Is this a trend? I don't know. But it's good news because, done right, advisory boards can be a great asset to any company and its management team. Done incorrectly, they can be a major waste of time, energy and money. Here are four things to consider.
* Commitment. If you are not totally committed to having a board for the right reasons and to making the board a priority -- including having an open mind to the board's input and advice -- then forget it.
* Choosing members for the right reasons. You are forming this board to help you, your management and your company grow. Choose your advisory board members as carefully and thoughtfully as you chose your management team. You want the best and strongest people, with experience and expertise in areas important to the company's success.
Think about your strategies, your management weaknesses and experience and your growth plan. Pick people you trust and who share your ethical convictions. And there are people you don't want -- your attorney, accountant, banker, best friend, customer or competitor.
* Experience and leadership. Not everyone needs to have experience on advisory boards. However, seek out at least one person with extensive experience serving on successful boards. If that person is able and willing, appoint him or her as board leader. Make it that person's responsibility to work closely with you to ensure the board provides the maximum return to the company. That person should help you define the board's objectives, determine its mechanics and help the other members understand their role.
* Making it a priority
The best situations occur when the board and management team feed on each other. Management must follow though on all assignments from prior meetings and come to meetings prepared. Agendas, financials and other reports must be sent to members prior to the meeting, and detailed notes and action items should be taken and distributed afterward. Joel Strom (email@example.com) is director of Joel Strom Associates, LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Reach him at (216) 831-2663.
In the 1990s, increased demand caused many organizations to increase capacity, often without regard to the associated increase in operating costs. We all know what happened next.
As the economy recovers, demand will increase again, and businesses must once more increase capacity. But this time, it would be wise to build capacity without increasing operating costs.
The easiest, most cost-effective way to increase capacity is to do more of what you do best. By understanding your company's competencies, you can develop strategies designed to maintain your focus on doing more of what you do well and less of what you don't. Letting the organization's focus widen beyond its true competencies into areas where it cannot perform as well or as efficiently is an expensive proposition.
But you also must understand the three major components of your company that dictate your ability to increase capacity -- people, money and time.
Here are some ways to get the most out of each.
* People may be the most important and perhaps the most straightforward. There is only one strategy for the people component that can result in increased capacity at the least cost -- have the right people positioned within your business where they can produce the most impact. The more right people you have doing the right things, the greater the opportunity to increase capacity without increasing costs.
* Money ties directly to the need to focus on what your company does best. By implementing strategies to play to your strengths and eliminate the things you don't do well, you can do more with less. This is the only alternative when funds are tight, and is still the best alternative when funds are more plentiful.
* Time is finite. You can't snap your fingers and produce more time to do more work. The only way to create more time is to develop strategies that promote the best efficiencies. Improved systems, procedures and processes can help accomplish this.
Increasing organizational capacity on a budget can be done, but it requires a strategy that is focused and doesn't waste its most precious commodities -- time, money or people. Managing and monitoring these components of capacity will ensure the maximum utilization of your organization's resources. Joel Strom (firstname.lastname@example.org) is director of Joel Strom Associates LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Reach him at (216) 831-2663.
Now, that "excellent" hire was no longer with the business.
After six frustrating and costly months, the owner let the employee go. Factor in the damage to customers the employee caused, and the grief and resulting loss of productivity felt by other employees, and the actual costs are high.
How could an "excellent" hire turn into a dud? Because this business owner, like so many others, used the wrong criteria to make his decision.
Often, a candidate seems to have all the technical skills to perform the requirements of the position and has excellent interviewing skills. So how can you go wrong?
Considering the cost of a bad hire, why take chances? Studies have shown that the factors with the greatest impact on an employee's performance are not interviewing skills, appearance or even knowledge, training or credentials. Instead, they are attitude, self-motivation, maturity, capacity to learn and behavior patterns.
This is why so many employees get hired for their skill and fired for their fit.
Avoiding hiring mistakes -- or at least minimizing them -- requires more investment in the process before the hire to reduce the cost after a bad hire. The key is to learn as much as you can about the candidate during the pre-hire process.
Invest sufficient time in the interview process, including multiple interviews and meetings with company managers and key employees. Ask not just technical and experience-based questions but also behavioral-based questions.
However, to really find out how the candidate rates on those most important behavioral-based performance factors, consider an assessment tool, which can provide a look into the candidate's behavior and work ethic that interviews alone cannot.
Knowledge is power. In hiring and retention, this power can help achieve a strong, stable work force with the right people in the right places. Joel Strom (email@example.com) is director of Joel Strom Associates, LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.
