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Compassion Kills the Business

How far can emotion build your business, and when does it start breaking it?

Dr Frances Wright

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In an entrepreneurial business it’s easy to get really close to clients, suppliers and most of all staff. In theory, this is a good practice and relationships are often what hold an entrepreneurial business afloat, but that is only when such relationships are not interfering with sound business decisions.

Whether in a corporate or an SME, decision making should be based on cold data that is efficiently analysed in order to determine the correct decision to be made – there is no room for emotion.

When a client requests a discount because of its own budget restraints, the entrepreneur should have the cost of sale figures available to determine at which point a loss will be made on a job and have the courage to walk away if the job is no longer profitable, even if the client has become a close friend.

Making tough choices

Similarly, when suppliers are charging too much and thus affecting profitability negatively, it is the duty of the entrepreneur as custodian of the business’ finances to find alternative suppliers. If one has been working with a specific supplier for years, then this can become difficult to do, as it could mean disrupting an otherwise good relationship – but not doing so will be even more hazardous to the longevity of the business.

The most intricate and difficult area is that of staff. There is a basic principle in life; spend less than what you make. Especially in the service industry, salaries can easily become a huge portion of the company’s expenses and when there is free capacity in human resources it is as good as having wasted stock in the warehouse of a manufacturing business.

It’s the duty of the entrepreneur to ensure that there is just enough capacity to service the clients and fulfill on the requirements of the business. Extra capacity should be cut. It seems like a heartless approach to take, but keeping wasted capacity for the sake of relationships or compassion will put the sustainability of the business and, ultimately, everybody’s jobs at risk while compromising the credibility of the entrepreneur.  Another pitfall is to tolerate non-delivery by staff or suppliers due to relationship and for the sake of keeping the peace.

Finding solutions

Difficulties arise when suppliers and employees are fulfilling on all requirements, but an over supply of capacity is forcing an entrepreneur to cut back. The word retrenchment is probably one of the most feared words an entrepreneur can use. Not just for the employees, but also for the entrepreneur. It accompanies a feeling of failure.

When managing a small business, relationships will be much closer than in a corporate environment and it is always a hard decision to let go of talent and allow someone to re-enter the market when they have intimate knowledge of the company’s intellectual property. But the hard reality is that stock availability should match requirements and, similarly, human resource capacity should match service requirements or the business will burn money and will therefore not be sustainable.

Retrenchments

There are two ways in which retrenchments can be rolled-out; operational requirements or last-in- first-out (LIFO), each with their own set of procedural requirements. Once again an entrepreneur has to be careful not to let personal relationships cloud sound judgment.

When a retrenchment principle has been chosen, it has to be adhered to regardless of personal feelings or relationships. When choosing to retrench on operational requirements, decisions have to be based on which employees have too much spare capacity or whose absence will not negatively affect the business. It is important to be able to justify the decisions made.

Managing a business, especially a small business, is not an easy task and requires continuous planning, organising, leading and control.  Management of any business needs to be approached in an unemotional and analytical manner in order to make sound business decisions. While in some instances compassion is a good thing and can foster wonderful working relationships, without balance and objectivity it can easily kill a business.

There are many tools available to entrepreneurs to ensure sound running of the business. When business processes have been developed and quality and HR policies and standards are in place according to client requirements, there are measurements available to measure the performance and profitability of each client, supplier and employee. Any variance from standards or policies and any non-compliance with processes should be addressed immediately, regardless of the relationship involved.

Finding your tools

According to Churchill and Lewis (2000), the tendency of entrepreneurs to focus on their own skill and relationships often leads to them ignoring the ‘science’ of business and operational management.

They contend that this is the main reason for the low entrepreneurial success rate. Systems development is neglected and the owner-manager remains the main survival factor of the enterprise. During the life cycle of an entrepreneurial enterprise, the rapid growth phase is often followed by chaos, especially where there are no processes in place.

