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Three Key Ways to Decrease Work Stress

Last week we outlined three key areas in which work stress can arise.

Cash insecurities, team performance and an accumulation of random problems can all add towards elevating work stress, eventually impacting your capabilities, your personal life and your physical and mental health. From there, we explored real-life scenarios in which our clients had rectified these work stress triggers, removing their own issues and creating a far more balanced workflow.

It’s all well and good to hear about the negative effects of stress and a few scenarios where people were able to decrease some of the work stress creators in their lives, but what can you do today to begin getting your chronic stress triggers under control?

Three Strategies for Removing Work Stress

Get Clear on Your Money

Understand it takes less time to keep your cash clear than it does to manage the stress and problems that stem from flying financially blind. 

If you don’t have a basic budget, create one immediately. If you have an accountant available for the task, utilise them. If not, ask Google! Ignorance on how to do things is not a valid excuse. 

Clarify the flow of money going in and out of your business each month. Then work on creating a forecast for what your revenues should be over the next 3-12 months, depending on your business type. The longer it takes you to recognise revenue the longer your time horizon should be. 

Lastly, review the information often. Identify the weak links you find in obtaining a strong revenue base and work towards strengthening them. Then sit back and congratulate yourself on moving from a reactive to proactive state in one of the most important areas of your business and alleviating a heap of work stress.

Improve Your Team’s Clarity on How to Help

If you are paying someone to help you grow the profitability of your business, you owe it to yourself and them to be crystal clear on what you expect from them. 

Start with your most valuable and strategic team members. Ask yourself whether what they bring to the business justifies the cost to the company. Then ensure that they have clarity around their specific role and the responsibilities it has. 

Question #1 – what is the position accountable for delivering (and be specific)? Question #2 – how will everyone know the person in the position is delivering on what they are accountable for? These should be KPIs or KPRs. 

Review these points of clarification with the staff member and get their feedback. Once you reach an agreement on what is required of the position, ask yourself whether the person in the role:

      1. Understands the position
      2. Is motivated by the position
      3. Has the required skills to be successful.

If any of the answers are negative, you will need to do more work on either training them, moving them to another seat, or moving them out of your company. Regardless of which path is required, it is far better than not receiving are paying for.

Create a Weekly Management Meeting 

If you don’t set a time each week where you can identify, discuss and resolve key issues facing your company you are guaranteed to have chronic levels of work stress. This is likely to have negative effects on your health and overall quality of life. 

Most business leaders meet with their team once a week. Ensure a key component of each meeting is to discuss issues – usually the last agenda item of the meeting. Then break the discussion into three steps:

Step 1 – Identify the issues or concerns people see within the company. This could be with customers, employees, processes, technology, safety, productions, etc. When people bring up an issue, don’t settle for the initial problem description. Define precisely what the problem is. Rarely does the first description do so.

Step 2 – Once the core problem has been identified, invite the team to add their insights for how they see the problem occurring and ideas for solving it. Most of this should focus on ‘what’ the problem is rather than on ‘how’ to fix it.

Step 3 – Identify a solution that has clear owners for each of the required activities and set defined deadlines. Be sure these tasks are reviewed at the following meeting to ensure the issues remain visible until they are fully resolved.

By implementing one to all three of these strategies we have little doubt you will both reduce your amount of chronic work stress but also see an improvement in your profitability and team morale. Your business should be a tool to improve the quality of your life – not rob you of your health and vitality. Like any powerful tool, if not used correctly it can be highly destructive. Take some quick initial steps toward improving how you manage your company and it won’t take long to begin feeling the health benefits that will come from it. 

Enjoy the process!

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Chronic Stress: Its Affects & the Solutions

Many say ‘Stress is a killer.’ This is only partially true. 

Short-lived jolts of stress – known as Acute Stress – are perfectly normal and are actually beneficial. Chronic Stress, on the other hand, can be a major problem. This is where the body doesn’t have the opportunity to go through the recovery process, remaining in a state of stress for a longer period, causing harm to your body and quality of life in many different ways.

