Tuesday, 11 August 2020

Leveraging Low cost automation for Cost Effectiveness

Even though the challenges for both large and small organizations are broadly same like increase in labor cost, non-availability of people, pressure on pricing, increase in expectation on quality standards and service, the large organizations are adopting automation of processes to some extent to mitigate the challenges, the small organizations are struggling to get most out of the automation.

While some of the SME business heads are getting exposed to innovative automotive trends like robotics, machine learning, artificial intelligence, and industrial 4.0; either they become scared of those developments, or some people are feeling guilty of not being updated in the organization and trying to look for automation.

In my view, those innovative trends are catching up and need to be evaluated on the investment and adaptability to small size organizations. Even large size organizations are in the investigation and preliminary implementation stages in the organization except a few, who leveraged the benefits mostly on the robotics application. We need to learn and watch the trend, and as far as small size organization is concerned, a lot of opportunities are yet to be explored in low-cost automation itself.

In this article, i have tried out to give an overview of leveraging low-cost automation possibilities in small, emerging organizations for cost-effectiveness.

Level of Automation in SME organization

I can classify the automation implementation  in SME's in 2 phases viz

  • Basic Automation Implementation
  • Advanced Automation Implementation

Basic Automation can be defined as the creation and application of technology, which makes equipment, process or a system operate automatically with or partial involvement of people.

Advanced  Automation systems represent a level of capability and performance that surpass in many ways the abilities of humans to accomplish the activities. 

Most of the SME's are in the stage of leveraging basic automation only and i dwell more on the basic automation and its application areas, challenges, and solution approach in implementing organization-wide basic automation system.

Why business head is reluctant to automation so far?

There are many factors that contribute to low-level interest in automation and in my personal experience, the following are the reasons

1. Lack of shifting the focus on people dependence on automation:

Most of the SME's are still comfortable and dependant on manpower even though the realization started on the need for automation wherever the repetition of the process, need of skill requirement. The business heads are feeling more comfortable and convenient to hire and deploy people than looking for automation solutions and upgrading to unknown subjects.

2. Investment:

some organizations are reluctant to the investment and comfortable with the recurring expenses.

3. Lack of supporting system:

Even though the organization is ready to move from manual to automation and for the investment, they are not getting the required support in terms of reliable sources for automation, after service and support, internal people training, irregularity on the power source, inconsistency in the parts.

Now things are changing in all the above factors thanks to compelling pressure on the competitive pricing and the change in the ecosystem for automation. But we need to go a long way in bringing in awareness and creating an environment for thinking towards automation and successful implementation.

some organizations in SME have consistently focus and investing in automation, and hopefully, this will continue, and there will be a widespread focus on automation.

Opportunity areas for automation in small, emerging organizations

Conditions under which we should consider automation?

  1. Massive material movement by manually or semi-automatic  which leads to accidents, fatigue or delay or low efficiency
  2. Too much dependant of human intervention in ensuring process parameters which leads to quality problems like defects and defectives, rework
  3. The repetitive and standard process where fatigue seems to exist

Primarily, when there is a need for

1. Accident prevention and ensuring safety
2. Improving manpower efficiency
3. Ensuring process and product quality

Typical application areas for automation

1. Movement of materials through material handling systems ( trolleys, hand pallets, stackers, conveyors, cranes, etc
2.  Reducing the dependence on manual intervention in a repetitive process like 100 % inspection or sampling inspection, where it is unavoidable to bring it under process quality through test rigs and scanners etc
3. Reducing the dependency on manual intervention where process consistency is important like molten metal pouring, chemical, powder mixing and in some cases automating loading and unloading the components in the machine
4.Avoidance of human intervention in mere data collections like attendance, machine utilization data, people efficiency details through software, data capturing devices 

Should we give strategic importance to automation initiatives or let it be operational initiatives?

In order to bring holistic achievement in the automation, the business head should give strategic importance to the automation initiatives. I mean, the business head should look at the business processes and manufacturing process in a holistic way for optimizing the resources through the automation route. 

Instead of trying automation in a localized, opportunities areas, if the business head looks at the overall opportunities in the system, identifying potential areas, forming core groups, evaluate the cost-benefit analysis, partnering with right solutions providers, involve all the stakeholders and implement as an important initiative, the benefit would be huge compared to the standalone, ad-hoc way of initiating some automation in the system.

How to identify opportunities for automation projects?