The need for sound processes increases as the enterprise progresses to a rapid growth phase. Hall, Daneke and Lenox (2010) argue that without processes and an awareness of sustainability, entrepreneurship will remain uncertain. Hung and Whittington (2011) believe that process and system theory will institutionalise entrepreneurship. They contend that entrepreneurs should use systems and technology to build legitimacy and mobilise resources.

Other tools which entrepreneurs should be using include role definitions and performance management systems. Service level agreements should be in place with suppliers and clients. Both the performance management system and the service level agreements should be used on an ongoing basis to track whether value is derived for the organisation.

When an entrepreneur realises that profitability will be affected by the performance of employees and suppliers, it becomes easier to manage the business based on facts and action, which leads to the creation of a win-win situation for the business itself, its employees, suppliers and its clients.

When running a business, there are various elements affecting its success and sustainability. The most important aspect for an entrepreneur is to ensure that the business is profitable. This cannot be achieved when relationships interfere with sound decision making processes.

Dr Frances Wright is responsible for the overall management of Trinitas Consulting (Pty) Ltd. Frances has a BSc Honours in Industrial Technology, a diploma in operations management & a certificate in production management. Frances completed her MBA at NorthWest University in 2007, where she was honoured as the top Operations student. She was awarded her PhD in Entrepreneurship at North West University and acts as a business mentor and trainer for Business Partners and Enablis. Frances has written many published articles, is an accomplished speaker and also stars in the YouTube channel “The Wright Solution”.

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Leading

The One Leadership Trait That Will Ensure You Succeed At Anything You Do

Can you adapt when the tough times hit?

Matthew Toren

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Very few things are certain in entrepreneurship. Regardless of how much your preparation or previous experience, obstacles and events you never considered are bound to creep up. Things will not go as planned. And while that does not mean a lack of planning is okay, it does mean that you need one critical leadership trait to survive and thrive – not just in entrepreneurship, but in all you do.

But, before I get to that, I have a story for you.

Several years ago, my brother Adam and I met an entrepreneur who had been somewhat of a strip mall king in a certain part of the U.S. He shared his story with us one afternoon, and we were amazed at the turn of events he had experienced in the previous few years. He had owned about 60 strip malls and, up until 2006, had been expanding pretty quickly.

He explained that he had put a hold on expansion because he was one of few people at that time who saw the looming real estate collapse that was about to hit. Not only did he see it coming, but he was actually very excited about it. He considered it a once-in-a-lifetime opportunity, and he spent considerable time and money preparing to capitalise on the downturn. He liquidated much of his stock portfolio, downsized his company and even sold several properties while he knew he could get top dollar – all in preparation for a strip mall buying spree once the time was right.

Related: Sales Leadership: The New Frontier

When the crash finally hit, about six months later than he originally predicted, he was shocked when it didn’t go as he had hoped. In his area of the country, commercial real estate faired better than in most areas, and the amazing deals he expected to see just weren’t there. He was able to close some bargain properties, but his “spree” fizzled pretty quickly, and he was stuck with liquid capital that needed a home – and one that offered the kind of return he had originally planned for.

With no experience in residential real estate, but knowing there were plenty of fire sales going on in that sector, he set out to change his entire approach, focusing on buying single family houses. He ended up purchasing nearly 2,500 houses (mostly from the banks), and in many cases, was able to rent them back to the original owners, allowing people to stay in a house they would otherwise have lost.

While still real estate-related, this new venture was a far cry from the strip mall business. But, as residential property values have recovered, you can imagine the return he’s enjoyed from his investments. Today, his portfolio is diversified among commercial and residential, and he’s waiting for the next once-in-a-lifetime scenario to come along.

The one thing

What was it that this entrepreneur had – and I would argue every successful entrepreneur has – that allowed him to be ultra-successful, even when things didn’t go as planned? It’s flexibility. Having the ability and willingness to pivot when something gets in your way is crucial to your success.