Below is a good reminder by McKinsey & Co on how we are negatively affected by chronic stress. 

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Where does the challenge of chronic stress appear for many business leaders? 

Obviously, running a team or business is a high-pressure, target-rich environment filled with continual triggers that can lead to symptoms of chronic stress – whether those are physical, behavioural, emotional or cognitive as outlined in the above infographic. 

Here are a few of the most common chronic stress creators for business leaders:

  1. Cash Insecurities

Not knowing if you can pay your employees or vendors is an awful feeling that can create an endless thought loop of stress. Most of us have felt this at some point in our careers, sensing this impending dark cloud constantly lingering in our periphery. Even when you can find a moment of calm, your mind soon remembers the concerns and the cycle of stress begins again. 

  1. Team Performance

There is nothing quite as stress-inducing as the thoughts and feelings around paying employee’s salaries yet still feeling the responsibility for ensuring their work gets done. This is the easiest time to question why you have a company in the first place. You have magically figured out how to work harder, have more pressure, yet make the same or even less money than when you were running the company alone. Why is it so hard to find humble, hungry and smart team members?!

  1. Accumulative Problems 

When you are a business owner or even run a team within a larger business, unplugging from your work is difficult to do. One of the biggest chronic stress creators is the consistent concern about what the next big problem will be. And because you don’t know from where the problem is going to arise there is a constant sense of stress around these unforeseen, often imaginary issues. 

Not feeling in control can have the same effect on your heart as actually enduring the stress-inducing problems. So even when problems aren’t hitting you, they are still impacting your body and its health.

Your body responds to this loss of control in the same way it responds when stressful events happen. It increases:

            • The number of stress hormones in your body
            • The amount of inflammation in your body
            • Your heart rate and/or irregular heartbeats
            • Your blood pressure

Following are some prime examples of how business owners we’ve worked with have improved some of their chronic triggers for stress:

  1. Clear Cashflow Forecast 

On of our clients had had enough with feeling the fear of not knowing what she could and could not afford to pay for in her business. Her solution was to do whatever was necessary to obtain an accurate 3-month cashflow forecast. Although it took a while to implement the necessary processes and disciplines, within a couple months of testing and tweaking she not only found financial clarity, she also identified some quick cost-savings wins that more than remunerated the time and effort. 

  1. Better Accountability Chart

We challenged a client to reassess how their management team was lacking accountability for their results. Fortunately, this leader trusted our guidance, setting aside judgments on what should be required of a manager and acting on our suggestion. Our request was that he spend time clarifying each of his managers’ roles in two key areas. The first: describing specifically what the role was accountable for. It didn’t take long for the leader to see how expectations weren’t clearly defined, either to them or to their managers. The second area: to identify objective ways to measure whether the manager was delivering on their role’s requirements. This necessitated a significant amount of thought by the leader, making it abundantly apparent that there could be a disconnect between the leader’s expectations and the manager’s objectives. The end result was a better-performing management team that had improved clarity on how to fulfil their responsibilities as well as support the company leader, creating s significant reduction in stress throughout the management team.

  1. Clear Process for Responding to Problems

One of the business leaders we work with struggled with the concern of impending problems. She found it consuming her personal life and made it a key deliverable for us to assist her with. After some investigation we found that her company didn’t have a clear and proactive way to identify, discuss and solve problems. This meant that many problems were not identified early on because they weren’t big enough to receive attention. So what could have begun as a small error rapidly escalated into lost revenue and the client firing the company. 

This is like the principle of forest fires. By eliminating a single spark, you can save an entire forest; so by recognising and resolving small issues early on, you eradicate the possibility of major problems arising.

We helped our client and her team allocate a portion of their weekly management meetings to identifying any issues and resolving them before they escalated. These clear resolution strategies were then tracked week-over-week until the issue was fully resolved. This allowed our client to feel she was in control of seeking problems out rather than waiting for the next big issue to land on her desk. More than that, the stress she had been feeling in her time outside of work completely evaporated.

