Category Archives: The SWOT Spot

Keep Your Business on Track and Growing: Measure What Matters

By Laurie Breitner and Karen Utgoff

There is more to keeping your business going in the right direction than looking at standard reports from QuickBooks or other accounting tools on a regular basis. While these reports can give you numbers, determining and appropriately tracking what matters — which numbers are important, how they are derived and what else you need to watch — is an essential responsibility of the owner(s) and management team.

In assessing current operations, it’s often useful to compare today’s results with past performance — prior period (year, quarter, month, or week) or effort (job run, project, or program) depending on your industry and particulars of your business. While this isn’t always possible for newer ventures, be assured that if you are diligent, ultimately these measurements will help reveal your company’s strengths and weaknesses, opportunities and threats, as well as performance.

For example, after one year in business you can only guess how seasonal factors will affect your cash flow. However, if you keep track, with five years experience you will be confident in anticipating how seasonal ups and downs might impact your business. When you hire a second employee in a particular role, you have some idea of how long it will take them to come up to speed; by the time you make your fifth such hire, you have a much better idea of how long it should take, as well as what it takes, to be productive.

For new initiatives, measuring is tied closely to looking forward (planning) for likely and intended outcomes. What will initial success look like? What events (milestones) are critical to track progress? How much will it likely cost? Are there gaps in your capabilities or resources that need to be filled before you can realize the potential of the new initiative? How much revenue and/or profit is the project expected to add and when?

What initial operational measures should be monitored? Here’s where it’s helpful to look at assumptions you made in making predictions. Did you assume that if you opened a second location in a nearby town that your strong positive reputation would automatically give a boost to the new site? Did your plan hinge on getting speedy municipal approval for a larger parking lot at the next planning board meeting? What key assumptions do you need to track?

Add to the standard routine of just reviewing (daily, weekly, monthly, quarterly, and annual) results with the following specific approaches that are critically important to measuring what matters:

Assess profitability and the fully allocated cost of goods sold from an operational perspective: For background review pages 8 and 9 of Laurie’s Thriving: Get and keep your business on track. Also, check out Karen’s Succeeding in Small Business post on Four tips for putting your business plan to work for your small business.

Project results for new initiatives with limited or no experience: For background, read Four steps to help small business owners evaluate the financial wisdom of new business-building initiatives and Small business management and entrepreneurship: Two key ingredients for sustaining success.

For additional information read Josh Patrick’s article on Every Business Has a Special Number, or Metric. Do You Know Yours? in the NY Times’ “You’re the Boss” blog and A Winning Culture Keeps Score by John Case and Bill Fotsch in the HBR Blog Network.

Here’s how to get started: On a single page, document the (up to) five most important measures, metrics, milestones, and/or numbers that you follow (or plan to track) to gauge whether you are on the right road, moving into the fast lane, or facing an unwanted detour. Review these metrics with your management team, board of advisers, mentors, and/or appropriate professional services providers. Evaluate them regularly to make sure they remain relevant guides for growing your business. Plan to fine tune them over time as your needs and business landscape change and you learn more.

© 2015 Laurie Breitner and Karen Utgoff. All rights reserved.

What’s So Special about You?

I could not have anticipated that a taunt I first heard in grammar school would be a question I’d later ask business owners in all seriousness. Businesses are most successful when they build upon their unique strengths and take appropriate steps to mitigate critical weaknesses.  But recognizing your strengths and weaknesses is easier said than done. Here is an overview.

While it would be impossible to enumerate all attributes an organization might have, the following list will get you started.  As you consider your organization’s strengths and weaknesses, please be absolutely honest.  It’s easy to think only in positive terms, to see only potential or to obsess over weaknesses. However, giving in to one-sided thinking will not result in actionable information. Better to recognize any areas that need attention as soon as possible so that you can address them before they negatively impact your bottom line. On the flip side, don’t fail to recognize where your organization shines. This may lead to discovery of competitive advantages that will help your business to leap ahead.

Expertise/industry savvy and contacts

  • Unique capabilities – what can your organization can do/supply that is not available from competitors?
  • Experience/knowledge of principals and staff – do you offer customers an extraordinary level of expertise or experience?
  • Industry ties – do you belong to and actively participate in industry associations?
  • Influencers – do you regularly engage in two-way communication with industry influencers?
  • Media – would it be likely for the media to contact you were there to be a breaking story in your industry?

