Relating to the external world – leveraging relationships that add value

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Business happens best in an environment where symbiotic relationships develop. All business involves rational thinking yet much of the decisions are made emotionally – both at a conscious level and at the sub-conscious levels. Building good relationship with your business ecosystem is not only important but mandatory.

1. Customer relationship –it is well understood and oft repeated that growing revenue by converting customers is far more expensive than doing so from existing customers. Your goodwill is generated at all customer touch-points. How your business interfaces with customers at all touch points determines how deep your relationship with the customers. This is a comprehensive science and an art that must be implemented whole-heartedly. 
2. Vendor relationship – Vendors are a key partner for a growing organization. It would be foolhardy to believe that vendors depend on you for their business and that you can be brash with them. A good steady relationship with your vendors ensures that you get inputs of steady quality and reasonable price. They will get preferential treatment in times of sudden increase in your requirements or in times of shortage. Many times vendors can come to your rescue when you need extra credit period to overcome a working capital squeeze.

3. Business Networking – Entrepreneurship is not an introverted activity, although many entrepreneurs are introverts. Being part of industry forums and business associations are important source of exchange of knowledge and information. There is much to learn from other people’s experience. Networking is also good for business; it offers an efficient means of ‘word of mouth’ marketing. In fact, more you refer others, more referral you are likely to get too.

d.      Knowledge Network – In managing your business, you will need help in many areas of expertise. Rather than look for expertise when in a crisis, it is a better idea to have a network of acquaintances and associations of people across a wide spectrum of knowledge and expertise. Your knowledge network could include a lawyer, financial experters, senior police official, banker, doctor, journalist, local politician, etc. A large knowledge network is of great value. Strategic thinking requires a wide range of inputs; knowledge network can develop into an informal board of advisors. More active a role you play as a giver within your knowledge network, more genuine and valuable the advice that will come to you at times of need. The knowledge network only complements, but it cannot replace the outside help you will need from professional experts and must be used only for bouncing ideas, clarifying points of view, and getting an opinion.

Visit www.mapcerebri.com

To get the full picture see the following links:

The Phantom Ceiling Effect.

How do you recognize the Phantom Ceiling Effect?

Breaking through the Phantom ceiling Effect.

Review you Revenue Model.

Structure-System-Staff and the Role of the Chief Entrepreneurial officer.

Reviewing structure to optimize performance of a small business.

Having the right systems – standardizing for performance.
Staffing - Critical success factor to keep growing. 

Business Owner - Chief Worker or Chief Entrepreneurial Officer?

Capital Adequacy and Financial leverage - preparing for opportunistic growth

Capitalizing on External Expertise - introducing competence for performance.

 

Capitalizing on external expertise – introducing competence for performance

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Managing a growing small business cannot be done on a do-it-yourself mode. Efficiency in running a business comes from using the right expertise. The business owner may be knowledgeable in many areas, but it would not be appropriate to do all tasks on your own and become the bottleneck in the organization’s growth. Instead use experts to multiply yourself. Your knowledge in key areas will be useful in getting better results from hired outside help. In areas you lack expertise, it is necessary to keep adding to your knowledge, only to understand the principles at work and leaving the execution to the hired expert. After all, you need not know how electricity works to switch on the light bulb. Hiring consultant or outside expert may add to cost, but it brings efficiencies that far out-weight the cost. Hiring consultants is the better way to bring unavailable expertise into a growing small business than hiring of employees. Managing employees require greater organizational commitment. Besides, is far easier to rid an under-performing consultant than an under-performing employee.

Visit www.mapcerebri.com

To get the full picture see the following links:

The Phantom Ceiling Effect.

How do you recognize the Phantom Ceiling Effect?

Breaking through the Phantom ceiling Effect.

Review you Revenue Model.

Structure-System-Staff and the Role of the Chief Entrepreneurial officer.

Reviewing structure to optimize performance of a small business.

Having the right systems – standardizing for performance.
Staffing - Critical success factor to keep growing. 

Business Owner - Chief Worker or Chief Entrepreneurial Officer?

