Business Organization | The Happy Future Group

Genchi genbutsu

October 16, 2009

This is an interesting article from Economist.com about the Japanese way of getting out of your office and about having a look at what is going on in the plant.

I like the part in which the author tries to compare the Japanese way and the American way. In my opinion, there is not much point in doing that. The best is to review what the strengths of both approaches are and build an even better system from there.

If you want to be an effective manager, you need to have a hands-on approach!

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Posted by Christophe Pelletier

The importance of a cohesive team

August 10, 2009

Helping each other creates cohesion and success In sports, everybody knows the importance of having a group of talented people who can play together harmoniously for the interest of the group. Not only must the team members be good at their specialty, but they also must have the understanding of the other players’ needs and skills, so that they can create for them opportunities to score. Moreover, everybody understands in sports the crucial role of the coach to create the proper interaction to achieve success. Terms as goals, help and support are common.

In business, having such cohesive teams, although always mentioned as very important, tends in many cases to be suboptimal. Many companies perform below what they should and could perform, simply because the interconnection and the fostering of the relationships are very often neglected. It almost looks like everyone sticks to their job description, on which by the way the nature of the interaction with colleagues is not even mentioned. Recruiting people and telling them what they have to do without telling them with whom and how to achieve the goals together will simply not deliver good results. When you take a look at reward systems, you will see that it generally never include collective goals, except the very general profit. Most of the time, bonuses are based on individual performance indicators that usually ignore the performance indicators of your direct colleagues.

Sport or business, the principles are the same So, how to achieve superior performance and build cohesive teams across departments? Actually, it is rather simple, at least in theory. Just copy what they do in sports. They draw charts about the strategy to reach the goal and beat the opponent. They review it together, and everybody gets to hear what their specific role is going to be. They will have to pay attention to what the adversary’s moves are and they will develop alternative strategies to deal with them. Everyone in the team knows their function, and most importantly, they know what their fellow team members will do for them and what they expect from them. Further, the coach is present on the sidelines and is very vocal giving instructions at once all the time as the game develops. Unfortunately, such a presence and such a hands-on support are often missing in business, because the coach is in a meeting.

Of course, running a business is not quite like playing the main event game, but they are simple ways to create that sense of support and quick reaction to changing situations and applying alternative plans. One of the most effective approaches to create cohesive teams in business is to develop the supplier-customer partnership at all levels of your organization (see our presentation about this subject). Everyone must know what the colleagues needs are and must communicate what their own needs are as well. This shortens discussions as there is clarity created beforehand and it enhances a sense of anticipation by all participants, as they will recognize what to supply their team members with in a timely manner. Last, but not least, creating and sustaining cohesive teams requires a strong hands-on leadership (read Presence: the prerequisite for leadership).

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Posted by Christophe Pelletier

Management & Leadership lessons from my dog – Part III: Leading the pack

June 2, 2009

After having reviewed how to communicate effectively and after having identified whom the boss should be, my dog Slider will now present her third topic, about getting the pack moving in the right direction.

Hello again dear readers,

All team members executing their mission

In order to have a group that moves and acts harmoniously, the first thing is to set the rules, then make sure that the rules are understood and accepted, and finally give the team members correct feedback swiftly and appropriately.

Settings the rules
In our dog world, no rule means my rule. Therefore, if you want to avoid total anarchy and a pack that disintegrate, you must make sure that all team members understand what you want and which behaviors they are allowed and which ones they are not. As the leader, this is your duty. You must make them clear and enforce it, meaning that you must correct improper behavior immediately. Failure to do so will send a very confusing message to our simple dog brains and we will improvise our own set of rules among ourselves.
The way to do this is rather simple, as it comes down to communication. It is all about clarity, consistency, patience, and verbal as well as non-verbal communication. For more details, I will redirect you to my first article about that particular topic.

Show integrity
Mean what you say and act accordingly. This set the example and set the standards that we want to live up to. Do not start negotiating every time we try you, because at this game, we are just smarter and better than you are. Moreover, do not start bribing us! We love it and be assured that we will ask for more, but you will never be able to get anything valuable out of us. Once you do this, you will not be the boss anymore.

Reward good behavior
This seems obvious to us dogs, but unfortunately, it rarely seems to be a spontaneous thing. Let us know when we do something right! It is not difficult to do and it makes us feel really good. When we are rewarded for doing well, we just want more reward, and you can be sure that we will do all we can to please you! Nothing works as well as celebrating a success together!

Reprimand and correct bad behavior
For as much as we understand reward, we do understand reprimand, too. Even though we might not be as smart as our human bosses, we really get the message expressed by frown, a stern look and the word “bad!”. You do not need to shout and gesticulate for minutes, and you certainly do not need to use violence. We get the message! The question is do you get our message then? You should, as our body language will show you that we feel bad about it. The only difference that I see between dogs and people when dealing with reprimand is that we, dogs, will forget about the tension rather quickly and resume our duties, while humans seem to have this tendency to grow resentment and anger. Trust me this is not worth it. A great boss will reprimand you, but will not make it a personal matter. He had expectations and they were not met. He will tell you exactly that, and he will tell you what he expects from you from now on. This is clear. You made a mistake and now you know what to do next. With a great boss, there are no hard feelings or frustration, just feedback and new objectives.