There is not a single thriving business that looks exactly like its founder envisioned it when he or she started out. Mark Zuckerberg had no idea Facebook would be what it is today and had no way of knowing the giant obstacles he’d encounter along the way. The same goes for any successful enterprise. And the one thing that the leaders of those enterprises had to have had is flexibility.

Related: How You Can Make Leadership Excellence An Effortless Effort

Just as important as being flexible is knowing when to pivot (or “flex”). Someone who pivots at the first sign of change ends up being all over the place – unfocused and scattered. The key is to know when flexibility is necessary to stay on a course to success.

One great indicator that it’s time to pivot is when you feel like giving up. When a challenge presents itself that’s so daunting that you consider throwing in the towel, think flexibility instead. How can you change direction – maybe toward something you never even considered – to stay in the game?

Don’t be so married to your ideas that you must either rigidly pursue them or give them up completely. Incorporate flexibility into your life in a smart way, and you’ll be a leader in all you do.

This article was originally posted here on Entrepreneur.com.

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How To Make Speedy Decisions As A Leader

Whom of us has not been held prisoner by our own devices of procrastination and fear? Whom has not used delaying tactics purely to play for time only to learn the true practical meaning of Shakespeares words: “I wasted time and now time doth waste me”?

Dirk Coetsee

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“Trusting one another, however can never mean trusting with the lip and mistrusting in the heart.” – Mahatma Gandhi


“Self-trust is the first secret of success” – Ralph Waldo Emmerson

Whom of us has not been held prisoner by our own devices of procrastination and fear? Whom has not used delaying tactics purely to play for time only to learn the true practical meaning of Shakespeares words: “I wasted time and now time doth waste me”?

Rapid decision-making

Harvard research has identified amongst other key traits of the most successful CEOs’ of Fortune 500 companies the ability to make decisions quickly and act on them at a rapid speed albeit with the inherent acknowledgement that they might get it wrong forty percent of the time.

Related: 7 Strategies For Development As An Entrepreneur

Why is speedy decision making and a rapid pace of execution so critical? Top leaders know that making quick decisions combined with swift execution creates a much better chance of success as opposed to very slow and bureaucratic verdicts underpinned by little or no action.

When there is a high level of distrust amongst the stakeholders in any entrepreneurial venture literally everything slows down as negative arguments ensue and takes up an enormous amount of precious time. Forced action underpinned by distrust loses quality and speed and can potentially bring a business to its knees.

“The speed of trust” is therefore an extremely valuable principle that all Leaders should live by, that is if they wish to serve a higher purpose than themselves and others. Those Leaders whom have developed a high level of self-trust and have earned the trust of their team members have put themselves in the very advantageous position of being empowered to move towards their vision at a rapid pace through quickfire decisions positively multiplied by confident and competent execution.

“The speed of trust” does not mean that decisions are made without careful consideration and stakeholder input putting the level of quality of execution at imminent risk. It simply means that the decision-making process is quicker than most as mistrust does not cast unnecessary shadows of doubt over the intentions and ambitions of all the stakeholders.

A Leader or Leaders whom has fostered self-trust within themselves will not go through lengthy spells of procrastination that those whom lack self -awareness and suffer from severe self- doubt has to go through.

How do I execute at the speed of trust?

How do I practically bring the principle of the “speed of trust” to fruition within my business? Firstly, ensure that this critical principal is applied throughout all business processes which starts with hiring trustworthy people and by working those out of the business whom cannot be trusted.  Secondly, as  a Leader your actions and words echo throughout every aspect of the business therefore do what you say you are going to do. Admit to your mistakes and fix them.

Thirdly be authentic in your pursuit of the vision of your business. One of the possible ways to achieve that is by being a visible and living example of the business values that you advocate as a leader.

Related: Sales Leadership: The New Frontier

Lastly in order for you to be trusted as a leader you must first show trust in others. Trust others by giving them more responsibility and verbalise your high level of trust in your team members. Passionately speak about this principle and its positive fruits at every opportunity. Make the practical display of this principle by employees or any other stakeholders known to all stakeholders and be lavish with your praise when anyone is willing to earn the trust of other team members.