These three examples demonstrate how problems can get the better of us, creating untold levels of stress. But how, with a little planning and thought, they can be easily rectified, not only removing any stress they instigate, but also improving company functionality and productivity.

This outlines the ways in which chronic stress can creep up on us, but also how this can be rectified. Next week, we will take a look at three specific strategies for removing chronic stress from your business life.

Until next week, enjoy the process!

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When “Ready, Fire, Aim” Hurts Business Results

When we feel pressure to achieve business results, such as greater revenue or profitability, we often opt for quick and immediate action – that’s even what productivity specialists advise. 

While there is truth in the adage, “the only thing worse than a bad decision is no decision”, those kinds of adages don’t always apply and it can save you a lot of time, money and frustration when you understand when the situation is right for a quick decision and when it makes more sense to “measure twice and cut once” to achieve better business results.

We all want to be effective business leaders. Somewhere on the entrepreneurial journey most of us develop a belief that spending money to solve a problem or to get desired business results is a productive action. And although investments of time and capital are required to achieve results, we get lured into believing that because we’ve spent some money we assume the issue is resolved or the result will be reached. This mindset is often the reason many entrepreneurs never obtain the results they are wanting and run out of money trying.

The goal of this article is to remind us that while quick and decisive actions are good, they need to be balanced with clarity of outcome, simplicity of strategy, and other things that may require time but allow for better long-term business results. There is a reason why one of President Lincoln’s most famous quotes is, “If I only had an hour to chop down a tree, I would spend the first 45 minutes sharpening my axe.”

Here are three scenarios where a Ready, Fire, Aim approach hurts you and undermines your business results:

  1. Business Result #1: Spending Marketing Dollars

Marketing is likely a painful concept for you if you are like most business people. And like all painful things, we do our best to avoid the topic as much as possible. When the need arises to obtain more clients or increase our brand awareness we tend to delegate the work to external marketing agencies. 

We do this in an attempt to avoid the discomfort of working within the marketing arena and hoping that people outside of our company will understand the nature of our products and services. 

Where the Ready, Fire, Aim approach normally rears its head is in selecting an agency to work with. We begin interviewing prospective marketing agencies before we have clarified some key data points. 

One of these is who our core customer or buyer persona is. It is not rocket science to figure out what our best customers look like. Even if you aren’t comfortable with the exercise, a quick Google search on ‘Best Buyer Persona Questions’ will provide numerous examples on how to clarify who your desired customers are. 

Often these details will affect what agency you are looking for and how to investigate whether an agency has had success with marketing in your specific field of business Selecting an ill-fitting agency will often cost you up to a year of time and thousands of dollars, often completely failing on your business results.

  1. Business Result #2: Hiring a New Employee

There seems to be a global acceptance that it is impossible to know whether a new employee will ultimately be a good fit in an organisation. This sentiment makes it easy for people to want to take the Ready, Fire, Aim approach in hiring new team members. Where this breaks down is when that strategy undermines the need to have a clear job description identified and precisely what the position entails.

This usually incorporates three specific areas:

      1. What business results the position is accountable for producing
      2. What the key activities are for the position
      3. What Key Performance Indicators (KPIs) define whether the role is being performed at a satisfactory level.

When we are clear on what the role needs to produce for results we will have a greater understanding of the skillset required of a new employee. 

This has two specific outcomes. On the one hand, it may discourage applicants, but these will likely be unable to achieve the desired business results. On the other, it will provide clarity for applicants, displaying the true breadth of a position that could initially be perceived as minimal. Either way, it promotes greater clarity of the position, often saving you time and money in interviewing people who aren’t a good fit ever being hired in the first place.

Once again, an ounce of prevention in the form of a more developed job description is worth more than a pound of treatment once someone has been hired into a position they may be inadequate for. 

  1. Business Result #3: Building Effective Teams

With so many team-building products and services out there, it is easy to fall into a Ready, Fire, Aim mindset, purchasing something promoted to build well-functioning teams. Once again, prior to purchasing something that could help you and your team achieve better business results, it is important to clarify what you are wanting to accomplish with your team dynamics. 

