly capable with an impressive background, if they aren’t a good match for the organization, the effects can be felt across the entire company. Work closely with managers to develop a list of desirable employee characteristics. Also, potential employees should have the potential to grow within the organization.
Understanding Your Company’s Strengths
According to the Harvard Business Review article “Meeting the Challenge of Disruptive Change,” there are three critical factors that influence success:
1. Resources. When evaluating resources, don’t just look at technology and equipment. Expand your thinking to your company’s branding, current customer base and success with vendors.
2. Processes. When considering your processes, evaluate your company’s current communication processes and framework to determine if it’s formal or less formal. Determine if the current style is still a good fit for your company and if it can accommodate new products and services – or will it bog down the process, and hamper efficiency? Once you’ve identified areas that need improvement, you can create an action plan for change.
3. Values. The last factor that helps a company understand their strengths is analyzing corporate values. Values aren’t just the core values posted on your company’s website. They extend further than this. Values include how employees operate during their daily tasks, how they handle customers and prioritize daily tasks. As a company grows, it becomes increasingly important that employees are trained to operate in a way that fits the company’s values and strategic vision. Organizational values should not just be listed on paper. They should become a part of the company’s culture.
Maximizing Your Strengths
Once your company has fine tuned the resources, processes and values, it is time to focus on identifying opportunities for innovation within your company. For example, in the Harvard Business Review article “Meeting the Challenge of Disruptive Change,” Merrill Lynch introduced the Cash Management account. This development allowed clients to use checks to tap into their equity accounts. Merrill Lynch marketed this feature to customers and the response was positive. Finding ways to provide customers with new innovations, while capitalizing on your company’s strengths and values, will allow you to create more opportunities for revenue. Also, make sure that your company has a framework that allows frequent innovations.
Fostering Innovation
Although the majority of innovation is positive for a company, at times, it can also be disruptive. For example, new innovations that go unnoticed by customers create a disruption. Many companies do not have a process for dealing with these disruptions. Creating strategic plans to deal with these issues will help your company handle these challenges better.
Creating Successful Teams
When refining your company’s processes and procedures, consider forming a team dedicated to the new challenge. The size of the team will depend how well the innovation fits within the organization’s current framework. For example, if the new innovation doesn’t fit well within your framework, consider hiring a larger team to manage the task closely. These individuals should be recruited from other business units across your company. However, if the innovation is a good fit within the current structure, create a very small team within your company’s current employee base. Each player on the team should have a specific function to move the idea from concept to market.
Enhancing Capabilities Through Acquisition Activity
When looking to purchase capabilities, companies often acquire a new company. However, during this process, senior managers should evaluate the company processes and values. For example, according to the Harvard Business Review article “Meeting the Challenge of Disruptive Change,” if an organization has been purchased solely for its process and values, it shouldn’t be integrated into the parent company. This will jeopardize the new company’s processes and values (which is why you purchased the company in the first place). Instead, allow the business to function as a stand alone company.
Taking the time to evaluate your company’s processes can get rid of roadblocks and frustration, allowing your company more opportunities to grow and prosper. Making changes to ensure your company has the right processes and procedures in place will support innovation and your company’s core values.
Resource:
Clayton M Christensen and Michael Overdorf. “Meeting the Challenge of Disruptive Change.” Harvard Business Review, March-April 2000.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark. .
Building an Innovation Portfolio: Avoid the Classic Traps
Creating innovative products and services doesn’t just allow companies to expand market share – it provides an opportunity to enter new markets and come up with new processes to enhance productivity. When tackling these projects, there are many pitfalls and roadblocks along the way. Projects that don’t have enough direction or too many constraints can face problems. But, learning common mistakes provides an opportunity to enhance innovation and achieve your goals.
The Balancing Act
In some ways, tackling innovation is like a balancing act. Many companies struggle to strike a balance between maintaining current research and development projects while adding new projects into the mix. Having a healthy mix of innovation in different life cycles will allow your company more opportunities for growth.
Broaden Innovation Strategy
When presented with a new innovation opportunity, executives typically evaluate the opportunity’s potential for high margins. Ideas with low margins may be rejected assuming that revenue opportunities are too small. However, rejecting ideas on these assumptions can limit your company’s ability to grow and expand to new markets. Instead, research all viable opportunities (even the small ones) to determine the long-term potential.
Also, don’t get caught up in chasing the next huge hit. The potential for high margins lure many companies into chasing after the next big thing. While it’s possible to come up with the next hit on the market, don’t forget to diversify. This way, if your “huge idea” doesn’t hit the big time, your innovation portfolio is diverse enough to provide other avenues for revenue. Find a mix of high and low risk opportunities to diverse your company’s innovation portfolio.
For example, companies looking to expand innovation should have a few “potential high revenue” opportunities at the top (yielding high margins and a premium pricing point), several promising midrange ideas and a larger base of ideas that are in the early stages of planning but still have promise. This pyramid approach has achieved high results for many companies.
Make Processes More Flexible
Stringent rules and regulations don’t create an ideal environment for innovation. Although new projects shouldn’t have free reign, there needs to be a balance between having a rigid structure and creating a system with more flexibility. According to the Harvard Review article “Innovation, The Classic Traps,” creating a reserve account for unplanned expenses resulting from innovation can help your company have more flexibility.
Break Barriers Across Departments
The task of innovation shouldn’t be limited to a handful of employees and executives. It’s important that those who are involved in daily business activities be tightly connected with innovators. For example, your business could create an innovation committee, charged with coming up with new ideas, running “real life” scenarios, and getting input from employees on the front line. This will help close the gap between the “idea generators” and those who are charged with executing and delivering the new products and services to the end users.
Look Beyond Technical Skills
When choosing the players on your innovation team, don’t just choose individuals with technical skills. They should also possess a high level of communication and interpersonal skills. Having team members who possess these skills will help break the barriers across business unit lines. For example, in the Harvard Business Review article “Innovation, The Classic Traps,” it highlights Williams-Sonoma’s e-commerce group, which choose a manager that wasn’t a technology expert, but was highly skilled in assembling a strong team of employees. With this expertise, she was able to build a team with diverse skills to generate and implement new innovative ideas that helped the company grow.
The people in charge of innovation should also be natural leaders. Although the leader doesn’t need to be an expert in the specific venture, they must be able to solicit support, partner with internal experts and execute innovation to drive success. It is important to find managers with the ability to get employees passionate about ventures. This will drive creativity, teamwork and success in your innovation projects.
Look Outside of Product Innovation
Innovation teams shouldn’t be limited to creating new products or services. In fact, they can create ideas that make distribution or marketing more efficient, increase customer value and drive down costs. Having a good mix of product, service and business operation innovation strategies will help make your innovation portfolio more diverse and positively affect your revenue.
Balancing your company’s innovation leadership, team players and mix of ideas won’t just help your company come up with better strategies – you’ll benefit from better execution as well. Companies can also learn from past mistakes and implement those lessons for future success.
Resource:
Rosabeth Moss Kanter. “Innovation, The Classic Traps.” The Harvard Business Review, November 2006.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark. .
The Balancing Act
In some ways, tackling innovation is like a balancing act. Many companies struggle to strike a balance between maintaining current research and development projects while adding new projects into the mix. Having a healthy mix of innovation in different life cycles will allow your company more opportunities for growth.
Broaden Innovation Strategy
When presented with a new innovation opportunity, executives typically evaluate the opportunity’s potential for high margins. Ideas with low margins may be rejected assuming that revenue opportunities are too small. However, rejecting ideas on these assumptions can limit your company’s ability to grow and expand to new markets. Instead, research all viable opportunities (even the small ones) to determine the long-term potential.
Also, don’t get caught up in chasing the next huge hit. The potential for high margins lure many companies into chasing after the next big thing. While it’s possible to come up with the next hit on the market, don’t forget to diversify. This way, if your “huge idea” doesn’t hit the big time, your innovation portfolio is diverse enough to provide other avenues for revenue. Find a mix of high and low risk opportunities to diverse your company’s innovation portfolio.
For example, companies looking to expand innovation should have a few “potential high revenue” opportunities at the top (yielding high margins and a premium pricing point), several promising midrange ideas and a larger base of ideas that are in the early stages of planning but still have promise. This pyramid approach has achieved high results for many companies.
Make Processes More Flexible
Stringent rules and regulations don’t create an ideal environment for innovation. Although new projects shouldn’t have free reign, there needs to be a balance between having a rigid structure and creating a system with more flexibility. According to the Harvard Review article “Innovation, The Classic Traps,” creating a reserve account for unplanned expenses resulting from innovation can help your company have more flexibility.
Break Barriers Across Departments
The task of innovation shouldn’t be limited to a handful of employees and executives. It’s important that those who are involved in daily business activities be tightly connected with innovators. For example, your business could create an innovation committee, charged with coming up with new ideas, running “real life” scenarios, and getting input from employees on the front line. This will help close the gap between the “idea generators” and those who are charged with executing and delivering the new products and services to the end users.
Look Beyond Technical Skills
When choosing the players on your innovation team, don’t just choose individuals with technical skills. They should also possess a high level of communication and interpersonal skills. Having team members who possess these skills will help break the barriers across business unit lines. For example, in the Harvard Business Review article “Innovation, The Classic Traps,” it highlights Williams-Sonoma’s e-commerce group, which choose a manager that wasn’t a technology expert, but was highly skilled in assembling a strong team of employees. With this expertise, she was able to build a team with diverse skills to generate and implement new innovative ideas that helped the company grow.
The people in charge of innovation should also be natural leaders. Although the leader doesn’t need to be an expert in the specific venture, they must be able to solicit support, partner with internal experts and execute innovation to drive success. It is important to find managers with the ability to get employees passionate about ventures. This will drive creativity, teamwork and success in your innovation projects.
Look Outside of Product Innovation
Innovation teams shouldn’t be limited to creating new products or services. In fact, they can create ideas that make distribution or marketing more efficient, increase customer value and drive down costs. Having a good mix of product, service and business operation innovation strategies will help make your innovation portfolio more diverse and positively affect your revenue.
Balancing your company’s innovation leadership, team players and mix of ideas won’t just help your company come up with better strategies – you’ll benefit from better execution as well. Companies can also learn from past mistakes and implement those lessons for future success.
Resource:
Rosabeth Moss Kanter. “Innovation, The Classic Traps.” The Harvard Business Review, November 2006.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark. .
Friday, August 7, 2009
Marketing Myopia: Expand Your Vision and Strategy
Even if your company has a successful product with very little competition, it’s important to stay on the defense. Getting too comfortable can leave you vulnerable to competitors – or, even worse, leave you unprotected if your product becomes obsolete. This process starts by shifting from a sales based approach to a marketing based approach, allowing you to focus more heavily on the customers’ current and future needs.
Defining your Business
When defining your business, it’s important to have an open mind. For example, a car manufacturer may choose to expand their business from automobiles to transportation – looking at new ways to address customers’ needs. Having a vague or outdated definition of your business can negatively impact the future of your company and severely limit growth opportunities.
