Critical Factors

Category: Execution

The actual execution of the strategy

  • Financial Statement Hacks for Small Business Owners

    Financial Statement Hacks for Small Business Owners

    “When the bank asks for them. Otherwise, why bother? …It’s just a bunch of numbers on a page.”

    Those were the precise words of a small business CFO in response to my question as to how often he generated financial statements for his company.

    Prior to that, I had asked the CEO how often he reviewed his financials. To which he replied, “I’ve never seen them.”

    You’re Busy

    Let’s face it, other than single moms – or single parents in general – small business owners are the busiest people on the planet.

    1. Maybe you don’t feel you have the time to review financial statements.
    2. Or maybe you don’t have a CFO or other means of generating financial statements on a regular basis.
    3. Or maybe you do review them but you’re just looking at them from an historical perspective.

    If any of these three scenarios apply to you, you’re deriving less than half of the value of financial statements – at best!

    So, here’s a series of short videos to help you transform your financial statements into invaluable information that will give you greater insights into historical performance but, more importantly, a structure for proactively managing your company.

    You Can Do This Over Lunch

    You may have your bookkeeper or CFO make these adjustments but it is important that you understand them.

    So just sit back, relax and watch these 5 short videos that will empower you to take mundane financial information and turn it into actionable data that you can use to proactively improve the performance of your company.

    Here’s How to Gain Greater Control by Transforming
    Financial Statements into a Foundation for
    Proactive Management of Your Company

    (All videos best viewed in full screen mode)

    In this introductory video, I lay the ground work for how you can easily convert “a bunch of numbers on a page” into management segments that represent the way YOU see your company.

    That’s why it’s important that YOU watch these videos.

    You want your financial statements to tell you a story each month.

    And you want them to tell you the story as YOU want to understand it.

    Introductory Video – Structuring the way you want to see it

    So now that we have the basics established, let’s take a look at…

    An Example using COGs:

    You see, the IRS doesn’t care how the financials are structured in this regard.

    We have this discussion with business owners all the time. “But my accountant…”.

    Your accountant’s job and main concern is to conform to GAAP.

    The bottom line is – well, it’s the bottom line: as long as profit is accurately reported, you can structure your financials any way you want.

    Oh, and another thing with regard to bookkeepers. They are not mind readers and they don’t necessarily understand the operation of your company.

    So you might find entries for ‘Other’ or ‘Miscellaneous’ or new accounts set up for a misspelling of an old account. We’ve seen it all.

    Don’t allow it!

    You can’t manage to a ‘miscellaneous’ or ‘other’ expense.

    When you get your financial statements structured to tell you the story of what’s actually going on in your company, you’ll want accuracy in everything that is entered.

    So now that you have the hang of it, let’s look at a way to organize all of your operations in a way that every member of your team will understand which will provide…

    The Foundation for Establishing Alignment and Accountability while Inspiring Engagement

    You see, once you have a structure that everyone can readily understand, employees will have a better sense of how their performance impacts the performance of other team members and the company as a whole.

    So now it’s time to…

    Apply the Structure to Overall Company Operations

    Again, this post was created to get you started on structuring your financials so that, rather than just conforming to tax requirements or a vague historical review of profit and loss, you can use your financial statements to proactively manage your company.

    It doesn’t change the cost of entering the data – it just makes the resultant information more valuable for you.

    And there’s more you can do with that information now that it’s properly structured.

    For instance, let’s conclude by taking…

    A Quick Look at Ratios for Greater Insights

    Done

    So there you have it.

    A quick way to gain greater insights from the historical data residing in your Financial Statements and, more importantly, the foundation for establishing more effective budgets and performance metrics for the overall operation of your company.

    Done for You

    Financial Statement

  • INSPIRE Excellence in Your Entire Team!

    INSPIRE Excellence in Your Entire Team!

    I recently wrote about how to Achieve Your Full Potential Through Level 3 Accountability and cited the Harvard Business Review article relating that 70% of ALL employees are demotivated and disengaged.

    Common sense dictates that a demotivated person is less productive than a motivated person. And you can ask yourself how productive you are when you are faced with a job you don’t want to do and how much less productive you are when you have someone telling you you should have done it better, faster or otherwise.