A team whose performance is impacted by a lack of trust is quite different from a team that is struggling with accountability or fear of conflict. Yet, with the Ready, Fire, Aim mentality; we purchase 360-degree reviews and Myers Briggs tools simply because it is marketed as the team-building solution.

Less is more with most business activities. When time is spent clarifying ‘what’ specifically we are wanting to accomplish, the ‘how’ will often reveal itself in more practical ways than simply purchasing an ad hoc product or service. The extra time spent initially will be time saved tenfold, and more than compensated for in business results.

That is what Lincoln is talking about when sharpening his axe. A little more effort in clarifying what to aim at will pay dividends on the value obtained when firing your shot. 

We hope this article helps you find a bit more patience with the effort of aiming and that your shots in business generate more value for you both professionally and personally.

As always, enjoy the process!

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Struggling to Pay Vendors on Time? It Could Be Your Cash Flow

I hear it more and more: companies are struggling to invoice their work, reducing cash flow and making it harder to pay vendors.  

However, delay in billing for your work is not an excuse your key vendors will likely accept for very long before it impacts your relationship with them. The most common repercussion is that credit terms are converted to more immediate payment terms rather than a longer-term repayment arrangement.

Not only will this affect your cash flow, it can also greatly impact your productivity if you are unable to purchase the resources required to convert into profit.

We may try to blame our delayed revenues on outside problems but those are most often out of our control and not helpful. In our practice, we regularly see early signs of delayed revenue problems with our clients. Fortunately between our three-way cashflow forecasts and other KPIs (Key Performance Indicators) monitored on company performance scorecards, we identify these problems early enough. We are then able to guide our clients to finding solutions before the issues negatively impact cash flow and the ability to pay vendors.

One solution is to modify a client’s sales contracts to protect against project delays. Another solution is to identify a risk early enough to be able to add additional suppliers to a client’s supply chain strategy.  

In a third situation, clients identify a project management strategy as a win/win and agree to provide additional payments in advance.

The 3-Step Cash Flow Solution

  1. Use shorter-period client invoice terms
  2. Pre-plan for future vendor invoices
  3. Negotiate a pre-pay installation plan with vendors

The primary advantage of managing drops in revenue is identifying the causes early enough to be able to find solutions that avoid cash flow challenges. To do this, you should have effective company scorecards and accurate three-way cash flow forecasts. If either of these strategies is missing in your company, I suggest you talk to your business advisor or account for some further guidance. If you don’t have confidence in either of those team members, call me today and we can walk you through how to get your revenue and cash flow under control so you can maintain strong relationships with your vendors and partners.

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Letting an Employee Go

Have you ever struggled with letting an employee go or working to keep them.

You might spend hours, days or even weeks in emotional discussions with business leaders trying to understand how to get various employees to acceptable levels of performance, but to no avail. This article focuses on providing a clear framework to diagnose whether you have an opportunity to fix a less-than-ideal employee performance situation or whether more drastic measures are needed.

With the current employee shortage it is always tempting to retain every employee possible rather than letting an employee go. However, the retention of one weak link can cause ramifications that may become detrimental to the entire team or business. Thus, it is always better to remove these weaker links because the cost of retention will always be higher than the modest void an exited employee will create in the short term.  

Step 1 for Letting an Employee Go – Core Values

Deciding who is worth the effort to retain versus those better removed is actually quite easy when you approach the decision-making in a well-proven way. The first step to letting an employee go is to measure the employee in question against your company’s Core Values. 

This will be difficult if you have not developed well-established core values to promote and demote team members. But thankfully it is never too late to start. If you understand the necessity of Core Values and how they work within organisations but you have yet to implement this strategy into your company, put this article aside and spend the time necessary to implement them effectively. You will be grateful you did and it will always be time well spent for long-term gain.