Reshaping your Focus
Companies need to think about customers in a new way. Often times, companies are focused on sales efforts which directly impact revenue. However, understanding the customers’ unique needs, and addressing them through marketing efforts, will do a better job of driving results.
Piggybacking on New Innovation
New technology that makes a company’s core products irrelevant or obsolete often feels devastating. However, this should be a welcomed opportunity for businesses, allowing them to tap into new customer needs, or even serve an untapped market segment. This can also reduce the amount of time a company spends at the drawing board coming up with new products designed to sustain and grow a company.
Watching for Signals of a Changing Industry
According to the Harvard Business Review’s article “Marketing Myopia,” there are four factors that can indicate that turbulent conditions may be ahead. Here’s a quick breakdown:
Defining your Business
When defining your business, it’s important to have an open mind. For example, a car manufacturer may choose to expand their business from automobiles to transportation – looking at new ways to address customers’ needs. Having a vague or outdated definition of your business can negatively impact the future of your company and severely limit growth opportunities.
Reshaping your Focus
Companies need to think about customers in a new way. Often times, companies are focused on sales efforts which directly impact revenue. However, understanding the customers’ unique needs, and addressing them through marketing efforts, will do a better job of driving results.
Piggybacking on New Innovation
New technology that makes a company’s core products irrelevant or obsolete often feels devastating. However, this should be a welcomed opportunity for businesses, allowing them to tap into new customer needs, or even serve an untapped market segment. This can also reduce the amount of time a company spends at the drawing board coming up with new products designed to sustain and grow a company.
Watching for Signals of a Changing Industry
According to the Harvard Business Review’s article “Marketing Myopia,” there are four factors that can indicate that turbulent conditions may be ahead. Here’s a quick breakdown:
- There isn’t any competition for your product. Once your product gains popularity, competitors will quickly swoop in to cash in on the new “needs” created by the product.
- Your product serves an affluent client base. This gives businesses a false illusion that their product is safe from the highs and lows of market conditions.
- Having too much confidence in pricing the product lower, and selling more volume. This creates a disproportionate focus on sales instead of marketing efforts. These two components need to be carefully balanced.
- Your product is reliant on scientific experimentation and improvement to continue to grow.
Focusing on Improving Efficiency
Many companies focus on improving efficiency in hopes that larger profits and growth will follow. However, this can be a mistake for companies if it results in neglecting other important areas, such as focusing on marketing efforts or improving their generic product for future growth. Striking a balance between these factors will produce the best results.
Breaking a False Sense of Security
Often times, when a company creates a product that appeals to an affluent consumer base, they feel overly confident in the success of their business. This lack of focus can open up opportunities for other competitors to create products that appeal to the customers’ needs.
Also, some companies have the misconception that their product is “indispensable.” Although you might not see an immediate substitute for your product, it’s important to not get too comfortable. New developments in the market can quickly make your core product irrelevant, which will result in a downward spiral of profits.
Evaluating Mass Production
As a product gains popularity, often times a company will ramp up production to drive down per unit cost. However, companies should be careful about managing this process. This also creates a high amount of pressure to “move” the product. This attitude can shift the focus of staff to sales, rather then marketing the product to drive sales. This process is important because selling focuses on meeting the needs of your company, while marketing addresses the needs of the consumer. And, ultimately what drives growth is the connection consumers feel with your product.
Creating an Emotional Connection with Consumers
When a consumer is purchasing a product, they need to be able to connect with the item. For example, products that consumers “have” to buy instead of “want” to buy lack emotional appeal. For this reason, it’s important to approach these products differently. For example, buying gas for your car isn’t always pleasurable, but getting more gas mileage or another added benefit can create an emotional connection. This will drive growth in sales, and create enhanced profitability.
Creating Better Marketing Campaigns
Focusing on creating more creative advertising strategies and sales promotional strategies can protect your product from competition, and help establish a unique position for new products. Often times, when exploring these strategies, companies will discover they haven’t asked basic marketing and sales questions.
Changing the way your company thinks about marketing can give your business a competitive edge in the marketplace. Also, understanding that even though your company has a strong position in the marketplace right now – it’s possible for that to change anytime. Investing resources in marketing will help protect and grow your company in the future.
Resource:
Theordore Levitt. “Marketing Myopia.” Harvard Business Review.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark.
Winning Over the Marketplace: Competing with Analytics
Maintaining and expanding your position in the current marketplace is essential for survival and growth. But many businesses are left asking the question, “What strategies can drive better success?” This is especially true if your company has a disadvantage, like higher pricing due to competition from companies that use offshore production.
But, even without the best pricing, there are ways to differentiate your products, become a market leader, and ultimately maximize your revenue. Analytics is the new “secret weapon” of choice for many companies. Having a heavy focus on analytics allows companies to make better decisions based on a high quality of data and analysis.
These tools can be used for a variety of functions, from determining pricing strategies to enhancing your company’s brand loyalty. But, before tackling your analytics strategy, it helps to have a few pointers.
Choosing your Focus
When creating a plan for analytics, it’s important to focus your efforts on areas with potential for the largest impact. Developing data and strategies around these areas pave the way for market leadership, and better results. Here are a few items to consider:
But, even without the best pricing, there are ways to differentiate your products, become a market leader, and ultimately maximize your revenue. Analytics is the new “secret weapon” of choice for many companies. Having a heavy focus on analytics allows companies to make better decisions based on a high quality of data and analysis.
These tools can be used for a variety of functions, from determining pricing strategies to enhancing your company’s brand loyalty. But, before tackling your analytics strategy, it helps to have a few pointers.
Choosing your Focus
When creating a plan for analytics, it’s important to focus your efforts on areas with potential for the largest impact. Developing data and strategies around these areas pave the way for market leadership, and better results. Here are a few items to consider:
- Research and Development: Many companies allocate large resources on research and development, which can be smart when done effectively. When managing this area, use analytics to improve the effectiveness of this process.
- Brand Loyalty: Once you’ve identified the most profitable market segment, it’s important to focus efforts on measurable retention strategies. Analytics can help you gather the information needed to accomplish your goal. This will enhance brand loyalty, and create lasting momentum for your company.
- Quality of Services or Products: Catching problems before they become widespread will help you quickly contain problems, and create solutions. Analytics can help you track this information, and create strategies for improvement.
- Supply Chain Management: Holding inventory too long is expensive and can negatively affect your bottom line. The quicker your product moves, the less holding costs, and the more revenue. Using analytics to manage this process will allow you to operate more efficiently, and have better cash flow.
Fine Tuning Pricing Strategies
An important part of analytics is determining your consumer’s threshold for pricing, and setting a pricing point accordingly. You can also expand your offerings, as discussed in The Harvard Business Review article, “Competing on Analytics.” After mastering pricing strategy, Marriott International expanded their expertise to areas like conferences, catering, and internet sales. This gave the company many opportunities to fine tune pricing, and appeal to profitable market segments.
Focusing on Retention Strategies
Most businesses know it’s more expensive to generate new customers than retaining your existing customer base. This means that developing optimized programs and targeting your loyal customers is worth the expense. Allocating resources on analytics focused on this area will yield positive results.
Shaping Revenue Strategies
In addition to implementing a retention program, companies should consider measurement tools which allow tracking for optimal revenue potential. For example, in the same article “Competing on Analytics” by the Harvard Business Review, Marriott created a revenue-management system that was designed to measure and grow revenue. Using this measurement tool allowed Marriott to grow their revenue from 83% to 91%.
High Impact Analytics Teams
When incorporating analytics into your company’s strategy, consider choosing skilled employers across all business units to join the team. For example, employees working in business units such as: marketing, operations, sales, and consumer research can maximize the impact of your team. That’s because a variety of backgrounds allows greater insight into the process and strategy behind analytics.
Role of Leadership in Analytics
Although not every CEO or senior manager has a background in statistics, having a trusted group of advisors can help them wade through information easier resulting in better decisions. These leaders should have internal consultants with expertise in this area to assist with questions. Also, when hiring employees in all departments, make sure there is a nice cross-section of employees who are skilled in analytics.
Managing and Sharing Analytics Data
The data collected during the analytics process is valuable across all sectors of your organization. For example, analytics can be used for developing pricing and promotional strategies - and for sharing with vendors and business partners to work towards future strategies and promotions.
In addition, this information can be used to tell a story about your company. Results generated from this information are valuable in your annual report, investor communications, and even marketing materials.
Balancing Analytics
Overcoming disadvantages in the marketplace isn’t easy. But having analytics on your side will enhance performance, and drive revenue. And remember that analytics should guide your decisions, but ultimately you’ll also need to trust your instincts. Using facts to direct your company’s resources, combined with your business instincts, will yield the best results.
Resource:
Author Info. “Competing on Analytics.” Harvard Business Review, January 2006
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark.
Thursday, July 2, 2009
The Balanced Score Card: Driving Better Performance
Whether your company is a market leader or brand new to the marketplace, all companies are constantly looking for fresh new ways to stay ahead of the competition. Although there are a wide variety of strategy and measurement tools, the balanced score card is a tool that ties these two components together.
This measurement tool was first introduced in the Harvard Business Journal in 1992. The balanced scorecard was designed to provide executives with a new formula for developing a company’s strategic objectives, while creating measurement tools. This tool quickly proved to be successful at motivating executives to come up with breakthroughs in critical areas, such as customer service and bringing new products to market.
While many companies have measurement tools, they are often disjointed and disconnected from financial initiatives. Some companies use the yearly budgeting tool to facilitate planning. However, this can leave gaps in planning and fail to address important points.
Implementing the Balanced Score Card
Introducing the balanced score card is a process that takes hard work from senior management and employees to drive success. Here’s a quick breakdown of the three steps needed to launch this planning tool:
1. Determine which Business Units Needs the Card
The first step in implementing a balanced scorecard is making a list of business units that will use the tool. According to the Harvard Business Review, a scorecard is appropriate for business units that have their own customers, production facilities, channels for distribution and financial performance measures. Once you’ve defined which business units will need their own scorecard, you’ll need to bring senior managers up to speed on the process.
2. Partner with Management Teams
Each senior manager should receive general information about how the balanced scorecard works and the benefits. Once the management team has reviewed the information, they will meet with the facilitator to discuss ideas and input for the process. In these meetings, senior managers will also accomplish the definition of success factors, the company’s mission and performance measures.
After the initial meeting, senior managers will meet for a second workshop to further define the scorecard goals. The attendees of this meeting will be more diverse including senior managers and high level and middle managers. At this meeting, an implementation plan will be developed.
Then, a final meeting will be held with the executive team only. In this meeting, the team will come up with a final plan for the company’s objectives and how they will be measured. During this process, senior management will also need to develop a strategy for rolling the process out to employees.
