Most strategy gurus believe that an organisation has a better chance of survival if it has a poor strategy implemented well, than if it has an excellent strategy implemented poorly. In this day and age, businesses likely don’t have the luxury of either. Building a sustainably successful business requires both a quality strategy and excellent implementation.
Thanks to the pressures of running a business, the chosen strategic direction is often shoved to the side-lines and becomes something you’ll ‘get to sometime’. The problem is, you never do. As a result, the business does much of the same as it did before, even if it does it a little bit better.
Failure to implement your chosen strategy means that instead of the organisation moving forward to hopefully disrupt or changes the rules of game, you play by the same rules as last year. Eventually, another organisation does something game changing, and you find yourself having to play by their rules. It’s risky business.
1. Plan for change
Chances are good that if you engaged in a formal strategic planning workshop that you left that session with a good idea about ‘what next’. The challenge now is deciding how to implement ‘what next’.
You will be familiar with the quote by Churchill “He who fails to plan is planning to fail”.
The next step is planning how to bring these great ideas into reality.
The planning process will focus on what needs to be done and who will be accountable for delivery. There is an excellent tool called a RACI Matrix. When an action has been decided, you allocate:
- The person Responsible for undertaking that action, and making it happen
- The person ultimately Accountable for ensuring it happens
- Through identifying the stakeholders who will be involved, either directly or indirectly, you identify who you need to keep Consulted and Informed.
2. Show each person how their contribution matters
Every person within the business must understand how their efforts relate directly towards the achievement of the organisation’s objectives. They must be shown the value that they create (tangibly or intangibly) and how this builds towards the overall achievement of the organisational strategy.
Taking this approach enables each employee to see how their efforts are important to the overall welfare of the company. It also assists each employee to see which efforts result in moving the organisation towards its strategic objective, and which activities keep the organisation on the hamster wheel.
3. Allocate resources required
A strategy cannot be successfully implemented unless and until the resources required for its implementation are awarded. If you are asking your team to change direction, and you are expecting a 10% increase to the bottom line through your existing focus, one or the other is going to be achieved.
When you plan implementation, you must have a very realistic analysis of what can be achieved through the existing resources, and where additional resources require commitment.
4. Set clear targets
As an output from your strategy workshop, you must have clearly defined SMART (specific, measureable, accurate, realistic and timeous) objectives. At an organisational level, you must know with the utmost clarity how much revenue you expect to generate from old versus new business activities, and how that activity is being funded. This needs to be defined for each month and year of the strategic implementation.
Each person who has been tasked with an element of the strategy must understand how their efforts contribute towards overall strategic attainment in terms of the numbers. Through a sensitivity analysis, these individuals must be shown the implications to the business of missing these milestones, or delaying their arrival. Time lost can never be regained.
5. Incentivise based on the new strategy
The new strategy cycle must include a review of how employees are incentivised. People will perform based on the metrics they are measured against. If you are expecting a change in behaviour, but you’re rewarding the behaviour that’s always been, you’re on a road to nowhere new.
6. Understand the 80/20 principle
The 80/20 principle is a critical factor in strategic delivery. Most employees spend their most productive first hour in the office sifting through e-mails and doing other ‘busy’ tasks that don’t necessarily move the business closer to its objectives.
Each day, every employee must set themselves at least one critical task which moves the business towards its strategy. That employee must not be distracted from that task until it is completed. Only once this fundamentally important task is complete should less important matters enjoy attention.
If this means meetings only start from 10h00, that’s a change the business must make. Managers must be disciplined in knowing the difference between what is urgent and important, and support their staff to complete their important tasks each day.
7. Review progress monthly
Unless strategic progress is tracked monthly, progress will slide. Each person tasked with delivery of elements of the strategy must present their status to the larger group. Leaders must watch for areas that are failing to achieve at the desired rate, and must evaluate what action to apply to accelerate the rate of delivery.
These meetings must never be cancelled. Cancellation of strategy progress meetings sends a signal to the organisation that there are other matters more important than delivery of the strategy. That simply cannot be the case.
