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Sunday, 25 November 2012

Feeling a Bit Uncertain? If You Are the Leader, You Make the Decision!


Looking over some of the blogs I have posted during the past three years, it seems that I have listed a significant number of leadership functions as being “primary”.

It really emphasises the need for a leader to be something of a polymath; to be able to cover all the bases while still being in a position to take action outside the normal and as necessary.

It’s a tough call but the great leaders seem to take it n their stride.  The fact is that the decision making process is central to the position of leader and that would apply to all the other functions.  Simply put, if the leader is indecisive, then however able he/she is in other ways, they are as nothing in the face of indecision.

Most of the great (benign, I do not include well known dictators)) leaders generally prefer an inclusive style of management with sensible consultation with either teams or specialists in order to come to a satisfactory conclusion.

An authoritarian leadership style is usually very decisive but frequently without the benefit of advice from anyone else (it’s often called “gut feel”) and this can lead to an enhanced need for problem solving.

Great leaders have in their make-up a level of humility which tells them that they really don’t know everything and discussions and consultation with others who perhaps know a bit more can only be beneficial.

In the end, of course, someone needs to make the decision and that is more often than not is the province of the leader.

Coming as I do from an engineering background I am well aware that some people like to have as much information as is humanly or Gooley possible  before they attempt to come to a conclusion.  It’s called “paralysis by analysis” and it generally stifles decision making.

Equally, the structure of the organisation is important; partnerships, for example, seem to have been set up with the prime intention of making decisions impossible.

I recall a member of my Vistage CE group some years ago who was Managing Partner of a large law firm.  We were discussing decision making and I rather naively ventured that it should be relatively simple as all they needed was consensus among the 26 or so partners.

He looked at me with a mixture of incomprehension and pity. 

“Consensus?” he almost shouted: “They don’t know the meaning of the word.  They insist that every decision must be unanimous”.

I timidly suggested that this could mean a slowing up of the decision making process and he growled: “You could say that!”

The whole point of this is that while it makes a great deal of sense for the leader to consult and take advice from both internal and external sources, in the end it is the leader’s primary function (there I go again) to make the decision, for good or ill.

It is, as I said before, a tough call and that is why the leader is in that position.  It will often lead to change and managing that is another issue which is in the province of the leader.

Frankly, it never ends and that is why the position of leader is both demanding and exhilarating.  It demands, amongst others, humility, awareness, sensitivity understanding, creativity and, above all, decisiveness.

If you have all that lot, you’ve got it made. 
 
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Sunday, 18 November 2012

Title of CEO, Managing Director, Chairman? First of All You Are a Leader!


Over the past couple of weeks there has been a flurry of discussions on the UK Vistage website about the role of the Chief Executive compared to that of the Managing Director.  Where, if at all, do they differ?

So, perhaps the question to ask is, are these just titles which effectively cover  much the same functions or are they truly separate and defined roles which are, or should be, complementary.

In a simplistic fashion perhaps we can define the role of the Managing Director as having overall responsibility for the effective operation of the business, day to day, and carrying full budget responsibility.

The Chief Executive oversees the running of the business and has the primary responsibility for forward planning and strategy.  The CEO has the final responsibility for the success or otherwise of the business.

However in the end there can be only one overall leader and that should be the Chief Executive.

So let’s take a look at this role as I see it.  It all starts with the definition of the purpose of the business, what is it there to achieve and for whom?  Vistage speaker Roger Harrop considers that, in the end, the purpose of the business comes down to money; for example, to increase the value of the business and hence the asset value for the investors.

That is by no means the only definition of the purpose and it is part of the CEO’s role either to define it or to work with the top team to decide on the definition.

Next the CEO needs to work with the top team to decide on the values espoused by the business.  Please don’t include Honesty and Integrity; if these are not givens then you shouldn’t be in business.  Typical values can be a dedication to training, respect for everyone’s ideas, a no-blame culture and so on.

Critically these values mist not be just a list in the reception area; they must be constantly repeated and visibly auctioned at all times. In other words, they become the way that we do things around here.

Finally it the setting of the short and long term objectives for the business and then answering the question; if that is where we are going, what will we need to do in order to get there?  Note, this does not ask HOW do we get there?
 
Difficult it may be but it is not the function of the CEO to be hands in the business and that can be painful when something goes amiss.  The responsibility for putting it right should be solely in the handsof the operational management, not the leader.

Overall then the primary functions of the Chief Executive are to set the objectives, determine the strategy for achieving them and above all to determine the culture of the business and to drive it into the business.  It is perhaps the only real top down function of the CEO and it is the absolute responsibility of the leader.

This means that the leader must take time out to think; not to make decisions, not to take action, but to think about the business in a quiet environment.  Go walk on a beach with the dog a couple of times a year (without a telephone) and just think about the business.  Remember that the leader is the ONLY person in the business who consciously thinks about it
Simple, isn’t it?  Get it right and it can only lead to success.
 
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Sunday, 11 November 2012

Are Your Monthly Accounts Timely and Accurate? Then You Are Very Fortunate!


