Many companies have major issues with technical or operational managers having to get a better business understanding of management practices. Finance is one of the bigger problems when SBU’s are given financial goals and expected to meet them. Sadly, many training programs over-complicate things and do not achieve the strategic objectives desired. As usual, a bottom up approach confuses the heck out of people (if out of context) who have not spent years in that field. This is typical of university type training where lecturers have probably spent a negligible amount of time applying their skills in reality. The theory is mostly useless. What is critical is that these significant people are given a good principle-based roadmap that they can meaningfully retain and apply in their environment. Less is more.
Before how, what?
What are the focal aspects of business that have to be understood, and used, at management level? In my many years of experience and study these are the key perspectives that are essential at operational and strategic levels. They are all 1st Quadrant high leverage aspects and relate to the values, structure and culture of an organization.
- A formal process of decision-making is seldom applied in an organization. Decision-making (DM) is a high risk practice and offers many pitfalls that can unnecessarily negatively impact the organization on a large scale. Ensuring that strategic criteria are met within this framework adds substantially to the structure of best practice. A standard DM and problem solving approach should be applied at all levels of management, with a formal method of measuring management DM performance.
- The concept of Economic Value is critical, specifically in finance where it provides a model that simplifies the analysis of the performance of an organization, showing the inter-relatedness of performance goals. It offers an excellent tool for decision-making and ‘what-if’ scenarios and has been adopted many of our largest Corporations to this end. Moreover, as a philosophy, ‘value added’ is crucial to the culture of an organization. This is the heart of productivity and offers a protection against bureaucracy. The EVA model also includes sustainable growth and leverage evaluations. Many companies happen to grow too fast and run out of cash. This is basic strategic decision-making. Critical also to a business is a focus on cash generation, not merely profits.
- Projects are new ventures undertaken by the business. The evaluation of larger projects and ongoing project management process needs to be formalized and evaluated properly using a DCF model with all its components. Project protocols should be established and kept on record. Specific project management software is critical if this is an ongoing practice in the organization, and the design should be integrated into the overall financial and decision-making criteria so that it rolls-up to meaningful, clear information.
- A Team Culture is essential in most organizations, specifically in a dynamic or project environment. It is essential that this culture is clearly understood, and the associated values are defined and applied by management. Ownership and output are two of the six core components.
- Operational management, continuous improvement and financial controls (including budgeting) are essential on an ongoing basis. If EVA is used for strategic decision-making, then management reporting should similarly roll-up to this. Everything must be designed from a top-down perspective. Budgeting needs to be more proactive and goal oriented than reflective. As mentioned in ‘A Common Failpoint’, software should play a critical part in optimizing productivity and profitability.
- Create a ‘Learning Organization’ by focusing on feedback, the last quadrant of the Strategic Change Cycle. Marketing and strategic feedback are highly neglected. New initiatives need to be properly and critically reviewed, before, during, and after implementation. Decision-making should be monitored and recorded relative to initial expectations and plans. It is only within this environment that meaningful, efficient reporting and analysis, i.e. proper performance feedback, can be realized.
These are the essential elements required for management to be on the same page and have an integrated performance structure. Training on these aspects could (and should) be set-up to run in-house using relevant systems and data. An experienced and qualified consultant/ facilitator should be able to define a strategic structure and process around which the organization can perform. These aspects will align and facilitate decision-making and strategic process and will go a long way to achieving desired goals. Focus on the process!
The role of a facilitator as discussed before is essential, as well as a devil’s advocate. This will ensure a balanced process where ‘advances are made by answering questions, but discoveries are made by questioning answers.’ A concerted effort to set up this in-house structure will act as a continuous rethinking and reinforcing of the processes involved that define how the business is run, and will help to establish a ‘best practices’ culture.
It is difficult to find a well-rounded, experienced, and well qualified consultant or facilitator that can pull this off. Someone who has a broad experience base that includes financial and operations management, systems and software design, general and project management on both sides of the fence (application and consulting). Combined with a focus on strategic thinking and process, this person would be ideal in helping to design an integrated solution for an in-house training base to cement 1st Quadrant issues for your business.
All of my work is based on proven principles, great authors and accepted best practices, and contained in more detail in my book MEganize. Please refer to www.MEganize4life.com for personal learning and related content.