8. What’s the conversation?
As the executives within a business, you set the focus of the organisation through the conversations you hold with employees.
If the company says strategic delivery is key, but your conversations are all about today’s sales numbers, that will forever form the focus of the functions reporting to you.
Sales numbers today are of course important because they secure the business for tomorrow, but the strategy sustains the business next year.
Strategy therefore must enter and remain as a key component of the conversation. No matter how good your business model is today, there will come a time when what worked works no longer. Or perhaps it works to a lesser extent.
If you intend your business to be sustainable in the longer term, then you have an obligation to yourself and everyone who relies on your organisation to think deeply about what is going to create viability for your company, and identify what actions will get you there. And then you must take that action decisively and relentlessly if you want to enjoy business longevity.
17 Most Important Performance Management Decisions Leaders Will Need To Make
Is your organisation geared to handle its own growth strategies? Are you sure?
Roadmap to success
The 17 most important performance management decisions you need to make as a leadership team to build a high-growth organisation. Understand what they are, make them, and your business will thrive.
If you’re awesome, you’ll succeed. If you succeed, you’ll grow. As you grow, the scale will change everything and, then, you won’t be awesome anymore — unless you change a lot of what made you awesome in the first place. This is known as the scale up paradox. In a nutshell, what got you here, won’t get you there! The ability to recognise this and change yourself and your business is what separates great businesses from brands that have faded into obscurity.
Knowing what to change, when to change and how to change is the very essence of scaling up.
Take as an example the way we manage performance. A start-up can run everything on ‘check-ins’. Through frequent check-ins you can zero in on who’s doing what, by when and how. You can keep on top of how things are going and whether you need a course correction. The check-in system is awesome. Until it’s not.
Because you can’t run everything on check-ins when there are 30 people around. The ‘check-in’ system basically means that you are the system. You, the founders, keep everything together. This means you’re the bottleneck. Your personal bandwidth is the ultimate ceiling on your growth. And that is bad news for your health — and your business.
If you’re awesome, and you succeed, and grow, it won’t be long until you can’t sleep because of the many loose threads in your brain: Tasks you need to assign headspace to, projects and people you’re not ‘on top of’, discussions to be had that you can’t get to.
So, to get some sleep, you’ll be forced to take delegation to another level. This is not simply a question of giving away tasks or projects; it means giving away responsibility for entire parts of the business. That’s scary. But if you have great people, it’s also liberating.
Now you’re sleeping again. For a while. Because if your people are awesome, you’ll succeed, and you’ll grow, and pretty soon the balls will be dropping again. You’ll realise that what you assumed people were doing, they’re not doing, just because they assumed they should be doing other things. And you’ll long for the days of the ‘check-in’ system when you could be on top of everything through enough ‘check-ins’. But there’s no going back now. You’re too big. You simply can’t check-in with everyone when you’re at or beyond the 30-person mark.
Maybe you’re having a conversation with someone at that point, and they tell you about OKR: Objectives and Key Results. Now there’s a system you can hang your keys on! A rhythm to align on key priorities and targets every two or four weeks (or every month or quarter, if you’re a bit more mature).
Liberation! Suddenly you can be on top of everything without the check-in overwhelm. It’s a thing of beauty, really. Until it’s not.
Because if you’re awesome, and you succeed, and you grow, the day will come when those balls will once again drop. And it won’t be because the senior team aren’t doing what you agreed when you set your quarterly OKRs. It will be because the business is too complex now for OKRs. OKRs still rely on a lot of manual alignment through collaboration and regular ‘check-ins’ at the operating level. Even simpler than that, the balls are dropping because, suddenly, there are a whole lot of new people issues you have never had to deal with before at this level:
- Accountability vacuums: A rising tendency for important things to fall into ‘no man’s land’ with nobody accountable for them
- Major differences in contribution: A rising number of people in cruise mode while the rest of the team do all the work
- Performance politics: Lots of high performers are unhappy because people aren’t being treated fairly. Slackers are getting good reviews and rewards just because their managers are lenient; high performers, on the other hand, are getting the same as them because their team has higher standards
- Compensation politics: People aren’t satisfied that bonuses and increase decisions are being made fairly
- High Performance Culture slide: All of this is causing relational friction and culture issues that are impacting performance.