Capital Adequacy and Financial leverage - preparing for opportunistic growth

Capital Adequacy and Financial Leverage – preparing for opportunistic growth

Photo: Pixomar_FreeDigitalPhotos_dot_net

The need for capital adequacy and financial leverage is not for survival alone. You are now a growing successful enterprise that desires to make the transition of being small to becoming big. This is the time to prepare for opportunistic growth and not being stuck in the operational rut. To execute growth, we need to have capital adequacy and financial leverage. The following are the things we must do –

1.      Postpone gratification and invest in the business – Retain earnings into your business; don’t get greedy on paying yourself dividends. Retaining earnings in the business is the most effective source of capital for a small and growing business. Keep adding to your reserves and use it to fund your growth ideas. Trade instant gratification through dividend income for higher valuation for your invested equity.

2.      Cash Flow controls – However good your going is, keep the cash flow cycles short. Find ways to make it shorter and shorter. Leverage your vendor credits and keep your receivables in tight control. Keep the DSO low and minimize/ eradicate receivables beyond 45 days.

3.      Inventory turnover – maximizing inventory turnover is the best way to make money work harder for you. By minimizing manufacturing set-up times, improving  manufacturing process efficiencies, and managing inventory better, your working capital requirement can come down significantly; improving your ROI.  Even if you are a services company, leverage you billing man-hours efficiently; put processes in place that shortens the delivery time on every service order/project. Keep a close watch on man-hour utilization because work always expands to fill time. Monitor also the under-utilized man-hours (bench time) which is opportunity cost particularly if bench-time occurs due to poor resource planning.

4.      Bank Overdraft – this is an important source of working capital fund. Even if we are not in dire need of this facility, it is best kept ready for use to leverage sudden market opportunity when they are presented. Maintain good relations with your bank and keep a low cost bank OD facility active.

5.      Build credibility with your bank for a Long term Loan – Although you may not need a long term loan right now, keep your relationship with your bank as if you need it now. Keep you bank informed of your financials and your business plans. Deal with you bank at formal and informal levels to built your relationship. The bank should look at you are a potentially great client to have. This helps to negotiate better terms when you actually require a long term loan to fuel your growth. Approaching you bank at the eleventh hour of need gives the bank an upper hand in negotiating the terms of your debt. Bankers look for the following 5 things before they lend money –

a.      The character of the business owner and the reputation of the business.

b.      Capacity to repay; judged by the quality for your business model and the cash-flow.

c.      Availability of collateral security.

d.      Net worth of the Business.

e.      Contribution, i.e. your equity in the Business.

Visit www.mapcerebri.com

To get the full picture see the following links:

The Phantom Ceiling Effect.

How do you recognize the Phantom Ceiling Effect?

Breaking through the Phantom ceiling Effect.

Review you Revenue Model.

Structure-System-Staff and the Role of the Chief Entrepreneurial officer.

Reviewing structure to optimize performance of a small business.

Having the right systems – standardizing for performance.
Staffing - Critical success factor to keep growing. 

Business Owner - Chief Worker or Chief Entrepreneurial Officer?

Business owner - Chief Worker or Chief Entrepreneurial Officer?

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The business owner is the Chief Entrepreneurial Officer and cannot be the Chief Worker of his enterprise. While he owns the business, he must not be the master doer of all the tasks of his enterprise. It is important to realize this key thought. Some things need to be envisioned for action, few must be pushed, but many things in an enterprise happen automatically; if only one creates the right set of processes and have people do them for you without your involvement. As a CEO you don’t have make every entry in the general ledger. An important cause of the phantom ceiling effect is that CEO, because of their personality, become the bottleneck – won’t let go and will run all aspects of their business. In the early start-up phase this may be required, but what makes good CEOs is their ability to let their organization grow on its own. CEOs must make an important transition from Doer-Managers to Thinker-Leaders.

This transition doesn’t happen easily and naturally. It is an act of will for the CEO. Where such transitions happen, most often the enterprise too makes a transformation from being small to becoming big. The CEO transition to a thinker-leader is a two step process – first step is the realization that transition is mandatory and must happen; second step is a conscious self development to make the transition. This self development can be structured by hiring consultant who can guide the organizational transition process and your learning happens as you go about it. A CEO Coach is a good option too.

