GROWTH YOU CAN COUNT ON

What are you hoping for from your business?  Survival?  Something approaching high performance?  Are you happy just being able to continue trading month-to-month, year-to-year?  Or, instead, are you hoping for continued growth and improving profit?

For most, this doesn’t seem to be much of a choice.  What business owner would say that they don’t crave growth or at least a decent return for their efforts?  Why then, do many of these same business owners behave as though survival is as much as they can expect?  In my experience, many SMEs could perform much better by applying a little discipline to analysing and understanding some key decisions and measures.  Consider for a moment an analogy – the performance of the human body.

For some “human systems”, (people!) survival or “continued life” is all they ask of their body.  The only inputs they “manage” (and often not very carefully!) are things like diet, sleep, and exercise.   At the same time, most people measure only a few outputs.  Possibly clothes size, sometimes weight, and perhaps even blood-pressure these days.  They may also notice occasional performance problems like illness, or breathlessness with hard work.  It would be unusual, though, for most people to monitor such problems systematically.

Now consider most serious athletes.  Clearly, they also think about diet, sleep, and exercise.  However, they also make a few more “critical performance” decisions.  When to compete, what supplements to take, when to rest from training, and what kind of coaching to look for, will all be considered.  Serious athletes also “measure” much more than the average person.  They take great interest in a range of “key performance outputs” to help them decide how to make changes to the inputs – the critical performance decisions.  As well as weight and blood pressure, they also monitor event performance, and things like VO2 max, cholesterol, body mass index, flexibility, stride length, cadence, and often much more.

Top athletes understand the relationships between the outputs and the inputs.  They monitor the outputs closely so that they can modify and optimise the inputs for top performance.  Their goal is to produce their very best in competition.  Mere survival is no good to them – they crave the maximum their body “system” can deliver.

In our work with SMEs, we view the business performance in much the same way as top athletes consider their “body performance”.  If we expect top performance, then we should figure out what the “key growth decisions” are, and which “key growth outputs” should be monitored.  These outputs should then inform the key growth decisions – to help optimise and maximise growth.  In our experience, however, many SMEs measure and monitor very little.  They operate only in survival mode.  Even when they do measure, often they are measuring the wrong things.  Just as bad, they don’t use the measurement to optimise their key growth decisions.

Many owner/managers seem to have an aversion to measurement.  One business-owner friend openly resists “over systemisation”, at the same time accepting that he is far from optimising his business’s key growth decisions.  The result is an acceptance of survival, rather than optimised performance.  It’s not unusual to ask business owners basic growth questions, (e.g. “how much does the average customer spend on your products?”) and get answers that turn out to be 300% wrong!

These problems are particularly evident in sales and marketing performance.  Many SMEs are sub-optimising growth by ignoring data that could transform their sales and marketing efforts.  This uninformed view of sales performance produces growth plans that cannot possibly be delivered!  These same businesses, however, often have much greater growth potential than they realise – hidden growth potential that sadly might never be fully realised.  In effect, many business owners actually don’t understand their business “system” in the way that a top athlete understands his/her body “system”.

Thinking about your business as a system can highlight how to make better business decisions – optimised decisions that can deliver reliable growth (an approach we call Data-Driven Business Growth).  In business there is always risk and uncertainty, but we often accept more than we necessarily should.  Even seemingly basic questions, answered with rigour and discipline can provide great insight for decision-making.  How often do customers buy?  How much should you pay to gain a new customer?  What are your conversion rates from enquiry to sale?  For many SMEs, these questions are either never asked, or answered with less than useful levels of accuracy.  It is here that lies a great opportunity for growth. 

I read recently that Audrey Baxter, CEO of Baxters Food Group, felt that they were suffering paralysis by analysis.  What they needed, she suggested, was the return of a more entrepreneurial spirit.  This may be true for some larger companies but in my experience, most smaller businesses are at the other end of that particular spectrum.  Too much analysis is certainly as bad as too little, but a bit of thought can help determine a measurement and analysis regime that can pay for itself many times over.

What did you do today to grow your business?

As a leader you are what you do! How you spend your time is a critical determinant of your impact on the business. The most successful leaders spend the majority of their time focusing on the delivery of next year’s business plan and beyond. These leaders have clarity and focus; clarity about the key actions which are necessary to take the business to the next stage of growth and a focus on delivering these actions. They are also relentless in driving this agenda every day! Many business leaders find this difficult to deliver as they get sucked into the operational side of running the business. Let’s consider some of the actions can you take to be more strategic and create a more daily focus on growing your business.

