Key Takeaways
– Control needs be an ongoing priority from the very inception of your business. If lack of control is apparent – damage to your business’s prospects most likely has already been done.
– Gaining Control is about communication, focus and consistency, and not about complex tools or systems.
– Conduct weekly or monthly Leadership Reviews with key team members to gain control promptly.
– Regular Leadership Reviews will serve as a foundation of a business management system supported by financial planning and analysis which you’ll eventually need.
What to Expect
With this article we’ll begin exploring how startups, small and medium businesses can boost their top and bottom lines.
The goal of this review is to establish foundation for ongoing control over your business by reviewing the importance of and actionable steps for building your own management system.
In future articles we’ll gradually drill down into various aspects of Control as well as expand into other concepts and tools to help your company grow and increase productivity.
Focus on Control. Always
From the very ideation stage of your business, Control needs to be your top priority and woven into business activities and practices.
Control – and such its tools as strategy, budgeting, performance reviews – is hardly underappreciated as a key component of sustained success. Nevertheless, it can be tempting to postpone focusing on it until a business reaches a certain milestone, scale, or until something happens. It’s a dangerous path, as by the time we notice a need for more rigid control processes, it may be more challenging to implement them, or your business may already have lost a lot of momentum.
It can be easy to lose focus on Control. On our quest to lead our businesses to success, we all recognize the importance of having both a great idea and strong execution. We relentlessly work on attracting a great team, on helping it build robust products and processes around them. Then we get traction and are on the road to success. And soon we may start noticing that a lot of progress has been made, but it’s becoming somewhat overwhelming to manage all the pieces.
Lack of Control won’t necessarily manifest in something instantly catastrophic. It could be an imbalance in focus: going all-in on product development without fully addressing complexity of its supply chain, or polishing operations without building sufficient demand to fully benefit from well-optimized manufacturing.
Even seemingly favorable situations may pose a hidden danger. Without proper controls in place, it may be impossible to know when to not engage into opportunities. Maybe everyone will be a bit too excited to start serving a large customer or to expand into a new market without properly considering business’s capabilities. It this happens, an otherwise smoothly working business may bite more than it can chew.
Lack of Control most likely won’t immediately and severely damage your business. By building a strong team, we insure ourselves against critical errors. But lack of control creates imbalances that will keep undermining your businesses gradually and unnoticeably until they build up into larger bottlenecks and eventually become a real issue.
Build and implement control over your business from the get-go. Not only it can solve the dangers mentioned above but also is much more cost-efficient. Just as prevention is better than cure, gradually building discipline and tools to enable control is easier when a business is only starting.
It’s never too early to focus on Control, but it can be too late. Below we’ll discuss how you can get started.
Control isn’t about Complexity
Control and to have it is to be able to act proactively and promptly based on real-time picture of a business and its environment by making and implementing decisions that would yield expected results in the shortest reasonable timeframe.
In short, it is to always know what’s happening with your business / industry / economy, and, if necessary, to make changes to your business fast and without surprises.
To get there, we’ll need to build capacity to obtain, analyze and communicate various types of information as well as a robust skill set within the organization. With our drive to perfection, it’s easy to immediately imagine that we’ll need a complex system of processes. Control procedures, in fact, should be reasonable and strive to be as simple as possible. Complexity will only slow you down, and pace is critical.
Key point: Control is not about complexity, but about communication and alignment, focus, consistency.
Ultimately, we need a process which will allow leadership and functional or project teams to:
- interface with each other to maintain awareness of business and its environment, raise questions, request help.
- make sure all teams understand each other’s perspectives and ideally have a similar view.
- agree on priorities and deadlines, adjust them, when necessary, check progress towards priorities.
- set and maintain the cadence and standards for business-wide processes, including the ones related to control.
Such process, or more a set of those, is called a Business Management System (BMS), which in essence is a recurring communication-action-analysis (also referred to as “plan, do, check, act”) loop across an organization to convey and analyze organization’s focus and performance.
BMS should be supported by financial planning and analysis (FP&A) function. FP&A maintains and communicates real-time picture and story of a business’s economics and performance, which serve as a foundation of goal setting (Strategy, Budget) and recurring performance checks (weekly, monthly or quarterly reviews).
Before building full-scale BMS and FP&A, we can start with an impactful yet simple solution which will boost control and serve as a foundation of future processes.
Leadership Reviews Will Build Control
Communication has been a recurring theme so far, as it’s at the core of Control and the tools through which we achieve it – BMS and FP&A. And communication is what will help us get started with building our own BMS following the principles of simplicity.
To start your own Business Management System, hold recurring Leadership Reviews – discussions with the following parameters:
- Hold Leadership Reviews weekly or monthly. Invite decision makers and key contributors who will represent all areas of organization’s value chain. Have permanent participants and, if discussion requires, invite guest participants.
- Require from participants full transparency and commitment to bring to everyone’s attention all points which can be a threat or opportunity for a business, even if these points seem remote or are not in the agenda.
- Set clear agenda in advance. Keep Reviews on time and no longer than 3 hours. Stick to agenda and reserve time for discussing unexpected items.
- Participants run the discussions. There should be no separate designated position to run the meetings. Participants can rotate the responsibility of keeping the discussions on track among each other with each meeting.
- Agenda will have regular and ad-hoc topics. That will allow both dedicating ongoing attention for critical goals/processes and addressing urgent situations.
- Go through all key components of your business. Make sure at minimum to review updates on markets and customers (in general), customer orders (if applicable), revenues and product pricing, cost of material and contribution margins, critical expenses, general profitability, Balance Sheet items including working capital, non-financial KPI’s.
- Each topic or metric reviewed needs a story, not a formal report or only numbers.
- Set or adjust action items with timing and owners as the output of the discussions.
Main goals of Leadership Reviews are to:
- update understanding of market and business;
- check whether goals and targets are still relevant and correcting them if necessary;
- tweak performance;
- solve emerging issues.
As a result, your business will work as a single entity by being aligned on vision and around the goals, by having better and real-time understanding of external and internal conditions and by addressing changes in them immediately.
Having Leadership Reviews as discussions rather than formal presentations and keeping them recurring is critical. This is how details are uncovered, teams learn to talk and work with each other, transparency and trust are built. With practice, time invested in the Reviews will be spent more and more efficiently.
Regular Reviews will both serve as operational checks of actual results and as a natural precursor of Strategy and Budget. Updating the latter whether you prefer annual or rolling cycle will be much easier, as with recurring Reviews you’ll always be up to date with market and business situation.
To hold regular leadership discussions a business doesn’t necessarily need designated analysts or associates who’d run the show or prepare complex analysis. Large and complex organizations may benefit from a separate FP&A team. However, startups, small and medium businesses may benefit more if leaders and key contributors conduct the analysis required for Leadership Reviews themselves.
Wrap-Up
Control built into your regular business activities will help avoid issues which can keep undermining your company being unnoticed until it’s too late. Building control from the very inception of the business will be the most cost-effective and impactful option. Control needs to be as simple as it can reasonably be.
To gain Control, you’ll need a business management system supported by FP&A. As the foundation and starting point, conduct recurring Leadership Reviews around market, customers and business conditions with leaders and key contributors to business’s value chain. Recurring meetings will build discipline, clarity and focus.
In next articles we’ll expand into concepts and applications of control, management systems and FP&A.