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Strategy

Who’s Doing The Driving In Your Business?

Looking at long-term strategy when day-to-day task demand your attention is hard. Here’s why so many strategies fail to deliver.

Ed Hatton

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driving

It is almost a caricature. The executives go away on a strategy planning weekend. They have a successful think tank and come back fired up with great strategies and enormous enthusiasm. Then the day-to-day tasks demand attention and three months later nothing has changed. The idea may still be discussed in management meetings but this is becoming embarrassing. Why did it all go wrong?

It is easier to think about how to grasp opportunities and solve problems than it is to implement plans. A central problem of implementing new strategy is that it usually relies on people who already have busy jobs with little time or energy to execute additional tasks.

The planning session seldom takes this into account so strategy implementation remains project-based and dependent on spare time availability within the management team. Nothing changes and the company drifts on as it always has.

Real life: Business & Leadership Lessons from Kumaran of Spartan

Entrepreneur style

The style of many entrepreneurs may be another cause of failure to implement strategy. The phrase ‘working in your business instead of on your business’ is almost universal.

Entrepreneurs naturally fix problems, manage people daily, sell, manage the finances, pacify irate customers and liaise with suppliers because they have always done so, and are now good at these tasks. They work long hours doing things what others would be less effective at doing. Working in the business becomes a comfort zone, and the area they gravitate to when there are problems.

Moving at least some focus to strategic and development issues is a must if the business is to avoid becoming self-limiting, and most business owners accept this. One way to do this is to delegate responsibility for just one function, then have the strength to manage only the agreed outputs, not the process.

This is difficult; you have to allow them to make mistakes and never take over unless asked or if a real disaster looms. Deliberately use the time saved to focus on strategy and general management. Then repeat with another function and save more time. It gets easier the more you do this.

Assumptions and perceptions

burning-tyres

Starting the planning session from wrong assumptions, especially where you perceive the business and its competitors to be now, can doom new strategies before they are born. Starting with the assumption that what you are doing is almost right and must only be improved on is risky, especially if your assumptions about competitor strengths, customer needs and satisfaction levels are flawed.

In the absence of hard research or deliberate fact gathering there is a high risk of this being the case. If this sounds hard to believe test your own knowledge now with questions like:

  • Exactly how big is the total marketplace?
  • What is the market share of all the major competitors, and how many salespeople do they have?
  • What trends of product mix, debtors, total sales and cash flow do we track?
  • Why do customers buy from us rather than select from the many choices on offer?
  • What percentage of my customers are also customers of competitors?
  • Why does anyone buy from each major competitor?

In each case support your answers with hard evidence, or acknowledge they come from assumptions or gut feel. If most of your answers are supported by evidence I congratulate you; you are in a good position to develop strategies to improve on what you are doing. To the others, I suggest you do some homework before tweaking anything.

Real life: How Ian Fuhr Built Sorbet – The Beautiful Business Empire

Then have a review of existing strategy, measuring outcomes versus plans and identifying causes for under- or over-achievement. New strategies built on this foundation are likely to be better than the big dreams which so often emerge from strategy sessions. An outside facilitator can help to keep things on track.

Ed Hatton is the owner of The Marketing Director and has consulted to and mentored SMBs in strategy, marketing and sales for almost 20 years. He co-authored an entrepreneurship textbook and is passionate about helping entrepreneurs to succeed.

Strategy

You Are Your Own Client

Before you can build a start-up that takes over your industry, you need to treat yourself as your own best client.

Allon Raiz

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client-service

In business, when you have a client, the relationship is formalised into a structured one where there are defined expectations and regular meetings. For example, if you are a consultancy and have a one-year contract to deliver services to a client, the relationship will be formalised, structured and possibly include monthly status meetings. Some may be report-back meetings while others may be briefing meetings.

Your client will receive a monthly invoice and there may be quarterly reviews of the work you have done. Your general mindset is one of service to the client because they are important and worthy of the effort. Crudely speaking, most service-provider arrangements work in a similar way because the structured model works.

In contrast, as entrepreneurs, our relationship with our own business is often far more chaotic or ‘organic’ than formal. My contention is that it is also much less effective. When I work with SMEs, one of the first things I do is encourage the entrepreneur to treat his or her own business as a client by formalising meetings, ensuring that there is a feedback loop and having a service-provider mindset. By making these philosophical and structural changes, you will create a far more efficient and well-run business.

There are four aspects to any business which, in my view, should be formalised.

1. Partners

It still astounds me how informal the meetings are between partners in SMEs, especially when they operate from the same office. There are no set times, no agendas and no outputs required. The fact that you might sit in the same office or chat regularly is the problem because it’s interpreted as proper communication while it’s actually a very undisciplined and unstructured process. Casual chats do not ensure that all the requisite items or issues are being properly discussed and dealt with.

Related: How Investors Choose Who To Invest In

2. Staff

The often-given excuse for not holding weekly, biweekly or monthly meetings with team members at the same date and time is that the business is fluid and the entrepreneur needs to be responsive to their clients’ urgent needs whenever these might occur. And so non-rhythmic meetings are occasionally inserted into the gaps in between the chaos.

The discipline that I try to imbed in the SMEs I work with is to hold rhythmic meetings at a certain time and day every week, month or quarter. Should there be a need to cancel this meeting for whatever reason, it should be rescheduled. The simple discipline of rescheduling and not cancelling allows for a compromise between the practical reality of an entrepreneur’s life and the discipline required to build a sustainable business.

3. Agendas

Agendas are often seen by entrepreneurs as an icon of the structure of the corporate world. They smack of rigidity, stuffiness and boredom so they are often discarded and replaced with warm and fuzzy chats. In reality, in order for it to be an effective use of time, every meeting requires a structure, outline or agenda.