3. Implementing and Reviewing the Balanced Scorecard
Once all of the details of the balanced scorecard have been finalized, management will need to implement the scorecard. This process includes communication with employees and putting support in place for the new measurement systems. Once the information has been implemented, the scorecard will need to be reviewed quarterly to measure effectiveness and performance. In addition, the senior management team should evaluate the scorecard annually. In this meeting, they will need to determine if the measures still fit in terms of strategic planning and resource allocation.
Trying a Pilot Program
Some companies decide to start out slower when implementing the balanced scorecard. In these cases, a company can launch a pilot program in specific divisions to test the program’s effectiveness. During this process, many companies choose to focus on output measures to drive better success.
After the program has been launched, the company can evaluate the effectiveness of the program and determine if it should be integrated across the entire company.
External Reporting Issues
Many companies wonder if the balanced scorecard should be included in external reporting. The Stanford Business Review explains that the scorecard isn’t easily translated to the investment community. This tool is primarily useful for internal purposes that plan and shape the future of an organization. Also, the information used in the scorecard is sensitive and should be protected.
Getting Rid of Benchmarking
Although benchmarking is a common performance tool, companies often find this requires an investment without much return. If your company is using benchmarking, you’ll need to discontinue it when launching the balanced scorecard. Since the balanced scorecard focuses on output instead of process, it generally can’t be used in conjunction with benchmarking.
When adapting a balanced scorecard, remember to keep it simple. Companies that get carried away, adding hundreds or even thousands of performance goals, don’t get the full benefits. Instead, keep your goals to a dozen or less. The results of using this tool will be well worth the investment and will provide a solid foundation to grow and preserve your business.
Resource:Robert S. Kaplan and David P. Norton. “Putting the Balanced Scorecard to Work.” Harvard Business Review.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark.
This measurement tool was first introduced in the Harvard Business Journal in 1992. The balanced scorecard was designed to provide executives with a new formula for developing a company’s strategic objectives, while creating measurement tools. This tool quickly proved to be successful at motivating executives to come up with breakthroughs in critical areas, such as customer service and bringing new products to market.
While many companies have measurement tools, they are often disjointed and disconnected from financial initiatives. Some companies use the yearly budgeting tool to facilitate planning. However, this can leave gaps in planning and fail to address important points.
Implementing the Balanced Score Card
Introducing the balanced score card is a process that takes hard work from senior management and employees to drive success. Here’s a quick breakdown of the three steps needed to launch this planning tool:
1. Determine which Business Units Needs the Card
The first step in implementing a balanced scorecard is making a list of business units that will use the tool. According to the Harvard Business Review, a scorecard is appropriate for business units that have their own customers, production facilities, channels for distribution and financial performance measures. Once you’ve defined which business units will need their own scorecard, you’ll need to bring senior managers up to speed on the process.
2. Partner with Management Teams
Each senior manager should receive general information about how the balanced scorecard works and the benefits. Once the management team has reviewed the information, they will meet with the facilitator to discuss ideas and input for the process. In these meetings, senior managers will also accomplish the definition of success factors, the company’s mission and performance measures.
After the initial meeting, senior managers will meet for a second workshop to further define the scorecard goals. The attendees of this meeting will be more diverse including senior managers and high level and middle managers. At this meeting, an implementation plan will be developed.
Then, a final meeting will be held with the executive team only. In this meeting, the team will come up with a final plan for the company’s objectives and how they will be measured. During this process, senior management will also need to develop a strategy for rolling the process out to employees.
3. Implementing and Reviewing the Balanced Scorecard
Once all of the details of the balanced scorecard have been finalized, management will need to implement the scorecard. This process includes communication with employees and putting support in place for the new measurement systems. Once the information has been implemented, the scorecard will need to be reviewed quarterly to measure effectiveness and performance. In addition, the senior management team should evaluate the scorecard annually. In this meeting, they will need to determine if the measures still fit in terms of strategic planning and resource allocation.
Trying a Pilot Program
Some companies decide to start out slower when implementing the balanced scorecard. In these cases, a company can launch a pilot program in specific divisions to test the program’s effectiveness. During this process, many companies choose to focus on output measures to drive better success.
After the program has been launched, the company can evaluate the effectiveness of the program and determine if it should be integrated across the entire company.
External Reporting Issues
Many companies wonder if the balanced scorecard should be included in external reporting. The Stanford Business Review explains that the scorecard isn’t easily translated to the investment community. This tool is primarily useful for internal purposes that plan and shape the future of an organization. Also, the information used in the scorecard is sensitive and should be protected.
Getting Rid of Benchmarking
Although benchmarking is a common performance tool, companies often find this requires an investment without much return. If your company is using benchmarking, you’ll need to discontinue it when launching the balanced scorecard. Since the balanced scorecard focuses on output instead of process, it generally can’t be used in conjunction with benchmarking.
When adapting a balanced scorecard, remember to keep it simple. Companies that get carried away, adding hundreds or even thousands of performance goals, don’t get the full benefits. Instead, keep your goals to a dozen or less. The results of using this tool will be well worth the investment and will provide a solid foundation to grow and preserve your business.
Resource:Robert S. Kaplan and David P. Norton. “Putting the Balanced Scorecard to Work.” Harvard Business Review.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark.
The Core Competence of the Corporation: Develop for Growth
Often times, companies discover that losing sight of core competencies isn’t difficult. With expanding technology, many businesses find themselves offering new products and services that simply don’t mesh with their core competencies. But the problem is, losing sight of these attributes can severely limit a company’s success and hamper future opportunities for growth. Investing time in developing a set of strong core competencies can give a company the ability to expand product offerings, and drive profit - without sacrificing the foundation of the company.
Developing Core Competencies
When perfecting core competencies, it’s important to ask a few questions about your current product offerings. Determine if your current core competencies allow you to tap into a variety of markets. If not, you could be limiting your company’s ability to grow in the future. Also, determine if your competencies are producing strong benefits to consumers. And finally, make sure your competencies aren’t generic and competitors can’t “copy” your unique abilities.
Reshaping Management Strategies
Although market leaders make developing core competencies look easy, it’s often the complete opposite. This leaves many businesses wondering “what’s the secret?” These skilled companies are able to design competencies that are flexible; they can easily change with the marketplace. When rethinking these attributes, keep in mind that products need to be capable of adapting to a consumer’s desire for functionality and likeability.
This may sound straightforward, but in practice, accomplishing this task is often difficult. Companies need strong management to make these changes. And often times, management changes will be needed. Maximizing internal resources can also help companies recognize their core competencies and then develop additional opportunities.
Making Core Competencies Stronger
Once a company has identified core competencies, it’s important to strengthen those attributes to drive success. Putting together groups and committees that include individuals from all business units of the organization can help a company develop stronger core competencies. During this process, the company will also need to look at how funds are allocated. For example, if a large chunk of the budget is allocated for breaking into emerging markets, some of that money should be shifted back to strengthening core competencies.
Organizing Delivery Value
Before a company can successfully strengthen their core competencies, they must determine the delivery value. Marketers, salespeople and production staff must all understand the customer’s needs and how to deliver a message and product that fits perfectly with those needs. This will allow companies to differentiate their products from key competitors and earn a reputation as the market leader.
Partnering with Employees
Senior managers should invest time in employees so they understand the company’s core competencies. Employees who work in a “silo” environment are so focused on their individual tasks they often can’t see the big picture. Integrating employees into a process that helps connect their job function to core competencies can help employees have a broader focus. They will also be able to share their experience with other individuals in the organization, which is crucial to success.
Protecting Core Competencies
If a company loses sight of core competencies, they can often lose their best assets in the marketplace. These attributes provide strength and lay the foundation to develop new products and technologies. Keeping core competencies in mind when entering new markets can also help guide success. The Harvard Business Review article “The Core Competence of the Corporation” discusses 3M’s competency with sticky tape. The company recognized that their core competency lay with sticky tapes and developed the famous post-it-notes, magnetic tape and pressure sensitive tapes. Although the company’s product offerings are broad, each product can still be tied to the company’s core competencies.
Perfecting Technology
Technology is an important driver to success. For example, auto manufactures often have distinct engines that give them a competitive advantage in the market place. This is also true for video cameras, digital cameras and computers. Focusing on technology provides a core competency that customers start to recognize and feel a loyalty towards.
Also, over time the marketplace changes and consumers demand technology advances. For example, many consumers are drawn to “miniaturization,” wanting smaller, sleeker and more advanced products. Companies that anticipate these advances and incorporate them into current core competencies can gain market share and drive up profits.
Protecting Core Competencies
The Harvard Business Review article explains that companies who judge their competitiveness by pricing and performance of end products are risking the erosion of core competencies. Outsourcing important components can often be a mistake. Instead of outsourcing, companies should try to keep unique technology and designs in-house instead of trusting them with an outsourced company. This allows a company to keep control over their core products and services and have greater power to determine future success.
Investing in the development and preservation of core competencies can help a company enter markets more effectively and develop a market leader position. All business units must work together and share talented employees for the greater good of the company. Managers must be willing to circulate talent and skills to protect and build the most effective core competencies.
Resource:C.K. Prahalad and Gary Hamel. “The Core Competence of the Corporation.” Harvard Business Review.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark.
Developing Core Competencies
When perfecting core competencies, it’s important to ask a few questions about your current product offerings. Determine if your current core competencies allow you to tap into a variety of markets. If not, you could be limiting your company’s ability to grow in the future. Also, determine if your competencies are producing strong benefits to consumers. And finally, make sure your competencies aren’t generic and competitors can’t “copy” your unique abilities.
Reshaping Management Strategies
Although market leaders make developing core competencies look easy, it’s often the complete opposite. This leaves many businesses wondering “what’s the secret?” These skilled companies are able to design competencies that are flexible; they can easily change with the marketplace. When rethinking these attributes, keep in mind that products need to be capable of adapting to a consumer’s desire for functionality and likeability.
This may sound straightforward, but in practice, accomplishing this task is often difficult. Companies need strong management to make these changes. And often times, management changes will be needed. Maximizing internal resources can also help companies recognize their core competencies and then develop additional opportunities.
Making Core Competencies Stronger
Once a company has identified core competencies, it’s important to strengthen those attributes to drive success. Putting together groups and committees that include individuals from all business units of the organization can help a company develop stronger core competencies. During this process, the company will also need to look at how funds are allocated. For example, if a large chunk of the budget is allocated for breaking into emerging markets, some of that money should be shifted back to strengthening core competencies.
Organizing Delivery Value
Before a company can successfully strengthen their core competencies, they must determine the delivery value. Marketers, salespeople and production staff must all understand the customer’s needs and how to deliver a message and product that fits perfectly with those needs. This will allow companies to differentiate their products from key competitors and earn a reputation as the market leader.
Partnering with Employees
Senior managers should invest time in employees so they understand the company’s core competencies. Employees who work in a “silo” environment are so focused on their individual tasks they often can’t see the big picture. Integrating employees into a process that helps connect their job function to core competencies can help employees have a broader focus. They will also be able to share their experience with other individuals in the organization, which is crucial to success.