    On average, a demotivated employee works at approximately 32% of their full potential. So, if on average, your company is operating at approximately 22.4% of its full potential, what is that costing you? What do you do? – coddle people and bribe them to do their job? – constantly threaten them with a pay cut or termination?

    There are basically two ways to motivate people:

    1.     Carrot – the coddling
    2.     Stick – the threatening

    NEITHER of them is effective – long term.

    Think about it. If you are using the stick approach, you need to be present or at least be constantly monitoring every aspect of performance. The moment you let up, that employee will revert to whatever unproductive behavior that concerned you in the first place. On the other hand, if you are using the carrot approach, you may be creating a situation in which you only get the performance you’re already paying for through a salary by offering the bribe of a bonus. By these definitions, you don’t want to motivate your employees, you want to learn to inspire them.

    Hopefully it is clear that, by inspiration, I do not mean coddling (in any way!). Inspiration emanates from touching something inside a person that makes them want to perform at their very best without regard to who is watching. The difference is that motivation is an external force imposed upon a person; inspiration is an internal force that you cultivate within a person.

    While we focus on accountability, creating an inspired workforce is at the heart of the Critical Factors Management System. The end result is optimal productivity and therefore optimal profitability. Sure, the tools we employ can be used to simply monitor performance and hold people accountable but the magic of the overall system is to inspire people to hold themselves accountable.

    So remember – you can hold employees accountable to your standards through motivation – OR – learn to inspire them to hold themselves accountable to excellence.

    Want some help? Download our FREE PIP Checklist for 7 Steps you can start implementing today to INSPIRE excellence from your entire team!

  • Achieve Your Full Potential through Level 3 Accountability!

    Achieve Your Full Potential through Level 3 Accountability!

    Accountability is obviously critical to the success of any business. After all, every business strategy has to be executed through people. Assuming the strategy is sound, the efficiency with which they execute the strategy determines the degree of profitability. Thus, holding people accountable to the strategy is essential to success.

    Because my practice focuses upon development or refinement of business strategy and execution through the Critical Factors Management System, people have referred to me as ‘Mr. Accountability’. I am sure this conjures up images of a hired hand that goes into companies with a big stick and makes sure everyone is productive. My clients understand, however, that my philosophy with regard to accountability has nothing to do with using a stick – or a carrot for that matter.

    In fact, while you can motivate people with either a carrot (reward) or a stick (threat), I don’t advocate either because both require that you be present in order to achieve the performance you are seeking. At best, this achieves what I refer to as Level 1 Accountability.

    Level 1 Accountability is merely establishing goals, allocating accountability and holding people responsible for results. While many companies don’t even achieve that level of accountability, if that was the extent of my practice, there really wouldn’t be anything unique about what I offer. Thus, let me use this football analogy to explain Level 2 and Level 3 Accountability in order to provide perspective on the magic of Level 3 Accountability.

    Most of us who love football love it because of the amount of strategy employed. Yes, to the casual viewer, it appears to be a simple game of brute strength but, in fact, with most teams pretty much evenly matched in terms of athleticism, at the end of the day, the game is won or lost based upon strategy and execution of the strategy.

    Remember the 2011 Playoff series?  Every game was decided as a result of a split second lapse in concentration. In all instances, the teams were physically similar, well prepared and the strategies were almost equally matched – the games were decided upon errors in execution. And my GIANTS won the Superbowl! (but I digress…)

    That said, let’s get back to strategy in football and how football and business are similar. In fact, bringing it back to business for a moment, my philosophy is that there are three steps to success in business:

    1. Clear & Quantifiable Goals
    2. Comprehensive Strategy
    3. Systematic Execution of the Strategy

    Back to football:

    • Every member of every team and every team has a Clear & Quantifiable Goal – Win the Superbowl
    • Every team has their own specialized strategy (their offensive and defensive playbooks)
    • Every team has to execute their strategy in order to achieve the goal

    Briefly, with regard to goals, the primary goal in football is to win the Superbowl which means winning regular season and then playoff season games.

    With regard to strategy, however, every team is different. There are various descriptions of NFL offenses, for instance, including some interestingly named such as Smashmouth, Pistol, Vertical Passing,West Coast, Run-and-Shoot, Spread, Spread Option and Read Option.