If you have identified your company’s Core Values then ask yourself how frequently you observe the employee in question embodying them using a criterion of Frequently, Sometimes or Never.  For an employee to align with your organisation there shouldn’t be any Nevers, with a mix of Sometimes and Frequently. It can be personally confronting to exit your first employee using Core Values as a decision-making process but when you see the impact on the rest of the remaining team you will realise that your decision of letting an employee go was wholly justified.   

Step 2 for Letting an Employee Go – Ability

After you determine whether the employee in question aligns with your Core Values, the next step is to identify whether they have the ability to deliver what is required in their position or seat. In order to do this both objectively and effectively, it is important to have the employee’s position or role well defined. For this, three things should be addressed:

  1. What are the position’s key deliverables? This explains ‘why’ this position exists and how you know it is being done well.  
  2. What are the main activities for the position? This should provide insights into what the person does for much of their time.
  3. What are the main Key Performance Indicators (KPIs) for the position? This will avoid any doubt in what the expected level of activity and performance needs to be within the role.

With this review of the employee’s position in hand you are now ready to evaluate your employee by asking yourself three questions:

  1. Do they fully Understand their position? Often times there can be a fundamental misunderstanding regarding what is important about a position versus what is simply ‘nice to have.’ When you have a clearly-defined role as described above this is less likely, but most businesses don’t do a great job of defining in writing what is critical about a role – the position’s key deliverables. If you have any doubt whether they fully understand the position you need to invest some time in ensuring this is not the issue.
  2. Do they have the Capacity to perform at a level that is required for the position?  Although one could use sophisticated cognitive assessments to determine this for some roles, typically you as a business leader can often get a good impression simply by asking yourself this question. By answering yes to Question One you know they understand what is expected of them, now it comes down to whether they have the skills, disciplines or time management capabilities to do so. If the answer is no then the employee is likely not a fit for that position and you either need to redefine their position or consider letting an employee go.
  3. Do they have the Desire to perform the necessary activities required for the position?  Up to this point you have confirmed they both understand and have the capacity to do what is necessary to be successful within the position, the question is whether they want to. This is an important final hurdle to clarify because people can get tired of things that they are really good at. Problems answering this question in the affirmative require collaborative discussions with the employee to find a win/win, potentially adapting their job description in order to keep them enthusiastic and motivated while still fulfilling the original role. These types of challenges can often be resolved quite easily if diagnosed and addressed early on. Often times a great employee leaves a company without warning with an explanation that they became bored and wanted to find new opportunities.
Letting an Employee Go
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Company culture and your core values aren’t just common topics in the pages of business management books, they are well-proven strategies for growing strong and profitable companies. Clearly defined position descriptions aren’t simply an HR requirement, they should help you and your employees clearly understand what is required of a role and how to measure whether a staff member is fulfilling that role proficiently.

Letting an employee go is never easy, but by following this process to assess your employees we are confident you will develop a happier and more productive team.

Enjoy the process!

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The Value in Asking for Help

The Value in Asking for Help

If you are like most of us you are not a big fan of asking for help. 

Although you might utilise this strategy in an effort to cultivate creativity, research shows that not asking for help is most often our default reaction, rather than a choice, due to a fear of possible rejection or disappointment. 

This article’s aim is to remind us of our choice and bring attention it some of the limiting beliefs many of us have developed over the years around asking others for help.

To be clear, I am a recovering addict of self-sufficiency. Amanda Palmer’s book, The Art of Asking helped shine a light into a corner of my emotional world I had been keeping partitioned off since childhood. 

In the spirit of keeping this article short, one big idea on this topic of asking for help is to realise that we have wrongly associated asking for help with vulnerability and rejection. 

Misunderstanding Asking for Help

We’ve mistakenly learned to ask for help from a belief that the person we are asking holds the power in the exchange. So the request is coming from a position of shame or weakness rather than a more empowered mindset.

On the flip side, at other times we have asked for help coming from a point of expectation which happens when we feel power over another person. This often results in a feeling of disappointment in the asking process and possible resentment on their part.

