Well-known ‘Secrets’: 7 Steps to Boost Company Performance

Based on our 16 years of working in and studying diverse organizations, we conclude, “The problem with today’s executive is not a lack of knowledge of how to effectively lead a company, but rather a lack of application of that knowledge”.  In essence, there is a knowing-doing gap.  The basic dynamics of organizations have not really changed over the years; therefore, we should focus on turning our current knowledge into action rather than “inventing” new ways to lead.

This Report distills the myriad of management trends and principles into 7 timeless, well-known ‘secrets’.  These ‘secrets’ help polish executive effectiveness and boost company performance.  We cut through the clutter and breaks down the 7 ‘secrets’ into simple actions that an executive can immediately apply to his/her company.  Leaders who apply actionable steps and use simple tools create competitive advantage for their companies.

The 7 “Secrets” are interrelated, as are any factors in a complex system. These ‘secrets’ also address the TOP 10 Risk Factors for Growing Companies that we have gleaned over the past 16 years:

SECRET #1:  FOCUS
Identify your market, your advantage and your expertise, then STICK TO THEM.  “Sticking to your knitting” is often an operational challenge for entrepreneurs.  To maintain your focus, consider automating, streamlining or outsourcing areas that are not core to your business in order to:

• Increase focus (of intellectual, financial, and physical resources)
• Reduce liability
• Capture missed opportunities.

The Effort-Impact Grid enables you to quickly assess activities worth streamlining, automating or outsourcing. This assessment will help you focus your intellectual, financial and physical resources on the core competencies of your business – those things you do better than anyone else.

Your top priority to streamline, automate or outsource should be those activities that fall into Quadrant I (Low impact, High resource demand).  You should also consider alternate ways to accomplish Quadrant III activities (Low impact, Low resources demand).

Those activities with High Business Impact (Quadrants II and IV), are not necessarily immune to outsourcing.  They may not be as high of a priority for modifying as other activities because:

• you want to have direct control over high business impact activities
• Quadrants I and III offer “quick hits” for improved efficiency.

A recent German study found that the most profitable companies sold fewer products, had fewer customers and suppliers.  In others words, complexity leads to overhead that results in increased expenses.  Added complexity generally leads to increasing sales with eroding net margins.  On the other hand, this study found that simple, focused operations were more profitable.

Performing an 80/20 Analysis will help you identify the most profitable services, plants, products, salespeople or regions in your business.  Since there is substantial evidence that the 80/20 Rule is alive and well in most facets of life (e.g., computer CPUs, engines, sales, internet content), it is safe to assume that some variation of the 80/20 Rule applies to your company (possibly 70/30 or 90/10).

Therefore, if the 80/20 Rule exists in your company, it means that most profitable 1/5 of your company is 16 times more profitable than the remaining 4/5.  There may be good business reasons for your remaining 4/5 (e.g., new technology, market expansion, loss leader), but often times these less profitable areas are just leftover and have never been assessed for profitability.

A quick and dirty 80/20 Analysis can be easily performed with any spreadsheet.

SECRET #2:  PLAN FOR SUCCESS
Planning is one of the most well-founded principles of personal and business effectiveness.

Although the time horizon is shorter in today’s fast economy, planning at all levels within your company will still significantly improve your chances of hitting your targets.  Your planning should trickle down through your company.  Each level of Planning provides the context for the next level, resulting in organizational alignment:

• Mission
• Vision and Values
• Strategy:
  •  financial
  • market
  • human capital
  • operational
• Tactical
• Individual Performance.

A solid strategic plan is important, but remember,  “The devil is in the details”!  Companies who are diligent about translating strategies into specific, individual performance objectives tend to operate more effectively and efficiently.  Since most planning sessions end with just a plan, creating SMART goals is a simple way to instill Action and Accountability into your planning process.