    Every team has their own strategy and they develop a game plan each week based upon that strategy. They don’t, however, simply implement the same strategy each week. They look at their strategy, anticipate every conceivable situation that might occur during a game and come up with contingencies. So football teams employ what I refer to as Comprehensive strategy.

    For example, they may have a play for 2nd and 11 but that play will be different depending upon field position, time on the clock, the way the wind is blowing, player injuries, etc. (And in business, it is essential to have contingencies built into your strategy as well but let’s stick to the football analogy for the moment.)

    Okay, so each team has different strategies and those strategies will change at any given moment depending upon the situation on the field. But think about this – every team’s strategy is so well conceived and so clearly communicated that, during the game, when the quarterback steps into the huddle, no one is asking questions and no one is making suggestions. He simply says three things – the formation, the play and the count and everyone in that huddle immediately knows their assignment (which could change on the line of scrimmage depending upon the way the defense lines up but that’s more about about skills, knowledge and training and beyond the scope of this article).

    So let’s assume that the quarterback has called a pass play. He repeats it twice and they break from the huddle. He stands in shotgun formation and takes the snap from center. As he scans the field he sees his receiver wide open down the right sideline because the defensive back has fallen. He steps into the throw for an easy touchdown but, just as he is about to release, he gets creamed by a defensive tackle.

    Now, you won’t see the owner of the team come down from the box, run onto the field and scream at the guard who missed his block. You won’t see the coach come running off the sideline and into the huddle to yell at the guard who missed his block. And, for the most part, while they may give him a sideways glance (Level 2 Accountability – members of the team holding each other accountable), you won’t see the other members of the team scream at the guard who missed his block. Why?

    While there may be many thoughts on this, the simple answer is this:

    • EVERYONE on the team is working towards the same goal
    • EVERYONE on the team knows the strategy so well that not only do they know their own assignments, they pretty much know everyone else’s as well
    • That guard KNOWS that he alone did not execute. He knows that he let the team down. And he knows that everyone else on the team knows he let them down. They are all in this together.

    There is no need to scream at him.  He already feels bad for missing the block. He is holding himself accountable. And that is Level 3 Accountability – when members of the team hold themselves accountable. And there is only one way to create Level 3 Accountability – you must INSPIRE rather than motivate people; the difference being that motivation is an external force imposed upon people whereas inspiration is touching something within that person.

    And, in order to inspire people, you must give them a sense of being part of something they believe in that will be bigger than the sum of its parts (not just a company, but a company that stands for something great). You must give them a clear understanding of the goal and a sense of ownership in that goal. You must give them a clear understanding of the strategy and their ability to contribute to the strategy so that they have a sense of ownership. You must give them a clear understanding of their role in executing the strategy. And you must monitor the performance of each member of the team and the team as a whole consistently, objectively and transparently.

    In other words, in order to create Level 3 Accountability in your organization, you must have:

    •     Clearly Defined Goals
    •     Understanding and Buy-In to the Strategy
    •     Consistent, Objective and Transparent measurement of performance

    In football, it is easy to see who is performing and who is not on every play of the game. While the spectators may have a question now and then about who blew and assignment, no one on the football team has any question. Can you say that about your business? Does your team share your vision (Goal). Do they understand the strategy? Equally important, have they bought into the strategy? (If they don’t believe it, they won’t achieve it). And, does everyone on your team know how their personal performance impacts the execution of the overall strategy?

    If  the answers to any of these questions is ‘no’, then you can’t have Level 3 Accountability. And if you don’t have Level 3 Accountability, your organization is not going to achieve its full potential.

    By the way, do you want Level 3 Accountability? If you haven’t done it already, download our FREE PIP Checklist for 7 Steps that will assist you to achieve Level 3 Accountability. If you already have THE PIP Checklist and want a step by step guide for implementing the 7 Steps, get THE PIP Manual.