Automation opportunities can be identified at the overall business process level and within the process, in each elemental level, automation can be identified.

This can be done using process mapping techniques and micro elemental analysis.

Process Mapping Techniques:

for example, you consider one commodity or RM, and you can map the process from the moment it enters the security gate for GRN entry to final FG dispatch as shown in typical process mapping.

In each business process, the team should ask the following questions.

1. Is there a possibility for automation to improve the safety, efficiency, and accuracy of the process?

the team should look at each process only from the lens of AUTOMATION to get the benefit of quality, efficiency, and improving safety aspects. Most of the time, we are using a different lens like waste elimination, variation reduction, people interface etc, sometimes we overlook the possibilities of automation. of course all the waste elimination and reduction methodology may ultimately lead to automation, but when we go through the process only from the automation benefits like efficiency improvement, safety practices improvement, and quality improvements, there is a high probability to find automation projects.

After identifying the potential projects, the team can do the techno, commercial benefits evaluations to select the highest potential automation projects.

Micro Elemental Analysis for identifying the  Automation opportunities:

Another approach is using micro elemental analysis in which the engineer list down the operations into elements and each element is being questioned for the improvement through low-cost automation possibilities.

For example, in one of my client operations, they engage in press shop operations and when the process engineer lists down the elements like Picking the comp, loading, pressing, ejecting and unloading the component, they identified opportunities to eliminate ejecting and unloading by providing low-cost automation which takes cares of ejecting and unloading into the container automatically once the pressing operation is over.

The point is for the small organization, we need both approaches to identify the potential opportunities for automation.

Levels of Automation :

1. Fixtures / simple low cost mechanical/ Hydraulic / Pneumatic  setups
2. Material Handling facilities
3. Low-cost Special Purpose machines
4. Standalone High-cost automation
5. Integrating multiple machines and human interfaces

A typical checklist for successful automation projects

In most of the SME organizations, one common pattern i am seeing is that the organization is not getting the benefit of the automation even though the concept or the intention behind the automation projects was clearly thought-out and articulated.

The success will be materialized only when the team ensures some of the factors right from conceptualization to operationalizing the automation in line with customer's demand or flexibility.

The following factors need to be considered in the planning and execution stage to get the full benefit of the automation.

  • Clarity on the objective of automation, whether the automation is meant for efficiency or safety or quality or the combination of all.
  • Conceptual idea or drawing about the automation before discussing with the external service provider
  • Desirable cycle time and matching with existing and future takt time requirements
  • Selection of reliable source who is having integration experience in electro, mechanical and digital space
  • Ergonomics consideration
  • Availability of spares requirement
  • Basic maintenance guidelines and adherence
  • Meeting return on investment as per organizational guidelines

Like any other initiative, when the automation initiatives are conceptualized holistically and executed correctly by involving all the stakeholders, any automation will give more significant benefits to the organization.

Sunday, 12 April 2020

Managing the uncertainties in small,emerging organization

Coping with COVID 19 aftermath effect in small, emerging Organizations?

General Note :

This article is mainly for the Business Heads or CEO of the small, emerging organization with manufacturing facilities on dealing with the uncertainty due to COVID 19 lockdown and aftermath effect.

Since each organization is unique in terms of customer segment/demand pattern, operating cycle, working capital requirements, and cash flow cycle, I have given a generic solution approach only, and you can relate with your organization. Accordingly, you need to add/ modify the plan.

I have divided the discussion into three parts

1. Things to be done during the lockdown 
2. Managing the situations immediately after lockdown 
3. Learning and preparing for future-fit

As we are going to discuss the short term crisis management plan and future-fit in the long term with our limited experience in ever crisis, as we have seen in our generations. There may be changes in the demand, cash flow, business practices, or even business model, those things, in my opinion, we can tackle relatively easy with collective learning and collaboration. What is required at this moment for the leader is a healthy emotional balance to cope with the challenges.

To enhance your emotional strength, sharing some of the perspectives

1. You are destined to be an entrepreneur for a reason. As per one of the latest survey, only 5% of the 7 billion population belongs to the entrepreneur group. First, you need to feel proud of it. The purpose of entrepreneurship is more than money, i.e., fulfilling the society's needs at large or making a meaningful impact on humanity. You are one of 5 % of the entrepreneur population. When you realize this fact and feel the privilege that you have got in life, that brings you high self-esteem within you. That high self-esteem gives tremendous power to solve any challenges. First, feel good and feel responsible for being part of the solution provider fraternity.