The reality is that asking for help should be seen as a collaboration between two parties where both can receive value in the exchange. This type of asking can come from a place of respect, one that focuses on helping one another where there is no judgment tied to the outcome. There is a request and a response that becomes mutually beneficial for, or at least equally appreciated by both parties. 

Whether help is ultimately given in the common form of time or money is immaterial. Sometimes people will decide to help and other times they won’t feel able to. What matters is whether you are approaching the request from a place of respect and that you remain open to whatever choice the person makes.

Asking for Help in Business

So what can this concept of asking look like in business? Obvious examples can be seen in sales. You likely know some salespeople who don’t ask their customers to buy their products and services out of fear of rejection. Others set their expectations of their customers far too high, inevitably leading to disappointment. Whichever perspective they may take, most salespeople could improve their ability to have win/win interactions with customers where they share what is important to them and elicit similar insights from the customers. 

This skill of asking for help reaches far beyond sales, applying to all aspects of company dynamics. How about a boss asking a direct request for help on a project? Often the boss doesn’t want to be disappointed in the employee so they never ask in the first place. This can lead to the mentality of “if you want something done right, do it yourself”, which in turn can create frustration, annoyance and sheer exhaustion. Other bosses might not want to inconvenience the other team member because they are already busy or there may be fear around looking incompetent or admitting one’s own shortcomings. 

All these scenarios don’t end as well as if the boss were simply to be open and able to ask for help in a collaborative and respectful way. At the very least, they demonstrate their humanity to another team member and likely gain more goodwill with them even when no help can be given. Others may result in the boss receiving some additional and unexpected support. 

How to Ask for Help

To be clear, just asking for help isn’t good enough because when it is done poorly it is often detrimental to relationships, appearing demanding and irresponsible. Our opportunity here is to gain more courage in receiving what we really want and need by asking for help in a way where that creates value for both parties with a lack of judgement on the outcome. Respecting a person’s willingness to help, regardless of the effectiveness and ultimate results of that assistance, is the first step to a stronger, mutually accepted relationship.

So get out there and ask people for what you really want. Just be sure you do it in a collaborative and respectful way!

And until next time, enjoy the process!

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Effective Financial Management | Blind Spots Part Five

5 Common Blind Spots Leaders Have Are Not Seeing How To:

Company Planning Collaborative Accountability

Blind Spot #5 – Managing the Financial Aspects of Your Company

This article focuses on the fifth of five blind spots many business owners have when trying to grow from 5 to 50 employees. In our previous article, we discussed the first blind spot: not seeing the value around consistent company planning. The second blind spot focussed on how to maintain employee accountability, while the third highlighted seeing the importance of high-quality weekly management meetings. Last week, we highlighted the importance of efficient company performance monitoring, which brings us to the final blog of our series.

The fifth blind spot involves not managing the financial aspect of the company. Too often business owners begin their business on a shoestring and adapt to monitoring cashflow by how much money they have in their bank account. Although this is never advised it can work initially when the financial numbers and expenses are small. This quickly changes however, and when revenues and costs go up it becomes impossible to manage cashflow based on your balance. 

Financial Management Pitfalls

The most classic miscalculations come in the form of tax bills and annual costs that are not amortised over the whole time period. These ‘lumpy’ sporadic bills often drain the business accounts unexpectedly. If too many of these surprises sneak up on you, the business rapidly develops significant issues.

Too often, the first strategy used by entrepreneurs is to forgo paying their taxes. The tax department then transitions to becoming a lending institution, with excessive rates of interest that only slip you further down the slope. This dynamic often continues indefinitely. When the company does well enough on the sales side of the ledger, it can work its way out of debt, but too often the weight and stress of the tax bill become too much for the company and owner. This self-perpetuating dynamic continues, and eventually becomes too much for the company to endure.

Outsourcing Financial Management

It doesn’t have to be that way. We find that eliciting the help of an outside entity like a virtual CFO can dramatically improve both the dynamics and likelihood of business and financial success. A CFO-like advisor can act as an objective third party by removing the financial management blind spots and quickly implementing objective checks to monitor how the company is financially performing. This gives you greater accountability and streamlines the process of managing your outgoing financials.