    In summary:

    1. Level 1 Accountability – tell people what to do and then hold them accountable; watch them carefully and always be prepared to dangle a carrot or threaten with a stick but, understand that, in your absence, performance will drop off
    2. Level 2 Accountability – clearly communicate the strategy, allocate accountability and ensure that performance measurement is transparent to the whole team. Members of the team will hold each other accountable and, done properly, do so in a positive manner.
    3. Level 3 Accountability – ensure that the goal and the strategy are clearly communicated, allow the team to participate in establishing the goals and the strategy, inspire (as opposed to motivate) excellence by giving members of the team ownership of their responsibilities and a clear understanding of how their performance impacts the rest of the team, create a consistent, objective and transparent means of measuring performance, take timely appropriate action (including praise for exceeding expectations) and watch the transformation in your company as people hold each other and then themselves accountable

    By the way, do you need Level 3 Accountability? According to a recent article published on the Harvard Business Review Blog Network, “Gallup’s research shows that engagement among US workers is holding steady at a scant 30%. This means seven out of ten people are either “checked out”, or actively hostile toward their employers. Seven out of ten.”

    Download THE PIP Checklist and see how many of the 7 Steps can help you create Level 3 Accountability today!

  • Surrounded by Idiots

    Surrounded by Idiots

    I fully understand the frustration of entrepreneurial CEOs in executing their vision and the sense that they are surrounded with incompetence.  It takes patience but the way to achieving their vision is to inspire people to their fullest potential and thereby get 100% productivity out of them rather than measure how many minutes to the hour they are giving you in activity.

    I am not arguing on any point as to whether the business owner is right or wrong in anything they think or feel but rather telling stating simply that inspiring excellence is more effective than motivating activity. People can only rise to their full potential and then be inspired to reach for more.  No amount of domination is going to surpass the productivity of an inspired workforce.

    Inspiration comes from within.  Motivation is an external force upon. When you inspire a person, you touch something within them that makes them believe they can achieve something beyond their current state of being. Achievement is the greatest inspirational energy. Reaching beyond oneself – to expand oneself – is the empowering force.

    To achieve, one must surpass a goal; and thus the goal becomes the starting point. Involving people in the goal, sharing the goal [the vision of the company] and collectively expanding upon the goal to a unified vision is the core [the driving force] of the inspiration. Clearly communicating and collectively refining the strategy creates buy-in [the foundation] for self-accountability and the inspiration for excellence in execution of the strategy.

    How can you possibly get more than 100% out of a person other than to expand them into something greater?  You can’t expand a person through an external force exerted upon them (motivation).  Whether they accede to your demands or to your bribes, they are diminished.  You can only get more than 100% out of a person if you expand upon their current full potential.

    Even that aspect of the military process during which they break recruits down during boot camp is obviously designed to make them better people when they come out than they were when they went in.  But you do not operate your company in the military.  People are free to come and go; not so much so during down economic times but, nonetheless, free to come and go. We don’t need to get into the fact that the newest generations, the workforce, are more mobile and are seeking work environments in which they can grow. ALL generations, ALL people are more productive when they are inspired.

    So again, as I have previously stated, INSPIRE your people to Excellence!

    …else you will stay frustrated and stressed out while continuing to beat that dead horse by cracking the whip and demotivating them thus leading to decreasing productivity and profitability as you prove who’s the boss.  And, as we all know, economies go through cycles.  The current down cycle will eventually change and there will be more job opportunities out there.  So start focusing on inspiring your workforce to excellence so that you don’t have to find yourself lonely at the top when the economy improves.

    What do you think?

  • The Best Team Wins!

    The Best Team Wins!

    In today’s business world, the greatest competitive advantage is derived by those organizations that can attract, develop and retain the right people at the right time and execute in an environment of accountability.

    Properly developed, your PIP ensures that:

    1. the Company Vision has been clearly defined and communicated
    2. management is in strategic alignment and
    3. there is a framework for systematic execution of the strategy

    It is Management Team Development that then ensures that the management team has the fundamental skills to perform at the top of their game to actually EXECUTE the strategy.

