Every business owner thinks about exiting their business. Some hope to sell. Others may have plans for somebody to ‘take over’ (e.g., next generation; partner/co-owner; employees via employee stock ownership plans; etc.). Maybe the plan is to step away slowly and continue to take an income or profit. Regardless of the plan, the success of each is largely contingent upon the health of the business.
Any buyer will want some assurance of continuing revenue, as well as the ability to continue operations at a profit. The likelihood of recurring revenue lessens when the ‘Selling CEO’ exits and there is no team in place to drive sales. Let’s assume there is a sales and marketing team to drive revenue. Is there an operating system with the accountability in place to execute on delivering the products and services sold? Does the system measure the effectiveness of those responsible? Do you have trusted relationships with suppliers? How well documented are your systems and processes?
It might seem counterintuitive, but a good test of this happens with a passive CEO. What happens when you (the owner/CEO) take time off? Imagine taking a two-week vacation with no access to your phone or computer. Would the business thrive or would you come back to a firestorm? Take it a step further. Does your management team have a clear direction for the next 3-5 years? Are your vision, values, and goals clear? Would they share the same view of that long-term goal in your absence?
Based on our collective experience in leading Peer Advisory Boards (Mastermind Groups) and one-on-one executive coaching, if the answer is ‘no’, it’s unlikely the team will be able to provide strategic direction, much less daily tactical direction.
The following article shares similar guidance. Please tell us about your experience, as you dream about exit and begin to move closer to leaving your business.
Why Many Small Businesses Cannot Be Sold (NY TImes)
This man has a dream.
John-Leslie Brown is the Baby Boy of Mamie Brown’s Baby Boy, Les Brown. You might have heard of them. If not, Google can fill in the blanks.
Toastmasters International awarded John-Leslie Brown the Best Speaker Award, making him the highest paid teen speaker in America.
He begins this speech talking about Mamie Brown. She had a dream. By all accounts, that’s about all she had.
Mamie Brown, with her third grade education, passed down her values to her family.
Here, he asks, “Who is your Mamie Brown?”
“Why not you?”
…fill in the dots…
Why not you be the person who accomplishes something?
“Why shouldn’t you be the person…who actually cares about something outside?”
What’s your dream?
In this article by the Boston Consulting Group (BCG), they share a study by Harvard Business School reporting that CEOs spend 60% of their time in meetings and 25% on the phone and events, with the balance (15%) going to everything else. Whether your ‘free’ time is 15% or 50%, how you spend it is key to whether you are investing it or simply spending it. Now is the time for reflection.
We, too, have found that time can be spent unwisely, with limiting decisions (from poor planning) that lead to unclear goals and lack of clarity. This quickly turns into lots of questions, is often accompanied by low energy. Fear eventually takes over, resulting in a reaction plan.
On the contrary, empowering decisions that invest in the future typically lead to higher energy and a sense of gratitude about the situation. This clarity on the end goal is accompanied by strategic questions and the courage (determination, faith) to take decisive action that moves ever closer to the end goal.
You might ask, what is the common denominator between thought and reflection (as highlighted by BCG) and an investment in empowering decisions? The answer: an investment is foundational and long-term, whereas ‘solving immediate problems’ is situational and short-term (i.e., putting out fires).
BCG notes the value in allowing some structure and schedule to allow time to step back and consider the big picture and long term. In so doing, having the perspective from an outsider (whether it be a trusted partner from within your industry or an advisory board from outside your industry) helps provide a level of honesty and accountability that goes beyond the immediate ‘need’ to put out (forest) fires, helps avoid fires in the first place, and may even chart a path beyond the edge of that forest to whatever it is that you dream about achieving.
Please read further to enjoy The Rewards of CEO Reflection.
A Systematic Approach for Achieving and Maintaining Operations Excellence
We’re almost half-way through 2017. Are you working on your business or simply reacting to fires? Do you have a playbook for operations?
More than two-thirds of middle market companies (defined as annual revenue of $10 million to $1 billion) feel they “have trouble making improvements stick.” Based on experience and data (survey of 400 C-suite executives), The National Center for the Middle Market shows that companies do better, “when they approach their operations as systems, with parts or subsystems that can be fine-tuned both individually and in concert.”
Their guidance is simple:
- Manage Operations through Governance of the following subsystems:
- Strategic Alignment
- People Development
- Daily Management
- Stay Close to the Work through leaders (managers) who are “visible and engaged” to your operation, resulting in:
- Faster problem-solving
- Better understanding of customer needs.
- Choose an Operations Method that Works by having a formal method that is comprehensive and systematic.
- Share Your Strategy such that everyone’s work aligns with your mission and vision.
Each of the subsystems require attention individually and works in sync with the overall operations system:
Strategic Alignment guides employee action by setting priorities based on a clear understanding of the overall strategy. This starts from the top down and requires that leaders check in with employees to review priorities and challenge processes.
People Development enables employees to address customer needs in the operation by building their capabilities and skills. People must understand their roles and be able to perform them. The EOS (Entrepreneurial Operating System) Model sums it up this way: they get it (their role), they want it (they like and believe in what they are doing), and they have the capacity to do it. Once the people are in place, the key is building a learning organization (we will post more on this shortly).
Daily Management allows leaders to identify issues and/or gaps to get the right work done. The first step is to have visual controls to track progress and coordinate across functions. The second step is accountability. This requires knowing what each person is responsible for at any given time. The third step is “leader standard work” or “management by walking around”, which means routinely checking that the work is getting prioritized and completed.
Problem-Solving ensures that people can quickly address problems when they occur. This first requires having some system to report the ‘problem’ and then prioritize what to address first. In this process, it is critical to identify the Root Cause of the problem, a skill-set which may require training. Often, the solution may involve working across functions and levels within the organization (i.e., teamwork with transparency into roles and responsibilities).
Finally, operational excellence requires Measurement. In the survey, they identified the following metrics to judge operational excellence: Customer Satisfaction, Profit Margin Changes, Productivity Changes, Employee Satisfaction, and Employee Training Hours.
In conclusion, while middle market companies may struggle to make improvements stick and may be less inclined to formalize an operations method, they do have some advantages over larger companies. Typically, they have greater focus on customer satisfaction, and senior leadership is more involved in operations than at larger firms. Ultimately, good governance is the key to operational excellence. Know what your company is all about. Share that from the top down. Have a formal operations method and stay close to the work. Make sure your subsystems are in sync.
We encourage you to take the Operational Excellence Questionnaire at the end of the report.
Read the full report here.
Courtesy: National Center for the Middle Market