The ‘business’ of Running a Business

By Tommy Bartshukoff

In a clear and straightforward manner, this book provides structure and direction to help managers achieve success in running an organization. The author shares his global experience in a highly visual manner, using well-crafted summaries and anecdotes.

Chock-full of good advice, it is full of wisdom and practical recommendations for anyone in a management position to create focus and alignment within the team and most importantly, to foster engagement. It gets to the point quickly, with concrete suggestions to create a safety net and to accelerate successful execution.

Overall, it takes the reader on a journey through all the vital areas of a typical organization and shares well-proven ways to handle many of the key situations managers will likely encounter along the way. It is particularly relevant today, when more and more people are starting their own businesses and have very little margin for error.

With more than 30 years of experience as CEO in global companies across cultures, as well as an owner of SMEs, the author is direct and frank, although distinctly empathetic.

Why make the same mistakes others have already made for you? Buy the book. Read it! And set yourself apart from the crowd.

• Language: English
• Publisher: BookBaby
• Release date: May 1, 2017
• ISBN: 9781543900996

Book preview

insight

Chapter One

Discovering the real value

of your company

Valuing the company

When I ask managers what the value of their company is, they mostly answer: ‘share price x number of shares’ - which is true. However, it needs a deeper understanding of what the value consists of, as that value is rather volatile

Most of the real value of your company is to be found in its intangible assets.

These are the items in your ‘goodwill box’ – people, talent, leadership, processes, knowledge, customer relations, patents, and licenses etc. plus anything else that is not tangible. Or, to make it more concrete - ‘everything you can drop on your foot without feeling any pain’.

Why are these important?

Well, because they normally constitute between 60-90 % of your company’s value averaging 80 % of the S&P 500.

Wow! So, let’s take a look at them, then and make them more ‘tangible’, so that they are visible in a structured way.

And let’s not forget that there are not only intangible assets, but also intangible liabilities!

The ‘balance sheet of intangibles’ is, therefore, an extremely important factor in order to understand what the mid- to long-term prospects of your company are.

I have structured this book in a way that puts the spotlight on key intangible areas of any organization – as well as some of the tangible ones - in order to provide concrete examples.

The list of intangibles can be pretty long.

It comprises, amongst other things:

•Leadership – setting direction via the corporate vision.

•Effective vision, objective and strategy decisions

•Change, initiatives, crisis management

•Internal stakeholders, talent management, creating and managing high-performing teams and other ‘people issues’.

•Relations with external stakeholders, such as customers, suppliers, unions etc.

•Effective networking - to gain and share experience

•Operational issues – processes, methods, quality assurance, claims, fraud etc.

•Intellectual property rights

•Motivation – morale

The importance of intangibles

In 2015, a whopping 87 % of company value was comprised of intangibles

As I mentioned earlier, there are also intangible liabilities such as:

•lack of trust

•lack of urgency

•lack of motivation

•lack of emotional connect

•attitude of fear

•secrecy

•inadequate policies, processes

•lack of knowledge, knowledge management etc.

•poor communication

•poor transparency

We could also call them inhibitors to progress and they have a crucial effect on strategy choices.

These choices will emerge when you have clearly defined the ultimate goal and, using gap analysis, when you have figured out what you have to do and how in order to accomplish the goal, within your desired time horizon.

The inhibitors have a major impact on your capability to achieve what you want.

The ‘vital few’ – the key issues that can make or break a company

Take a look at the following illustration.

Good management of soft factors create hard cash

Strategy and the impact of tangible and intangible assets

The top key drivers for a company’s performance and competitiveness very often form an 80/20 relationship. There are ‘vital few’ in every role and task and this is where the focus should be. Pareto analysis / charts are an effective way to identify and show these ‘vital few’.

A +/- 1 % sensitivity analysis for these vital few that have a major effect on your bottom-line (volume –price - cost – waste – expenses etc.) is a good way to make them more visible.

Vital few – focus on what is important

A basic product or client profitability analysis

The ‘vital few’ can be found using rather simple ratios such as:

•Sales/employee

•Profit/ employee

•Cost/sales price

•Dependency on clients (biggest ten) especially profits!