Protecting Core Competencies
If a company loses sight of core competencies, they can often lose their best assets in the marketplace. These attributes provide strength and lay the foundation to develop new products and technologies. Keeping core competencies in mind when entering new markets can also help guide success. The Harvard Business Review article “The Core Competence of the Corporation” discusses 3M’s competency with sticky tape. The company recognized that their core competency lay with sticky tapes and developed the famous post-it-notes, magnetic tape and pressure sensitive tapes. Although the company’s product offerings are broad, each product can still be tied to the company’s core competencies.
Perfecting Technology
Technology is an important driver to success. For example, auto manufactures often have distinct engines that give them a competitive advantage in the market place. This is also true for video cameras, digital cameras and computers. Focusing on technology provides a core competency that customers start to recognize and feel a loyalty towards.
Also, over time the marketplace changes and consumers demand technology advances. For example, many consumers are drawn to “miniaturization,” wanting smaller, sleeker and more advanced products. Companies that anticipate these advances and incorporate them into current core competencies can gain market share and drive up profits.
Protecting Core Competencies
The Harvard Business Review article explains that companies who judge their competitiveness by pricing and performance of end products are risking the erosion of core competencies. Outsourcing important components can often be a mistake. Instead of outsourcing, companies should try to keep unique technology and designs in-house instead of trusting them with an outsourced company. This allows a company to keep control over their core products and services and have greater power to determine future success.
Investing in the development and preservation of core competencies can help a company enter markets more effectively and develop a market leader position. All business units must work together and share talented employees for the greater good of the company. Managers must be willing to circulate talent and skills to protect and build the most effective core competencies.
Resource:C.K. Prahalad and Gary Hamel. “The Core Competence of the Corporation.” Harvard Business Review.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark.
Middle Market Investment Bank, VERCOR, Expands to Pacific Northwest with Seattle Office
FOR IMMEDIATE RELEASE
PRLog (Press Release) – Jun 22, 2009 – VERCOR, a middle market investment bank with offices in North America, South America and Europe expanded into the Pacific Northwest with the addition of Seattle-based dealmaker, Joe Hoff. Joe brings VERCOR and middle market companies over 20 years of comprehensive business experience.
Joe’s expertise comes from the buy and sell-side of complex business transactions. As a senior leader with Fortune 1000 companies such as General Signal and SPX and as a management investor in private middle market companies with annual revenues exceeding $70 million, Joe has a broad leadership background in mergers and acquisitions, business development, product development, manufacturing and supply chain management throughout North America, Europe and Asia.
Joe’s experience as an entrepreneur enables him to empathize with business owners in the middle market. “Most dealmakers at VERCOR have been involved in starting, buying and selling their own businesses. We can advise clients from an owner’s perspective. That’s why Joe is a perfect fit for our team,” states VERCOR’s Managing Principal, Mark Jordan.
VERCOR advisors are dedicated to identifying strategic and financial buyers, negotiating deal structure and closing transactions no matter the economic climate. Joe states, “The recession has been indiscriminate by region and industry, but some businesses and industries continue to perform moderately well. Now is the time for middle market companies to act on an exit strategy or to implement changes that can improve their performance and prepare them for a future exit.”
About VERCOR
VERCOR is a provider of middle market investment banking services with offices in North America, South America and Europe. Specializing in transactions for companies with revenues of $10 to $100 million, VERCOR offers extensive expertise in all stages of the business sale from concept to completion. The experts at VERCOR have executed transactions totaling over $1 billion in value. For more information about VERCOR, visit www.vercoradvisor.com.
PRLog (Press Release) – Jun 22, 2009 – VERCOR, a middle market investment bank with offices in North America, South America and Europe expanded into the Pacific Northwest with the addition of Seattle-based dealmaker, Joe Hoff. Joe brings VERCOR and middle market companies over 20 years of comprehensive business experience.
Joe’s expertise comes from the buy and sell-side of complex business transactions. As a senior leader with Fortune 1000 companies such as General Signal and SPX and as a management investor in private middle market companies with annual revenues exceeding $70 million, Joe has a broad leadership background in mergers and acquisitions, business development, product development, manufacturing and supply chain management throughout North America, Europe and Asia.
Joe’s experience as an entrepreneur enables him to empathize with business owners in the middle market. “Most dealmakers at VERCOR have been involved in starting, buying and selling their own businesses. We can advise clients from an owner’s perspective. That’s why Joe is a perfect fit for our team,” states VERCOR’s Managing Principal, Mark Jordan.
VERCOR advisors are dedicated to identifying strategic and financial buyers, negotiating deal structure and closing transactions no matter the economic climate. Joe states, “The recession has been indiscriminate by region and industry, but some businesses and industries continue to perform moderately well. Now is the time for middle market companies to act on an exit strategy or to implement changes that can improve their performance and prepare them for a future exit.”
About VERCOR
VERCOR is a provider of middle market investment banking services with offices in North America, South America and Europe. Specializing in transactions for companies with revenues of $10 to $100 million, VERCOR offers extensive expertise in all stages of the business sale from concept to completion. The experts at VERCOR have executed transactions totaling over $1 billion in value. For more information about VERCOR, visit www.vercoradvisor.com.
Monday, June 8, 2009
How to Make the Most of Your Back Office: Cost Cutting Strategies
When times get difficult and sales are falling, companies often make back office cuts in departments that provide support. Departments that usually face these cuts are finance, human resources and other cost centers that don’t directly generate revenue.
However, a recently study conducted by Bain found alternatives to support center cuts can actually be more effective. This study examined 37 companies in a variety of industries and found that reconfiguring support services and trimming, instead of cutting costs, is a more effective strategy to recovering from falling sales.
Evaluating Department Activities
When trimming costs, managers need to work together to identify which activities aren’t essential. Focus on keeping the activities that are adding the most value to customers, and cut activities that have less impact.
This task will require managers to carefully evaluate the steps involved in each process. For example, human resources may evaluate the recruiting process and find that applicant information is entered in two different places. Consolidating that information into the same database reduces inefficiencies, freeing up additional time and saving costs.
Implementing Department Accountability
If a specific business unit is incurring large expenses from items such as ordering reports - change the way the money is budgeted. For example, the department may have to take those costs directly out of their budget instead of a general cost center. This will encourage the department manager to generate guidelines for ordering reports, which effectively cuts out non-essential ordering costs.
Automating Tasks
When trimming expenses, evaluate opportunities for automating back office tasks. Implementing Customer Relationship Management (CRM) software may allow your sales force to operate quicker and generate faster quotes. This will also enhance customer satisfaction and reduce the amount of time spent generating sales quotes. Have managers work diligently to identify these cost saving opportunities.
Cutting Expenses
When companies examine expenses, they often find areas for improvement. For example, regulating hotel and travel expenses more carefully can save the company money and cut down on wasted resources.
Restructuring Departments
When evaluating each business unit’s tasks, it often makes sense to restructure the entire department. For example, a company that operates in five states might have a marketing department in each state. After careful analysis, senior managers might discover that consolidating the department into a regional office will save resources and positively impact the bottom line.
Outsourcing Business Functions
Before outsourcing, make sure to invest time in weighing the costs and benefits. Evaluate how the decision will affect the customer experience. This is especially true when outsourcing customer service functions. If customers are disappointed with the outsourcing result, it can decrease sales, which leads to decreased profit.
Implementing these cost-saving strategies can minimize the amount of employee cuts and make a company more efficient. And when business starts to pick up again, the company will be positioned better for increased growth and profits.
Resource:Paul Rogers and Herman Sawnz. “How to Make the Most of your Back Office.” Results Brief Newsletter.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
However, a recently study conducted by Bain found alternatives to support center cuts can actually be more effective. This study examined 37 companies in a variety of industries and found that reconfiguring support services and trimming, instead of cutting costs, is a more effective strategy to recovering from falling sales.
Evaluating Department Activities
When trimming costs, managers need to work together to identify which activities aren’t essential. Focus on keeping the activities that are adding the most value to customers, and cut activities that have less impact.
This task will require managers to carefully evaluate the steps involved in each process. For example, human resources may evaluate the recruiting process and find that applicant information is entered in two different places. Consolidating that information into the same database reduces inefficiencies, freeing up additional time and saving costs.
Implementing Department Accountability
If a specific business unit is incurring large expenses from items such as ordering reports - change the way the money is budgeted. For example, the department may have to take those costs directly out of their budget instead of a general cost center. This will encourage the department manager to generate guidelines for ordering reports, which effectively cuts out non-essential ordering costs.
Automating Tasks
When trimming expenses, evaluate opportunities for automating back office tasks. Implementing Customer Relationship Management (CRM) software may allow your sales force to operate quicker and generate faster quotes. This will also enhance customer satisfaction and reduce the amount of time spent generating sales quotes. Have managers work diligently to identify these cost saving opportunities.
Cutting Expenses
When companies examine expenses, they often find areas for improvement. For example, regulating hotel and travel expenses more carefully can save the company money and cut down on wasted resources.
Restructuring Departments
When evaluating each business unit’s tasks, it often makes sense to restructure the entire department. For example, a company that operates in five states might have a marketing department in each state. After careful analysis, senior managers might discover that consolidating the department into a regional office will save resources and positively impact the bottom line.
Outsourcing Business Functions
Before outsourcing, make sure to invest time in weighing the costs and benefits. Evaluate how the decision will affect the customer experience. This is especially true when outsourcing customer service functions. If customers are disappointed with the outsourcing result, it can decrease sales, which leads to decreased profit.
Implementing these cost-saving strategies can minimize the amount of employee cuts and make a company more efficient. And when business starts to pick up again, the company will be positioned better for increased growth and profits.
Resource:Paul Rogers and Herman Sawnz. “How to Make the Most of your Back Office.” Results Brief Newsletter.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Lessons Learned from Private Equity: Enhancing Performance
As private equity firms become more successful, many public firms are learning how to implement these companies’ winning strategies. According to McKinsey research, about 75% of private equity firms do not experience better success than the stock market. However, the remaining 25% of these firms consistently achieve results that outperform the stock market.
This high performing group has mastered several components to enhancing performance. For example, deals in the private sector that are worth over $100 million, did not evolve because private firms paid less then market value. Instead, these private equity firms are using calculated strategies to determine which companies to purchase.
This high performing group has mastered several components to enhancing performance. For example, deals in the private sector that are worth over $100 million, did not evolve because private firms paid less then market value. Instead, these private equity firms are using calculated strategies to determine which companies to purchase.
Researching Deals
Public firms can enhance success during acquisitions by investing in a strategic assessment of potential deals. This assessment is typically taken during the first few months of a deal, and accomplishes several goals:
- Determining which costs to cut
- If there are new markets to pursue
- Potential portfolio changes
Once these components have been evaluated, a value creation plan can be implemented. In this plan, managers will determine the possible risks and value from acquisition activities.
Compensation Strategies
Private equity firms are highly committed to overseeing investments once the deal is closed. A method used to enhance performance is using compensation strategies to align high level managers with strategic objectives. This entices managers to invest more of their time in collaborating with the board and completing research to help set the direction of the company.