2. Accept the reality that this lockdown or perceived slowdown post lockdown is not something you created, it happened by nature as a balancing act and you and I am part of it. Let us accept it. Once you accept, you are moving out of your denial, blaming Government, comparing other countries and you are in a position to take the challenge and look forward solution approach.

3. Also just reflect your past, even though we have not seen such lockdown and post lockdown scenarios in our lifetime, we have faced similar situations or helpless situation. 

 For example, we have been part of 2008 recession with a lot of uncertainty and other regional uncertainties like flood situations, demonetization effect, epidemic panic then and there in the last two decades. We faced all those challenges, and today still, we are standing tall now.

 Even you can relate some of the uncertainties you faced in your personal life, the moments you lost your dear ones in uncertain times, an accident happened at critical times, loss of employment and money, and so on. While those moments looked like dark, you came over all those challenges, and today you are still surviving. The point is when we are in the turbulent time, it looks like the path is dark and seems to be all is over. However, the time is potent and heels for everything. Those moments shall pass on.

4. We are better than those who lost their lives in this pandemic period, and those are struggling in a remote location, and we must be grateful for that. We need to have faith in our capability, life, and above all, the invisible force at this time.

The point is when you accept the reality, take responsibility for you and your people, your business, being grateful for everything in life and having faith in yourself and divine power that  will give a tremendous positive mind-shift to tackle the challenges. 

This mindset, courage, positive outlook, taking responsibility for everything, acceptance to reality is very much essential than any strategies, brilliance, and any other support from external.

With that positive mindset, let us get into managing the challenges in the short term and long term perspective

Short term  or during the lockdown period:

First , nobody knows precisely when this lockdown will be over, and normal life resumes even though different countries and the Government declares a different time frame. Assuming that this  lockdown continuous for another one or two months, as a business head, what you need to do by maintaining the balance between short term hard reality and the future aspiration and stakeholder's interest.

1.Taking care of your people:
It is the moral responsibility to take care of the people that are in your organization  as at the beginning of the lockdown. Ideally, you need to pay the salary irrespective of the rules or instruction from the Government. As I am fully aware of the pain of cashout situation without any revenue, I look at this gesture as a responsible citizen. 

Depending upon the size and mix of people category in your organization, you can have an open dialogue with the senior team. The people who are at the top of the pyramid shall be paid partial compensation with the understanding that dues will get paid before the end of the financial year if the business bounces back from the crisis then. Equally, the team's maturity is also essential in understanding the business situation. As a balancing act, they need to get what is minimum required to conduct the standard living at this point. 

You can initiate the discussion with the team and share your pain and work out the options depending upon the size of the organization. In my opinion, the bottom of org structure, say operating people can be compensated fully as their earning will ensure the standard living and also, the gesture will bring them emotionally closer to the organization, and this helps the organization in the long run.

      2.Engaging people:

As you are aware that habits die hard, whether it is good or bad. When people develop the new habit of staying home without many routine tasks, professional responsibility, and spending time in low productivity activities, bringing back to normal life, will take extra momentum. 

Also, the employees need to  be made understanding that this lockdown is a lifetime opportunity to reflect, learn some new competencies which will help them personally and professionally in the long term.

We can ask them to enroll in online courses related to their personal and professional development.I also shared some of the learning resources last week.

Alternatively, you can engage them by conducting or sharing some technical, behavioral, leadership development sessions through online thanks to technology. Some apps are offering a free or lowcost subscription for conducting webinars like zoom, GoToMeeting etc. In this process, your team members who are having an interest in teaching can take the lead and conduct short duration sessions.

Also you can ask the team members to present their functional knowledge to colleagues. This will help to improve the communication of your team members and improve cross-functional understanding.

Also, now you can develop the strategies, roadmap for improving your marketing visibilities, people development process, cost optimization potential projects , and similar activities which you have been thinking and postponing due to time constraints during regular days. You can ask your team to do the analysis and action plan in their respective areas, and you can review, facilitate in a cool manner. This way, you are making out your plan ready in your business and functional areas, and also, the team is engaged well during lockdown times. This planning process will help you once you resume the operation.