Customer base

  • Customer satisfaction/fans – do your customers refer or recommend you to potential new customers?
  • Loyalty – do you receive repeat orders from customers?
  • Diversification – do you have multiple customers in a variety of industries?
  • Are your customers financially stable?
  • Do your customers expect you to compete on price alone?

People

  • Leadership and top managers – is your leadership team complete, respected, knowledgeable and well connected?
  • Overall, do employees have all the skills and qualifications they need?
    • Skill level – does your organization ensure that staff is well trained, up-to-date and knowledgeable?
    • Dedication to quality and customer service – is your organization’s definition of quality and customer service measurable, clear to all members of your staff and considered in every customer interaction?
    • Licenses, insurance and certifications – do you/your staff have all relevant licenses, insurance and certifications?
  • Succession plan/pipeline – do you have a clear succession plan and the means to find and attract sufficient new employees?

Suppliers/raw materials

  • Stable – are your suppliers financially stable?
  • Raw materials – is it likely there will be an adequate supply of raw materials available at a reasonable price?
  • Bench strength – do you have multiple suppliers of key goods or raw materials?

Products/services

  • Are your products and services distinct from those of your competitors?
  • Do you have exclusive agreements to sell products and services in your market?
  • Do you offer a complementary mix of products and services not found at the competition?
  • Is demand for your products and services seasonal and/or tied to events beyond your control? (Weather, subsidies, tax incentives, etc.)

Intellectual property

  • Patents/trademarks – do you own and protect patents and trademarks?
  • Marketing collateral – does your marketing collateral engage and inform your customers base?

Infrastructure

  • Convenience to customers/suppliers – are your organization’s locations accessible to both customers and suppliers?
  • Traffic – if it’s relevant, are you located in a space (either physical or virtual) where your customers are likely to congregate?
  • Visibility – is your organization easy and convenient to find both physically and virtually?
  • Processes and procedures – do you have efficient, documented processes and procedures?
  • Systems – do your systems (computer, telephone, forms, inventory management, etc.) effectively support customers and staff?
  • Technology – do you have all of the industry-specific tools and technology you need to compete for business?
  • Overhead – is your operation efficient?

Financial

  • Financial strength – is your organization on sound financial footing?
  • Banking relationships/access to credit – do you have on-going positive relationships with one or more banks that would be willing to extend credit?
  • Positive cash flow – overall, is your cash flow positive?
  • Terms – are you offered and do you take advantage of suppliers’ best possible terms?

Culture

Culture significantly influences an organization’s ability to attract and retain employees, respond to problems, and to provide a great customer experience. For more on this, read Karen Utgoff’s recent post on looking at your organization’s culture with fresh eyes.

It is often illuminating to involve customers, suppliers and staff in exploring many of the questions above. You can learn a lot by understanding their views. Also, what might have been accurate in the past may not always be true. Support your assessment with facts whenever you can. Refresh this information periodically, more often if your circumstances (market, customers, etc.) are in flux.

Understanding your organization’s strengths and weaknesses will give you a better understanding of internal capabilities. To formulate a strategy, these need to be considered in the context of the external environment. For more on doing so, see this post by Karen Utgoff on sorting out opportunities and threats.

© Copyright 2014 Laurie Breitner. All rights reserved.

Get a Fresh Perspective on Your Organization’s Culture: A (Mostly) Do-It-Yourself Approach

By Karen Utgoff

When was the last time you took a systematic look at your organization’s culture? Many owners and leaders of small-to-medium sized businesses could answer this question with one word: “Never.” Unfortunately, culture is often neglected when leaders size up their organizations even when its importance is recognized because it is difficult to measure:

  • Unlike cash flow, leads generated, cost of goods sold, defect rates, absenteeism, or other company/industry empirical measures, culture cannot be assessed strictly in terms of numbers.
  • Culture — good or bad — is so much a part of an organization’s day-to-day “normal” it can be difficult just to recognize its influences, much as individuals may be blind to their own good or bad behavior patterns.
  • Culture is very much in the eyes of its many beholders — employees, customers, suppliers, as well as the management team. Although it may be uncomfortable, it is important to consider each for their perspectives and bring the necessary objectivity to the process.
  • Convincing yourself (and staff) of its importance to find the time to do this type of assessment can be very difficult in the midst of day-to-day demands.

Nevertheless taking a fresh look at your organization’s culture is critical; while the work is difficult, the payoff could be substantial. In many ways, an organization’s culture is at the core of its ability to respond effectively to immediate difficulties as well as meet long-term challenges and seize opportunities. Culture significantly influences an organization’s ability to attract and retain employees and, of course, its customer experience.