So, right now, there’s way too much going on for OKRs and ‘check-ins’ to work. Things need more alignment and coordination than you’re going to get through your team interactions. You need a new way of aligning the different parts of the business without falling into ‘check-in overwhelm’.
You need a performance architecture with more processes and systems that maintain alignment across teams. Big words. Corporate words, which we know entrepreneurs tend to dislike. But let’s understand them.
Basically what they mean is that, around about this time, performance management needs a major upgrade. Why? And how should you do performance management? Isn’t it an awful relic of industrial-age corporate management, which is why so many top employers are moving to something new?
True enough. The dilemma is that a lot of the new age buzz about liberating talent to thrive without backward-looking performance reviews don’t work in most contexts; most often, it will break things even more than a frustrating, antiquated performance management system would.
The reality is that performance management is much more complex than an annual review and, furthermore, is definitely not a ‘one-size fits all’ approach.
If you’re scaling up and keen to build a scalable performance management system that works in your context (and at the same time reinforces your greatest culture assets), here are 17 of the most important performance management decisions you will need to make as a leadership team.
Performance management intent: What is the main goal of our performance management system? Accountability for performance, coaching for development and improved performance, or both? Harvard Business Review says this is a 70-year old debate. Don’t assume your other leaders see this the same way you do.
Individual appraisals: Do we believe that focusing on individual appraisals would result in better — or worse — business performance? Does it adversely affect team work and a ‘looking beyond my scorecard’ mentality?
Standardisation: Given that various parts of the business are so different, should we be doing the same thing across the business? How do we do performance management differently (if we even should) in areas as different as engineering, sales and customer service?
Target setting processes: Should targets be set from the top down, bottom up, or some combination of the two?
Nature of targets: Should performance targets be activity targets, behaviour targets, intermediate outcome targets (closest to ultimate outcome, that are fully within control) or ultimate outcome targets (even if not within our control)?
Bonuses: Should we link rewards to personal performance ratings? Some say that you should just pay really well and bake everything into a fixed bonus, or into basic compensation, and fire the non-performers. Which works best?
Bonus pool formula: Which proportion of an individual’s bonus should be determined by either individual contribution versus the performance of their team or division, or the business as a whole?
Long-term incentives: What percentage of variable incentive remuneration (VIR) should be long term, and which should be deferred to future years/long term (LTIR)?
Increases: How should performance ratings affect salary increases?
Formal or informal feedback: What is the right balance between formal appraisal and informal continuous feedback?
Feedback sources: Are there objective measures? If not, who gives input to the appraisal? If there are multiple parties, how are their inputs weighted? Is a line manager’s feedback more important than multiple, non-line individuals or ‘bosses’?
Performance appraisal scale: How do we summarise individual performance assessments?
Appraisal frequency: How often do we appraise performance and give feedback? Would this be per assignment or based on time, such as weekly, monthly, quarterly, bi-annually or annually?
Bonuses versus career investment and opportunity: How do we decide which individuals to prioritise for investment in growth and promotions? How do we balance bonuses versus investment in learning, development and promotions?
Dealing with high performance that doesn’t produce results: What do we do when people perform well, but don’t deliver the business results due to issues outside their control?
Performance management roles: Who does what in the performance management process? What belongs to HR? What belongs to line managers?
Performance management software: When do we move from Excel (or similar) to software products that streamline this process? What are the best packages for our business? (Small Improvements and Engagedly are our top recommendations).
Walter Penfold, MD Everlytic
- Fire faster. Bad performers are toxic for the culture. Use the three-month probation period brutally. The culture impact of firing fast is much superior to that of firing slow.
- Attune to sentiment. Many poor performers are great at upward management. They can look like performers to you, but people around them know the truth. Stay attuned to, and respond to grumblings.
