Tag Archives: planning

Entrepreneurs: Learn to Delegate to Capable Employees

Delegation

The “take charge” attitude that permeates a builder’s very makeup is easily channeled and tempered with proper direction and focus. Avoiding “one man rule” tendencies is as easy as one word: delegation. The effective executive delegates rather than performing all critical tasks. However, successful delegation requires that responsibility and authority also be delegated. Herein lies a problem for the executive–“hands off” management.

An experienced founder’s abilities and characteristics relate to starting and preserving a good business idea. Chief among those abilities would be creating a vision for the company, which is usually unstated but somehow understood. While it may seem a chore for others in the company, projecting a confident and self-assured image that appeals to prospective buyers  comes naturally to the experienced executive.

Additionally, identification of market opportunities and provision of top notch service to meet customer needs are focal points of the founder’s vision. Unfortunately, the ability to create a workable organization to achieve company goals and objectives may prove more elusive. The business owner who possesses the innate skill to attract others to pursue an unwritten vision may lack the skill to build an efficient organization.

Employees

Clearly, employees are critical to the success of profit maximization in any business; it is their effort that keeps the wheels of progress turning. Most employees have spent careers in similarly sized (small) companies in the same industry setting–be that white collar or blue collar–with limited exposure to alternate environments. Consequently, their frame of reference in employer/employee relationships amounts  to that which the founder and, where applicable, previous employers have provided.  With limited cross-training in other professional disciplines, these members of the team have the least job flexibility and therefore generally welcome changes in work flow patterns that can make their jobs appreciably easier and more effective.

Job Specialization

While cross training or shared skill sets occur as a matter of necessity, job specialization is a focus of many small businesses. A certain “pride of ownership” can arise from this high degree of specialization. Fiercely loyal, most employees would rather sacrifice some temporary perks rather than leave a benevolent employer “high and dry” in a time of financial duress. Since the employees tend to be skill-oriented, they require a great deal of direction in defining work assignments. At the same time, they spend a lot of time observing the founder and mimicking his or her efforts; if the entrepreneur is a go-getter, they will learn to hustle on the job in order to meet production requirements. In short, employees can be extremely valuable in performing the legwork that makes the business optimization a reality.

Employee Responsibilities

Employees are required to adhere to schedules, commit to the strategic plan, be willing to work long hours, and be brand ambassadors of the company in the community. Schedules governing production, documentation, and reporting must be religiously followed to ensure optimal work efficiencies. Time, budget, and administration constraints are to be respected and emphasized among employees and their  supervisors.

Mindful of how they represent the company, your people are the “front line” experience that others have with your brand. Whether buying from suppliers, meeting with customers, or serving in a local non-profit, they have an opportunity to make you look great–or not.

When company plans cause inconveniences for employees, it should be up to the employees themselves to raise the issue with their superiors. Once they have been given the right to voice their opinions and concerns, they should be expected to fall in line with the plan. Failure to follow established guidelines should not be tolerated. Without respect of your core values, your employees should be replaced by those who can carry your banner proudly!

 

Owner as Entrepreneur vs Manager: Jekyll and Hyde

At the center of every small business management team is the owner, whose primary long-term responsibility is to manage the company effectively. While some companies have several people who function in this capacity, this discussion will assume that an on-site entrepreneur/owner runs the business. Traditionally, this individual oversees the entire operation and personally looks over most company work, both in the office and in the field/plant. Furthermore, the owner is commonly a jack-of-all-trades, wearing the hats of many different employee roles.

The “Jekyll & Hyde” Theory

It is often asserted that the individual who single-handedly runs a company has a certain, identifiable “Jekyll and Hyde” personality. In demeanor and approach to problem-solving, the typical owner ranges from brilliant to tyrannical. An effective strategic plan must therefor encourage brilliance while keeping the owner away from problems that transform him or her into an ineffective manager. The same qualities that have enabled the owner to gain insight into many facets of the business operations are the exact ones that force him or her to be involved in every decision, major or minor. Such overt  care and concern for the company is to be anticipated and applauded. When it results in ineffective management, however, a remedy must be devised.