Don’t let the desire for perfection derail getting started. Taking initial steps will allow you to build a foundation for future improvements. Here is an approach that might help you begin.

Use a general framework as a starting point. While it is tempting to start by framing your assessment around the particulars of your organization, this could introduce assumptions about your culture that skew results or interfere with insights. Instead, start with a one-size-fits-all structure to assure a fresh perspective that will help you develop an objective, inclusive view of your culture.

While there are many frameworks out there, I like the one provided in John Coleman’s “Six Components of a Great Corporate Culture” from the HBR Blog Network. This article breaks culture into more manageable pieces:

  • Vision (and/or mission)
  • Values
  • Practices
  • People
  • Narrative*
  • Place*

It’s worth noting that these are components of both great and problematic cultures; the difference being that in great cultures the elements work together to create a highly productive, effective organization.

Go beyond your talk to get at your walk. Because culture depends much more upon what an organization does than what it says, look for evidence of culture in action. Use facts to support your observations or help you to see more clearly.

Use the framework to describe your organization’s culture from your (the CEO/owner’s) perspective. Record your view of each aspect of your organization’s culture. Limit yourself to a single page that succinctly covers the six components rather than a detailed description. Once this summary is complete, if you feel the need for more information add backup pages to support the summary page. For example in the section on Narrative you may want to mention the story about when you and everyone else worked late into the night to help a customer in a crisis. This could be listed as “How we went above and beyond for XYZ Co. when they needed our help,” while backup information could include highlights of your team’s efforts and XYZ’s thank you letter.

Use the framework to see your organization’s culture from many perspectives. Eventually you may want use the template to gather the perspectives of employees, customers and others who have experience with your organization. To get started, focus on employees from the front lines to the management team. Provide a copy of the template and Coleman’s blog.  Ask each one to describe your organization’s culture as he or she sees it. Encourage backup notes to support observations on the main sheet. Anonymous returns encourage frankness, but you will not be able to follow up for more detail. Often a third party is engaged to gather and consolidate returns to help overcome this barrier.

Compare and consolidate perspectives to see with fresh eyes. As you accumulate perspectives from various individuals throughout your organization and beyond, look for points of agreement and divergence. Be mentally prepared for both delightful and disappointing discoveries. For example, you may find that employees are quietly taking the initiative to realize the mission through their day-to-day actions, or that employees are only partially aware of the organization’s values. You may also find that there are some positive aspects of your culture that you, as the leader, rarely or never see but want to encourage. In any case, your mandate is to see your culture through fresh eyes rather than to act immediately on the details.

Once you have a deeper understanding of your culture, it will become easier to find ways to strengthen and nurture its positive aspects. For example, if employees are unaware of the organization’s values, you may realize that a values statement needs to be distributed to everyone, that values need to be integrated into performance evaluations, or that you will seek opportunities to create new narratives by recognizing employees whose actions exemplify organizational values.

Improve your ability to analyze and assess organizational culture by observing others. The steps above are just a starting point. One of the joys of my work is that I am regularly exposed to a wide range of organizations. In some it’s clear that talk and walk have diverged, while in others employees are remarkably in sync. There is a lot to learn from both. To strengthen your ability to nurture the culture in your organization, try applying the framework to others. Does your supplier tell you that its people are innovative problem solvers but your experiences say otherwise?

Include organizational culture as a regular part of management review. Remember that the steps above are a beginning not the end. Along with your margins, customer-base and employees’ technical capabilities, a healthy organizational culture is an important part of your business’ strength. In addition to its internal value, it plays directly into your reputation, brand, and competitiveness. To create, nurture and sustain culture effectively, make time to assess it systematically as part of routine, ongoing management and leadership efforts.

* For more on Narrative and Place, see my post on “Using narrative and place to nurture small business culture” in Succeeding in Small Business.

© Copyright 2014 Karen Utgoff. All rights reserved.

Want to Be a More Effective Decision Maker? Beware of Blind Spots and Biases that Can Interfere

By Karen Utgoff

In business and driving, beware of what you can't see. Photo: K. Utgoff

In business and driving, beware of what you can’t see. Photo: K. Utgoff

Business decisions are made every day and mistakes are inevitable — none of us can read minds, know the future, or wait for perfect information. However, it’s sad and unnecessarily costly when a mistake is preventable.