According to McKinsey research, private equity partners using this strategy invested about 50% of their time three months after the deal closed. While, less successful private equity firms devoted only 15% of their time.
Successful partners also spent more time working with management to determine if staffing changes needed to be made after the deal closed. Active partners also used operation indicators to measure performance instead of standard financial measures.
Realigning Governing Structures
Although many companies use financial engineering or price arbitrage to measure performance, private equity firms are finding these tools to be less effective in current market conditions. The highest performing equity firms are adapting governance arbitrage, which involves realigning governing structures that are not aligned well.
Public Firm Challenges
Many public companies are focused on compliance instead of enhancing the effectiveness of governance. This is partially because of the growing number of regulations and codes that are evolving.
In addition, those who are not at the executive level do not always experience financial gains when the company is performing well. However, if the company experiences hardship, these individuals are affected. Since these individuals are often recruited from professional management positions, they are usually more emphatic with managers than shareholders.
Spending more time on strategy and developing talented managers can help board members have a better understanding of the company’s initiatives and objectives. Currently, most executives feel that the board has limited understanding of goals and corporate strategy.
Sharing Information
Public companies can implement strategies used by private equity firms such as creating a free flow of information between managers and non-executives. This includes sharing information that is not financial in nature – like strategies and initiatives. Although public companies do not have incentives, implementing these strategies can help boost performance.
External Benchmarking
There are also external benchmarks that can be used to determine performances initiatives. For example, these benchmarks may include overhead costs, cost per unit production, manufacturing processes and purchasing. Benchmarking these areas can give a company a competitive edge.
The benchmarking process should also provide independent verification that the benchmarks are being achieved. Companies also need to evaluate how often benchmarks are created. Since this process can be time consuming and expensive, companies can reevaluate these areas every few years.
Performance Challenges
Unlike pubic firms, private equity firms can offer managers equity stakes, investment opportunities, and bonuses for meeting objectives. In fact, top managers in equity firms own up to 19% of the equity. This creates personal motives for outperforming the competition.
When a private equity firm is having difficult times, management is quick to act swiftly – spending more time with management, minimizing underperforming areas, and hiring consultants to improve performance.
Because incentives are structured differently with public firms, the strategies and actions are often less aggressive. This is an area of opportunity for public companies. Taking aggressive steps to improve performance will ensure that actions are better linked to value creation objectives.
Searching for Talent
Finding a management group that is ready for extreme change can be challenging. If executives are not completely behind the changes, they will not be effective. These leaders must also have a high level of understanding of each team’s strengths and identify weak players.
Although public companies may face challenges, learning a few lessons from private equity firms can enhance performance. Revamping the governance structure will allow public firms to compete more effectively with leading private equity firms.
Resource:Andreas Beroutsos, Andrew Freeman and Conor F. Kehoe. “What Public Companies Can Learn from Private Equity.” McKinsey on Finance, Winter 2007.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or by email.
Thursday, April 23, 2009
Winning in an Uncertain Economy: Strategies for Lowering Costs and Improving Performance
In turbulent economic times, companies are faced with difficult decisions; including where to cut costs. Although an executive’s first instinct may be to reduce staff, there are many options available. With a few creative strategies, your business can identify opportunities to maximize efficiency while minimize job loss.
Sustainable Cost-Cutting
Sustainable cost cutting starts with looking at your company’s organizational chart. This allows you to brainstorm what options are on the table. To accomplish this, determine which activities each business unit performs, and how these tasks are adding value to revenue production. Then, determine which activities can be streamlined or discontinued without effecting productivity or sales.
For example, evaluate the Human Resources department and determine which activities are contributing to hiring and retaining valuable employees. You might find that employees are bogged down with a cumbersome system that does not efficiently handle candidate information. Solving this issue would increase efficiency, and allow staff to concentrate on other company initiatives.
Maximize Process Efficiency
When a company grows, sometimes old processes get in the way of becoming more efficient. Identifying processes that are outdated and need an overhaul will boost your overall efficiency.
There are many options for revamping processes that are not efficient. For example, you can change which employees handle the process if the task is not appropriate for the department. Also, in some situations, you may have the option of automating the process. Automating does not just make the process faster, it frees up employee time to focus on other projects.
Another option to consider is outsourcing functions that can be achieved more efficiency than handling in-house. This can include support functions that need to be more flexible to accommodate the organization’s growth.
Balance Cost-Cutting with Growth
Cutting costs should be balanced with investing in the company’s future growth. That is because cutting costs too deeply can paralyze a company’s ability to plan for growth; jeopardizing their market position. To accomplish this, focus heavily on efficiency while simultaneously planning for future growth.
Creating Customized Solutions
Using a one-size-fits-all approach to cutting costs can hamper your company’s ability to succeed. That is because each product you produce has a unique set of customers, with individual needs.
Implement effective cost-cutting strategies by examining your customer’s priorities. If price is a priority, you will need to examine options that will drive the price down without compromising quality. If value is a factor, consider offering special discounts to loyal customers. And if quality or brand image is an issue, make sure to avoid cuts that will affect these factors.
Customizing cuts based on the customer’s needs will preserve your profits and boost productivity.
Cut Duplicate Services
As an organization grows, sometimes functions are duplicated. Identifying these areas is an important opportunity for cutting costs.
For example, you might examine back office functions to determine if two employees or business units are doing the same thing. And if so, determine how those processes can be consolidated to maximize efficiency.
And remember to always consider technology solutions when cutting duplicate services. For example, if two business units are collecting the exact same information, it would make sense to create a centralized system; minimizing the duplication of work and increasing efficiency.
Connect with Front Line Employees
Since front line employees are in direct contact with customers, it is important to carefully analyze their activities. This is because these employees have a huge impact on your company’s ability to produce revenue.
Examine how much of their time is spent selling versus completing paperwork or administrative functions. Brainstorm ways to shift more of their time to sales and less time on paperwork. This could include delegating paperwork tasks to a support person, or streamlining processes to require less paperwork.
Also, it is important to motivate employees to connect with the customer. This can be achieved with incentive programs or special recognition for a job well done.
Look for Opportunities to Increase Sales
Saving your organization money is important. But it is just one strategy in a muti-faceted approach to success. It is important to understand other opportunities for success – like making contact with customers more effective.
For example, if a customer contacts a bank call center to order checks, what other opportunities exist for that customer? You might train call center employees to discuss the benefits of receiving online statements; which saves paper and is better for the environment. This cuts the organization’s mailing costs and improves efficiency. Analyze how to make points of contact more effective and entice employees to grow business.
Even in financially difficult times, it is important to look deeper when cutting costs. Take the time to create strategies for maximizing efficiency without tabling plans for future growth. This will allow your company to save money while maximizing market share.
Resource:
Hernan Saenz and Darrell Rigbyi. “Winning in Turbulence, Streamline G&A.”
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Sustainable Cost-Cutting
Sustainable cost cutting starts with looking at your company’s organizational chart. This allows you to brainstorm what options are on the table. To accomplish this, determine which activities each business unit performs, and how these tasks are adding value to revenue production. Then, determine which activities can be streamlined or discontinued without effecting productivity or sales.
For example, evaluate the Human Resources department and determine which activities are contributing to hiring and retaining valuable employees. You might find that employees are bogged down with a cumbersome system that does not efficiently handle candidate information. Solving this issue would increase efficiency, and allow staff to concentrate on other company initiatives.
Maximize Process Efficiency
When a company grows, sometimes old processes get in the way of becoming more efficient. Identifying processes that are outdated and need an overhaul will boost your overall efficiency.
There are many options for revamping processes that are not efficient. For example, you can change which employees handle the process if the task is not appropriate for the department. Also, in some situations, you may have the option of automating the process. Automating does not just make the process faster, it frees up employee time to focus on other projects.
Another option to consider is outsourcing functions that can be achieved more efficiency than handling in-house. This can include support functions that need to be more flexible to accommodate the organization’s growth.
Balance Cost-Cutting with Growth
Cutting costs should be balanced with investing in the company’s future growth. That is because cutting costs too deeply can paralyze a company’s ability to plan for growth; jeopardizing their market position. To accomplish this, focus heavily on efficiency while simultaneously planning for future growth.
Creating Customized Solutions
Using a one-size-fits-all approach to cutting costs can hamper your company’s ability to succeed. That is because each product you produce has a unique set of customers, with individual needs.
Implement effective cost-cutting strategies by examining your customer’s priorities. If price is a priority, you will need to examine options that will drive the price down without compromising quality. If value is a factor, consider offering special discounts to loyal customers. And if quality or brand image is an issue, make sure to avoid cuts that will affect these factors.
Customizing cuts based on the customer’s needs will preserve your profits and boost productivity.
Cut Duplicate Services
As an organization grows, sometimes functions are duplicated. Identifying these areas is an important opportunity for cutting costs.
For example, you might examine back office functions to determine if two employees or business units are doing the same thing. And if so, determine how those processes can be consolidated to maximize efficiency.
And remember to always consider technology solutions when cutting duplicate services. For example, if two business units are collecting the exact same information, it would make sense to create a centralized system; minimizing the duplication of work and increasing efficiency.
Connect with Front Line Employees
Since front line employees are in direct contact with customers, it is important to carefully analyze their activities. This is because these employees have a huge impact on your company’s ability to produce revenue.
Examine how much of their time is spent selling versus completing paperwork or administrative functions. Brainstorm ways to shift more of their time to sales and less time on paperwork. This could include delegating paperwork tasks to a support person, or streamlining processes to require less paperwork.
Also, it is important to motivate employees to connect with the customer. This can be achieved with incentive programs or special recognition for a job well done.
Look for Opportunities to Increase Sales
Saving your organization money is important. But it is just one strategy in a muti-faceted approach to success. It is important to understand other opportunities for success – like making contact with customers more effective.
For example, if a customer contacts a bank call center to order checks, what other opportunities exist for that customer? You might train call center employees to discuss the benefits of receiving online statements; which saves paper and is better for the environment. This cuts the organization’s mailing costs and improves efficiency. Analyze how to make points of contact more effective and entice employees to grow business.
Even in financially difficult times, it is important to look deeper when cutting costs. Take the time to create strategies for maximizing efficiency without tabling plans for future growth. This will allow your company to save money while maximizing market share.
Resource:
Hernan Saenz and Darrell Rigbyi. “Winning in Turbulence, Streamline G&A.”
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
The Power of Managing Complexity: Streamlining Business in a Turbulent Economy
In difficult economic times, it is important to minimize your company’s exposure to loss. This can be accomplished by evaluating which products are making money and which processes can be simplified. Evaluating these components will allow you to determine if there is a way to streamline production and ramp up revenue potential.
Simplify Production Costs
In good economic times, companies are growing and more layers of complexity are added. However, increased complexity can create higher costs and decreased production. In addition, in a difficult economy, evaluating these areas can help your company save money.