At a recent one-to-one with one of my Vistage CE group members we were discussing information flow in the business and how it can be and is used to beneficial effect.

I was slightly stunned by his comment in passing that his Finance Director was now managing (I use the word reluctantly) to produce the monthly management accounts six weeks after the month end. (it had been up to eight weeks as the FD fond other things to do which he considered more important)

The sad fact is that management accounts which are six weeks late (in anyone’s language) are frankly useless.  The company could have gone out of business while the FD was saying things like “I can’t do it any quicker because we don’t have all the invoices in yet” and similar excuses

The whole idea of management accounts is that they are supposed to assist the CEO in the management of the business (or is that a trifle simplistic?) and six weeks late means that they are, to all intents and purposes, useless other than as an historical record of what happened. 

Any action taken as a result of them would be founded on dubious evidence at best and at worst would be positively dangerous.  Ask yourself, do you drive a car by looking constantly into the rear view mirror?

So why even bother?

When an FD is appointed or indeed anyone tasked with the preparation of monthly accounts, it should be made absolutely clear that they must be presented in a workable format no more than three days after month end.

All arguments about not having all the necessary documents in hand are specious as the management counts, almost by definition will contain some input which can and should be estimated.  If the monthly national statistics for GDP can be corrected a month later, then so can monthly management accounts.

Another of my members mentioned that as they were going through a short term downturn blip, the Finance Director was becoming more and more nervous by the day and was starting to look at sales by the week.  When he then started to worry about sales on a daily basis, it was pointed out to him that the business operated long term so please stop it (or words to that effect).

The whole question of the value of monthly accounts is called into question when this sort of thing happens.  It also calls into question the role and indeed the attitude of the financial personnel in the business.  The fact is that finance does not run the business; it is the product of the business and is a measure of the level of success.

Possibly the most important factor and certainly in these times, is the cash position and that should be monitored on a daily basis without fail.  Remember that you can be profitable and fail because you run out of cash.   The credit control operation in the business is the most important section of your accounting function.

A useful test for the leader is what has become known as the Desert Island method.  In essence, the leader is metaphorically marooned on a desert island with a mobile telephone which works once a month and for a very short time which allows only five questions to be put.

So what questions would you put to find out exactly how the business is doing (like what is the cash position)?

More importantly, what questions would you put to find out what actions are being taken to drive the business forward to achieve the long term goals?

And that begs the question, do you (and everyone in the business) know your long term goals and do you know what you will need to do in order to achieve them?  It’s certainly nothing to do with monthly accounts.
 
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Sunday, 4 November 2012

Economy Blues Affecting Your Business? Change and Innovation Lead to Success!


The BBC Radio 4 early morning farming programmes have been awash with dire predictions about the  state of British dairy farming mainly, it is suggested, because the major supermarkets are paying 24p a litre for milk and the cost of production is nearer to 28p a litre.

Accordingly, many dairy farmers have gone out of business and pedigree herds have been sold off.

On the other hand, the nominations for the BBC Farmer of the Year Award include  several dairy farmers who are making good attempts to run their businesses successfully even in the current climate.

Why the anomaly?  The milk market is unusual in that the price to the consumer is held as low as possible by the supermarkets, claiming that consumers won’t pay any more, the second tier, the processors, claim that their costs have risen and they cannot pay any more to the farmers.

This then is not a market where “it’s not about the price”, or is it?

It seems to me that those dairy farmers who are successful have accepted that they are now in their own “new normality” and they must do something to redesign the way that in which approach the market or go under like so many of their compatriots.

I know that I have quoted this before but Albert Einstein hit the nail on the head when he said:

·       “The definition of insanity is doing the same thing over and over again and expecting a different result”

The primary reason for farmers going out of business is that they have not accepted that they must change the way that they run their businesses in the light of current market forces if they are to stay afloat.

If some producers can do it, why can’t many do the same?  It’s all about change and the resistance to change.  “We know what we are doing, we have always done it this way” is a perfect recipe for disaster in these straitened times, and not only in farming.

Just look at the demise of Comet, yet another High Street retailer going into administration.  Passed around to various owners, most of whom were not retailers and probably didn't understand it anyway, they became merely a showroom for electrical goods which they were prepared to sell to any customer who wished to nuy.

Service?  What service?  Technical assistance?  Don’t be daft – that means that we would have to train the staff and that costs money and we can’t afford it.

So what happens is that they determinedly stay running the business in the same way, equally determinedly lowering prices “to be competitive” presumably hoping that things will change and the good times will return.

At the same time they moan about competition from web based suppliers instead of embracing it with enthusiasm.  Their major error is that they look upon the web as a threat instead of an opportunity.

One problem is that the word competitive has come to be associated only with low prices which frequently sound the death knell of a business.  On the other hand those leaders who realise that to survive in the existing jungle, it is essential to innovate, to change and question everything that they do in order not only to survive but to prosper.

Too difficult to start a business or to change one in a recession?  Please note that Microsoft , Apple and Goggle all were started in a recession.  New ideas, new thinking and a clear view of what success looks like, will always win.

Don’t worry about your competitors; make them worry about you.
 
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