Tag Archives: OrgDev

Coping With External Elements of Decline

By using tools like promotion, persuasion, buyer education, accelerated product development, process improvements or elimination, growth plans, market development, and adjusted sales practices, business owners can adapt to changes in their external operating environment. Paying attention to the following warning areas is important in coping with external elements of decline:

  1. Economic growth, which gives management an indication of the economic climate and influences expansion plans.
  2. Credit availability and money market activity, which indicates trends in commercial and investment banking affecting financial needs. Changes will affect the cost of funds.
  3. Commodity market movements, which reveal trends in raw material inputs.
  4. Capital market activity, which gives a clear signal of investors’ attitudes toward your industry. 
  5. Business population characteristics, which can advise executive teams on the number of businesses entering and exiting the industry (niche). This signal can be used as an indicator of the expansion and contraction of the market and competitive size of the industry.
  6. Price level changes, which indicate the rate of inflation. This rate influences the consumption and therefore has an impact on the company growth rate.
  7. Changes in the competitive structure of the marketplace, which affect products, pricing, and marketing and sales.
  8. Changing technology, which allows rapid breakthroughs and changes in products, processes, and marketing and sales.
  9. Cultural/social changes, which can alter buyer preferences or the conditions under which a product can be sold.
  10. Legal/political changes, which can adversely affect the marketplace or have an impact on the execution, marketing, or sales of a product/service.

Coping With External Elements

Some  businesses prosper during crises. They plan for changes and create resources that enable them to continue to function. For example, some businesses use substitute products in their processes, and their adaptability allows them to survive. In short, many strong teams do find it possible to both address and influence the external elements.

There is no denying, however, that external elements can have a profound effect on companies. Teams are forced into unique experiences when confronting situations they don’t understand. External elements are usually not a part of most businesses’s planning processes. While many will fail, some are saved–those that are adaptable and able to return to their core products and once again become profitable.

Businesses with less than 50 employees are actually the heart of the economy. Unfortunately, they are also the companies most frequently in need of a turnaround, having the same internal and external problems but lacking the business and human resources of many larger companies.  Consequently, these smaller businesses do fail, just as larger ones do, but without the press coverage.

To effectively cope with the external elements requires that the executive team plan for the unexpected and implement the plan when it occurs. Since management knows it can expect changes in economic conditions that will affect the capital and money markets, it must plan for those changes. The areas that management can control must be prepared for the possibility of external environment changes. Strategic planning that is not flexible is, therefore, useless. For example:

  • Most companies should prepare for increased competition, local, regional, and around the world.
  • Legal and political changes are always on the horizon and should be duly noted; it is not a question of whether they will affect the business, but when.
  • Being aware of cultural and social changes affecting purchasing patterns is predictive of consumer spending and its impact on the entire local business economy.
  • Changes in technology are continual and must be utilized where appropriate.

The main issue to be addressed is whether the business is making the change or being subjected to it. In either event, the management team must adapt to the new environment or be prepared to suffer the consequences.

 

How Successful Businesses Maintain Organizational Morale

 

 

Organizational morale builds quality products (and services). Employees who are well-paid, well-trained, and appreciated work harder than those who are merely trying to earn a living. Giving employees more and more responsibility as they develop skills and gain experience makes them feel wanted and valuable. training employees to do their jobs expertly teaches them the value of quality performance. Finally, rewarding an employee for continuing contributions to company profitability reinforces the company’s goals, mission, and objectives.

Some of the benefits to organizational morale include the following:

  • Employees are willing to work longer hours to ensure that a job is done correctly.
  • Customer service and sales are carried out with positive attitudes. As the company makes more money from these quick and repeat sales, the business can afford to hire the cream of the crop in employees. The appearance to anyone outside the operation is that of a well-oiled machine.
  • Rather than fending off mercenary plots and complaints all day long, management can plan for upcoming projects, ensuring the best use of employees’  talents.
  • Striving and bitter rivalries are easily ended when all employees are treated impartially and fairly.
  • Quality control is much easier to enforce with a group of hard-working, motivated workers than with uncaring employees who are simply filling a slot.

Training

Truly effective training and development programs make good employees out of average employees, and great employees out of good ones. When an employer takes the time and effort to teach employees how to perform their jobs better, employees usually respond with increased effort on the job.  Bonds between management and employees are created as an employee gains a greater sense of self worth. The employee begins to feel that his or her contribution to the overall business matters and is important.

Responsibility

Employees in successful companies have two types of responsibility–to their peers and to their bosses. Each is important to a smooth-running company. However, responsibility can prove an albatross around the neck of the employee who lacks the corresponding authority to make decisions. Good employers will therefore not only be creative in assigning work to employees, but also in providing the best possible environment for them–including adequate authority where appropriate–to help them succeed. Reporting to management helps employees feel they must do a good job and that someone is around who can help them if the going gets rough. Being accountable to peers in addition to bosses teaches employees to respect one another’s work and to learn how to work together to reach common goals.