Visit www.mapcerebri.com

To get the full picture see the following links:

The Phantom Ceiling Effect.

How do you recognize the Phantom Ceiling Effect?

Breaking through the Phantom ceiling Effect.

Review you Revenue Model.

Structure-System-Staff and the Role of the Chief Entrepreneurial officer.

Reviewing structure to optimize performance of a small business.

Having the right systems – standardizing for performance.
Staffing - Critical success factor to keep growing. 

Staffing – Critical success factor to keep growing

Photo: Salvatore Vuono_FreeDigitalPhotos_dot_net

The organizational performance is dependent on having the right person doing the right job. Many factors are critical to successful staffing in organization. In enterprises that are hit by the phantom ceiling, it is seen that the old team that got you to the current level of success does not work out any more. New challenges require new competencies. You will play small if your support system doesn’t play a bigger game than you. Holding back having a new team, when you really want to generate bigger success is holding yourself back from growing big. Common mistake business owners make is to hire less expensive people to keep expense low. This is short-term thinking that leads to long-term growth being stifled. You need experts who can take ownership of their roles and even the task-doers that you recruit must have high levels of commitment and initiative.

Adequate staffing

It is common for entrepreneurs to cut corners and recruit fewer people than you would actually need. Such cost cutting is, in fact, costly. It is important to have adequate staff to ensure that what needs to be done gets done.

Staff Competence

There are 4 components to staff competence – Talent, Attitude, Skill and Knowledge. All four components are relevant to a well rounded competence.

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Most entrepreneurs have struggled with staffing; getting the right persons to fill your vacancies is always difficult. The most important reason for this is that they look for people who can plug and play into the roles they are recruited for. Such ready well prepared individuals are not easy to get, for a small business, at salaries that don’t cause a big hole in the enterprise’s pocket. Then what can we do. First thing to do is to begin recruitment in a planned manner, much earlier than the time when the role becomes ‘critical-to-fill’ for the company. Second, recruit for talent and attitude rather than look for ready knowledge and skill. Be prepared to train and develop individuals for knowledge and skills for important roles that the enterprise needs to fill. Talent is inborn and cannot be taught; attitude is shaped over an individual’s developing years and is difficult to alter quickly. These are two qualities that we should give maximum importance to while recruiting. Where is the time to train and develop people? Well this is one of the most important things a growing organization must get right and the Chief Entrepreneurial Officer must focus on. A right person for the right role is very important to beat the phantom ceiling effect. First define the role, then we define the talent, attitude, skill and knowledge required for each role or position in the organizational structure, then we recruit people to match these requirements and lastly, have and implement a well thought out training and development plan. For each part above there is expertise required, and the CEO must be deeply involved in the whole process. Even if the CEO has the expertise to execute this, he must look for external expertise of a qualified consultant to achieve the desired goal. The CEO must think and manage this, but avoid the doing these parts, so the he can be free to think and manage the other activities that are also critical to the success of the enterprise.

Staff Compensation

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If we were to follow the above scheme for recruitment, we are hiring talent that are yet to reach their potential and therefore will come at lower costs. However, we will have to invest in their training and development. The compensation needs to be structured with lower fixed pays, reasonable variable pays, good benefits and welfare schemes, and a challenging and energizing working environment. Providing a great work environment makes it hard for individual to look elsewhere for their professional growth, even if the pay is lower than the industry average. It is said that people don’t quit companies, they divorce their bosses. You the CEO are the important reason for employees to remain or exit from your company. If you are a good mentor and care for your employees’ growth, you will have fewer people turnover. You must nurture and build an organization that is continuously learning and growing.

Visit www.mapcerebri.com

To get the full picture see the following links:

The Phantom Ceiling Effect.

How do you recognize the Phantom Ceiling Effect?

Breaking through the Phantom ceiling Effect.

Review you Revenue Model.

Structure-System-Staff and the Role of the Chief Entrepreneurial officer.

Reviewing structure to optimize performance of a small business.

Having the right systems – standardizing for performance.