When evaluating costs it is important to par down spending without hampering innovation. Plus, you will need to consider the benefits of staying close to important markets. That is because having operations in local markets will keep you in touch with what customers want. This is especially true during a recession when competition is fierce and being connected to your market is essential.
According to the article “Winning in Turbulence” by Mark Gottfredson and Darrell Rigby, using a Zero-Based Approach can help simplify costs. This approach suggests that you imagine a time when your company only produced a few products without all of the complexities. This will allow you to brainstorm ideas on how to simplify processes and cut out unnecessary costs.
Evaluate your Product Offerings
Although it is nice for customers to have choices, if you have a small customer base seeking a product, this might be a place to cut. This is especially true if the profit margin is narrow. Plus, expanding your product line to include too many choices may even dilute your company’s brand if the new products are not perceived well.
Evaluate How Production is Achieved
When producing products, it is most cost effective to have large runs of products; versus small batches. Although many companies do small runs for convenience, you can achieve streamlined production with a few steps. First, implement a higher order minimum for customers – which will cut down on small batches. Also, implement longer lead times on production so you can combine orders and minimize costs. You may also want to consider outsourcing production when it makes sense for your company.
Evaluate the Productivity of your Equipment
If you have a product line that has a high percentage of scrap, evaluate those costs compared to how profitable the product is. In these situations, it might be worthwhile to consider not producing those products anymore. Also, make sure that low-volume projects are not being run on equipment that is designed to run high-volume projects. Making these simple changes can increase your efficiency and profits.
Streamline Decision Making
Streamlining the decision making process can reduce costs by increasing accountability and speeding up decisions. According to the article “Winning in Turbulence” by Mark Gottfredson and Darrell Rigby, this can be achieved by making a list of how many managers a decision needs to go through before arriving at the CEO. Evaluate if there are layers in this hierarchy that can be reduced or eliminated. Making these changes can save your company substantial operating expense each year.
It is also important that managers have clear direction on how decisions should be made (with appropriate accountability). Without these components, decision-making can be disjointed and time consuming; paralyzing a company that is struggling to stay afloat in a poor economy.
Controlling Costs
As organizations become more complex, costs often become difficult to manage. Without cost accountability, your company can face serious issues in a poor economy. To enhance your company’s performance, create a system for evaluating the validity of all costs; even the small ones.
Focus on Fixing Short Term Challenges
When you are evaluating the complexity of your organization, you may find many areas that need improvement. Unfortunately, in a poor economic environment, it is not practical to fix all of these areas at once. Instead, evaluate which processes will yield the best results in the short term. This strategy will produce quicker results; helping your company weather a difficult economy. And once you have survived the hard times, you can focus on the larger issues that need attention.
Evaluate Data Collected
Having good data can help executives make decisions and plan the future of the company. However, having too much data can bog managers down and decrease productivity. To solve this problem, evaluate what data is currently collected. Then, par down the data to include only what managers need in the current economy. Also, evaluate the data collection processes to determine if there are opportunities to streamline those functions.
Managing and improving your company’s complexity can help streamline processes and improve your bottom line. Plus, you will benefit from enhanced productivity and increase revenue – which can turn your company around in a difficult economy.
Resource:
Mark Gottfredson and Darrell Rigby. “Winning in Turbulence, The Power of Managing Complexity.”
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Simplify Production Costs
In good economic times, companies are growing and more layers of complexity are added. However, increased complexity can create higher costs and decreased production. In addition, in a difficult economy, evaluating these areas can help your company save money.
When evaluating costs it is important to par down spending without hampering innovation. Plus, you will need to consider the benefits of staying close to important markets. That is because having operations in local markets will keep you in touch with what customers want. This is especially true during a recession when competition is fierce and being connected to your market is essential.
According to the article “Winning in Turbulence” by Mark Gottfredson and Darrell Rigby, using a Zero-Based Approach can help simplify costs. This approach suggests that you imagine a time when your company only produced a few products without all of the complexities. This will allow you to brainstorm ideas on how to simplify processes and cut out unnecessary costs.
Evaluate your Product Offerings
Although it is nice for customers to have choices, if you have a small customer base seeking a product, this might be a place to cut. This is especially true if the profit margin is narrow. Plus, expanding your product line to include too many choices may even dilute your company’s brand if the new products are not perceived well.
Evaluate How Production is Achieved
When producing products, it is most cost effective to have large runs of products; versus small batches. Although many companies do small runs for convenience, you can achieve streamlined production with a few steps. First, implement a higher order minimum for customers – which will cut down on small batches. Also, implement longer lead times on production so you can combine orders and minimize costs. You may also want to consider outsourcing production when it makes sense for your company.
Evaluate the Productivity of your Equipment
If you have a product line that has a high percentage of scrap, evaluate those costs compared to how profitable the product is. In these situations, it might be worthwhile to consider not producing those products anymore. Also, make sure that low-volume projects are not being run on equipment that is designed to run high-volume projects. Making these simple changes can increase your efficiency and profits.
Streamline Decision Making
Streamlining the decision making process can reduce costs by increasing accountability and speeding up decisions. According to the article “Winning in Turbulence” by Mark Gottfredson and Darrell Rigby, this can be achieved by making a list of how many managers a decision needs to go through before arriving at the CEO. Evaluate if there are layers in this hierarchy that can be reduced or eliminated. Making these changes can save your company substantial operating expense each year.
It is also important that managers have clear direction on how decisions should be made (with appropriate accountability). Without these components, decision-making can be disjointed and time consuming; paralyzing a company that is struggling to stay afloat in a poor economy.
Controlling Costs
As organizations become more complex, costs often become difficult to manage. Without cost accountability, your company can face serious issues in a poor economy. To enhance your company’s performance, create a system for evaluating the validity of all costs; even the small ones.
Focus on Fixing Short Term Challenges
When you are evaluating the complexity of your organization, you may find many areas that need improvement. Unfortunately, in a poor economic environment, it is not practical to fix all of these areas at once. Instead, evaluate which processes will yield the best results in the short term. This strategy will produce quicker results; helping your company weather a difficult economy. And once you have survived the hard times, you can focus on the larger issues that need attention.
Evaluate Data Collected
Having good data can help executives make decisions and plan the future of the company. However, having too much data can bog managers down and decrease productivity. To solve this problem, evaluate what data is currently collected. Then, par down the data to include only what managers need in the current economy. Also, evaluate the data collection processes to determine if there are opportunities to streamline those functions.
Managing and improving your company’s complexity can help streamline processes and improve your bottom line. Plus, you will benefit from enhanced productivity and increase revenue – which can turn your company around in a difficult economy.
Resource:
Mark Gottfredson and Darrell Rigby. “Winning in Turbulence, The Power of Managing Complexity.”
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Monday, March 23, 2009
Performance Improvement Initiatives: Boosting the Success of Your Project
Companies often struggle with taking a project from concept to execution. According to an article written by Booz Allen Hamilton titled “Performance Improvement Initiatives,” a staggering 40% of these projects fail to deliver on their promises. But there is good news for companies interested in boosting their success on project implementation. Making a few changes on how you approach your projects can improve your implementation success rate.
For example, companies can improve their success rate by strategically planning implementation, partnering with front line employees, assembling a team of employees to monitor the plan’s success and responding quickly to challenges.
Struggles with Implementation
Successfully implementing a project is one of the most difficult challenges. This is because once ideas move from the concept phase to implementation; there are many opportunities for challenges. For example, current processes, employee functions and technology capacity can all create issues.
Companies can also experience issues with communication; resulting from disorganized leadership. And if your company operates in silos (where employees aren’t fully aware of their connection to other business units) this can pose an additional set of problems.
The solution to these issues is using a systematic approach to bringing your project from concept to implementation. Booz Allen Hamilton’s article suggests focusing on implementation in a strategic order to drive up project success.
Successful companies use a three pronged approach; focusing on the order of implementation, controlling front-line employee behavior and developing successful project management techniques.
Focusing on Implementation Order
The first step in designing a successful implementation strategy is focusing on which steps need to occur to implement your project. Carefully develop each actionable step, to understand any potential issues with project implementation plans.
Once you’ve created a list of actable steps, carefully evaluate each step to determine which actions should happen first. To make your implementation plan most effective, talk with affected business unit leaders. Discuss any potential challenges that may occur during a given step. And if challenges are present, discuss what solutions are needed before implementation. Then, move the actionable item further down the timeline; allowing the business unit manager to resolve the issue while your are working on other steps.
Your plan also needs to be flexible to change. During the implementation process, changes will occur – threatening to put a halt to your project. Design a plan that is flexible enough to accommodate these changes – allowing you to work around the issue. This will assist in avoiding delays on your project delivery date.
This process allows you to identify possible issues, such as staffing or technology capability challenges, and create a plan for resolving those issues without bogging down the entire implementation process. It also allows communication to flow between those managing the project, and the business units affected by the implementation plan.
Front-Line Employee Behavior
Anticipating your front-line employee behavior will allow you to design rewards for desired behavior. Since front line employees play an integral part in a company’s success, you need them to be on board with the project.
Determine what steps are needed to get these employees up to speed on the project and how to motivate them to achieve the desired result.For some employees, this may involve monetary compensation like a cash bonus tied to performance. While other employees are motivated by winning extra vacation days or having public recognition of their achievements. Exam your group to determine which types of rewards are most appealing.
On the flip side, you’ll also need to consider consequences for undesirable reactions to the project. Anticipate these behaviors and devise plans to deal with these issues if employees decide to be resistant to change – and how to ensure compliance for new procedures or protocols.
Project Management
Busy executives don’t have time to monitor the daily implantation of a project. For this reason, it’s important to designate a project manger or entire team devoted to implementing the project.
The team should have a project manager, capable of driving action and delivering success. Avoid choosing leaders that are easily persuaded or distracted. Instead, select a leader who has excellent negotiation skills and a proven record of driving results.
Also, choose project team members that represent different business units of your organization. This will allow you to gain collective insight into any project challenges. These individuals can also assist in working across business unit borders for successful implementation.
Making a few simple changes to how your company approaches project implementation can allow your business to increase the percentage of successful projects. And once you’ve modified current strategies, you’ll become more efficient in project implementation and enjoy the benefits of increased performance.
Resource:
Eser Becer, Brian Hage, Matt McKenna and Herve Wilczynski. “Performance-Improvement Initiatives.” Booz Allen Hamilton.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
For example, companies can improve their success rate by strategically planning implementation, partnering with front line employees, assembling a team of employees to monitor the plan’s success and responding quickly to challenges.
Struggles with Implementation
Successfully implementing a project is one of the most difficult challenges. This is because once ideas move from the concept phase to implementation; there are many opportunities for challenges. For example, current processes, employee functions and technology capacity can all create issues.
Companies can also experience issues with communication; resulting from disorganized leadership. And if your company operates in silos (where employees aren’t fully aware of their connection to other business units) this can pose an additional set of problems.
The solution to these issues is using a systematic approach to bringing your project from concept to implementation. Booz Allen Hamilton’s article suggests focusing on implementation in a strategic order to drive up project success.