I have been insisting in my client organizations and some organizations have initiated marketing planning during the lockdown time

    3. Take a timeout for self-introspection on your leadership style :

 As a business head, your organization growth depends on your mindset, thought process and business practices as most of the time, you are the person influenced significant decisions, either good or bad, in the past. Your organization had grown to this level, predominately because of you. Now, this is the right time to think about your mindset related to you, your business, customer, process, and people. Now, this is the right time to practice new habits in your daily management, which will bring a positive culture in your organization.

I had recommended some of the resources last week which may be useful to you during this time to polish your personal leadership style.

 In fact, the working of the cashflow the requirement for the next 6 months in the different scenarios can be worked out, and the various options of mobilizing the cash can be figured out during lockdown time. This planning and risk mitigation work will give clarity of managing the reality when the operation resumes.

Immediately After lockdown:

When we resume the operations, the most likely concern area for most of the small business is in dealing with the following

  1.      Demand Uncertainty
  2.      Cash flow uncertainty
  3.      Resources availability especially manpower

Let we understand each uncertainty in detail, and we discuss the workable solutions approach.

You need to relate with your organization and accordingly add/modify the solutions approach, as you may have all the data about your organization.

Demand Uncertainty:

The concern on the demand side is whether the demand would be similar to pre-COVID period or not?

Most likely the demand would not be prior to COVID period unless you are in the the business of FMCG product manufacturing or in essential items manufacturing category. However, the order will be picking up  gradually, and you need to think about how you can RAMP UP in line with demand. The timeframe is beyond our control, but ramping up in line with demand is still in our influence or control and with little planning, going in detail in all aspects, we certainly manage it.

How to manage the ramp-up in case you are in other than essential products?

  •      First one or two weeks, you need to consume the existing RM and liquidating the current FG stocks. We need to watch the demand trend very closely, according to the pattern, we need to order the supply. Considering the lead time of your supply base, you can order within a few days of operation. The timing and quantity need to be worked out as critical action. This decision will vary for each organization as it depends on the existing stock situation, your customer segment, and the demand pattern.
  •      Instead of running all the shifts and all the machines, try to go for a single shift for a few days or week, then look for shift expansion depending on the demand pattern and people's availability.
  •      Instead of working six days, consolidate the demand requirements and complete in 4 or 5 days working pattern. This consolidation will help you to reduce your other manufacturing expenses by running idle as we accustomed to spread for working all the days.
  •     Close coordination is required between the customer, internal planning team, procurement team, accounts team, and the business head in understanding the trend carefully and making timely decisions. Since everyone is anxious about the demand and urge not to lose the given order, there is a tendency for not going into detailing and planning on material and equipment. 
  •     However, good coordination and team working, timely decisions will help the organization to come out of initial ramp-up challenges. As a business head, you need to include all the people in this process, and you need to anchor them, which seems to be new for you, and this delegation and minute reviews, facilitation need to be adopted at this point. 

Cashflow uncertainty:

This is one of the most concern/aspect of the business head in small, emerging business.

Unless  the organization is cash-rich  and  debt-free or having the discipline of parking 6 months working capital in short term investments, this period is challenging to manage, however, when you have faith in your long term health of the organization, you can manage through by taking some bold decision to mitigate the risk, and you need to learn the financial discipline from this crisis.

  •     First, we need to get the data of outstanding payables and receivables. Assign your relevant team from accounts, sales, or any other related function depending upon your organizational structure as a Taskforce team to improve the collection and paying to the suppliers. (You need to consider your supplier also as they are small and in difficult situations on cashflow than you).
  •      Parallelly, we need to work it out for the next 3 months with ramping up of demand, what would be the working capital required at the worst-case scenario, and an optimistic case scenario. This working will give you clarity on whether you can manage with the internal collection and payment method or should you go for the external debt assistance for pumping the money. This call needs to be taken at the earliest , and you need to make a bold decision as this will pay off once the situation improves. If you are not serving the exiting customer due to your own financial issues, you will get into the trap of losing the existing customers and at the same time paying your internal expenses without any returns.
  •     This is the crucial time to meet your demand requirements and be on the flow of increasing the demand and getting the benefits. Any delay or wait and watch mode may put a risk of losing the existing order, and the future cashflow also gets worsen.
  •    In fact, the working of the cashflow the requirement for the next 6 months in the different scenarios can be worked out, and the various options of mobilizing the cash can be figured out during lockdown time. This planning and risk mitigation work will give clarity of managing the reality when the operation resumes.