    This is not rocket science. In fact, as with any type of coaching, it is common sense; it is simply not common practice. That’s why people like Tiger Woods employ a coach. Amateurs practice until they get it right. Professionals practice until they can’t do it wrong. At all levels of management, our Focus on the Fundamentals program ensures that your management team will operate at peak performance by focusing on the following management fundamentals:

    1. Planning
    2. Resource Optimization
      1. Time Management
      2. Delegation
    3. Effective Hiring
    4. Interpersonal Relations
    5. Accountability Management
    6. Leadership

    1. Planning

    The key to achieving any goal is to have a plan. And that plan needs to be in writing.  We focus on the fundamentals of developing a Business Plan, Succession Plan, Departmental Plan, Career Plan, Life Plan or any plan to get you to where you want to go.

    2. Resource Optimization

    You have a vision, it is broken down into goals and you have a plan to achieve those goals. Do you have the right resources? Are your resources optimized to ensure the most efficient achievement of the goals? Create Strategic Alignment throughout the organization for maximum results by optimizing existing resources and identifying essential needed resources. EVERY company has at least three resources in order to operate: 1) Time, 2) People and 3) Money.  While money management is a discipline reserved for financial specialists, time and people are resources that must be managed by EVERY manager. Thus, among the two most important sub-categories for resource optimization are:

    2a. Time Management

    Time is the most elusive resource available to every manager. Time can’t be bought, earned, saved or created. Either manage time or time will manage you. Learn how to control time, eliminate time-wasters, increase productivity and increase profits.

    2b. Delegation

    The number one obstacle to advancement among managers is ineffective delegation. Think it is easier to just do it yourself? Faster to do it than explain it? You’re better at it anyway? If you answer yes to these questions you are not developing your team and you are not developing as a manger. When you’re ‘doing’, you’re not ‘managing’. Management is the ability to get things done through other people. Learn to be more productive through effective delegation.

    3. Effective Hiring

    It’s a fact – In business, just as in sports, the best team wins. Jim Collins’ concept of get the right people on the bus, the wrong people off the bus and the right people in the right seats (Good to Great) is among those that you must learn. Develop effective recruitment, interviewing, hiring, orientation, training, development and retention processes to maximize workforce productivity.  It is imperative to learn how to hire the RIGHT people at the RIGHT time.

    4. Interpersonal Relations

    CEOs, business owners and managers deliver top performance when they learn how to develop their interpersonal relations skills, including and especially effective communication skills, and employ them to direct and INSPIRE each member of the team.

    5. Accountability Management

    Your most valuable resources are human. Among the greatest challenges to managers is controlling people. It is critical to the performance of the company to hold people accountable for performance. Learn to create an Environment of Accountability by effectively measuring performance on a consistent, objective and transparent basis and taking timely, appropriate action.

    6. Leadership

    Leadership is not merely a function or a position; it is a way of BEING. Being a leader and being in a leadership position are not necessarily the same thing. We have developed a variety of workshops, trainings and coaching sessions to focus leaders on their strengths, teach the difference between leadership and management and provide a solid foundation for leadership development.

  • Is Cruising Safe?

    Is Cruising Safe?

    As I read the articles and reports of the Italian cruise ship disaster I feel for the families of travelers involved and I think back to my last cruise and our marveling over how they never even completed the safety briefing.  Though we left from Venice, Italy, we were traveling on a recognized cruise line. Our previous cruise had been in the Caribbean with Royal Caribbean and the safety briefing had been regimented and thorough (a distinct memory of that cruise).

    Leaving from Venice, we got as far as being huddled in a grand dining room for the safety briefing before disbanding with no idea of even the location of the life boats. Plenty of people remarked that this safety briefing was ‘a joke’ or a ‘waste of time’.  As experienced cruisers, the fact that we did not feel as safe is not so much important; what is important is the fact that we were not, indeed, safe. Again, as with everything I preach in business, it all starts with ‘What’s the Goal?’

    Among the chief concerns, if not the mission of a cruise line, must be the safety, well-being and enjoyment of its passengers. That safety briefing, required on all cruise lines, is a critical factor to the accomplishment of this mission. Every aspect of it must be carefully detailed in a strategic plan. Every execution of it must be carefully monitored in an accountability management system. What are the three steps to everything I preach in business?

    1. Clear Goal
    2. Comprehensive Strategy
    3. Execution

    The headline reads ‘After sinking, some wonder: Is cruising safe?’