Successful companies use a three pronged approach; focusing on the order of implementation, controlling front-line employee behavior and developing successful project management techniques.
Focusing on Implementation Order
The first step in designing a successful implementation strategy is focusing on which steps need to occur to implement your project. Carefully develop each actionable step, to understand any potential issues with project implementation plans.
Once you’ve created a list of actable steps, carefully evaluate each step to determine which actions should happen first. To make your implementation plan most effective, talk with affected business unit leaders. Discuss any potential challenges that may occur during a given step. And if challenges are present, discuss what solutions are needed before implementation. Then, move the actionable item further down the timeline; allowing the business unit manager to resolve the issue while your are working on other steps.
Your plan also needs to be flexible to change. During the implementation process, changes will occur – threatening to put a halt to your project. Design a plan that is flexible enough to accommodate these changes – allowing you to work around the issue. This will assist in avoiding delays on your project delivery date.
This process allows you to identify possible issues, such as staffing or technology capability challenges, and create a plan for resolving those issues without bogging down the entire implementation process. It also allows communication to flow between those managing the project, and the business units affected by the implementation plan.
Front-Line Employee Behavior
Anticipating your front-line employee behavior will allow you to design rewards for desired behavior. Since front line employees play an integral part in a company’s success, you need them to be on board with the project.
Determine what steps are needed to get these employees up to speed on the project and how to motivate them to achieve the desired result.For some employees, this may involve monetary compensation like a cash bonus tied to performance. While other employees are motivated by winning extra vacation days or having public recognition of their achievements. Exam your group to determine which types of rewards are most appealing.
On the flip side, you’ll also need to consider consequences for undesirable reactions to the project. Anticipate these behaviors and devise plans to deal with these issues if employees decide to be resistant to change – and how to ensure compliance for new procedures or protocols.
Project Management
Busy executives don’t have time to monitor the daily implantation of a project. For this reason, it’s important to designate a project manger or entire team devoted to implementing the project.
The team should have a project manager, capable of driving action and delivering success. Avoid choosing leaders that are easily persuaded or distracted. Instead, select a leader who has excellent negotiation skills and a proven record of driving results.
Also, choose project team members that represent different business units of your organization. This will allow you to gain collective insight into any project challenges. These individuals can also assist in working across business unit borders for successful implementation.
Making a few simple changes to how your company approaches project implementation can allow your business to increase the percentage of successful projects. And once you’ve modified current strategies, you’ll become more efficient in project implementation and enjoy the benefits of increased performance.
Resource:
Eser Becer, Brian Hage, Matt McKenna and Herve Wilczynski. “Performance-Improvement Initiatives.” Booz Allen Hamilton.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Leadership of the Future: Strategies for Success
Talented leaders are the backbone of a company; developing strategic initiatives to grow and preserve the business. However, with competition in the marketplace growing fiercer than ever, companies need to focus on creating management programs that develop leaders with the necessary skills for success. Building in-house programs to train and develop leaders will result in enhanced performance and increased revenue potential.
According to the McKinsey Global Survey Results, six important leadership skills are essential to a company’s future success. These areas include challenging assumptions, encouraging risk taking, inspiring employees, clearly defining expectations, rewarding achievements and participative decision-making. Focusing on these areas can assist with positioning your company for future success.
Challenging Assumptions
A company can become “stuck” when leaders are not willing to challenge current assumptions. This can hamper the creative process; discouraging the growth of new ideas that are outside of normal assumptions. Encourage leaders to think beyond the constraints of traditional assumptions. Incorporating this management strategy can foster both manager and employee innovation.
Encourage Risk Taking
Future leaders should be trained to incorporate strategies for risk taking. This is because taking the right risks can payoff with increased revenue and market share. Train your executives to get out of the “safe zone,” and consider new opportunities – like considering an acquisitions or a merger to break into a new market; or expanding products and services to reach underserved market segments.
Inspiring Employees
Once a leader has designed innovative strategies, it is important to inspire employees to get behind implementation efforts. In most cases, managers will need to reach out to front-line employees who personally serve customers. These employees are a key component to success because of their ability to impact customers directly.
Employees need to feel empowered by their ability to drive the company’s success – and managers must inspire them to want to put forth the effort. This requires unique strategies designed to forge a partnership between employees and management.
You can also inspire employees by creating a desirable work atmosphere to boost morale and foster a team environment. Also, consider designing a plan to reward valuable employee contributions. This could include a special employee recognition program tied to performance.
Clearly Define Expectations
When designing successful leadership strategies, it is important to clearly define expectations for employees. When employees understand what is expected of them (and have the tools to achieve the desired goals), job satisfaction is greatly improved. Also, provide a clear roadmap to success, and tie rewards to desired results. This will reinforce employee expectations. Even making simple changes, such as scheduling regular annual reviews, and creating individual benchmarks, can impact a company’s success.
Rewarding Achievement
Successful leaders also need to focus on rewarding employee achievements. Successful incentives take into consideration what motivates a group of employees. For example, some employees will be motivated by monetary compensation or gift cards. Moreover, other groups of employees will be most satisfied with extra vacation days or a more flexible working schedule. Some employees will prefer personal recognition in front of their peers, or a special lunch with their manager. Choose a plan best suited for your working group to drive up job satisfaction and motivate employees to want to meet company goals.
Participative Decision Making
Future leaders of successful organizations should focus on cultivating a participative decision making environment. Participative decision-making is an effective strategy because a leader does not always have the foresight to anticipate all challenges when making a decision. Engaging others in the decision making process allows the executive to tap into an individual's unique talents. For example, a direct manager of the affected business unit may have valuable insight the senior manager has not anticipated.
A participative decision maker will consider all input, then make the final decision; accepting full responsibility for any consequences resulting from that decision.
Creating a Corporate Training Plan
According to the McKinsey Survey, companies interested in maximizing their success should consider implementing a corporate management-training plan. This allows executives to teach management principles that are most effective in their environment. Although these principles may deviate from an individual’s management style, those who participated in the McKinsey Survey reported that when implementing these strategies, they became better managers.
Management Style to Avoid
When creating a corporate management program, avoid individualistic decision-making strategies. This type of strategy tends to be less successful and does not foster a team environment. Instead, focus on creating a team environment by encouraging the upward flow of communication.
Developing managers who encompass the leadership qualities of the future will allow your company to gain momentum and rise above the competition. In addition, employees will appreciate consistency among managers, and enjoy a team driven work environment.
Resource:
“Leadership for the Future.” McKinsey Global Survey Results.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
According to the McKinsey Global Survey Results, six important leadership skills are essential to a company’s future success. These areas include challenging assumptions, encouraging risk taking, inspiring employees, clearly defining expectations, rewarding achievements and participative decision-making. Focusing on these areas can assist with positioning your company for future success.
Challenging Assumptions
A company can become “stuck” when leaders are not willing to challenge current assumptions. This can hamper the creative process; discouraging the growth of new ideas that are outside of normal assumptions. Encourage leaders to think beyond the constraints of traditional assumptions. Incorporating this management strategy can foster both manager and employee innovation.
Encourage Risk Taking
Future leaders should be trained to incorporate strategies for risk taking. This is because taking the right risks can payoff with increased revenue and market share. Train your executives to get out of the “safe zone,” and consider new opportunities – like considering an acquisitions or a merger to break into a new market; or expanding products and services to reach underserved market segments.
Inspiring Employees
Once a leader has designed innovative strategies, it is important to inspire employees to get behind implementation efforts. In most cases, managers will need to reach out to front-line employees who personally serve customers. These employees are a key component to success because of their ability to impact customers directly.
Employees need to feel empowered by their ability to drive the company’s success – and managers must inspire them to want to put forth the effort. This requires unique strategies designed to forge a partnership between employees and management.
You can also inspire employees by creating a desirable work atmosphere to boost morale and foster a team environment. Also, consider designing a plan to reward valuable employee contributions. This could include a special employee recognition program tied to performance.
Clearly Define Expectations
When designing successful leadership strategies, it is important to clearly define expectations for employees. When employees understand what is expected of them (and have the tools to achieve the desired goals), job satisfaction is greatly improved. Also, provide a clear roadmap to success, and tie rewards to desired results. This will reinforce employee expectations. Even making simple changes, such as scheduling regular annual reviews, and creating individual benchmarks, can impact a company’s success.
Rewarding Achievement
Successful leaders also need to focus on rewarding employee achievements. Successful incentives take into consideration what motivates a group of employees. For example, some employees will be motivated by monetary compensation or gift cards. Moreover, other groups of employees will be most satisfied with extra vacation days or a more flexible working schedule. Some employees will prefer personal recognition in front of their peers, or a special lunch with their manager. Choose a plan best suited for your working group to drive up job satisfaction and motivate employees to want to meet company goals.
Participative Decision Making
Future leaders of successful organizations should focus on cultivating a participative decision making environment. Participative decision-making is an effective strategy because a leader does not always have the foresight to anticipate all challenges when making a decision. Engaging others in the decision making process allows the executive to tap into an individual's unique talents. For example, a direct manager of the affected business unit may have valuable insight the senior manager has not anticipated.
A participative decision maker will consider all input, then make the final decision; accepting full responsibility for any consequences resulting from that decision.
Creating a Corporate Training Plan
According to the McKinsey Survey, companies interested in maximizing their success should consider implementing a corporate management-training plan. This allows executives to teach management principles that are most effective in their environment. Although these principles may deviate from an individual’s management style, those who participated in the McKinsey Survey reported that when implementing these strategies, they became better managers.
Management Style to Avoid
When creating a corporate management program, avoid individualistic decision-making strategies. This type of strategy tends to be less successful and does not foster a team environment. Instead, focus on creating a team environment by encouraging the upward flow of communication.
Developing managers who encompass the leadership qualities of the future will allow your company to gain momentum and rise above the competition. In addition, employees will appreciate consistency among managers, and enjoy a team driven work environment.
Resource:
“Leadership for the Future.” McKinsey Global Survey Results.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Tuesday, February 17, 2009
New Book Teaches Business Owners to Drive Business Value despite the Economy
The recession is spawning concern from business owners regarding business value. Driving Business Value in an Uncertain Economy, a book by Mark Jordan, offers business owners the key factors that drive business value in any economy.
FOR IMMEDIATE RELEASE
PRLog (Press Release) – Feb 16, 2009 – The recession is spawning concern from new entrepreneurs, executives and seasoned business owners regarding their business value. Driving Business Value in an Uncertain Economy ($11.95, ISBN-13: 978-0-9816572-4-0) offers business owners the key factors that drive business value in any economy.
“The common misconception among business owners is that economic and market trends are the only factors for determining business value,” states author, Mark Jordan. He adds, “When they encounter a scenario like this, fear paralyzes them. They ignore things they can do everyday to boost business value regardless of the economic circumstance.”