For some business owners, the answer is, "I don't know." But if you don't know the answers to basic questions about your company, you are flying blind with no navigational tools to help you avoid disaster.
I admire the ability of many entrepreneurs to follow their gut feeling. But there is no excuse for ignoring information and making decisions in the dark. Yet they continue to do so.
The president of a manufacturing company once decided to eliminate his older product line because it wasn't growing. He believed a new line represented the future of the company. He was instrumental in the development of the new line, and was not objective.
I convinced him it was too big a decision to make without more information. A thorough analysis of costs revealed the old, less glamorous product contributed all of the company's profit. Had it been eliminated, the company would have lost money.
Sometimes I wonder if we don't create information because we don't want to know the truth. If we had all of the information, it might tell us the job we want so badly, the one that we just won, is not a good job for us.
I've seen troubled companies where the latest financial statements are six months old, where job costing is "something we know we should be doing," and cash projections are a foreign concept.
Information must be a priority. Gathering operational data is easier and cheaper than ever. Technology makes it easy to turn data into information.
You cannot fly blind and expect to reach your destination safely. Use knowledge to avoid disaster. Joel Strom (firstname.lastname@example.org) is director of Joel Strom Associates, LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.
There's an adage in my COSE Business Planning course material that says, "A goal without a plan is simply a wish." A business plan provides the road map to move that goal from wish to reality.
Business plans can be completed at various stages of a business's life cycle. They're not just for start-ups seeking cash; they are also valuable tools for growth of an existing business.
In 20 years, I've read a lot of business plans, some written for start-ups, others for well-established businesses seeking growth or change. No matter who wrote the plan or for what purpose, there were two common blunders -- too much optimism and not enough focus.
The No. 1 blunder plan writers make is that they get a bad case of unbridled optimism without any solid footing in reality, resulting in sales and profit projections that would make any CEO envious.
That optimism needs to be tempered. The numbers must be believable. Don't reduce projections just to reduce the numbers, but if the projections can't be backed by fact, and if the facts are not documented , they can only be considered entrepreneurial optimism, not reality.
Make sure you balance the two.
Lack of focus
The second blunder is the "we can conquer the world overnight" syndrome.
You can't have too much focus in business. A strong focus allows you to concentrate your limited business resources in the most impactful areas, helping you get a much greater return on your invested resources and a better opportunity for success.
Even if your company's product or service can be sold to different markets, or in different shapes and sizes, the key is patience. A plan that documents a slow and steady strategy of attacking markets one at a time will have more credibility than one that outlines a widespread attack.
A business plan can help make your dreams a reality, but it has to be realistic and well thought out. Now is a great time to think about your plan and enter the upcoming COSE Business Plan Competition.
It could give you the discipline you need to complete a plan, and you might win money to get your plan in motion. For more information, visit www.cosechallenge.com. Joel Strom (email@example.com) is director of Joel Strom Associates LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing profitability and value. Reach him at (216) 831-2663.
Pioneers had a vision: Go West. They encountered mountains without highways, rivers without bridges, wild animals and extreme weather. Each represented a potential barrier that could stop them from achieving their vision. They had two choices -- turn around or develop strategies to overcome the barriers.
Like pioneers, business owners must set, then focus on their vision, no matter what the perceived barriers. The belief must hold that no barrier is insurmountable. With sufficient effort and creativity, the goals can be achieved. If one strategy doesn't work, try another.
Finding a way around or through barriers often requires eliminating some sacred cows. These may be people who have been with your company for years, but instead of growing and changing, they are focused on old barriers rather than new solutions.
Worse are those who represent an organization whose culture has always allowed the focus on barriers as an excuse for not setting and reaching a great vision. Unless you remove those who limit creativity and prevent new ideas from being generated, those visions may simply fade.
If past practices allowed the organization to focus on barriers rather than the vision, a major culture shift -- including new rules -- may be needed. And when setting goals and visions, comments that focus on barriers rather than on the vision must be removed from the conversation. As the mindset shifts,and the focus goes from barriers to vision, the barriers, not the vision, will fade.
Organizations that define their vision as they want it, without regard to perceived or real barriers, often find the resourcefulness and creativity of those within the organization becomes evident. Encouraging creativity can translate into the creation of an organization that not only achieves its vision but exceeds it.
Consider the companies that may never have reached the levels they reached, or the products that never would have been created, if barriers had been used as an excuse for not going for the vision. Think about how history would have been different if the pioneers had decided not to travel because of the mountains and rivers they had to cross.
Now think about your company ... and where you'd like it to go. Joel Strom (firstname.lastname@example.org) is director of Joel Strom Associates, LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.
