(English) The Problem often is the way Business Owners see the Problem in their Business.
Almost my daily routine for the last 20 years contains one way or another management consulting. I encounter the same challenge over and over again. Business owners see business problems in an over simplified way. Moreover, because of that, their perception of problem solution is limited and quite often illussional, as if there is a “magic stick”.
Nowadays, businesses operate in a turbulent, uncertain and complex environment. The impacts of the international business economic environment in Cypriot businesses are more direct and severe from what it was 10 or even 20 years ago. And every year is getting bigger and bigger.
Therefore, business modelling requires new perspectives, new & modern business strategic, leadership and financial models that will allow businesses to accommodate for the uncertainty and complexity factors that old models do not even come close to dealing with.
Let me elaborate by giving a few specific examples:
Strategic Business Planning
Upon a very simple question – what is your strategy? Why do you exist? Business owners come with the traditional answers of Profit, Market Share, Sustainability or Growth. Some others may throw on the table – Happy Customers or market penetration.
This cannot be today’s Strategy by a long shot! The above with perhaps the exception of “happy customers” are not Strategy. They are the results / by – products of deploying a Strategy (if any) and implementing a Business plan, or carry out the day to day activities of a business.
The answer to the question of what is strategy lies with finding the answer to why should anybody bother to buy anything from you when there are so many other selling the same thing.
The answer to that question inevitably cannot be that simple, isn’t it? It encompasses the strategic requirement of the current times. It very much relates to creating competitive advantages and Core Values. A process which is not easy and it is also ongoing / dynamic.
People
It is recognised that people (they are called Human Resource – a term that I don’t particularly like) is the most important of all resources (capital, instructure, technology, products, methods).
How do you get the best out of people?
Business owners nurtured in management of the past 20 to 30 years, strongly believe that managing people (organizing, planning, guiding, coordinating and controlling) using best management practices is the key. Wrong!
This is only half of the truth in today’s environment. The other half is leadership. So we need to go away from the traditional Leadership & Management as separate distinct skills. We need to develop Leading Management skills and Tools. Unless a Manager, applies management skills in a Leading framework, not much can be achieved at competitive salaries.
There is another truth in today’s environment relating to the initial question. To get the most out of the people you need first to create the mechanism to hire the best talent.
What is the best of an average employee? Average performance.
Performance
I ask the question to business owners and Managers. What performance do you require from this position/person? 80% of the time I don’t get an answer because there isn’t one and sometimes they give a very subjective, vague answer such as: To be productive, to meet deadlines and execute projects or tasks.
Even performance appraisals when implemented are full of crap. They ask Managers to assess their people on things as for example, Pressure Resilience or Communication or Management or Initiative or Adaptability.
How do I measure pressure resilience objectively?
I either need a mechanical press to subject an employee under pressure and measure at which point he or she will break – obviously a joke – or I need to create a criterion for this. One which is specific and measurable.
Moreover, performance is not designed at the bottom line but at the top level. It evolves from the strategic objectives, which we interpret into specific, measurable, attainable, realistic and time bound corporate objectives which in turn we interpret into Departmental or Team or Individual objectives which constitute the individual performance criteria.
Only then I know that when someone delivers results in accordance with their individual performance criteria, that contributes to a team or departmental objective which contributes to a corporate objective(s) which take me a step toward my strategic objective.
Moreover, performance is about deciding which criteria are critical by limiting performance indicators and assigning weights based on importance.
Accounting, finances and
How is your business doing financially?
These are examples of answers I get. I guess well. We are reaching a sales target of X and we make a profit of Y. Or we could do better. Due to the crisis we had a decrease of about 5% in the sales etc etc. Isn’t that good?
Now here is the thing. The following scenario could apply to any business according to those answers.
The business had a sales figure X and achieved profit less than Y because the business owner doing the math in his head did not accounted for a series of expenses, such as depreciation, financing expenses or lack of initiative, mistakes, poor quality ( those normally are not measured by accounting systems). Moreover he / she did not accounted for his/her salary. Last week I had a meeting with a Business Owner in Trading whose Company make 1,5 million in Sales. I asked what is your salary. He said € 1.500 / month. Now why do I want to go into all trouble, investments, anxiety, stress to run a Company for this Salary?
In addition, the profit comes from 40% of this product range while the other 60% was loss making.
Now, is it the guess of doing well a good guess? Noor!
And those are a few simple examples – there are a lot more that I can quote – which prove one thing.
You cannot simplify things in today’s complex business environment. You must connect the dots of your business to the figure / model of your imagination (Strategy)
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