Entrepreneur or Manager?

Efficient businesses require in-house management. Unfortunately, the skills that make an owner a successful entrepreneur can be at odds with those that make one an effective manager. Excellent entrepreneurs have great sensitivity to market changes. However, when they leave the daily operations to become managers, two things happen: 1) they stop using their innate skills, and 2) they manage ineffectively.

Though the owner may experience periods of fear or apprehension, as a group owners are generally optimistic and opportunistic. Good owners emanate confidence, motivating those around them. For example, by spotting a mismatch between market demand and supply, a good one can inspire employees to work towards meeting that demand. Uniquely able among executive team members  to downplay the importance of minor setbacks, savvy owners emphasize the company’s forward movement in a vision casting mode.

Finally, first-hand knowledge of company history sets the owner apart. Having founded the company, the owner as entrepreneur is an indispensable part of the management team. When questions arise concerning company history or past performance, as they frequently do during times of tension, who better to turn to than the individual who has owned or managed the company all the while?

The Owner’s Vision

In providing vision for the company, the owner is expected to identify opportunities to pioneer new markets and expand the company’s presence in existing markets. Thorough identification of precise product offerings and internal procedures to make the products is a large part of every owner’s job description. The interaction between market research (including trends, buying patterns, and demand) and company vision is a relationship that the effective entrepreneur manages on a regular basis.

The entrepreneur can help the management team by maintaining personal relationships  with key parties such as sales people and lenders. If links have been formed based on good rapport with these parties, it is only fitting that these relationships continue  when they cannot be successfully turned over to another manager. This scenario rings particularly true with regard to negotiations with suppliers. The owner’s involvement in handling these parties is essential to reinforcing profitability.

 

Stop the Rhetoric About SmallBiz, Politicians!

We small business owners watched the political conventions over the last month and were listening to what the pols had to say about watching out for our interests. Numerous speakers took the podium to address an economic challenge not seen in this generation. We of the post-Baby Boom era are wondering whether our way of life will bounce back, rather than when. So many people have lost jobs, big companies have lost revenues they had taken years to build, and small business owners have lost both jobs and revenues as well as their livelihoods. We are, to say the least, keenly interested in whether we are being heard by Washington and our state capitals. We are certain that social security and probably Medicare will not be there for us when we reach retirement age. We truly do not care what happens to those programs–tell us what is going to be done to help us with issues we face!

Saying that small business is the backbone of the economy is not enough–both presidential candidates kowtowed to the convention audiences and said what they had to, but it wasn’t convincing. Part of the reason the comments seemed disingenuous is that “small business” is a catch-all phrase that does not distinguish between differing types of enterprises. As  others have pointed out, a restaurant is a very different type of company than a small manufacturing concern.  Dan Danner, the CEO of  the National Federation of Independent Business (NFIB) says, “There is always a tendency for lawmakers to think that small businesses are just smaller versions of General Motors, and they’re not.” Main Street businesses have very different perspectives on policies that are developed by government. Policies  covering health care, trade, taxation, and ecology often reflect the lobbying power of big business over small business. Chris Holman, chair of the National Small Business Association, says that politicians often “go and vote against small business.”

Data from the Small Business Administration shows that small business has been hit harder than big business by our recent recession. One of the statistics–share of nonfarm GDP from private companies–fell from 48+% in 2002 to <44% in 2010. With home building and related trades suffering from the aftermath of the mortgage crisis, there has been a very slow return to stability –let alone growth–in many small business sectors. Uncertainty over potential changes in the tax code and Obamacare has many small business owners anxious as to what to plan for and how to develop strategies  focused on more than just a few months down the road.

