I wrote this article for my (print) newsletter 25 years ago. It’s so relevant even today that I decided to republish it, even though it’s longer than my usual post. I think it’s worth the extra few minutes you’ll spend reading it.
We are often asked: What is the most common problem that we see in the companies we work with. The answer might surprise you.
The commonly expected answer is financing, or adequate cash to run the business. It’s true, cash is often a big challenge, particularly for companies in dynamic stages of change, growth or decline.
But we don’t have much trouble raising money for companies that have their act together. Everyone knows there are lots of banks looking for “a few good borrowers,” and there are tons of second tier lenders for companies still too young for their bankers to take on. In addition, there is lots of venture capital and “angel” money looking for solid investments. And then there’s the investing public via stock offerings, the government via the Small Business Administration, and the list goes on. So availability of money isn’t really the problem.
The problem that we see most often, and which is the greatest deterrent to successful growth, is management focus.
You may ask: Is that the old saw about management, management, management? Yes, it is, but with a particular emphasis: Clear and determined focus on the most important strategy, objective, or task at hand, is the challenge that I see entrepreneurial companies most often stumbling on. Their stumbles are usually painful, and too often fatal.
The founder starts his or her company with a singular focus on one of three things, generally: a great, innovative product, a passionate mission, or a market niche that is not being served. The company gets launched, and initially funded, as a result of that focus. Then there is a company to run, with people to hire, train and manage, operating procedures to create (and then monitor), more financial commitments, more financial risk, more need for financial and management attention.
And all this is in addition to the things that got the company going in the first place. Founders are not particularly good at these things, but someone has to do them. To make matters worse, founders often don’t trust someone else to do the work, and if hiring is not their strength they may have good reason not to trust. But often it’s just because it’s their company and they want it done their way. Some control-oriented CEOs will supervise these activities in minute detail, even if it’s not their area of expertise, often smothering the very employees they hired to do the job.
The result is the founder takes his or her eye off the ball. They no longer have enough time to drive development, or close key sales, or network with the people who will provide the next level of funding or partnering. And no one else is there to carry on with the same intensity, the same commitment, the same passion. So that great idea that launched the company now falters, and everyone wonders why the company got into trouble when it had such a great start.
The answer, then, is management focus: applying the most important company resources to achieve the most important company objectives, no matter what.
So, what are the most important company resources? And which are the most important company objectives?
Good questions. And of course the answers are different for every company. The way to find the answers that are right for you, however, is not so different. You can use many of the same techniques that built Amazon, Walmart, Microsoft, and every really well managed company. We believe they break down into five fundamental tools of business management:
- Vision. There must be a clear vision of what the company wants to become, and it must be actively reflected in the mission and the daily activities of your business. If your primary focus is simply to make money, you will be distracted by every momentary challenge to current profits, and you will be repeatedly pulled from one opportunity to another. It’s like trying to pick a stock by only looking at the daily trading ranges. You will spend your time chasing trends rather than setting them. Always be crystal clear about where you are going, and make sure everyone in your company sees the goal too.
2. Planning. The foundation of every successful venture is a plan. A well thought out (and clearly written) business plan (both strategic and tactical) starts with your vision and then identifies:
- What you want to achieve, your specific goals and objectives;
- What you must do to achieve it, what products, what markets, how much, how fast;
- What resources you will need, people and money mostly; and
- The strategy for using those resources to achieve the goal.
When your plan is on paper, you will know what you must focus on, and so will everyone else.
3. Budgeting. A budget is the monetary tracking system for your plan. Every CEO has one, but most have it in their heads somewhere, or on a shelf, rather than in the hands of everyone who can use it to help produce the desired results. A budget that is not actively used by everyone who has a role in managing the business is worse than useless, it’s a waste of precious time. Every CEO should expect their people to understand, and strive to stay within range of, budget targets. This usually means that key players must have had a role in creating it. It always means that three questions are asked and answered every month:
- Why did we get a result different than we budgeted?
- What must we do differently to get a better result next month?
- What did we learn that will make next year’s budget better?
4. Hiring. Hire the best people you can afford. Then pay them what they’re worth, and expect exceptional performance from them. Define the job to be done, and then find people who excel in doing that job, whether it be CFO, salesperson or shipping clerk. You will get your money’s worth many times over, and you’ll need fewer people to operate your company. If you hire primarily based on the lowest wage that you can convince someone to accept, you will never get more than a day’s work for a day’s pay, and that’s not the way great companies are built. Hire the best.
5. Managing. Let your people do what you hired them for. Give them clear direction, or vision, or guidelines, and then stay out of the details. They will never do it the way you would, which is quite often better for you. They cannot do it the way you would and be the quality people you intended to hire. If their work does not meet the company’s standards, then change their job or change the person. Do not spend your time making up for their shortcomings. You’ll only aggravate your own shortcomings in the process, and neither job will get done right.
Management focus is achieved by pursuing a vision with clear, targeted action plans, and employing talented, dedicated people to do whatever it takes to meet those plans. Business success is achieved by either mastering that process or being very lucky. Do you feel lucky?
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