Resource availability, especially operating level manpower:

As discussed in the demand flow pattern, you can not expect full attendance from week1  and this also to be planned and monitored  inline with demand pattern as part of the up ramping process. Even during the normal period also, sourcing the right manpower was a challenge for small organization and post-COVID, this challenge will become severe. As most of the resources are migrant people, bringing the people to the organization by giving job security, a healthy environment, becomes an additional burden.

For some months down the line, we need to ensure social distancing, providing personal protection and other preventive measures inside the organization, which is new for most of the small organization. This will be a good measure for the individual and organizational health perspectives. Unless we give confidence to the working people on job security and the health preventive measures, ramping up the attendance would be difficult.

As mentioned in demand readiness and ramp-up, a special cross-functional to be formed to mobilize the  people from various agencies and need to be monitored on personal hygiene and protective measures for some time until normalcy restored at least.

During the first to the third week, managing resources and ensuring availability and meeting the delivery requirement would be a  prime task, and the key team must work closely, and the business head must focus only on this task.

All the above issues are look like common across all the organizations, the severity will vary between the organization depends on the existing process, customer, and internal realities. When you are mentally prepared in those critical areas, you can think and develop multiple options now.

Focus areas once normalcy restore:

The time frame we may not exactly know. However, once you are comfortable with the ramp-up, the focus must be given on reflecting the learnings and starting a new paradigm the way you are managing the business.

Key focus area must be

  • Being "lean" in all aspects of business
  • Bringing financial discipline 

Being lean in all aspects of business:

Irrespective of any crisis, the safest and responsible way to manage the business is " Working on the principles of CONSERVATISM".

We need to look at each business process and to eliminate and reduce the waste as much as possible. The question we must ask ourselves is whether we are using minimal resources and maximizing the output.

In some of the organization, with growth prospects visibility, we have developed the complacency in our attitude, and we got into the situation of

Excess equipment and investment
Excess debts
Excess manpower
Excess Inventory
Excess administrative expenses

While large size organizations are prudent on the expenses and conservative on the investments, return on investment, being small, emerging organizations, the way we are looking at the resources utilization needs to be relooked and re-engineered for the sustainability of profitability and growth.

We need to relook at our business processes and to re-engineer as going forward, the opportunity will be for those who are open for being smart and flexible to the demand of the external environment. 

Bringing Financial discipline:

Some business head is inherently very disciplined in financial management. When I speak to them, it seems that they are comfortable for the next 6 months, even when there are no operations. That should be the proactive practice, and this must be the focus for each business head irrespective of the business nature. If we are working only on survival mode, then there is something problem in our business model or practices or with the segment or customer, we are dealing with. This needs to be seriously relooked and re-engineered.

Financial discipline includes

1 Bringing a structured process on cashflow management
2.Bringing the culture of cost-consciousness in every activity
3.Driving cost projects as a culture
4.Debt restructuring and aim for zero debt
5.Reviewing P&L every month and analysis

To sum up,

I have just outlined the likely scenario and the solutions approach and I am sure as a business head you might have thought about all the scenario and my perspective might have helped to refine your thinking process a little bit to manage the short term uncertainty and to become a strong business on a long term basis.

Pl let me know your practical challenges and let us discuss the solutions approach.

Thursday, 9 April 2020

How to measure inventory and set the target?

One of the questions most of the business head used to ask is, " How do I know my inventory level is high or low? How can I measure Inventory and I track? What is the benchmark for the inventory level?

My answer would be as follows.

Comparing or benchmarking may not give the right approach. As we discussed in the Holistic approach to managing Inventory in small, emerging organizations, Inventory is a function of many factors like your business, trade type, supply chain factors, product mix, lead time, volume vs. variety.
The benchmarking may not give you clarity about all the elements in the benchmarking industry or organization.

Instead, understand your inventory metrics as on today, set a target to reduce it every year from now on.

How should I measure my Inventory?

There are different measures to measure Inventory.

For example, you can measure your inventory value as a % of sales. Every month, you can measure and track your inventory value regarding your sales value.

Another proven method of measuring Inventory is Inventory Turn, which implies your organizational capability of turning Inventory frequently to achieve the sales.

Inventory Turn = Cost of Goods sold / Avg Inventory.

Cost of goods sold = This is the cost to make the goods like raw material cost + manufacturing expenses + any other indirect expenses.