•Operational expenses/sales

•Waste(kg/liters)/purchased material (in-out of your ‘factory’)

•Training development cost/number of employees

•Maintenance cost/age of equipment etc. etc.

•R&D % / sales

Other ratios could be:

•Credit days

•Ageing list of debtors

•Equipment age/total usage (life cycle)

•Employee age structure

•No. of claims (could also be a ratio)

•‘Best’ customer(volume/value/profits)

•‘Best’ product/service (volume/value/profits)

•Quality, structure and access to information

These ratios can have different time horizons which need to be taken into consideration. So, take a holistic look at your numbers and look at the compounded effects.

Example:

What can be the effect of employing and maintaining low-cost staff?

•Lower total wage cost but higher training costs

•Lower quality, more waste, more claims, more re-work etc.

•Lower productivity, higher communication cost (more misunderstandings)

•Loss of trust from customers, Quality level, attitude etc.

•So, take a holistic view to avoid sub-optimization and then…

Chapter Two

Vision, Mission, Objectives and Strategy

"Decide what to do

and what not

to do

and stick to that decision!"

Vision and Mission

A real sign of a losing organization is one that has a fuzzy vision and an unclear mission.

Meaning that:

•The corporate vision and mission don't inspire people

•There is a lack of strategic alignment

•People don't know where the organization is going and what it is trying to achieve in the future...

Let me ask you a question: What do you think - or, better still, what do you feel – when you read your company’s vision and mission?

The vision must touch, energise and inspire you and be a worthwhile cause.

What about

‘We transport material’

As compared with:

‘We are building a bridge for our children’.

A vision statement doesn’t have to be complicated, but it should strike you and others as being worthwhile.

One of the best corporate visions I have heard described was that of the liquid food packing company – the Tetra Pak Group - expressed as:

‘A package should save more than it costs.’

It clearly states that the product will always add value.

Bingo!

In the process of defining your vision and mission, ask yourself a few questions:

What are we doing now? (For our customers)

What do we want to do?

What could we do? (For our existing and new customers)

Regarding ‘new customers’, these are sometimes just a variation on who you are serving and what you are doing for them right now.

You can change the ‘customer’s’ perception through bundling, or unbundling and re packaging – doing things differently.

I prefer to use the word ‘different’ instead of ‘new’ as it doesn’t sound like a criticism of what has been done before, but rather another angle with other assumptions.

To match the vision and mission with objective-setting and to see what is achievable, it’s a good idea to do a SWOT analysis (Strengths/Weaknesses (internal) and Opportunities/Threats (external)

If you then plot them into the matrix below, you will get an even better idea of what to focus on.

Are the objectives really attainable with the resources you have?

What do you need to add – or change?

Consider the ambition level, timescale and time allocated?

It has been proven that in order to get the best effort from people they need to feel that the objective will stretch them – while remaining attainable.

There is an important exception, though.

If you feel that there is a need to do things radically differently, you might choose to impose objectives that definitely cannot be reached without a major re-think – a quantum change in the way you do things!

Objectives and Strategy

Whose objectives are we talking about here?

Those of your ‘real boss’ of course – the company owners.

In accordance with the over-arching goals of the owners, you should set a few (3-5) primary objectives in the areas of main opportunities and obstacles to focus attention and communicate the priorities.

When you set objectives, always try to make them:

•Measurable – how can you otherwise measure progress and deviations?

•Balanced - in all vital areas, as this is important to help in allocating resources

•Holistic – to ensure alignment and to avoid sub-optimization

Unclear objectives result in a faulty strategy

Even if your objectives are clearly defined, they will not be attained if: they are not effectively communicated to the organization

•they are not adapted to the audience (the tone of delivery is lacklustre, lacking emotion and inspiration).

•they are poorly communicated (by which I mean that they have no credible rationale)

•they do not take into account the current company culture and external forces

Strategy and results – why things might not happen?

Strategy is all about the future.

By definition, it is ‘the decision about how you will achieve your objectives,’

In other words, how can you get the most out of your limited resources?

It’s about how you will use your existing resources and what resources you must acquire and how to exploit opportunities and navigate around obstacles/inhibitors.

Many successful strategies have been written after the