Having the right Systems – Standardizing for performance

In most growing businesses, the major routine cause of hectic activity and the consequent less than proportionate return on effort is a complete lack of process standardization. Most common refrain is that my products/service is highly customized, each customer needs to be dealt with individually and processes cannot be standardized. The reality is that every business can have standardized processes, major parts are standardized and last mile delivery could be customized. Take the example of a Cardiac Surgeon – can his process be standardized? It can be argued that each cardiac surgery is different, and therefore how can any standardization be possible. But a careful review will show you that preoperative and post operative processes have many common elements which an efficient support team can execute. The specialist cardiac surgeon walks on to the operating table and spends just the time to do his specialized job and walks away leaving the beginning and last portions of the operation to be done by the others in his team. By doing so the specialist cardiac surgeon conserves his energies to do more operations per day. In the similar way, we must look hard at our delivery processes to achieve maximum standardization of all processes leading to customer delight and this must encompass the post delivery services too.

Following the standardization of processes, one must define roles of persons to execute the well demarcated parts of the processes and also define the competencies needed to efficiently perform them. Thus the 4 key elements to improve process efficiency are – standardization, role definitions, competency definitions and fitting the right person for the right role. This business process organization is a very important aspect of breaking the phantom ceiling effect.

The blog that follows this one will highlight the critical aspects to consider while staffing, in order to help small businesses become big ones.

Photo Courtesy: Paul, FreeDigitalPhotos.net

Visit www.mapcerebri.com

To get the full picture please see the following links –

The Phantom Ceiling Effect

How do you recognize the phantom ceiling effect?

Breaking through the Phantom Ceiling

Review your Revenue Model

Structure-System-Staff and the Role of the Chief Entrepreneurial Officer

Reviewing structure to optimize performance of a small business

Reviewing Structure to optimize performance of a small business

In most small organizations wanting to grow, it is common to encounter people working in teams where each person can do the other’s role – each member is an all-rounder. The business owner has deliberately created this structure so that absence or employee turnover will allow the remaining members to make up the resource gap. There are very few specialists if at all. This is an efficient system, where you will have people with average competency making deliveries, operating from the principle of ‘fear of loss’ and not geared to deliver the best output. Everybody is a ‘Doer’, and seems to be doing similar tasks. In extreme case even the business owner becomes ‘Chief Worker’ rather than a ‘Chief Entrepreneurial Officer’. Such an organization is so busy doing that there is very little ‘Managing’ or ‘Thinking’ time. In making the transition from being small to becoming big, a highly performing organization must have separation of ‘Thinking’, “Managing” and ‘Doing’ in its organizational structure.

The CEO and top management should wear the strategic thinking hats and mainly be concerned with thinking on how to take the enterprise forward. Their role involves little managing of business processes and a very minimal role as a task doer.

The senior managers are the key persons driving the product/service delivery and their dominant role is to manage. It is important the they play minimal role as the task doers and must think of how to make their departments play out its key role in driving the organization forward.

The junior staff in contrast, are the task-doers and play an important role in the efficient completion of assigned activities. They manage the assigned activities and think on improving the productivity of the activities they are accountable for.

This structured role allows participants to play specialist roles which gives each a sense of purpose and there is clarity of expections from each individual based on the competency required at each level of the organizational structure.

Clearly there must be enough task-doers and the managers should never be asked to stretch across to fill gaps as a task-doer – this has a demoralizing effect on them, distracting them from their role as managers, consequently both delivery quality and productivity suffers.  

The separation of think-manage-do increases span of control of the top level and senior level managers which will still allow for a flat and efficient organization structure. The structure has the CEO as the strategic thinker at the top, who should use hired experts to multiply himself, a few functional specialists must play the key role as managers – the link between thinking and doing and lots of energetic junior staff who are the task-doers.

The next blog will dwelve into the need to have the right systems that augment organizational performance through process standardization.

Visit www.mapcerebri.com

To get the full picture please see the following links –

The Phantom Ceiling Effect

How do you recognize the phantom ceiling effect?

Breaking through the Phantom Ceiling

Review your Revenue Model

Structure – System – Staff and the Role of the Chief Entrepreneurial Officer

Is the “Structure – System – Staff” and the Role of the Chief Entrepreneurial Officer (Business owner) all aligned for optimal delivery?

