We’re all aware that businesses are valued primarily on sales and/or profits, so I won’t bore you with that conversation and tell you to increase sales or reduce expenses. The other element of business valuation is the sustainability and probable continuation of those cash flows. Everything that increases staff turnover or diminishes the effectiveness of your teams ultimately saps the life force of your business and the continuity of your business cash flows.
In addition to the two named above, this article shares twelve more ways businesses hemorrhage or produce value from the inside. These sources of loss and opportunity are sometimes difficult to identify and quantify, and they’re easy to ignore because it takes awareness, focus, and work over an extended period to address them sustainably. However, improving performance in these areas can have a significant impact on customer satisfaction and business value, and it’s possible to change any of these through consistent leadership, a little extra effort up front, and appropriate role modeling. Ultimately, like any habit or behavior change, new behaviors and processes quickly become normal operating procedure, and they easily replace the behaviors that got the business where it is today.
1. Staff Turnover And Employee Retention
Effective onboarding is key to employee retention and engagement. Companies with highly engaged employees are 20% more profitable than companies with least engaged employees. Improve your on boarding process and your people will be more engaged as “owners” of the company. Engaged employees create happy customers. Happy customers spend more money, come back more often, and gladly refer their friends and colleagues to become customers of your company.
2. Gossip Or Ownership?
A company where people are more likely to complain about a problem than to discuss it with someone who can do something about it, is a company where morale is low, resignation and cynicism are reducing performance, and stakeholders across the enterprise are dissatisfied. Stop the gossip by starting a conversation about what we can do to address the subject of gossip. Get that information in front of the people who can do something about it.
A balanced culture is critical to health, fitness, and sustainability of a company. If a company is too heavily focused toward any specific metric or KPI (Key Performance Indicator), performance and satisfaction in other areas will quickly suffer. Ultimately, the losers will be the staff, the customers, the management, and the investors. As an example, consider the prototypical company so focused on making the sale that it’s bankrupt in almost every other way. As real life examples, consider Wells Fargo or Barings Bank. Here is a great article with more information about the culture that arose at Wells Fargo, which enabled the problem to persist for several years before it became a public embarassment. Now four years since the Wells Fargo culture problem became ubiquitously known, evidence of its internal cultural cancer and associated costs continues to surface.
4. Policy By Exception Or Affirmation?
Policies written proscriptively (for example, “You may not…”) crowd out creativity and disable intrapreneurial choice among the operations leaders you’ve hired to sustain and grow your business. Affirmatively stated (“We will…”) policies specify appropriate ownership and accountability for decision making and results. Properly framed, they empower and even require your leadership and management teams to enable meaningful progress. Furthermore, such policies have the added benefit of enabling and maybe even requiring your leaders and managers to develop their own teams of accountable leaders and managers. All of this will position your business to scale when opportunities are present, instead of leaving your people with the excuse to do nothing, due to all the things they’ve been told they can’t do.
Consider your choice of legal counsel and other advisors.
Are your advisors qualified? Do they have business experience and success in the areas they advise?
6. Risk Management Or Fear?
Do your risk managers primarily discourage decisive action for fear of potential liability (and the possibility the legal team might end up with some overtime)?
7. Ownership Or Avoidance?
Consider the attorney who ‘retired’ from legal practice to corporate attorney so he could stop working evenings and weekends, and who never made a choice that would clearly result in the need for overtime.
8. Enablement Or Control?
Do your shared services leaders prefer to not develop your managers, write or encourage blanket policy because they want to negotiate every issue independently (even “standard” items like purchase/sale contracts on your own letterhead, when they drafted the boilerplate), thus creating themselves as de facto bottlenecks to progress? Do managers complain they feel like human routers between third-parties and your legal team? If so, this is the ultimate ‘progress prevention department’, and your executive team has effectively kneecapped the decision-making authority of your firms’ operational managers. With a business built like this, why hire managers when you can just hire administrative assistants and expand the size of your legal team instead?
Consider the company with billions in revenue and thousands of employees, where a senior attorney, who managed the purchasing organization, had an explicit (but unwritten, and he would gladly tell you in person) policy to never deliver a policy or procedure document, expressly so all consideration, no matter how mundane, was required to go through him and his team. Consider the number and amount of purchase transactions in a company with billions in revenue and thousands of employees, and consider the effect on management effectiveness of hamstringing operational managers this way.
I’m not suggesting there should be complete control by business managers nor appropriate checks and balances, but I am suggesting that business managers should be enabled and accountable for appropriate decision-making in their area, and policies, templates, and standards can be produced that enable their success.
What’s the de facto result of your organization’s governance framework? Have you asked your managers lately? Do you believe them when they tell you?
9. Risk Management Or Fear-Driven?
Are risks managed or are decisions delayed and avoided with fear-based “concerns”?
Do something new, or at least enable your team to do so. Whether changing a process or implementing the use of a new tool, most successful innovation is additive, and most successful big change is the product of incremental changes over time, not the result of a massive, sudden, cataclysmic shift or ‘big bang’ project. If the words, “we’ve never done it that way”, “that’s not how we do it here”, “you just don’t understand”, “good luck with that”, or “they’ll never let us do that” are common in your enterprise, you may have a culture of low accountability and low results. This is possible even in the midst of high margins, and maybe even encouraged by government monopolies granted on the basis of regulation, patents, or trademarks.
11. Document, Adopt, and Deploy
From a simple form or checklist, to a clearly defined and communicated policy or procedure, to a software implementation, members of your team are dying to do things differently because your customers are begging them to do so. Others, not so much. Is there a path and a role for innovators in your organization to blaze new trails, even as the weight of operations persists in the proven method? In three years, your company must be doing something new: the business cycle and continuously changing customer demands will require it even if you and your management team aren’t paying attention.
With the advent of “the cloud”, there are now dozens of “on demand”, “Software As A Service” applications available for inexpensive monthly license terms. These are improving operations, customer satisfaction, and transforming nearly every industry, even the sleepy, historically low-information-tech ones, like apartment management, dry cleaning, cars for hire, law, and medicine. Are you and your team on the path to the future, are you resentful at being forced down the curve by regulation, or are you ignoring the whole process while you unknowingly wait for your more innovative competition to destroy you? How you respond is your choice alone.
Ultimately, the policies and culture of an organization are the work products of the most senior leader(s) in the organization. The buck stops (and starts) with the leaders. If there are opportunities to improve any of the following, then there are opportunities to create happier customers, grow sales and profits, and increase the value of the business:
- Staff turnover/employee retention
- Hiring practices
- Performance against metrics or KPIs
- Management skills
- Leadership skills
- Risk management
- Enablement with controls, not just control
Share your feedback!
- What other areas impact your company’s business value and customer satisfaction?
- Do you know a company that has opportunities for improvement in one or more of these areas?
- Have you calculated the potential benefits to performance improvement in these areas, in your company?
- Let me know if you know a company that could use help in one or more of these areas — I love growing businesses and people!
This essay was originally published at LinkedIn
Also published on Medium.