Change your time utilisation

The starting point is to review your existing utilisation and analyse how  much time you are spending on driving the delivery of your plan. You can do this by keeping a detailed time log for a week or reviewing your diary and to do list to get a sense of how you utilise your time at present. When you know how you are spending your time then you can consider what your “ideal” time utilisation should be in order to leverage your time to get the most from it. The creation of your “ideal” time utilisation identifies the areas you need to spend/more less time on and provides a focus for change.

There are many factors which contribute to a lack of personal productivity – poor time management, procrastination, inability to delegate. Most of the experts in time management agree that even the most effective time managers can improve their personal organisation and free up at least 10% more time. That’s an extra half day a week (at least) to focus on driving you strategic agenda. We’ve all read the books on time management or been on courses which deliver short term results. Ultimately, most people slip back into their old ways when they become embroiled in the day to day delivery. As with most major changes to personal habits, time management tricks and techniques do not work unless you are fundamentally motivated to change

Become expert at prioritising

One of the most important elements of focusing your time is deciding what to do. As a business leader you have choices. You have the freedom to fill your day with the tasks and actions you choose. Even where there are blockages to doing what you want (or need) to do, you have the power to re-allocate resources, recruit, or put new ways of doing things into place. The trick is to make sure that you are focused on delivering your strategic agenda,

One practical way of being more strategic is to fill your “to do” list and diary with Strategic Actions. Most diaries and “to do lists” are full of the operational minutae that conspire to soak up your time. Strategic Actions are the 'vital few' - the small number of activities that have the largest impact in relation to delivering your business objectives. They should be the first thing you put on your list to ensure that you are creating time and focus to deliver the most important (strategic) actions. This will provide a substantial boost to your personal productivity and strategic focus.

Create time for planning

Strategic leaders are effective at being proactive, planning and getting ahead of the game.  The Urgency/Importance grid is a great way of considering how you use your time. Box 2 is the proactive (planning) box, dealing with important issues before they become urgent. While most people recognise the importance of box 2, too much business activity still takes place in box 1 And 3. It is all too easy to get sucked into activities in box 1 as their presence in that quadrant suggests an imminent deadline. Also, lack of prioritisation and delegation leads to time being spent in box 3. The uncertain nature of business means that a certain amount of our work will take place in Box 1 but this is not a strategic box.  Spending more time in box 2 will make you a more effective strategic leader

Delegate, delegate, delegate

Leadership involves getting things done through other people and delegation is an essential element of this process. Effective delegation will not only free up time for you to spend on Highest and Best activities. It will also stretch and develop the capabilities of your people. The key to freeing up time is to identify the areas you should be spending your time on and becoming ruthless at eliminating the rest. Effective delegation is a critical part of this.  In our experience, effective delegation can provide 50-60% extra time to focus on your Highest & Best areas.

Develop your strategic thinking skills

The last and possibly most important area to consider is the development of your strategic thinking skills. The quality of your business plan will be dependent on the levels of strategic thinking that lie behind it. Business leaders must be effective strategists who can develop and deliver robust ways of achieving the company’s objectives. Leaders must work at developing the intuitive skills which Mintzberg describes as “seeing above and beyond”. The ability to see “above” is about taking an overview of where the business is and developing an appropriate strategy to move it forward. Seeing beyond is the ability not only to see the future but also to construct the future, by thinking laterally and anticipating trends.

Strategy is a dynamic process. market opportunities, competitor’s actions, customer requirements and external factors are all in a continual state of flux. In order to be an effective strategist you should be continually testing and refining your own strategic thinking. You also need to open yourself to new ways of thinking through exposure to other companies, business concepts and other business leaders

The core belief behind our Highest & Best leadership approach is that business growth will be seriously constrained unless you (and your team) focus on what and how you spend your time. Highest & Best is a strategic approach that links leadership and business growth. It requires more effective personal organisation, enabling others and  the development of strategic thinking skills; but as a starting point you could develop the habit of asking yourself on a daily basis - What did I do today to grow my business? 