Wouldn’t it be wonderful if you could reduce avoidable errors at little or no cost? My experience tells me that many business owners, executives and managers could do just that if only they were more aware of personal tendencies that influence their decisions as well as vulnerabilities we all have that stem from the way we (that is, our brains) perceive and analyze situations and information. Cultivating this self-awareness is one of the lowest cost — but most challenging — ways I know to become a more effective decision-maker.

Perception and perspective are tricky things. Optical illusions exploit the way our brains work, causing us to misperceive objects and images. We often consider these to be tricks that aren’t very important to daily life, yet there is at least one major exception: the passenger side mirrors on our automobiles, which come with an engraved warning reminding us that “Objects in the mirror are closer than they appear.” In addition, to use this mirror effectively a driver must be aware of the blind spot. Both the blind spot and misperceiving distance are problems because (when we are in the driver’s seat) our brains are quick to misinterpret the image in the mirror as physical reality.

In similar ways, business decisions are vulnerable to misperceptions or skewed perspectives. Vulnerabilities generally fall into two categories: those everyone shares as part of the human condition and those that are particular to an individual. As with the side mirror, being aware is a critical first step to minimizing their impact.

No one is perfect; individual inclinations and gaps sway all of us. The ability to be self-critical is key. Here are some questions intended to provoke useful self-examination:

  • Do you tend to be overly optimistic or pessimistic based on recent experience?
  • Do you defer to experts or discount their opinions completely?
  • Do you balance intuition and evidence or automatically favor one over the other?
  • Do you probe for information and knowledge or make do with whatever is available?
  • Do you actively seek alternative views or protect yourself from being challenged?
  • Do you tend to make decisions too early or delay until the situation is critical?
  • Do you fear scrutiny or embrace it?
  • Do you change your mind too easily in the face of new information or resist too much?

Individual inclinations and tendencies can and do negatively impact decision-making.  None of us can escape entirely but self-awareness can help balance and counterbalance our weaknesses while making the most of our strengths.

It is also important to factor in biases and blind spots that researchers have identified as hardwired into each of us. Though hard to counteract, there are steps that can help to manage these human factors. Robert Wolf provides an excellent starting point in his post on “How to Minimize Your Biases When Making Decisions” for the HBR Blog Network. In my consulting practice I have seen these biases reinforced or mitigated by an individual’s personality and decision-making patterns; so be mindful of their interplay.

Another human factor to consider is willful blindness. This phenomenon is not confined to business decisions but can have a devastating effect on an organization in which it occurs. Especially insidious is that blind spots render issues that require attention or decisions invisible until they become crises, sometimes presenting an existential threat to the organization or inflicting terrible harm on others. To learn more, listen to Margaret Heffernan’s TED talk on the topic or read her article on “Willful blindness: When a leader turns a blind eye” in the Ivey Business Journal online.

While the focus of this post is on individual decision makers, it applies to teams as well. Startup ventures, intrapreneurial teams, and top management at organizations (large and small) are all susceptible. As with individuals, teams have their own vulnerabilities. Teams that are comfortable with internal conflict and seek information from divergent sources may be less susceptible to willful blindness but may have difficulty absorbing the final decision when it’s time to do so. Alternatively, the danger of willful blindness or confirmation bias may increase when team members are discouraged or punished for raising important concerns or contributing information.

SWOT spotHas this post convinced you that you can become a more effective decision maker? If so, use the information here to assess your own decision-making habit and patterns. Ask people you trust to level with you about your strengths and weaknesses. When you spot an opportunity to improve yourself or your team(s), remember that change is difficult and requires persistence. Progress takes time and set backs will occur. Keep at it; there is a lot to gain.

© Copyright 2013 Karen Utgoff. All rights reserved.

What’s your SWOT Spot?

By Laurie Breitner

In real estate the old saw is that the three most important things are location, location, location. In business — especially a small business — it’s focus, focus, focus. My colleague Karen Utgoff and I have been encouraging business owners to think this way for years, each from our own perspective.

Karen is a market strategist and often looks at businesses through that lens. That is, what are the opportunities and threats that could impact a business? As an operations person, I have a different viewpoint. I consider a business’ strengths and weaknesses. Of course each of us does that within the context of the business’ specific mission and target market. When we work together, we joke that I handle the S-W while she deals with the O-T. It’s our effort to bring a little humor to the topic and it usually gets a laugh.SWOT spot

So, expect to read about ways to determine and operate within your organizations’ SWOT spot — the place in your market where you can take advantage opportunities, mitigate threats, utilize your strengths and minimize your weaknesses.

 

© Copyright 2013 Laurie Breitner. All rights reserved.