Well dear readers this conclude this short presentation. So remember, if you wish to be the boss, you must act like one!

(The opinions expressed in this article are those of the dog only, and do not necessarily reflect those of the Happy Future Group Consulting Ltd, but we tend to subscribe to the dog’s views more and more.)

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Posted by Christophe Pelletier

Employee turnover, performance indicator of management

April 5, 2009

We all have heard this a million times: employees are the most valuable assets of a company. It sounds great, but in the everyday life, we can see many examples of companies forgetting this nice statement.
So, in the practice, what is the most valuable asset of a company? Did I hear you say it? Yes! Money! Well, this was an easy one, because management reviews the financial weekly and monthly, while they evaluate their employees only once a year, and that is if they ever do. And when they evaluate, in many cases it is only to bring up all the “bad” things they can to discourage the employee to ask for a raise.
Well, this is what mediocre managers do. The good managers know that the quality of financials are a consequence of the quality of the motivation and therefore of the performance of their employees.
Employee turnover is a sign of the quality of the company culture, and this for a simple reason. Why would people leave a company if they are happy and that they are treated fairly? Really, there are not many reasons why they would or should. Most employees would prefer to spend their all lives in the same organization. And most employees go to work with the desire of doing a good job and thus not have any conflict with the boss. Of course, there are always employees who will look to find something somewhere else, but these are a small minority.
The higher the turnover, the lower the morale and the poorer the company culture. For the reasons that I was indicating above about the general employee loyalty and ethics, it will have to take a fair amount of frustration and actually the realization that there is no hope for improvement for an employee to decide to go browse on the job market again. It has been said before, and it is very true: employees do not leave companies, they leave their manager. Ha! That is a good one for you to ponder about when someone leaves your department, isn’t it? Of course, it takes two to tango and there are many reasons why things do not work out the way they should, and maybe another reason for the employee to leave is simply that communicating on the issues at play did not happen. So it also takes two to divorce.
Managers have performance contracts, but these contracts are mostly linked to financial results (the important asset class) and some “non-financial, which in many cases end up to be some interesting project that are never quantified when it comes to their real added-value or degree of difficulty. Very rarely will employee retention (another expression) for employee satisfaction be an integral part of the performance contract.
And this is quite sad, because employee turnover is a plague. It costs a lot, just like it costs a lot to replace a lost customer. First it will cost financially, because the company has to place a job ad, and might have to pay some severance. Then several people in the organization will have to spend time for the selection process and the interviews. Once the new employee is hired, you can be sure that time (time is money) will be spend on training the newcomer, and this period can last up to 6 months, depending on the jobs. Indirectly, it can cost you money too either because people talk and the turnover will eventually give your company a poor reputation and in some cases because the employee who left might attract with him customers away from your company.
Some managers, reading this would say that the turnover is high because they have to fire people. Well, that is another indicator of the quality of the company, as they would not recruit the right people…

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Posted by Christophe Pelletier

Intelligent growth

April 4, 2009

Everybody in the business community will tell you: you must grow your business.
But what does this mean exactly? What do you grow? How do you grow?
For having seen the good, the bad and the ugly of growth, these questions are quite important.
My answer is: Grow your business intelligently! And of course, all business leaders do exactly this, don’t they?
Well…
So let’s get back to the basic questions first!

What to grow?
This is the tricky area.
The risk for a successful business is to think that growth will be linear. In other words, if you produce x units and make a profit of y, by growing to 2x you will make 2y profit. Sometimes you do, sometimes you don’t.
Good business people want to make money and what you should grow is your profit. There is no point of selling more if you do not make more profit, as that means that you do not make money on the extra sales. Then, why invest and hire and complicate your business if you do not have any marginal advantage in doing so? This sounds obvious and yet the number of companies that do exactly the wrong thing is amazing. Volume matters within certain limits but margin must come first.