A more specific financial management blindspot that virtual CFOs can help with is with cashflow forecasting. Even the most basic types of financial disciplines involve monitoring financial results in the form of monthly and quarterly financial reporting. Looking into the future is as important as looking in the rearview mirror at how a company has performed.  Effective forecasting offers insights into how the company will perform, providing all-important feedback on what adjustments need to be made now to assure future financial success.

Financial Management: Conclusion

Both strategies help a business owner and their team be more realistic in terms of how the company is performing.

In conclusion, it is important to recognise one’s desire to guess how their company is performing. This avoidance of objective and predictive information exposes an owner and their business to a great deal of unnecessary risk. Virtual CFOs are wildly cost-effective. Thus it is fitting to say, ‘an ounce of prevention is worth a pound of cure’!  Remove the financial management blind spot today and start better monitoring both what the company’s needs are now as well as how it will likely be performing over the next 30-60 days.

Until next time, enjoy the process!

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Performance Monitoring for Your Company | Blind Spots Part Four

5 Common Blind Spots Leaders Have Are Not Seeing How To:

Company Planning Collaborative Accountability

The aim of this blog series is to remove these common business leader blind spots by focusing your attention on each issue and bringing visibility and understanding to concepts that will be easier to see and, therefore, improve over time. Let’s take a look at the benefits of Collaborative Accountability.

Blind Spot #4 – Lack of Consistent Company Performance Monitoring

This article focuses on the fourth of five blind spots many business owners have when trying to grow from 5 to 50 employees. In our previous article, we discussed the first blind spot: not seeing the value around consistent company planning. The second blind spot focussed on how to maintain employee accountability, while the third highlighted seeing the importance of high-quality weekly management meetings.

The fourth blind spot lies in not realising the importance of consistent overall company performance monitoring. This exists for two main reasons:

Business leaders think they mentally maintain their company performance monitoring & don’t need ‘reports’ to tell them how things are going.

This may be true to some extent but this belief comes unravelled when things become more complex or detailed. Mentally maintaining a general idea of the sales volume is more manageable than tracking the gross profit on a specific type of work. Additionally, we tend to forget how numbers are trending even when they are important to us. Utilising efficient, documented performance monitoring, such as with a company scorecard, retains performance information objectively so it removes our tendencies to remember things the way we’d like versus what actually occurred.  

Business leaders mistake financial reports for company performance monitoring.

I agree with most business owners that there is minimal value (though certainly some) in reviewing numbers that occurred in the previous month or quarter. It is like thinking you could affect the outcome of a game by watching the replay highlights. Effective company performance monitoring is about reviewing numbers where the results indicate how the game is going to end if things continue on the current path. This gives the business the all-important opportunity to take preemptive actions that can affect outcomes. This is the difference between a KPI (key performance indicator) and KPR (key performance result). An Indicator attempts to predict the future while a Result is something that cannot be changed or affected.

Even when business leaders realise they can’t effectively monitor their business without first monitoring KPIs, it still requires work to obtain an effective scorecard for a company.  

The goal is to keep your performance monitoring scorecard to between 7 and 10 statistics, though when beginning that number is often more like 15-20. Over time and consistent performance monitoring, companies settle into a scorecard that has around 10 numbers that include mostly KPIs but a few KPRs. The management team develops a level of trust and comfort that when the numbers are good the company is actually doing well, and when numbers fall off, they are highlighting issues that need to be resolved in order to keep the company’s financial results on track.  

When business leaders invest the time and energy required to generate effective company performance monitoring it allows them to better predict what’s coming and to be able to navigate the inevitable issues that arise in business from time to time.   

Scorecards should add fun and objectivity to a business and its management team. Start visually tracking more of your critical performance numbers consistently and see what happens to your ability to identify problems sooner and begin resolving them faster. After all, problems usually get bigger the longer they are left unattended, so the sooner you spot them, the easier it will be to resolve them.

Until next time, enjoy the process!

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