Structure of an organization allows defining of who does what. Most small businesses operate with little or no structure, and roles and responsibilities overlap. When there are only few balls bouncing, all the balls may be handled well. But when the business grows, and there are too many balls to handle, the play becomes inefficient and more time is spent picking up the fallen balls than keeping all the balls bouncing. Having a well defined structure allows for role clarity and definition of competency needed for each role. This allows for division of labor and co-operative functioning within an organization, resulting in operational efficiencies.

Systems within an organization define how the work should get done for the best possible outcomes. Most work flow in a small enterprise is intuitive - therefore not very organized - resulting in suboptimal performance. When the business is small this will do but as the business grows, the operational complexity grows too. The enterprise needs business process organization and the systems and processes have to be put in place.

Staffing becomes critical to keep pace with the growth of business. Issues like staff adequacy, competency and compensation need to be addressed strategically and professionally and cannot be done in an emergent manner.

Role of the business owner (Chief Entrepreneurial Office) changes over the life of the business. During the early stages, there is very little middle management and the business owner plays many roles and does most of the thinking, managing and doing. As the business grows it is impossible to continue doing this. Business owners need to let go and must allow others employees to take over many things they are used to doing.  Most business owners fail to do this and come in the way of their organization’s success. They become the bottleneck that prevents the business from making the transformation from being small to becoming big.

The role of the CEO, organizational structure, presence of standardized processes within a reliable system and competent staff that has well defined roles and is high on energy; create a potent interplay that enables an enterprise to gather the right momentum to make the transformation from being small to becoming big, by breaking through the phantom ceiling effect to create a scalable enterprise. Such a scalable enterprise travels on the autobahn to unlimited growth. Growth now happens because you have created a system that allows growth to happen, and the CEO is not a bottleneck but the engine for growth.

The next blog will address how the organizational structure of small business can be amended to facilitate its growth.

Visit www.mapcerebri.com

To get the full picture please see the following links –

The Phantom Ceiling Effect

How do you recognize the phantom ceiling effect?

Breaking through the Phantom Ceiling

Review your Revenue Model

  

Review your Revenue Model

Are some products/service or customer groups keeping you too busy for your good?

It is important to have a very serious look at the revenue stream. Most enterprises never have a product-wise P&L, therefore do not realize that they may, in fact, be using up too much of organizational time, effort and money on a product or a service that is not as profitable as they thought it to be or that some customer segments that use their products or service may be too resource intensive to be serviced profitably at the current pricing levels. Most entrepreneurs consider maintaining a product-wise P & L as too much effort and this action may be making their company look busy and hardworking, consequently delivering products that they must not be focusing on. Sometimes an unprofitable product is retained on the list because it was the product that the company began with or because the business owner has invested a lot of emotional energy in taking it to the market. Being emotional doesn’t work well for the business. This aspect is valid even in case of a single product business.
It is important to  separate the expenses that can be allocated to the product and the overhead costs of managing a business enterprise. Managing the cost of the product and managing costs of the enterprise should be looked at separately, although all revenue is generated from a single product. The efficiencies/inefficiencies may come either from how the cost of the product is managed or how the cost of running the enterprise is managed, or both.

It is easier to have a P&L for a product than for a service. Costing the time spent on a service is not easy; this makes it harder to determine whether we are individually profitable in each of the services the enterprise delivers and how some fastidious customer segments may keep us very busy for relatively low returns.

The next blog will take a look at the interplay of the “Structure – System – Staff” and the Role of the Chief Entrepreneurial Officer (Biz owner) and the need to align them for optimal delivery.

Photo Courtesy: Stefano Vallei, FreeDigitalPhotos.net      

To get the full picture please see the following links –

The Phantom Ceiling Effect

How do you recognize the phantom ceiling effect?

Breaking through the Phantom Ceiling

Breaking through the Phantom Ceiling



Many factors interplay to cause the phantom ceiling effect. It is necessary to recognize all interplaying factors and address each to break through the phantom ceiling in order to effectively make the transformation from being small to becoming a big business. The following are the many factors that one must give a careful thought to - 

 

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1.   The influence of revenue stream on the ability  to deliver profitably.