The key to success in a family business is to operate it like any other business. Yet successful owners who possess a well-developed ability for rational thought seem to lose it when confronted with a decision they perceive could affect the family.
Succession planning provides a great example.
There are not many fathers who don't believe their son is the best candidate to become the next president of the family business. An honest and objective reality check may prove this isn't true.
It may even identify the son as incompetent, immature and disliked by most people in the organization. If the father ignores this, then emotion has trumped reality, and trouble is on the horizon.
Sometimes, the overwhelming wish of the owner to keep the family together in the business can create another problem. Even companies that follow otherwise good management practices can fall into the trap of ignoring advice from trusted outside advisers if it contradicts the "all-the-family-forever-in the-business" mindset. This can only lead to disaster.
If you ignore reality, you could transfer the company to a second generation that is simply not capable of furthering the business. The better alternative may be to sell the company and let members of the second generation establish their own lives with funds from the sale.
Organizational problems are also inevitable when family members who should not be in the business are allowed to remain. Other family members resent that their sibling (or cousin or brother-in-law) is not carrying his or her own weight. Employees also resent the underperforming family member and recognize that standards are different for their own performance.
The ultimate success of a family business depends on removing emotion from the equation. Otherwise, reality is poorly served. Joel Strom (email@example.com) is director of Joel Strom Associates LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.
In a company, they may not be the last words, but once that thinking becomes part of the culture, it can mean big trouble. It may indicate the company has gotten stale and that it is no longer serving its customers' needs.
When was the last time you took a hard look at what your company really does and how it does it? If you haven't, you should be asking yourself, "Are we doing the right things, or are we simply doing things right?"
Companies spend years developing and improving products and services. After making or doing something that long, their efficiencies and quality get better, so why aren't they always selling more of this thing they do so well? Perhaps it's because the thing they do so well is the wrong thing.
It may have been the right thing at one time, but as they honed their skills, it became the wrong thing. Newer products and services hit the market. Or customers' tastes and needs changed. Whatever the reason, no matter how well they do something, if it's not what the customer wants or needs today, it's the wrong thing.
Sometimes companies get so good at doing certain things that they start doing more of those same types of things. The new services are well received. Demand for the older services decreases, but they are still offered.
The organization now has both newer, stronger and older weaker services. It becomes like a tree that has so many branches they stunt its growth. Limited nutrition must be spread to every branch. Instead of a more compact, but strong, healthy tree, it is large but weak. It may be time to trim the tree.
Trimming is not always easy. Companies have spent years cultivating their products, services or locations and grown attached to them as they nurtured them. The belief has always been that bigger is better. Pruning requires a change in mindset to accept the need to cut back in order to improve the company's strength and health.
I once worked with a retail chain that was adding stores every year. There were, however, underperforming stores. Some were the oldest locations with the greatest sentimental value. They just no longer met customers' needs and changing shopping habits.
It was difficult convincing the owners that their resources could be better utilized in their better performing stores. These older stores ran very well, and their staffs did a great job of serving customers, but there were just not enough customers.
It was a case of doing something right but not doing the right thing. The evaluation and pruning process made the company temporarily smaller but much stronger.
Doing things well and continuously improving processes and operations is crucial to continued success. But so is examining what it is the company is doing so well and then having the courage to prune branches before they weaken the entire tree. Joel Strom (firstname.lastname@example.org) is director of Joel Strom Associates LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.
In the last two months, weve tackled the first seven rules for strategic planning success, covering the steps in the development of the strategic plan.
As important as the first seven steps are, the last three could be even more important, since they focus on turning those strategies and plans into action.
When strategic planning processes fail, it is usually because the plan was developed but never implemented. In these cases, all that results from the time, effort and money spent on developing the plan is an expensive exercise and a dusty, outdated document.
The true benefits of strategic planning come from implementing the plan.
8. Make the plan a usable document. Like most documents, policies or procedures, if your strategic plan is filed or placed in a book on the shelf, it is soon forgotten and seldom referred to.
To maximize the benefits of the plan, management team members need to use it as a tool to manage. They wont, unless the document is concise and easy to refer to.
The best way to make it into a usable document is to get it all onto a single page. Backup materials and analysis can be kept in the strategic planning books or files for periodic reference. The actual plan, though, including the mission statement, goals, performance objectives and strategies, need to be summarized on one sheet.
9. A goal without a plan is simply a wish ... and a strategic plan without implementation is simply not worth it. No one undertakes a strategic planning process with the idea of developing a plan but not implementing it.