Average Inventory = In a given period, say in a month's time frame, you can take the average Inventory you are maintaining. For example, you can add up all the day's Inventory in a month and divide by the working days. That will give the average Inventory.

Some organization has a practice of taking closing stock or opening stock, but that will be skewed to an extraordinarily high or low value.

For example,

To make an annual sales turnover of 100 lakhs, if you have avg inventory 100 L, Your inventory turn would be 100/ 100 =1
alternatively, for the same sales turnover of 100 lakhs, if you have avg inventory 50 L, Your inventory turn would be 100 / 50 =2
In case, if your avg inventory is 10 L, your inventory turn would be =100/10 = 10

The higher the inventory turn, the more active you are.

If there is a higher inventory turn, that means, with minimal Inventory, you are turning many times to achieve the sales turnover, result in lesser working capital or better cash flow.

Hence, one of the practical measures of Inventory would be " Inventory Turn."

Increasing Inventory Turn is possible only when you look into the root causes of the symptoms and initiating strategic and tactic initiatives.

That is a continuous activity, and you need to benchmark yourself and continuously work on optimizing the Inventory without affecting the delivery performance.

Now the action for your organization is 

1. What is your organizational Inventory Turn?
2. What is the target you are setting for the next year to increase your Inventory Turn?

Saturday, 4 April 2020

Difference between OTD and Delivery Actualization

Most of the organizations have been measuring many KPI's related to delivery performance to the customers. Out of many measures, commonly used measures are  Delivery actualization % and Ontime delivery (OTD) %

Even though those measures are meant for delivery performance assessment, there is slight difference in the purpose and desirable behavior expected from those measures. In reality, both measures often interchangeably used and sometimes confused.

Given below some clarifications on both the measures (KPI's) and its purpose.

Delivery Actualization %:

This measure is calculated as follows

Delivery Actualization % = Quantity delivered / Quantity committed to the customer

for example,

the customer asked for 1000 pieces/month, and as an organization, you accepted to deliver 1000 pieces/month and if you delivered only 800 pieces/month, then 

Delivery Actualization % would be 800/ 1000 = 80 %

Likewise, for each customer, you can calculate and finally arrive at your average delivery actualization.

This measure will indicate your performance towards meeting the delivering commitment in terms of quantity.

Pl, note that this measure is not concerned about the TIMELINE.

This measure indicates your organizational INTERNAL CAPABILITY towards delivery commitment.

On-time Delivery (OTD) %:

This measure is calculated as follows for each customer

On-Time Delivery % = No of components delivered full qty ON TIME / Total no of components

For example, a specific customer has 30 components that must be delivered in full qty as per the timeline committed either as per PO or by 1-1 mutual agreement.

Out of 30 components, you might have met 25 parts delivered on the EXACT DATE  in full quantity as committed and remaining parts, you might have missed out on the DELIVERY TIME COMMITMENT. 

then , OTD % will be 25/ 30 =83 %

This measure indicates your performance towards meeting customer's requirements on time.

Pl note that in the above example, you might have delivered all the quantity by the month-end and might have achieved 100 % delivery actualization. But you missed the timeline (OTD) target.

from the customer point of view, your timeline commitment is also critical even though you met quantity commitments at the end of the month.

To sum up,

OTD is important from the customer perspective on the timeline

Delivery actualization is important from internal capability and loss of sales perspective.

However, as a business head, you must be sensitive to both measures of delivery even though the intention of each measure is different.

Friday, 3 April 2020

Presupposition for Business and Leadership

A presupposition is something you believe that it is true without any proof. Your actions are based on the presupposition. As a business head, you need to have some presupposition about your business.

Given below some of the presupposition I use to insist on my client's business when  I interact with them. That works well in relooking their beliefs and the way they conduct the business.

No individual is important than the organization
         Separate family relationship and business accountability

         Set the policies or processes whenever there is ambiguity

         Leaders should do what he expects from others. People are watching.
      Treat all the stakeholders equally

        All the business at the end of the day is to serve the customers and make money. So, No business is special.

       Being the Leader is a privilege. Leverage it for serving.

     Irrespective of your age, designation, and authority, in your given area, you are the leader. Feel the responsibility.

Pl add if anything else

Wednesday, 1 April 2020

Factors to be considered while recruiting CEO or Plant Head

One of the challenges for most of the promoters of the small, emerging organizations are recruiting the right person as CEO or plant head, (depends on the size of the organization, the designation terminology varies).