2.   Delivery as interplay of Structure – System – Staff and the Role of the Chief Entrepreneurial Officer (Business owner).

3.   Capital adequacy and financial leverage to prepare for opportunistic growth.

4.   Capitalizing on external expertise to bridge the competence gap.

5.   Relating to the external world to leverage relationships that add value.

In the blogs that follow I will be addressing each of the above points one at a time. The next blog takes a look at the revenue model to throw some light on the possibility that some products/service or customer groups keeping you too busy for your good?

To get the full picture please see the following links –

The Phantom Ceiling Effect

How do you recognize the phantom ceiling effect?



How do you recognize the Phantom ceiling effect?

We need to look for the presence of three concurrent symptoms.

First important symptom is that the order books are full and there is never a revenue famine. You are in the right market at the right time, revenue is good, and so is the cash-flow, salaries are paid on time, the vendors and creditors are paid on time and the receivables do not pose a problem although you may be a bit lax on it. Second important symptom is that your revenue growth is incremental and not multiplicative any more. Third, the company is the busiest that you can see, with lots of action and running around – but the business is constraint by the ability to deliver. The delivery times are longer than ideal and the quality of delivery is variable, requiring corrective actions following multiple client feedback.

Failure to act correctively may result in many or all of the following –

1.   High people turnover – You want to add more people, to address the problem of delivery, but every time you come close to filling up your budgeted vacancies, a few people quit and upset your plans.

2.   People turnover creates further inefficiencies due to poor competence and lack of training (too busy to put new recruits through a training process).

3.   Customer complaints increase due to variable quality of output requiring more time being spent to keep the customer discontent low.

4.   Your products/services are never ‘Zero Defect” and often need corrective action.

5.   Your cash flow is OK, salaries are paid out on time, People are adequately paid – but the general morale of the company is low. Everybody is working hard long hours, and employees are getting rather tired.

6.   You are putting long hours too because you have now become the Chief Worker instead of the Chief Executive – you are filling into the gaps caused by employee turnover and lack of training. You are continuously handling one crisis or the other – never failing but never happy either.

Why are you in this situation? Why has the phantom ceiling effect hit you? The primary reason for this is that you are using the same methods that helped you be a small successful business to grow your business big – you are applying small thinking for creating a big business!

The phantom ceiling effect occurs primarily because every business settles to the level of its delivery capability. An enterprise always over-estimates its delivery capability and imagines that brute force is the answer. The simple belief is that you can add more hands and the work will get done. This is a sure shot way to fail big time.

How can you break through the phantom ceiling effect and make the transformation from being small to becoming a big business? Please wait for the next blog that’s coming soon.

To read the Blog “The Phantom Ceiling Effect” click here

The Phantom Ceiling effect

Photo Courtesy: Luigi Diamanti,FreeDigitalPhoto.net

It is a very tough act to get off the starting block and build a successful small business having good revenue and great profit. You have a great value proposition in your product/service offering and you are able to generate revenue with relative ease. The going has been good for the first couple of years, and then you hit a revenue ceiling. Your revenue growth that was exponential has become linear and is now crawling. You are working harder than before, all resources in the firm are fully engaged, you have added more people and have also increased your marketing budgets – but you are just not getting the big bang growth that you are looking for. You can see that the market is growing, there are many small players entering your market space and some of whom are beginning to show signs of being your serious competition. What seemed like an open and clear market made just for you is getting crowded. You may still be one of the larger players in the market but you don’t seem to get big enough!

This is the phantom Ceiling effect that many small firms hit when they want to make the transition from being small to becoming big. It seems as if you are running on a tread-mill, running faster and faster, yet you are still there. This is called the phantom ceiling, because it is really not there, the ceiling is made of ether and you can actually break through.

If you look carefully, the potential market may be attracting many opportunistic players, over time they could hit the phantom ceiling too. In the process of market consolidation, a few will break through and dominate the market and many will fade away slowly or quickly depending up on how they act out their business models. If you are going to be the one to lead your market then you must act now.

The occurrence of the phantom ceiling is a good sign provided that you can recognize it early. It is a sure sign that you are in the right market poised for growth, and that you are among the early strong players in the market place.

How do you recognize the Phantom ceiling effect?