Bloomberg Businessweek writer Peter S. Green profiled several small business owners in the September 17-23 issue who spoke to the issues above. Tom Campbell, who owns the Regulator Bookshop in Durham, NC, spoke out against the unfair advantage online retailers like Amazon have due to sales tax exemptions. He’d like to see the exemptions lifted to create a more competitive playing field. The 20 employees under his supervision have concerns about the future of small bookstores who have to compete in an environment where their customers pay an additional 7+% due to the imbalance in tax liability.

Tom Secor, who owns Durable Corp. in Norwalk, OH, feels that the tax system favors larger businesses. Preferential loopholes in the tax code seem to favor those who have the klout to petition government to listen to them, he says. “Big business is getting the better end of this because they have the money to spend.” Secor’s comments are similar to those voiced by Richard Eidlin, director of public policy at the American Sustainable Business Council. Eidlin decries subsidies offered to big business–whether broadband spectrum or ethanol price guarantees. He says, “If there’s going to be corporate welfare, you could throw some of that at the small corporations.”

In summary, small businesses want someone who understands their needs, can develop programs for sectors of the small business economy, and won’t bog them down in paperwork and red tape. While few actually believe that a president can personally be attuned to these issues, we hope against hope that they will make it a part of their platform and governance!

Qualifications of a Turnaround Adviser

An effective turnaround adviser must be uniquely qualified to deal with crises and prepared to assume responsibility for the company’s success. The three most important background credentials for an adviser are as follows:

  • an identification with the needs of declining companies
  • specific industry expertise in your industry or a related one, and
  • a track record of overcoming adversity and making the most of poor situations

General Requirements

When evaluating possible advisers, teams should look for someone with both practical, hands-on capabilities and an educational or research-based knowledge of the issues at hand. Make sure you do not have a novice attempting on-the-job training at your expense. It would be wise to find someone who has performed at least a dozen turnarounds individually and who has access to other personnel with the same or greater levels of experience. Furthermore, familiarity with research and educational publications within your industry that highlight concepts of turnaround practice gives an adviser a more objective view of workable solutions to difficult problems.

Industry Expertise

A background in your industry prepares an adviser to face the peculiar, industry-specific dilemmas that invariably arise. Previous work with companies of various sizes and in various markets furnishes the adviser with extensive–and beneficial–exposure to your industry. A proven ability to learn new markets overnight and employ existing operating resources effectively will result in quicker turnarounds. Examine the methods the adviser used with prior clients and determine whether similar programs would make a comfortable fit for your business. “Sanitized” copies of turnaround plans produced for other clients may even be requested.

Success Rate

A turnaround adviser’s success rate with previous clients is an important statistic. Much as a baseball team manager would hesitate to hire a pinch hitter who batted below .200, the executive team must exercise caution in selecting someone to captain the turnaround team. Most advisers who have been in business for more than five years can claim a one out of two (50 percent) or greater rate of success. To reduce risk, the team should look for an adviser who can claim–and substantiate–an 80 percent or better success rate. Once a successful adviser has been located, the team shout contact references and ask what made the effort a success.

Crisis Management

Effective turnaround advisers must possess certain qualities and characteristics that uniquely prepare them to deal with crises. The first such quality is “multilevel simultaneous thinking”–the ability to solve problems on several different levels at the same time. This is a skill gained over time through both education and experience. The ability to interact with numerous employees to resolve multiple dilemmas and relate to each in an appropriate manner is also essential.

Negotiating with Opponents

A turnaround adviser’s ability to search for all the important details, address issues with a penchant for opportunism, and follow through on commitments will also further the turnaround process. Note that “opponents” emerge in turnarounds virtually overnight; they tend to be former allies such as lenders and vendors. Being able to decipher an opponent’s true bottom line and make an offer that more than covers his or her threshold yet preserves the company’s position will save the company precious time during the turnaround. Indeed, many of these opponents in negotiations will return once again as allies when the business emerges from its decline. In completing a cycle of commitments to stakeholders, the turnaround adviser should ensure that every promise made can be carried out to the letter. Such consistency in following through on promises will enhance the builder’s credibility and image in the community.