- Give immediate, direct feedback on any performance issues. This should never wait for a formal performance review. We do a formal 360-review once a year.
- Keep it super simple to start — we definitely over-complicated it.
- Centre on weekly one-on-one meetings. Then performance management becomes the way you work, not a chat between strangers once a quarter.
Stuart Townsend, Edge Growth
Be realistic. Our training budgets are not realistic enough to enable people to build the competencies we need them to have to deliver the outcomes we expect.
Brad Magrath, Co-founder, Zoona
- Invest in growing your managers. We over-estimated the ability of young, inexperienced managers to have honest candid constructive conversations. If they suck at having good performance management discussions, the whole system breaks down.
- Non-performers weren’t scored as non-performers, leading to ugly train smashes down the line.
- Bad managers give good ratings to bad performers.
- Invest in creating role clarity. Performance management didn’t work well initially because we lacked role clarity and agreed metrics.
- Focus on behaviours, not just outputs.
- Ensure managers are deliberate around context of feedback: Is it coaching, is it performance, is it brainstorming? Be clear on why the conversation is happening so the message is not mixed.
- Get huge buy in from the beginning — we didn’t do enough of this. Then people don’t actually do appraisals well and the whole system breaks down again.
- What you measure is what you get — A-players like the idea of being performance measured objectively. Make sure the metrics are totally objective and have integrity.
The ability to recognise that what got you here won’t get you there is the first step towards building a high-impact, significant business.
Why You Should Do Things That Won’t Scale In Your Early Start-Up Days
Unless you want to be a small-business owner with a lifestyle business, you’re probably looking for an idea that scales – something that allows you to 10x your customers and profits in record time – but how do you accomplish this? Here’s some counterintuitive advice.
In the early days of Airbnb, when the site had just a handful of hosts in its website, the founders of the company did something surprising: They offered to have the accommodation hosts were offering professionally photographed for free. As they didn’t have the money to actually pay professional photographers, they did this themselves. They showed up, introduced themselves and took some pictures.
In the world of Silicon Valley, this seemed absurd. Silicon Valley is all about scaling. You want an idea that’s easy to expand exponentially. For instance, the marginal cost of adding a single user to Facebook or Dropbox is small, which makes these companies extremely scalable.
Service businesses, meanwhile, are typically not very scalable, since they are limited by the time and energy you can physically put in. Every new client brings more complexity and demands more time and resources.
With their free photography, the Airbnb founders had turned an Internet start-up into a service business. There was no way you could scale this kind of behaviour, so, according to the dominant Silicon Valley philosophy, this was not worth doing. If this was what was required to sign up people on Airbnb, it could never be a success.
The manual approach
So, why did the founders do it? Because Paul Graham at the famous Silicon Valley incubator Y Combinator suggested that they do it.
Y Combinator has funded many, many successful start-ups (including Airbnb and Dropbox), and one of its most common pieces of advice to new start-ups is to do things that don’t scale. Recruiting users manually is not a failure or proof that your concept won’t scale. Most of the time, it’s simply a necessity.
“The most common unscalable thing founders have to do at the start is to recruit users manually. Nearly all start-ups have to. You can’t wait for users to come to you. You have to go out and get them,” says Graham.
“This can’t be how the big, famous start-ups got started, they think. The mistake they make is to underestimate the power of compound growth. We encourage every start-up to measure their progress by a weekly growth rate. If you have 100 users, you need to get ten more next week to grow 10% a week. And while 110 may not seem much better than 100, if you keep growing at 10% a week you’ll be surprised how big the numbers get. After a year, you’ll have 14 000 users, and after two years you’ll have two million.”
Surprise and delight
Another reason, according to Graham, why the manual approach is important, is because it allows you to really know and understand your customers. By visiting all those Airbnb hosts, the founders quickly learnt what they loved and hated about the service.
By doing things that don’t scale, you get a much greater understanding of your customer, which comes in handy once you’re ready to flip the switch and grow quickly.