    Of course! – it could be…

    If safety is a priority (goal), a comprehensive plan can be developed that takes into account every known or conceivable variable (strategy). It is then critical to implement an accountability management system to measure performance and get back on track on a timely basis (execution). 

    As is the case in terms of profitability for companies following this formula, the degree of safety of cruising is a function of the comprehensiveness of the strategy – not only what you plan on doing but also everything that can go wrong (accounting for pilot error for instance) and the effectiveness of the accountability management system.

    (Does this sound familiar? If not, download our 7 Step Checklist for improving overall company performance.)

    Now that safety is a consideration, based on my experience, I will cruise exclusively with Royal Caribbean in the future. Every cruise line features amazing food, great diversions, cool destinations and plenty of entertainment. The big selling point moving forward will be safety. Royal Caribbean would do well to incorporate that into its mission statement. Travelers like me will appreciate them for their attention to a safe and enjoyable vacation.

    Does your Mission statement give your customers the assurance they seek in doing business with you? Does it set you apart from your competition? Do you have a comprehensive strategy to deliver upon your Mission. Is your team aligned with your Vision? Do they know precisely how their performance impacts the ability for the company to achieve its goals?

    If the answer to any of these question is ‘no’, download our our 7 Step Checklist for improving overall company performance. It’s FREE.)

  • Performance Management Process

    Performance Management Process

    Performance Management is a process that every member of your team must master. It requires consistent focus along with the fundamental management skills to ensure the process is efficient and effective. Every manager will be inclined to think ‘I could do it faster’, ‘I can do it better’, ‘I might as well just do it myself’, etc. but the company will never achieve its full potential unless every manager down to the supervisory level learns, rather than to DO things, to GET THINGS DONE through other people. In fact, the inability to effectively delegate is the number one factors holding managers back from progressing in their careers.

    What is a performance management process?

    An effective performance management process will:

    • clarify and quantify goals and expectations
    • properly align the resources of the organization to achieve its goals
    • clarify a comprehensive strategy to achieving the goals
    • consistently monitor individual and overall performance
    • inspire the growth of employees in executing their responsibilities
    • allow for timely course correction

    In THE PIP, we recommend that the owner of the company meet with the management team to create the overall performance management system. This includes the setting of goals as well as the development of the strategy to achieve those goals. Each manager, in turn, should meet with their team in the same fashion. This systematic approach ensures that everyone is on the same page and also has the potential to expand the vision for the company.

    The steps for accomplishing this are detailed in THE PIP Checklist. Generally:

    Goals. The primary goals for the company are its Mission (the promise to the customer that sets the company apart from its competition) and the Vision (what the company will achieve in delivering upon its promise to its customers).

    Strategy. Not only what needs to happen in order for the company to achieve its goals but also consideration to what can go wrong. It requires an alignment of all available resources, including and especially time, and the integration of the activities of every member of the team.

    Monitoring. There is a big difference between performance monitoring (historical observation of achievement – or lack thereof – relative to set objectives) and performance management (pro-active management to achieve objectives). Managers must not only monitor performance but create milestones and consistently monitor those milestones. Many micro-manage ‘after the fact’. The key to effective performance management is to establish specific milestones in advance, get agreement on the milestones and the specific dates for accomplishment, and then to consistently monitor performance so that appropriate action can be taken on a timely basis.

    Appropriate Action. This could be an entire article on its own. The absolutely critical aspects of taking appropriate action, however, are 1) ensure it is done on a timely basis (in time to get back on track), 2) NEVER chastise an employee in front of anyone else and 3) the most-oft neglected aspect of taking appropriate action – find opportunities to praise excellent performance publicly.

    Rewarding. And one last word related to appropriate action. ONLY reward a person if they exceed expectations. It is important to not reward a person, be it praise, a raise or otherwise, for doing the job that was expected of them. That is what their paycheck is for. If you have generally poor performance or morale, turn things around by setting easier goals that people can exceed but do not reward people for merely doing the job for which they are getting paid.

    THE PIP is systematic process for creating a performance management system. To get started, download your FREE PIP Checklist here.

  • How to Align Your Team for Optimal Execution

    How to Align Your Team for Optimal Execution

    I recently completed the implementation of the Critical Factors Management System into a $4.5 million manufacturing company that had been operating at a loss for the past six months.