Highest & Best Leadership – how to focus your time, energy and resources on growing your business

The most successful business leaders are the ones who are most able to focus their time, energy and resources on growing the business. However, this is not easy to achieve. Many business leaders get caught up in the day to day concerns of finding and serving customers and end up with little time for the really important activities that produce sustainable growth. The most important actions that would enable growth get lost among the minutiae of day to day responsibilities and actions which conspire to fill the day and soak up energy. This is a reactive, short-term approach to leadership which may help solve operational problems but makes it difficult, if not impossible to deliver future goals and objectives.

The leader also becomes more and more indispensable for short-term decision-making, all the while moving further away from the developmental and strategic role that is really required for long-term business growth.

The most successful leaders find ways to change how they operate and spend the much more of their time focusing on the delivery of next year’s plan and beyond. These leaders have clarity and focus; clarity about the key actions which are necessary to take the business to the next stage of growth and focus on delivering these actions. We describe leveraging your time, energy and resources in this way as “finding your Highest & Best”.  Highest & Best requires a combination of better strategic thinking, more effective time utilisation and a focus on management and organisation development. The result is the development of a more capable organisation, pursuing a more effective strategy, with much less dependence on the leader to achieve short-term results.

The transition to Highest & Best is set out below

The above model illustrates the focus and development required to be a Highest and Best Leader; concentrating your time energy and resources on the areas which will have the biggest impact in delivering your vision and objectives.

You may have heard the analogy which describes the leader’s role as driving the train. We believe that a more accurate description for the leader’s role in this situation is not driving the train but laying the tracks! 

Driving the train involves making sure that the business follows a predetermined track and arrives on time (delivery of short term objectives), while laying the track is about developing new routes for the future; a strategic focus on actions for next year and 4 years out to ensure that the vision is being delivered.

As a business leader you have a choice.  You can continue to be reactive, focusing on the day to day, and remain personally involved in all aspects of the business. It goes without saying that persisting with this approach to leadership can only lead to personal frustration and the certain knowledge that your business will never achieve its potential. Your dreams and visions will remain unfulfilled unless you grasp the nettle of personal change and make the transition to become a Highest & Best leader.

Graeme Crombie and David McKeran

Do Entrepreneurs make Great Leaders?

Leadership is about making things happen. Entrepreneurs are great at reacting to gaps in the market, seeing market opportunities and building businesses from nothing. Surely the entrepreneurial characteristics of driving, initiative, visionary, strategic are the very essence of great leadership and therefore entrepreneurs should be highly effective leaders?

However, the research shows that although two thirds of business owners want to grow their business, the majority don’t achieve their aspirations.  This suggests that many entrepreneurs are less successful at making the shift towards the leadership approach which is required for sustained business growth. 

What are the key leadership traits for business growth and how do entrepreneurs shape up against these? At Matrix we work with the leaders of growing companies – entrepreneurs. Over the past 10 years we have developed a set of competencies for leadership in the growing business. Our 360 degree profiling tool; Spectrum, has allowed us to assess over 250 entrepreneurs and benchmark them against each other. The result is a comprehensive assessment of the leadership effectiveness of the leaders of growing companies, as scored by their teams. 

Entrepreneurial leaders score highly in the following areas;

• Management of Change

• Commercial Awareness

• Strategic Focus

• Analysis and judgement

• Leadership

• Achievement/motivation

These are classic entrepreneurial traits and it should come as no surprise that these areas score high. The lower scoring areas are more interesting;

• Time Management

• Communication

• Managing Staff

• Delegation

Unfortunately, for entrepreneurial leaders these are core skills for which enable business growth. As a business grows the role of the business leader has to change. From doing to delegating; from working in the business to working on the business and from operational to developmental; these are the significant transitions in the leader’s role as they seek to grow and develop the business. Effective leadership is about stepping back from the day to day operations and concentrating on the strategic actions which are necessary to grow the business. Delegation and Time management are critical in achieving this change.

In addition, Communication and Managing Staff are critical in getting the most from your people. Effective growth to the next level requires a move away from a dependence on the entrepreneur and the development of the breadth and depth of management. The development of a strong senior team and leadership behaviours at all levels of the company is a prerequisite for growth. Leadership involves getting things done through other people and Coaching and managing staff are key competencies to deliver this.

In essence, great leadership is about a wide range of skills. Great leadership requires the ability to be visionary, strategic and entrepreneurial; combined with effective personal organisation and the ability to get the most from your people. For entrepreneurs to become truly great leaders and achieve their own aspirations and the growth potential of their business, they need to build on their natural strengths and augment them with some of the leadership traits necessary for business growth.

David McKeran