However, many planning processes seem to end that way. Unless the process includes a specific method or plan for implementing the results, there is only a slight chance the plan will be implemented to any great degree.
It is no different than many other good ideas in growing businesses: We get so busy doing what we need to do to run the business that these important-but-not-critical-to-todays-shipment tasks get pushed aside.
Development of the strategic plan is only the first part of the process. The second phase is the creation of the tactical action plans required to implement the companys strategies and to achieve its objectives.
Each functional area of the company must be responsible for developing its particular functions action plan. Not only does this provide excellent buy-in of the functions action plan, but also a basic understanding of the companys overall plan and goals.
10. Make strategic planning a routine part of the companys culture. To maximize the return on your investment, the strategic planning process should provide benefits for many years. Your company and the world around it are changing faster than ever before.
To keep your plan effective, constantly monitor and update it to meet changing competition, markets, technology or anything else that could make it ineffective.
Devise a plan follow-up and update schedule. Many companies hold a quarterly review and follow-up sessions with the planning team, concentrating on the functions tactical action plans. Consider an annual strategic plan review and update session to modify the actual plan, if necessary.
Review and conclusion
Now you have the 10 rules for strategic planning success. If youre a business owner whos already implemented strategic planning, perhaps by following some of these rules, you could improve your success.
If, however, youre an owner who has resisted strategic planning, these may help you realize that, done correctly, strategic planning can provide benefits that far outweigh the risks, is worth the investment in time and energy, and can help ensure your company becomes and remains a winner.
Joel Strom (email@example.com) is president of Joel Strom Associates Inc., Growth Management. His firm works exclusively with closely held businesses and their ownership, helping them set and achieve their growth objectives while maximizing their profitability and value. Reach him at (216) 831-2663.
He paused, looked remorsefully around that somewhat neglected conference room, and continued, I built a successful family business. It provided us with a great life and it represented a great future for you three. That future and my dream of you all working in it and thriving is gone now.
Then he repeated, How could you have done this, how could you have let this happen?
Our firm had been hired nearly a year before that meeting (at the prodding of the bank) to try to save the business. Although we had turned the income statement positive, the damage was done and the lack of cash made going forward nearly impossible.
We were able to arrange the sale of the company to another firm at a bargain price. The good news was that the owners got jobs and no one had to sell their home to pay off the bank.
This unfortunate situation happened because the father thought that simply working with his attorney and accountant to devise a succession plan that would provide him with an income, avoid as much tax as possible and work properly in his estate plan was all he needed. He had, in effect, prepared the will, but he had ignored any consideration of the way.
His succession plan was quite ingenious from the financial aspects and would have provided him with a nice retirement had he done a better job on his operational succession planning. He literally came in one day, told his sons he was retiring, who he wanted to take what key roles, what papers they had to sign and how much they were to pay him each month.
There was no training, no preparation, no coaching and no planning. Ten years later, he wondered why he had received only a few of the agreed upon monthly checks and could not comprehend how they could have let this happen.
I didnt have the heart in that meeting to tell him that it wasnt just the kids fault, it was as much or more his fault for not spending as much time preparing and planning for the operating succession as he did for the financial succession.
Scenarios like this are played out way too often. Great businesses that have been built with many years of hard work and effort are destroyed by a lack of operational succession planning. Owners of these businesses often say they have their succession plan done, when in fact, they have simply done the legal work.
Others claim they are too busy and way too young to worry about succession issues. Worse, some believe that succession planning is only for family businesses.
But whether it is a traditional family business or not, whether the owners are young or old and whether the owners are legally prepared for succession or not, as long as operational succession planning is ignored, the company is at risk. And if the company is at risk, so are the families, employees and everyone associated with it.
A recent survey of family business owners by Arthur Andersen found that although 92 percent presumed the business would remain under family control, 69 percent had no strategic plan and 43 percent had not identified a successor.
As important as operational succession planning is, and as elusive as it seems to be, it is really not that hard to accomplish. But, like any planning process, it does require a strong commitment to not only spend time and energy to develop the plan, but to also implement it. It needs the same priority and attention as any process that can affect the future of the business.
Operational planning can be broken into four steps:
- Establishing the vision and objectives;
- Assessing the current situation;
- Developing the plan;
- Implementing the plan.
There is little difference between planning for long-term business success and planning for business succession. The bottom line is that you need to develop a plan that fits your long-term vision.
Over the next four months, well tackle each of the four steps in the operational succession planning process.
Joel Strom (firstname.lastname@example.org) is president of Joel Strom Associates, Inc., Growth Management. His firm works exclusively with closely held businesses and their ownership, helping them set and achieve their growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.