Often employing little more than intuition, a crisis-oriented adviser can anticipate pitfalls and plan around them before trouble occurs. Being able to foresee a turn of events is a rare quality to begin with, but is especially valuable when coupled with the creativity that allows the adviser to adapt the flexible strategic plan to the changing demands of the situation. This ability to adapt to change is a necessary elastic band in the adviser’s armor, without which all other tactical weapons would be useless.

 

Sizing Up the Competition

Whether you are in turnaround mode, wildly profitable operations, or somewhere in between, it is imperative to know as much as you can about your competition. Competitive threats–present or forthcoming–should be well understood and strategies developed to address them.

Assessing the Competition

To assess buyer potential, knowledge of competing products is essential. Any advantage an executive team may hold over the competition needs to be studied with an eye toward exploiting that advantage fully. By developing this competitive advantage, the business creates non-financial barriers can prove difficult for the competition to overcome; financial barriers (for example, price discounts) are often more easily met.

Threats from competitors are a daily occurrence. Therefore, the competition should be monitored and key information compiled and categorized, either manually or electronically, and updated regularly. The most common forms of threat to watch are as follows:

  • the unanticipated entry of competition with extensive resources or new product offerings into the local market
  • the diversification of existing companies into new product offerings
  • the introduction of  a technology (such as a software as a service trendsetter) that exceeds currently available prototypes
  • efficiency improvements that create cost advantages not easily matched

Any slight advantage in cost savings others can gain presents a viable threat to the operation of every other participant in that niche. For example, if a company can source inputs cheaper, that competitor can control the market through pricing. While price reductions can be matched, cost efficiencies cannot. With reduced cost structures, the business could offer higher quality products for the same or cheaper prices to the same group of buyers another business is trying to attract. Some may strike lucrative deals with their vendors, who are in effect “held captive” by their need for the contract work. Streamlining staff or other reductions in overhead can also contribute directly to the bottom line and clear the way for improved price competition.

Gathering Information on the Competition

Given the possible threats, every company should study and know its competitors inside and out–not just figuratively, but objectively, analyzing competitive products in the field and the team(s) that produce them. If a competitor suddenly pulls out of a channel or wholeheartedly pursues another, the executive team should wonder and try to determine the reason. If you are playing in the same space, detailed information on the features, marketing and expected pricing of the offerings of others can be extremely valuable. More difficult to collect, but perhaps even more valuable, is information on a competitor’s cost structure. Knowledge in these areas prepares your team to position its offering in any given situation. This information can and should shape planning.

Information can be gathered from websites, especially press releases, industry publications and organizations, and word of mouth. Suppliers, services firms, and buyers are valuable sources of competitor information. Of course, such information must be considered in light of the motives of the person providing it. Proactive research in terms of surveys and interviews can also supply good background data. Most important–and easiest to obtain–is information from marketing agencies and sales organizations that serve multiple clients.

Gaining a Competitive Advantage

Companies gain an advantage when a known, unique asset is translated into a more competitive offering. Therefore, the executive team should carefully note opportunities to gain an edge throughout the information-gathering process. Capitalizing on company strengths–and opportunities to serve the market thereby–will instill the confidence necessary to withstand outside threats. Addressing buyer concerns in a positive manner, funneling their input into a constructive, sales-closing process, will enable the business  to make the most of both strengths and weaknesses. For example, by offering option packages and upgrades based on buyer demand, the company can secure more contracts. Meeting delivery schedules is also critical to enhancing competitive advantage. 

Customer service is another important area to scrutinize. Satisfied customers are a great source of new, repeat, and referral business. By carefully pre-screening potential buyers and collecting selection information, more targeted sales efforts can be made. Teams should expect prospects to respond to customer service before and after the sale as though the sale depended on it.