S = Specific
M = Measurable
A = Achievable
R = Relevant
T = Time-framed

SECRET #3:  SELECT & TRAIN RIGOROUSLY
Selection and training are your two best levers for improving your Human Capital.  You will get the greatest ROI in these areas.  Here are some key actions to ensure you maximize your ROI:

• Resist the “warm body” syndrome.  Hire a good fit for your company, and do NOT compromise.
  • The Applicant Evaluation Tool will help improve your employee selection:
    

    Application Evaluation Tool

    Applicant _______________ Hiring Manager _______________ Position _______________ Interviewer _______________ Department _______________ Date _______________

    Rating Scale:   1 = Does not meet position requirements 2 = Meets position requirements 3 = Exceeds position requirements

    (A) (B) (C) SAMPLE Critical Success Factors (CSFs) Weight (importance to job) Exceeds (3 pts) Meets (2 pts) Does not Meet (1 pt) Rating (A X B) 1. Credentials ____ X ____ ____ ____ = ____ 2. Job Knowledge ____ X ____ ____ ____ = ____ 3. Interpersonal Skills ____ X ____ ____ ____ = ____ 4. Relevant Experience ____ X ____ ____ ____ = ____ 5. Motivation ____ X ____ ____ ____ = ____

    Total Weight = 100 Overall Rating = ____

    Comments:___________________________________________________

    ______________________________________________________________

    Would you hire this candidate: __Yes __No __Other position

• Train continuously using a broad definition of training (mentoring, developmental assignments, special projects, building external networks, providing 360 degree feedback).
• Ensure that all employees understand your business – its cost/revenue drivers and how they can contribute to it financial success.

Since Employee Selection is the LEAST effectively executed management activity, you may want to read our report on “TOP 10 Employee Selection Mistakes… and Solutions”.

SECRET #4:  DEFINE PROCESSES
This ‘secret’ refers to automated AND manual processes.  Underdeveloped infrastructure (systems, processes and structures) is one of the most common Risk Factors for high-growth companies.  Effective processes are:

• Clear
• Replicable
• Documented
• Supported by tools
• Easily accessible.

Although it is always easy to say, “we need a new system”, we recommend streamlining your manual systems before you change your technical systems.  Many companies who reverse this order simply end up automating their inefficiencies.

As an acid test for how well your processes are defined, documented and consistently used by employees, ask yourself, “How easily could I franchise my business?”   Effective processes will enable you to work ON your business rather than IN your business.

SECRET #5:  DESIGN YOUR CULTURE
Culture can be a very complex topic, but based on our Guiding Principle of Simplicity, we boil down Culture to one thing – BEHAVIOR.  Simply put, you want to design your organizational systems to reinforce behaviors that support your Business Strategy.  Cultures are created and reinforced by:

• Rules and policies
• Goals and measures
• Rewards and recognition
• Staffing and selection
• Training and development
• Ceremonies and events
• Leadership behavior
• Communications
• Physical environment
• Organizational structure.

All of these systems must be aligned with your Business Strategy (vertical alignment) and with each other (horizontal alignment).

SECRET #6:  COMMUNICATE LAVISHLY
The payoffs for lavish communication are increased:

• Discretionary effort (ownership behavior)
• Productivity
• Employee intelligence.

Communication sounds intuitive enough, but many companies miss the mark.  In spite of all of the employee communication efforts, lack of communication is predictably the #1 complaint resulting from employee opinion surveys.  A closer look at these data show that employees really want to know 4 things:

1. Where are we going? (Strategy)
2. What are we doing to get there? (Plans)
3. What can I do to contribute? (Roles)
4. What’s in it for me? (Rewards).

Ensure that you are answering these questions before communicating about other topics.  Leaders from today’s most successful companies argue that “Leadership is Communication”.  Therefore, to be an effective leader, ensure that your communication is:

• A top priority
• Honest
• Consistent
• Multi-channeled
• Proactive
• Two-way.

SECRET #7: MEASURE
Measurement and feedback, like Planning, are well-founded principles of human behavior.  You can do all the right stuff, but if you do not measure your performance, you are significantly limiting your company’s effectiveness and ability to adjust.  When you do measure your results, keep these tips in mind:

• Measure what matters:
  • keep it simple
  • focus on a few key success factors
  • remember, what gets measured, gets done.
• Manage what you measure:
  • use your performance management system as a Strategic tool, not a Human Resources program
  • err on measuring more frequently.
• Balance measures amongst:
  • financial
  • customer
  • people
  • processes
• Cascade measures from company-wide down to each employee (a la the Planning process).

In summary, here are the 7 ‘Secrets’ to boost your company’s performance.

1. FOCUS on what you do better than anyone else.
2. PLAN for success at all levels.
3. SELECT and TRAIN rigorously.
4. Define PROCESSES.
5. Build a CULTURE that supports your vision.
6. COMMUNICATE lavishly with employees about your business.
7. MEASURE what matters.

Turning these ‘secrets’ into well-known principles in your company will create a sustainable advantage over your competitors.

Copyright © 1999 – 2003 by The L Group, Inc.