    As is usually the case, I cannot mention the name of the client but they are typical of many small businesses that are run by intelligent, passionate and capable entrepreneurs who have all of the industry knowledge and relationships, along with a brilliant product or service, that you would think are critical to business success. Yet, they are struggling or failing to reach their full potential. WHY?

    I knew the answer to the first question I asked my client before I even asked it – how could a company that was profitable two years ago with only $2.2 million in sales be losing money now that they were operating at $4.5 million?!

    The reason I asked the question was to see if he realized that the answer was simply this – there is a big difference between knowing how to DO something and knowing how to RUN A COMPANY that does what you do.

    Thankfully, he did. He understood and was ready to make that transition from running a business (being good at DOING something) to running a company (being good at GETTING THINGS DONE through other people).

    And thus, I could help him because his job, as the CEO, is to hold the vision, have the industry know-how and relationships and focus on inspiring his team to excellence. My job, as his Outsourced COO, was going to be to assist him, to execute his vision through his team.

    Up until two years earlier, he had pretty much done everything himself. He worked night and day for years to learn as much about his industry as possible and develop the relationships critical to his success. And then, two years ago, as he started to grow, he started hiring people to do a good deal of the work that he had been doing. At first it was easy to manage his workforce – even though he did not recognize he was micro-managing them.

    This is typical. As more people are added, it becomes more and more challenging to ensure that they are all operating efficiently. And, if you are micro-managing, in essence all you are doing is increasing your workload because you can’t be everywhere at once and watching everything everyone does. He had reached this stage and he was getting burned out.

    Of course, my first order of business was to take him back to the beginning and clarify his Mission and Vision. You are familiar with this approach if you are familiar with the 7 steps of THE PIP. If not, you may want to download THE PIP Checklist.

    Once we clarified his goals including his unique value proposition (Mission) and where he wanted it to take him (Vision) we worked on refining his strategy. The truth is, while I think we renewed his enthusiasm for why he is in business, he had been pretty clear on his goals and his strategy; the biggest problem was alignment.

    When your car is out of alignment – you know it. It just doesn’t feel right. You feel less in control and you know you’re wasting gas and tires.

    It’s really not that much different for a company.

    When your company is not operating on all cylinders – when things are out of synch – you feel less in control and you know you have diminished productivity and profits are suffering.

    In his case, his company was growing at a relatively fast rate but it lacked the proper structure to enable him to maintain control. And that is what was causing the burnout.

    He certainly hadn’t dedicated himself to building a company for the love of becoming a harried business owner.

    So we implemented the following structure which now enables him to lead with the calm control of a CEO of a strategically aligned team.

    This is the structure I use for every company. It will work for yours as well.

    We recognize that every company is unique and rightly takes pride in that uniqueness. At its essence, however, every company, whether for-profit or non-profit, services or widgets, Fortune 100 or Startup; has six critical components:

    1. Product or Service – someone needs to be responsible for the conceptualization, refinement and development of your product or service to ensure it meets your customer promise
    2. Marketing – you can have the greatest product or service in the world but if no one knows about it…
    3. Sales – awareness of and interest in your product or service needs to be converted into revenue
    4. Operations – the product or service needs to be produced, warehoused, distributed and supported
    5. Finance – revenue must be collected, bills must be paid and money must be managed
    6. Administration – strategic planning, legal, risk management and human resources support the entire organization

    By taking the VISION of the company and allocating the goals to these six functional areas of every company, we start the process of creating the alignment necessary for efficient and effective execution of the business strategy.

    This is a simple structure that every member of the company can readily understand.

    Product or Service

    What is your product or service? Does it fulfill your customer promise? Do you make changes every time the sales team learns something about a competitive product? How does that impact the operations team responsible for producing the product? If you do make changes, has the finance team analyzed the impact on profitability?

    You see, someone needs to be responsible for ownership over the conceptualization, refinement and development (not production) of your products and services. Marketing, sales, production, etc. cannot be allowed to make changes without coordinating with the Product/Service Manager.