“You should take extraordinary measures not just to acquire users, but also to make them happy. Your first users should feel that signing up with you was one of the best choices they ever made. And you in turn should be racking your brains to think of new ways to delight them,” says Graham.
Lighting the fire
The only opportunity you’ll ever have to thoroughly engage with all your customers on a personal level is when your business is still small. That’s why it’s important to do things that don’t scale early on. It creates the foundation for successful scaling.
“Sometimes the right unscalable trick is to focus on a deliberately narrow market. It’s like keeping a fire contained at first to get it really hot before adding more logs. It’s always worth asking if there’s a subset of the market in which you can get a critical mass of users quickly,” says Graham.
“Most start-ups that use the contained fire strategy do it unconsciously. They build something for themselves and their friends, who happen to be the early adopters, and only realise later that they could offer it to a broader market.”
You can read Graham’s entire blog post, Do Things That Don’t Scale, on his blog www.paulgraham.com.
3 Ways To Promote Business Growth In A Troubled Economy
If you’re running a small business, here are three things you can do to survive and thrive in this tough economic climate.
It’s a complicated time for South African business owners. According to Xero’s State of SA Small Business 2017 report, 62% have seen a reduction in consumer demand over the past year, and 68% describe economic instability as their most significant challenge. Of course, these problems that entrepreneurs face are not of their making, but they must face them nonetheless.
There is a degree of optimism amongst entrepreneurs which is encouraging: 45% anticipate that business will stay the same over the next year, and 40% expect growth. While this positivity is a good thing, it must be tempered with pragmatism and proactivity.
If you’re running a small business, here are three things you can do to survive and thrive in this tough economic climate.
1Look for cost savings
This is very obvious, but it’s worth repeating. When your business is contending with an ailing economy, it will be forced to make certain choices. Those choices can become more or less difficult depending on how you manage your incomings and outgoings.
Developing the firmest possible handle on your finances is the best defence against external turmoil.
Look for cost savings wherever you might find them. What subscriptions are you still paying for that you no longer need? Which supplier relationships need to be terminated? Are you spending too much on stationery? Aim to eliminate all unnecessary costs: Even if they’re small, they’ll often add up to a larger cumulative saving.
Technology can often help with this process. For instance, cloud accounting software like Xero can take care of financial administration and cash flow related tasks – identifying any areas of discrepancy or waste and ensuring that your resources are being used efficiently. Taking advantage of it is likely prudent.
And we mean everything.
Businesses that waste time, waste money. The more energy expended on manual processes and tasks, the less time you have available for vital business or operationally critical processes and tasks. It’s very hard to grow if you’re spending inordinate amounts of your day on repetitive, time-consuming work.
When it comes to things like report preparation, data entry, and accounts payable and receivable, it’s worth investigating your automation options. Things like pursuing invoices can now be done with a click of a button and a few strokes of the keyboard. What’s more, they can be handled safely, legally, and efficiently.
Don’t stop there. See what other tasks can also be automated. When you have more time, you have more headspace for the things that really matter to you and your company.
Although it shouldn’t be a rule during trying economic times, it becomes substantially more important during times of unrest. It’s easy to spend money on hires and gadgets in a blind panic, but it’s also dangerous – and can deepen any financial troubles you may have.
Any investment you have, no matter how trivial, should be thoroughly audited for potential profitability. If it won’t help you make money or become more efficient, it shouldn’t be pursued. If there’s a greater than acceptable chance of making losses, save the risk for a time when your business is more profitable.
Knowing what is and isn’t a sensible investment isn’t always easy. Cloud technology can again be of use here. if you’re considering investing in service desk software, it can generally let you know if the number of resolved queries will result in meaningful cost savings. If you invest in a marketing automation tool, it will let you know if your campaign ROI is likely to exceed the expense.
Navigating the choppy waters of the modern South African economy won’t be easy, but by implementing the above, it will be more than manageable. With financial prudence, process automation, and strategic investment, you can come out the other side even stronger than before.
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