A very good example of this principle in action was embodied by the Supreme Russian commander, Alexander Vasilyevich Suvorov whom never lost a battle and was respected by both his men and his enemies. He earned the trust of his men by being amongst them as often as he could, by sharing their hardships and by offering them the most authentic and quality military training known to man within that period of history.

Suvorov was a humble student of warfare and documented every detail of his learning experiences which included setbacks that he faced. He observed the morale of his men first hand and ensured that he inspired them not only through his inspiring speeches but by being a living example of discipline and bravery.

I will leave the reader with an important question to ponder, one that has echoed throughout history: Do you trust enough to be trusted?

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What Kind Of Leader Are You?

Your effectiveness in scaling your business starts with the kind of leader you are. Here’s how you can build yourself up into a leader others will follow.

Nicholas Haralambous

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When you are in start-up mode it’s tough to take a step back and think about the kind of leader you are or want to be. Most of the time you’re fighting to keep your business alive, never mind think about how you lead.

This is especially challenging when it’s faster and more efficient to just step up and do things yourself. It’s easier for you to make the decisions, do the work, check the work, follow up on the work, etc. However, it’s this situation that prevents young companies from scaling to the next level.

Ask More Questions

I work really hard every day to be quieter. Sometimes I succeed and sometimes I fail so dismally that I actually do more damage than good. You see, I like to talk. I like to hear other people talk and I like to bash around ideas until they become something bigger, something better and something that can move from idea into action.

Related: Your Leadership Journey Starts Now… And Go!

Coupled with liking to talk, I also like being right. Who doesn’t? Add onto these two things the fact that I like to read and research and then throw in a teeny bit of ego or pride and it’s a recipe for leadership disaster.

If I am the most well-read, loudest and most opinionated person in a meeting then all that happens is that I end up pitching an idea, getting everyone to agree with this idea and then assigning the work on the idea to become a reality. Basically, I am working with, for and amongst myself. It’s an echo chamber that leads to bad ideas surviving and an unhappy team leaving.

The Collective Is More Intelligent Than the Individual

As a leader and founder, you probably feel like you are the person with the best understanding of the problem you are trying to solve and the best person to solve the problem. This can lead to a dictatorial approach to leadership, team inclusion and problem solving. You have an idea, you tell your team and they do what you tell them.

If this is how you do it then I have to ask you a simple question: Why did you hire smart people? Just so you could tell them what to do? If that’s the case rather hire capable but cheap people, not the best.

Your best people are there to help you scale your business beyond your own thinking and time. There are a set amount of hours in the day. There are only so many emails you can answer in your day.

A good example in my business is customer support. We pride ourselves in our impeccable customer service online and offline. I can’t physically answer every question posed by customers but I can hire incredible colleagues, entrust them with my vision and views on our customers and then trust them to go out and use their good judgement.

Work With The Best

Here’s the kicker to being a good leader: You need to work with the best people.

This is not something I say as a passing statement. I want you to stop reading right now and think about the ten people you interact with at your company every day. Are they the best people you could be working with? If not, why not? How do you find the best people and bring them into your business? Go and do that.

Related: You’re The Boss, So Be The Boss

It’s important to work with the best for two very simple reasons.

Working with the best people pushes you to be better. If you are literally the smartest person in the room in every aspect of your business it means that you are surrounded by subpar players and you are not learning anything. The people around you are meant to educate you and push your business into places you didn’t even know were there.

Second, working with the best people attracts other incredible people. If you have a business full of average team members, can you guess what kind of people they pull towards your business? More average or less than average people. Why? Because average people don’t want to be surrounded by incredible people. If they are, they look worse and not better.

It’s incredibly difficult to be a good leader all of the time. In fact, it’s close to impossible. What you can do is try to be a leader who communicates, learns and grows with your team in an open manner.

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