    Marketing

    Marketing and Sales are often combined. They should not be. Marketing and sales perform completely different functions. The primary responsibilities of marketing are:

    1. Create Awareness
    2. Inspire Trial

    Of course, marketing must achieve its objectives by promoting the customer promise. It must be constrained, however, by the actual features and benefits of your product or service (coordination with product/service manager). It must generate the leads necessary for sales to generate the revenue required to meet company goals (based upon sales’ performance metrics) as well as the budgets established by finance.

    Sales

    The primary responsibility of Sales is to convert the leads from Marketing into revenue. Again, sales cannot make promises that the product or service does not meet (coordination with product/service manager and marketing), cannot offer discounts that are not within the budget (coordination with finance) and must be held accountable to established sales metrics (calls, presentations, closing ratios, etc.)

    Operations

    Operations is a big component. It includes purchasing, production, warehousing, shipping/receiving, customer service and facility management. Obviously, Operations must coordinate with all aspects of the company. For instance, with regard to:

    • Product/Service management (could different materials be used to make the product lighter/faster/stronger/more efficient…?);
    • Sales (can production keep up with sales? – this is a major consideration, for instance, with aerospace companies attempting to meet a promise of on-time delivery);
    • that customer service provides up-sell opportunities to Sales, etc.;
    • work within the budgets set by Finance and ensure, among other things, that shipments do not go out to suspended customer accounts;
    • etc

    Finance

    Finance has four major functions:

    1. Accounts Receivables – ensure on-time collection of payments from customers with a goal of minimizing 60+ day receivables (an important consideration for improving bankability)
    2. Accounts Payable – effective management of accounts payable has the potential to make a major impact on cash flow (the lifeblood of every company). Proper management of accounts payable means improving vendor relationships. If, for instance, you can extend payments by 30 days with every vendor, that buys you a month of additional cash flow.
    3. Cash Management – to the extent you are generating a profit, you want to ensure that any cash balances are working for you. You will, of course, re-invest these profits back into your company but there are innumerable financial instruments that can generate returns on investment greater than simply leaving them in a checking or savings account.
    4. Financial Analysis – historical, pro-forma, breakeven, purchasing, etc. analysis is critical to ensuring realistic company goals and the performance metrics and budgets necessary to achieve those goals

    Administration

    All of the foregoing components support the customer experience. Administration supports the overall organization and includes:

    • Strategic Planning
      • Develops the overall company strategy but not in a vacuum. As per the Engagement step of THE PIP, the strategy is finalized with the input of all of the foregoing components.
      • Monitors overall company performance through reports generated by Finance. 
    • Administrative Support
      • Each component of the company may have administrative support. All administrative personnel should report to and be coordinated at the Administration level.
    • Risk Management
      • All aspects of insurance.
    • Legal
      • Self-explanatory
    • Human Resources
      • Human Resources must be like Switzerland. Thus, it is separated from all other aspects of the company. Beyond recruiting, managing payroll and benefits, , and overseeing the on-boarding, performance review, compensation review and termination processes, Human Resources must provide an absolutely objective safe-harbor for employees to discuss and resolve any misunderstandings, grievances or conflicts.

    Again, these examples are an oversimplification of how these components integrate but, as you can see, even the most complex company can be broken down into these six components which provides a readily understandable structure that enables everyone to see how they coordinate with each other.

    And, when we break the company down into these six components, we can generate a complete business model. We can take the Vision for the company, break it down into the necessary performance metrics and budgets, allocate them to the appropriate personnel within each component of the company, monitor performance and know precisely what needs to be done and when in order to get the company back on track.

    My client now has an aligned team. Everyone not only understands their responsibilities but, more importantly, they know where they fit into the overall business strategy; they know how their performance relates to the performance of the other members of the team; and, as a team, they know how their performance impacts the overall success of the company.

    (By the way, my 30 MINUTE EXECUTION Planning Worksheet provides a quick way to allocate goals to these six functional areas. You can download it FREE by clicking here)They are motivated and working as a team with a unified goal. As a team, they will WIN!

    Are you ready to create an Aligned and Engaged team?

    If you haven’t done it already, download our FREE PIP Checklist. Alignment is a component of the 7 steps you can start implementing today to create sustainable increase in productivity… which leads to sustainable increase in profitability… which leads to sustainable increase in business valuation… which leads to sustainable increase in bankability.