Motivation and Reward

Bonus and incentive compensation programs are the rewards of excellent employee performance. Rather than threatening to discipline or even dismiss a problem employee, it is often better to motivate employees through encouragement. Fear of failing will not lead to successful work attitudes and performance–it will only lead to ultimate failure. On the other hand, building up an employee’s confidence has proven much more effective than criticism in raising performance levels. 

Once an employee has performed at or beyond the established level, successful management teams find a way to reward the employee. Not rewarding someone who has done everything requested and more makes the employee wonder a.) whether he/she has indeed done a good job, b.) whether the supervisor is a good enough manager to recognize the employee’s contributions, and c.) whether a “change of scenery” may be preferable. However, bonuses and incentives must reflect current and projected financial performance. A company experiencing financial loss must have a flexible plan to adjust employee compensation as necessary. 

A successful company becomes a self-perpetuating entity–the more successful it becomes, the more successful it can become. Executive teams who maintain high organizational morale and plan for growth will create positive cash flow from efficient operations. While your business may not be in a position to always do what larger businesses do, remember to run your organization in a professional manner any you will meet with greater success!

 

How Do Successful Businesses Manage Their Operations?

After working hard on the marketing plan and the financial plan, successful executive teams develop operating plans to implement them. These are the plans that ultimately result in successfully bringing one’s idea into the marketplace–and profits into the owner’s pocket. Staffing, office administration, and work flow supervision are the primary needs. Successful businesses anticipate problems and take steps immediately to improve workflow efficiency. Supervisors and budgets are assigned to control costs. If necessary, outside fractional help is secured to make sure that appropriate resources are allocated to the best potential outcomes. In addition, the top executive may recommend steps financial and marketing teams can take to enhance overall productivity–and, by extension, profitability. For example, organizations that offer and sell the same or similar goods or services over and over usually see fewer cost overruns and therefore generate more profit per unit of sale.

Staffing a business with the correct number and types of employees makes your workplace both productive and more enjoyable. Sprinkle in some training and development and you demonstrate care and concern for your people. Create feedback loops and engagement will soar. Successful organizations increase or decrease staff levels as operating plans require. Outsourced human resources–whether through independent contractors, fractional professional staff, or subcontracting–allows your company to optimize human resources for any level of work necessary. Making preparations to finish existing projects while beginning new ones and documenting how the work will be accomplished will focus your efforts.

Administering a variety of initiatives simultaneously places certain demands on office staff as well. A successful executive team thinks through the documentation needs of the organization and assigns responsibilities to appropriate personnel. Institutional knowledge is thereby captured for the benefit of all and adjustments become easier to make. Well-organized files–physical and electronic–are another vital component to smooth business operations and can eliminate wasted time and effort, as well as reinforce best practices!

Successful supervision of field (or plant or billable or development) personnel involves more than simply the “management by walking around” approach of yore. Think about technology as a means to do more with less. Creatively brainstorm as to how to maximize the benefits of being face-to-face versus virtual–it’s a trade-off of time, money, and precious additional resources. Recruiting and hiring should reflect an effort to add to the team those who are the best cultural fit rather than simply strong technicians who may undermine the esprit de corps. Compensation and performance management systems should reinforce your value system–not stand separate from it. Think of processes like equipping, quality management, customer service, coaching, mentoring, motivating as key factors in your success. When you do, plans can be made to enable your organization’s operations to become efficient and profitable.

Do Your Cultural Diligence in M&A!

Of course the merger was a success. Neither company could have lost that much money on its own.

-Steve Case, Former Chairman of the Board
AOL/Time Warner

Competitive markets create an environment wherein companies strive for revenue growth. When organic (internal) growth is hard to come by, inorganic growth becomes a target. Inorganic is a category that includes merger and acquisition (M&A) activity as a primary strategy.

While business exigencies demonstrate the “need” for change, often the hard facts found in classic due diligence processes have far less to do with ultimate success than the cultural fit of a transaction between parties. Consequently, organizations that understand their core values are much more likely to reach the kind of growth and success that nearly all businesses seek [Gallangher 2003].

Successful M&A has been known to grow markets, build on complementary strengths, and eliminate inefficiency. But what ultimately matters in an acquisition is what happens in the hearts and minds of the people who remain with the new organization and what culture these formerly distinct entities choose to build while moving forward [Gallangher].

The Mercer Consulting Group, in studying M&A activity, finds that, among unsuccessful ones that many of the failures are caused by not conducting the same kind of “due diligence” on the culture, structure, and processes of an acquisition target as they do on the financial balance sheet [Gallangher]. 

Traditional due diligence typically analyzes the following:
– Historical performance,
– Ownership and organizational structure,
– Management team,
– Products and services, 
– Assets and liabilities,
– Information systems and technology, and
– Organizational culture [Bouchard, Pellet 2002].