How do you grow?
The first thing you need to know is how big is the market, who are your competitors, what do they plan to do and how do you compare with them. If they are stronger than you , maybe you should keep a low profile and not go into a frontal confrontation with them.
If you are the stronger player, as most CEO’s like to think of their companies, realize that this does not make you invincible.
The key is a sound and realistic business plan.
Start with the sales plan: how much more can you sell for a profit in the market? Then you have an idea about the required volume of your operations.
Then review all the costs implications that the new situation will create and look at the bottom line. Here the key is to not do any wishful thinking or to make the numbers match because your boss demanded some bold performance from you. A helpful rule of thumb is that you probably will sell only half of the extra volume for the profit you think you can make, and the extra costs will be double of what you expect. Enter these revised numbers in your P&L budget and see what comes out.
Base your assumptions on ambitious but realistic data, and while having a dream is nice, do not let you lead by vain objectives. It is nice to be the largest, only if it makes your company the richest, too. Market share is nice, but it is not an indicator of success, never forget that the force that will drive your ability to get the price you want is the law of offer and demand. Even if you had a market share of 90% but had grown the business beyond what the market can absorb, you will not be able to keep the prices high, and depending on the elasticity for your product, you can very well end up selling at a loss. Always be market-driven!
There is nothing wrong with being conservative. There is much wrong in having your organization taking too many risks.
Another key point in your growth plan is the phasing. You need a longer term view on where you want to be and set yearly goals for your growth plan. Be aware that you can go only one step at a time and that you cannot skip steps. Like with building a house, you start with the foundations, then build the floors one after another, and you do not build floor#2 before you have finished floor#1.
And finally, you have a choice of either growing organically or acquiring another company (see my previous article on M&A).

Remember that the most important for a business is to keep existing, and growth is only one of the ways to achieve this.

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Posted by Christophe Pelletier

Mergers & Acquisitions: Buy wisely and manage efficiently!

April 4, 2009

Your business is successful and the next step for growth is to buy other businesses. This is a great opportunity for your company to get to the next level, but be aware that an acquisition can be risky. About 6 out of 10 acquisitions fail to deliver the expected results.

Buy wisely!

Do not rush and do your due diligence to know what you are buying, what the value is of the company you are interested in. Know about the history of the company, how many times it has changed owners and the reasons why.
A cheap company is not necessarily a good deal. If the current owner is selling at a discount, he must have a good reason and you’d better find out.
The best takeovers are acquisitions of well-run companies with a good track record. They have the least amount of potential trouble entering your business and their staff have a positive attitude. Only drawback for the short-term for you is that such good businesses are not cheap. However the return on the investment is likely to be quite good. Poorly performing companies sold cheaply, on the contrary… Should you choose to go for such wrecks, make sure you know how to fix up a business and first of all, get rid of all the managers that have brought that company in its current state, they only would undermine your company.

Manage efficiently!

Once, you have bought your takeover target, make sure things go very fast.
Although you might have not yet decided who should get which position in the new company, you must have already decided how the final organization chart should look like. Move toward this structure as quickly as possible, but do not rush into that either. Make sure you know the potential of all the staff you will now have. Do not lose talents, but find ways of making a good use of it; this is easier than having to go look for them again in the future as they might not be available anymore.
The key for a successful merger is intensive communication, a very hands-on and practical approach. Tell everyone what your vision is, how you see it getting executed and be open to challenging remarks, as there will be many of them. Intensive communication prevents insecurity, gossip and politics. On this last point, have a zero tolerance policy: do not allow politics of any kind, especially when you risk to have a poisonous conflict between newcomers and existing employees from your original company.
Do not spend much time on philosophical and intellectual activities about company cultures, the theory of mergers, hollow slogans such as “mergers of equals”. You need the right structure with position filled by the right people to execute the strategy and that is all.
When you hire new people, you do not waste time telling them about the theory of job hunting or treat them with false compassion. You just do it.
If you have to figure out the strategy after the merger, clearly you bought without a plan. Remember that the failure of preparation is the preparation of failure.
Good luck with your next acquisition!

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Posted by Christophe Pelletier

Why use revenue to define top companies?

April 4, 2009

(Article of mine published in the Vancouver Board of Trade’s Sounding Board of October 2003)Some of you will likely wonder why I ask this strange question. By recently reviewing such a list, I wondered about the relevance of the revenue criterion. Indeed, this review raised an interesting question: What does top 100 really mean? Are the companies the best? Are they the most profitable, the most sustainable, the most viable? Or are they just the ones cashing in the most revenue? If so, what about the cost side, in particular the cost control aspect, of business we hear so much about when we hear business specialists comment on company performances? Are the high revenue companies also the most cost efficient?
Clearly, investors and money lenders are much more focused on profit than on revenue. And what about working capital and cash flow? It seems we hear about them only when it is too late.
To define the best, it would be quite interesting to present the list based on an indicator such as economic value-added (EVA), which is a combination of profit and working capital. Such an indicator provides a good estimate of how the company uses its resources and how it financially performs. It also reflects how much wealth is created and allows simple comparisons between companies, not so much on how big but on how efficient and viable in the future they will be. Using this indicator as a management tool will also create a totally new approach to business, by aligning goals from all departments and staff, from the CEO down to the workers. Everyone will have the one and same objective: A higher value for the organization, which nicely meets the current trend towards more value-added products versus producing mostly commodities and raw materials. Further, an EVA-like approach would help make communication and employee compensation simpler and more consistent.
Creating more value for companies, together with a positive competitive atmosphere between businesses of all sectors, would stimulate our economy to excellence.

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Posted by Christophe Pelletier