This can be a comprehensive agenda similar to that used by corporates or as simple as each person in the meeting talking about their three top-of-mind issues. What is important is that there is structure and outputs, otherwise the meeting’s output is merely that it’s nice to know. The output from a meeting with a formalised agenda is that it’s nice to do.

Related: Why Reading Is The Most Important Tool In Your Arsenal

4. Product review

When last did you, as an entrepreneur, formally ask yourself if your products are still relevant and effective in the market? One of the greatest oversights made by SMEs is not regularly reviewing the appropriateness of their existing products or services. In a high-growth, chaotic environment that is attuned to constantly producing new products, existing products soon become the ugly stepchild, only getting attention when the client cancels the contract because your competitor has a faster, shinier and cheaper iteration of your product. An incredibly important discipline in any business is the regular and formalised review of products and services.

We resist structure as entrepreneurs and the price of that resistance is ineffective and inefficient businesses. By simply treating ourselves as we would our clients, we are able to imbed a level of structure to our businesses that will create a far more effective and enduring business.

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Strategy

What’s The Worst That Can Happen With A Disgruntled Silent Shareholder?

Whether a shareholder brings capital to the business, experience or connections, you need to ensure everyone has the same vision and values.

Kyle Torrington

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shareholders

While we often hear that it can be bad to have a silent shareholder that does not want to play ball, it is not often that we make enquiries about how the governance of a company can be hindered by a disgruntled shareholder.

Most of us assume that as long as they own more than 50% of their own company, they are entirely in control of all aspects of the company and how it is governed. This is not true: Even if you are a majority shareholder, holding less than 75% of all the shares in your company can still result in headaches if a minority shareholder, holding at least 25% of the company, becomes disgruntled and neither participates in the decisions of the company, nor consents to the decisions being made.

What is set out below highlights, among others, why it is so important to give shares in a company to prospective shareholders over a period of time, rather than from the outset. This allows for shareholders to prove their worth without you potentially placing your company in a position where it could be held at ransom for many years.

Related: 7 Factors To Determine Who Are Your Employees (And Who Aren’t)

The illusion of holding more than 50% of the shareholding in a company

  • Many people assume that by holding more than 50% of the shares in a company they are free to do with the business as they please. This generally only holds true for basic decisions of the shareholders, such as the removal and appointment of directors. The most important decisions of a company are based on special resolutions. A special resolution requires that shareholders, either individually or collectively, holding at least 75% of all the shares in a company, vote in favour of a specific decision.
  • Examples of decisions that require a special resolution include:
    • Amending a company’s Memorandum of Incorporation
    • Approving the issuing of shares or granting of other similar rights
    • Authorising the basis for determining directors’ salaries
    • Disposing of company assets
    • Mergers and acquisitions.

So, what does this mean for you and your company?

  • If you are a start-up looking to raise funds, apart from some exceptions, you will not be able to issue further shares to new shareholders or anyone other than existing shareholders if there is a shareholder that is effectively dead weight.
  • Should you manage to vote a new director to the board, you will not be able to determine the basis on which they are compensated (their salary) without a special resolution.
  • If you intend to merge with another company, you will not be able to pursue this without a special resolution.
  • If you plan to raise money by disposing of or selling most of the assets of your company you will, once again, be prevented from doing so.

Related: Reality Check: You Probably Don’t Own That Work You Outsourced

Accordingly, it is always best when starting a venture to vest your shares over a period of time. This means that, for example, shareholders are only entitled to have their shares allocated to them after a certain period of time to avoid a situation where you have a dead-weight equity shareholder hindering the governing of your company, and requiring possible litigation to remove them.

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Strategy

There’s More To Team Management Than Leadership

When you’re running a business you need to ensure that your employees are on your side, helping you to make profits. Giving them job security, taking them seriously and treating them with respect, will go a long way in enhancing loyalty and productivity.

Henry Sebata

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team-management

The staff that work for you determine:

  1. How happy your customers are with your business
  2. The quality of the things that you sell
  3. The costs that you incur to sell your products and services
  4. Your risks – the things that can go wrong and how much it costs you

All of these things determine your profitability and how competitive your business becomes. How do you ensure that everyone is on the same side and helping you to make profits?

At work everyone believes that they are getting something (such as money) and are giving something in return (such as time and effort). They are weighing up in their mind “how much am I giving, how much am I getting in return and is this fair?” If they believe that they are:

  • Giving too much or
  • Getting too little
  • Then this is unfair, and they won’t work well (poor productivity – how much they produce).

Related: Why Innovative Employee Benefits Are Your Competitive Advantage

The manager needs to:

  • Know what people are thinking about what they are giving and getting and
  • Manage the giving or getting side
  • So that people become more productive

In a smaller business you sometimes cannot afford to pay more or provide the sort of benefits (pensions, medical aid, bursaries etc.) that larger firms can and so the staff may be unhappy, not be productive and be on the look-out for something better.

How do you increase happiness without money?

Everyone wants:

  1. Job security – knowing that you will still have a job next year – and that you will get paid on time.
  2. Contributing to the success of the business. If you train staff to have the knowledge and skills to do a better job and you then encourage and support them to do this then they are happier, and you increase profits. If you then share some of these profits with the staff that helped you to make them then everyone wins!
  3. To be taken seriously and treated with respect. If you do this then staff are happier, and they will also treat your customers with respect.
  4. To be part of the team. You can often do this by having a regular briefing on what your plans are and discussing ideas. Because staff are doing the actual work they will often have good ideas and then will be motivated to implement them – it was their idea after all!

Staff leaving you all the time is a can destroy significant value. If you implement the strategy above, you will have happier staff that are more productive and a more profitable business.

Read next: Understanding Your Responsibility As An Employer

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