J. Robert Carleton, management consultant and senior partner of the Vector Group, says, “Unfortunately, little or no time is generally spent analyzing the nature, demeanor, and beliefs of the people who will be involved in carrying out the business plan”. He believes that standard due diligence does not address some of the key questions that must be asked to accurately assess organizational readiness for a major change, such as a merger or acquisition. Even when some of the “right” questions are asked, Carleton argues, they are often limited to brief interviews with key executives, who likely have differing views from the rest of the employee group. The people in the trenches, the ones doing much of the actual work are not even involved. He  finds it interesting that “in financial and legal due diligence no such ‘act of faith’ is acceptable” in terms of the investigative procedure [Bouchard, Pellet].

“Cultural due diligence” is a phrase that more strategists are using  to assess what stumbling blocks may hinder successful integration of entities and their operations. Key factors to be considered include:

– leadership and management practices, styles, and relationships,
– governing principles,
– formal procedures,
– informal practices,
– employee satisfaction,
– customer satisfaction,
– key business drivers,
– organizational characteristics,
– perceptions and expectations, and
– how the work gets done in your organization

[Bouchard, Pellet; see also Carleton, Lineberry 2004].

When HP and Compaq decided to combine forces, they used schematics like the one below to help them discuss the salient issues–

After looking through these issues and discussing each company’s culture, the merger team put together a chart like the one below to begin developing tactics to plan for a smooth post-closing integration.

As you look at this chart, think about key M&A transactions in your industry or local community. Of the ones that did not pan out as planned, do you think they would have stood a better chance had they systematically worked through these type issues during due diligence?

Cultural due diligence is vital to successful M&A processes. If earnest consideration were given to culture as it is to financial and other factors, inorganic growth and increased market share would be a realized outcome far more often!

(Thanks go out to Agata Stachowicz-Stanusch, who wrote of the value of cultural due dilgence and detailed a case study of the HP-Compaq merger in the Journal of Intercultural Management’s April, 2009 edition.)

European Media Incubators PepsiCo Style

Recently, we have noted that intrapreneurship is an emerging trend, perhaps even hotter than entrepreneurship. One of the hybrid expressions of these category leaders is the incubator inside the larger business. In the media industry in particular, the struggle to keep up with digital competitors creates a huge need for innovation. Chip Lebovtiz, writing for Fortune online, describes what two media companies across the Atlantic are doing.

The Irish Times and the BBC’s commercial arm, BBC Worldwide, are establishing intercompany startup incubators to harness young businesses’ disruptive energies. The (Irish Times Digital Challenge).. is akin to the plot of a Hollywood movie: a young up-and-comer works with a grumpy old mentor to overcome a problem, learning a valuable life lesson in the process. In this case, the problem is how to better monetize a company’s online presence and the life lesson is the experience startups get by working with a large company, says TheIrish Times Chief Innovation Officer Johnny Ryan.

Ryan is the brains behind (the competition), in which five early-stage companies  — 81 applied — spend eight weeks working at the Times to translate their pitch into virtual reality. While their ideas widely vary, their end goal is the same, to win €50,000 (about $61,000) from venture capital fund DFJ Esprit. The winning team must prove to the Times that its product provides the largest revenue potential and improvement to reader experience.

This is an interesting competition because large revenues and improved reader experience may be mutually incompatible. One has to wonder whether the intrapreneurs have the latitude to recommend strategies that may cannibalize longstanding business practices at the publisher.

BBC Worldwide Labs, a new business accelerator for startups, takes a similar but distinct tack. There is no competition between the fledgling companies and no prize money, but the six-month program offers a trophy of a different sort: the startups get a first client worth billions.

“The BBC can be a great first customer,” says BBC Worldwide Labs Head Jenny Fielding. The broadcasting giant can be “a partner at the point of commercialization for these companies.”

This approach is intriguing because of the built-in customer aspect. Many start-up companies struggle with defining a target market that is both large enough and profitable enough to serve as the fledgling enterprise scales. Yet, by becoming a captive supplier, does the intrapreneur become prejudiced against other viable market development opportunities?

What makes these programs distinctive is that the startups operate just down the hall from the people implementing their products. This proximity to the client is designed to overcome obstacles usually found in interactions between startups and large corporations.

Working with big companies is difficult for fledgling businesses. Fielding, in her role as the head of Digital Ventures at the BBC, often has to personally guide startups through the BBC’s diverse ecosystem. By situating the program in the BBC’s London Media Center headquarters, she expects the smaller startups to more quickly acclimate to and efficiently work with the larger BBC.

Neither the BBC nor The Irish Times will take equity stakes in the young companies they incubate. Instead, the media companies hope to establish a relationship with these startups that is ultimately scalable into a larger, future partnership…

Director of Global Digital and Social Media at PepsiCo Josh Karpf isn’t too surprised to see media companies adopt the (PepsiCo10 incubator approach)…”Technology is affecting every industry today, and media is no different, he says in an email to Fortune. “Companies that are trying to find technologies that will impact their businesses three to five years down the line are the ones who will win in the future.”