Jordan reveals that business value is, in fact, a combination of internal and external drivers. Chief among them is maintaining and improving sales, gross margin and earning trends. The author and Managing Principal of the middle market investment bank, VERCOR, also stresses the importance of leveraging a business’s best assets. The business advisor states a strong management team is an intangible and internal value driver. Finding new ways to capitalize on existing intellectual property is another way to boost business value. “Your management team and intellectual property are what makes your business unique. Any business can turn a profit. Your talent pool, and what they create, will set your business apart in the market,” Jordan shares.
Jordan complements the study of value drivers with frank advice based on his own experience aiding clients in their quest to boost business value prior to a business sale. Case studies and easy to follow action items serve as homework for readers ready to take the first step in growing their companies. Jordan states, “Business owners do not have to wait until the economy turns around to improve their business value, or get it ready for sale. They can do it right now.”
Driving Business Value in an Uncertain Economy (Decere Publishing, 2009) is available for purchase at major booksellers, or online at http://www.amazon.com/ or http://www.vercoradvisor.com/. Lightning Source, a subsidiary of Ingram Industries, Inc., is distributing the book.
About Mark Jordan
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of Selling Your Business the Hard Easy Way (Decere Publishing, 2008), Enhancing Your Business Value…The Climb to the Top (Decere Publishing, 2002) and co-author of The Business Sale…A Business Owner’s Most Perilous Expedition (Decere Publishing, 2001). He is also the author of numerous articles on mergers and acquisitions. For more information about Mark’s books, visit www.vercoradvisor.com.
FOR IMMEDIATE RELEASE
PRLog (Press Release) – Feb 16, 2009 – The recession is spawning concern from new entrepreneurs, executives and seasoned business owners regarding their business value. Driving Business Value in an Uncertain Economy ($11.95, ISBN-13: 978-0-9816572-4-0) offers business owners the key factors that drive business value in any economy.
“The common misconception among business owners is that economic and market trends are the only factors for determining business value,” states author, Mark Jordan. He adds, “When they encounter a scenario like this, fear paralyzes them. They ignore things they can do everyday to boost business value regardless of the economic circumstance.”
Jordan reveals that business value is, in fact, a combination of internal and external drivers. Chief among them is maintaining and improving sales, gross margin and earning trends. The author and Managing Principal of the middle market investment bank, VERCOR, also stresses the importance of leveraging a business’s best assets. The business advisor states a strong management team is an intangible and internal value driver. Finding new ways to capitalize on existing intellectual property is another way to boost business value. “Your management team and intellectual property are what makes your business unique. Any business can turn a profit. Your talent pool, and what they create, will set your business apart in the market,” Jordan shares.
Jordan complements the study of value drivers with frank advice based on his own experience aiding clients in their quest to boost business value prior to a business sale. Case studies and easy to follow action items serve as homework for readers ready to take the first step in growing their companies. Jordan states, “Business owners do not have to wait until the economy turns around to improve their business value, or get it ready for sale. They can do it right now.”
Driving Business Value in an Uncertain Economy (Decere Publishing, 2009) is available for purchase at major booksellers, or online at http://www.amazon.com/ or http://www.vercoradvisor.com/. Lightning Source, a subsidiary of Ingram Industries, Inc., is distributing the book.
About Mark Jordan
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of Selling Your Business the Hard Easy Way (Decere Publishing, 2008), Enhancing Your Business Value…The Climb to the Top (Decere Publishing, 2002) and co-author of The Business Sale…A Business Owner’s Most Perilous Expedition (Decere Publishing, 2001). He is also the author of numerous articles on mergers and acquisitions. For more information about Mark’s books, visit www.vercoradvisor.com.
Monday, February 16, 2009
Secrets to Executing a Successful Strategy
When examining cost-cutting strategies, companies often focus on reducing staff and flattening organizational charts. But this action often ignores underlying issues, and doesn’t result in long-term success. After several years most companies add back layers to their organizational chart, and end up in the same position as before – with increased costs.
Successful companies look past shrinking their workforce, and focus on strategies that address underlying costs. Focusing on areas with potential for greater efficiency, such as decision making accountability, will produce lasting results.
Focus on Execution Strategies
The key to creating effective execution strategies is ensuring every manager understands their decision making responsibilities. This prevents confusion about who is responsible for which decisions and allows managers to understand the scope of their authority. As a result, companies experience a boost in efficiency, and mangers spend less time justifying decisions to upper management.
Streamline Decision Making
Many companies have a single person, such as the Chief Executive Officer, making all of the decisions. This can severely bog down the decision making process and waste the CEOs valuable time. Instead, reserve the most important decisions for the CEO, and delegate the majority of decision making to several mangers, each with their own responsibilities and accountability. This will allow customers to be served better with quicker decisions and easier communication flow.
Make an Accountability Visual
Once management understands the scope of their decision making authority, compile the information into a grid. The visual should clearly demonstrate who is responsible for what decisions. This solidifies the process, and can be used as a communication tool for business units to understand who is responsible for what. Plus, having an official document will hold individuals accountable.
Clarify the Approval Process
Once decision making responsibilities are finalized, employees need to understand the approval process. Processes should be designed to promote the seamless flow of communication, resulting in fast decisions. Employees should receive a copy of the accountability visual, accompanied by protocols for requesting approval.
Avoid Second Guessing Decisions
Decision makers need to feel empowered and supported in their decisions. For this reason, second guessing activities should be avoided. Preventing these activities will prevent productively and communication issues.
Streamline Communication
Another important component to successful execution, is educating employees about how their actions impact the company’s bottom line. Strategies and measurement tools should be implemented to remind employees consistently of their ability to impact business. Plus, procedures should be put in place to promote the upward flow of communication from the front line to upper management. This will give management the ability to quickly solve problems such as pricing and service issues.
Keep Decision Making Close to Activities
When too many decisions are made at the corporate office, the reality of what’s going on with customers can be lost. This is because information moving from front line employees upward can get fine tuned and refined before reaching upper management. This results in decisions based on disseminated information, which produces unsuccessful strategies. The solution to this issue is keeping as many decisions as possible close to where the activities are occurring. This allows individuals with first-hand experience to resolve issues.
Increase Lateral Management Opportunities
Many companies discourage lateral management moves because they think it isn’t productive. However, allowing these moves can be a smart strategic decision. When laterally moving managers, other business units can benefit from cross-unit cooperation. The company may also experience less turnover, because middle-level managers won’t get bored and feel like opportunity is limited.
Foster Cross-Unit Collaboration
Execution strategies can be improved by examining communication flow between business units. This will result in more accurate forecasts on costs and lead times. Potential demand and production challenges will also be identified earlier, allowing quicker reaction and increased customer satisfaction.
Increase Rewards for Positive Contributors
If your company doesn’t already have an incentive plan, adopting one is a good decision. This action will assist in supporting your company’s strategies and goals. Assign measurable goals to employees, and hold individuals accountable for their performance. Positive motivation can be established with monetary compensation, gift cards, or other rewards. This allows individuals to be rewarded for their positive contributions.
Encourage Staff to Move Across Business Units
Like managers, having staff move into lateral positions makes a more well-rounded business model. Your business units will enjoy enhanced productivity and employees will be more stimulated and feel more valued.
Reshaping the way your company thinks about executive strategies will assist in identifying and cutting underlying costs. As a result, your company will enjoy success that won’t disappear in several years. And your company will benefit without cutting jobs and flattening your organizational chart.
Resource:
Gary L. Neilson, Karla L. Martin and Elizabeth Powers.” The Secrets to Successful Strategy Execution.” Harvard Business Review.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Successful companies look past shrinking their workforce, and focus on strategies that address underlying costs. Focusing on areas with potential for greater efficiency, such as decision making accountability, will produce lasting results.
Focus on Execution Strategies
The key to creating effective execution strategies is ensuring every manager understands their decision making responsibilities. This prevents confusion about who is responsible for which decisions and allows managers to understand the scope of their authority. As a result, companies experience a boost in efficiency, and mangers spend less time justifying decisions to upper management.
Streamline Decision Making
Many companies have a single person, such as the Chief Executive Officer, making all of the decisions. This can severely bog down the decision making process and waste the CEOs valuable time. Instead, reserve the most important decisions for the CEO, and delegate the majority of decision making to several mangers, each with their own responsibilities and accountability. This will allow customers to be served better with quicker decisions and easier communication flow.
Make an Accountability Visual
Once management understands the scope of their decision making authority, compile the information into a grid. The visual should clearly demonstrate who is responsible for what decisions. This solidifies the process, and can be used as a communication tool for business units to understand who is responsible for what. Plus, having an official document will hold individuals accountable.
Clarify the Approval Process
Once decision making responsibilities are finalized, employees need to understand the approval process. Processes should be designed to promote the seamless flow of communication, resulting in fast decisions. Employees should receive a copy of the accountability visual, accompanied by protocols for requesting approval.
Avoid Second Guessing Decisions
Decision makers need to feel empowered and supported in their decisions. For this reason, second guessing activities should be avoided. Preventing these activities will prevent productively and communication issues.
Streamline Communication
Another important component to successful execution, is educating employees about how their actions impact the company’s bottom line. Strategies and measurement tools should be implemented to remind employees consistently of their ability to impact business. Plus, procedures should be put in place to promote the upward flow of communication from the front line to upper management. This will give management the ability to quickly solve problems such as pricing and service issues.
Keep Decision Making Close to Activities
When too many decisions are made at the corporate office, the reality of what’s going on with customers can be lost. This is because information moving from front line employees upward can get fine tuned and refined before reaching upper management. This results in decisions based on disseminated information, which produces unsuccessful strategies. The solution to this issue is keeping as many decisions as possible close to where the activities are occurring. This allows individuals with first-hand experience to resolve issues.
Increase Lateral Management Opportunities
Many companies discourage lateral management moves because they think it isn’t productive. However, allowing these moves can be a smart strategic decision. When laterally moving managers, other business units can benefit from cross-unit cooperation. The company may also experience less turnover, because middle-level managers won’t get bored and feel like opportunity is limited.
Foster Cross-Unit Collaboration
Execution strategies can be improved by examining communication flow between business units. This will result in more accurate forecasts on costs and lead times. Potential demand and production challenges will also be identified earlier, allowing quicker reaction and increased customer satisfaction.
Increase Rewards for Positive Contributors
If your company doesn’t already have an incentive plan, adopting one is a good decision. This action will assist in supporting your company’s strategies and goals. Assign measurable goals to employees, and hold individuals accountable for their performance. Positive motivation can be established with monetary compensation, gift cards, or other rewards. This allows individuals to be rewarded for their positive contributions.
Encourage Staff to Move Across Business Units
Like managers, having staff move into lateral positions makes a more well-rounded business model. Your business units will enjoy enhanced productivity and employees will be more stimulated and feel more valued.
Reshaping the way your company thinks about executive strategies will assist in identifying and cutting underlying costs. As a result, your company will enjoy success that won’t disappear in several years. And your company will benefit without cutting jobs and flattening your organizational chart.
Resource:
Gary L. Neilson, Karla L. Martin and Elizabeth Powers.” The Secrets to Successful Strategy Execution.” Harvard Business Review.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
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