Guident Newsletter – July 2018 – Issue 26
Think of your business as a spider web
Are you considering writing a strategic plan for your business? When you do, think of your strategic plan using a spider web model, begin with these key areas in mind; management, production, marketing, human resources, finance, sales, and purchasing. Each of these seven areas acts as anchor points of the spider web. When one of these areas is doing poorly, the others are affected, like pinging one side of a spider web and watching the opposite side vibrate. To demonstrate I explain when sales are low, financials in the form of cash flow are affected. When HR has to lower the staff count due to cash flow issues, then production is affected. When purchasing is out of sync with the rest of the company, then production and financials can be affected. You get the picture.
If this seems familiar and is happening to your organization, then changes are in order. Begin your process by evaluating each of these seven areas to determine which area is strong and which area is a weak link within your business. Most often the financials are a weak link and your first target for change. I cannot emphasize enough the importance of having a person on staff that has a strong understanding of how the P/L, cash flow, and balance sheet work together in your organization. Once you are able to validate the accuracy of your financials you can then evaluate your entire organization and begin to create a strategy for greater profits.
Another area that is often neglected and a weak link is purchasing. Think about the number of dollars your company spends on materials and supplies annually, most often it runs into the millions of dollars with no one person accountable for the purchases or the inventory. This is an area where a business can recuperate profits without affecting customers or raising prices.
With changes underway in these two areas, you can look into the third area of production. Establishing Standard Operating Procedures (SOPs) for your production process will begin to curb waste and improve quality. Quality control begins in the production process. Without established SOPs you will often see an employee doing what they feel is best but often not in unison with others in their department or the organization. We call this Individual Operating Procedures (IOPs). IOPs cause poor quality, poor communications, and lost profits. Here is another area where you can recuperate profits without affecting customers or raising prices.
Other areas to review are the sales and marketing. It is important not to begin with these areas because without a profitable business model by increasing sales you will just cause yourself to work harder for fewer profits. Of course, none of these positive changes happens without management driving them. As Jack Welch stated, “Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.” Change begins at the top of the organization and is driven throughout the organization by management.
Think of your organization as a spider web and understand how the entire organization is affected when you initiate change in any one area, like pinging one side of a spider web and watching the opposite side vibrate. Your organization is intricately connected, and your strategic plan should reflect the relationships between these key areas and with your Mission Statement, located in the center of the web, holding it all together.