The real intention of recruiting to head of the organization is to bring professionalism in the organization and accelerate the growth of the organization from solo management of promoter or group of family members.

When the right person is not recruited and placed successfully *, the scenario has the following consequences in the organization.

*Here the success is the new business head settled down in the organization well and started delivering the results by taking care of all stakeholders.

1. From the business perspective, the compensation being paid to the business head becomes a liability as the business already is looking at the expenses as relatively higher, as it has not committed higher expenses as salary done earlier. 
2. When the value alignment is not there between the promoter or the new CEO or the plant head, it is going to be mentally disturbed to the promoter as he feels guilty of making mistakes
3. It signals to the organization members that no new person can stay in the organization for a longer duration and eventually complacent and superiority complex encompasses inside the organization.

From the all the perspective, in a small, emerging organization, the new CEO or plant head must be right, competent, adaptable to small organization business practices and at the same time, should lead and bring the changes in the organization as initially intended of bringing a professional outsider in an organization where it had been operated by the promoter through his/ her own way.

The promoter should have more scrutiny in finalizing the right candidate for heading the organization and take the organization to the next level.

Some of the factors to be considered while screening and recruiting the person during the interview process 

1. The organization needs DRIVER than CONDUCTOR:

Unlike large or established organizations, the small, emerging organization may not have the systems and processes established in all business activities. Also, the people in the organization are generally multitasked or multifunctional oriented, but lack of specialized, core competent in any particular function Someone has to drive to design and implement the systems and processes in the organization. Given the nature of the small business dynamics, any new system and process implementation initiative call for patience, going along with people, educating, handholding the people and relatively the effort takes time to see the result. 

The designated CEO or business head or plant head must have the aptitude to drive the change rather than the person who is comfortable to sustain and run the system driven organization. Hence while recruiting the promotor must check the person’s attitude towards the business and people in driving the change.

I had observed in many organizations, the promoter is going by the past history or the creditability of the candidate who worked in multinational, reputed organizations at senior positions. But the person seems to be comfortable in working in a stabilized environment and not comfortable in an unorganized environment. When the person is recruited, each end becomes unhappy with each other within a short time. Hence, the promoter must check the aptitude of the candidate to work as an entrepreneur in small organizations to bring the change rather than conducting the business seamlessly in an established environment.

How can it be checked during the interview process?

1. Make the expectation clear and explain the context of the difference between small and established organizational dynamics and ask for their comfort to deal with the challenge
2. Check the past work on initiating change management efforts, turnkey experiences 
3. Prompt them to share their experience in working in ambiguity environment, their success and failure stories

2. Check the Business Acumen of the candidate:

Since the new business head or CEO is expected to work at a higher level, the promoter needs to check the business acumen of the candidate in the CV or during the interview stages. Business acumen means aptitude towards business profitability, growth, and sustainability factors. Most of the people have worked in any one function and acquire deeper knowledge and experience in a particular domain. In the new position, it is expected to have both functional business acumen together. For example, one person might have solid experience in OPERATIONS throughout their career and if you expect him to drive marketing, sales, P&L, he/ she may find it difficult unless the person is open to learn quickly and adapt to the new requirement.

I know in one of the organizations, the person with strong experience in sales was made as CEO of the business, in which the engineering and manufacturing are critical functions to get more sales. But the new person finds it difficult to drive the engineering and manufacturing team and also struggles in his core sales function because of the internal environment. This scenario is not good for both people and for the organization.

It does not mean that people with a core functional domains cannot be successful in managing the business. It just needs passion, interest, willingness to unlearn and learn new things and the ability to give up some strength to gain new strength. 

Hence, check the business acumen of the candidate when you are looking for a business head.

3.Understand the background of the candidature:

During the interview, spend quality time understanding the candidate’s background in terms of family, age, the intention behind the shift to small size organization, the financial background to some extend possible. This probe will give some clarity on the person’s stay probability in the organization. 

Also, the promotor can check the person’s short- and long-term plans about his career and ask his consent to stay in the organization for a minimum of 3 years. In today’s scenario, with given opportunity, we can not force or predict the stay duration, but having an open discussion during the one to one conversation helps both to ensure continuity.
Frequent changes at a higher level will affect the stability of the organization and slow down the progress.

4.Compatible with your organization culture

Checking the compatible with your organization culture is very tricky and the intention itself to be questioned. The new business head or CEO is being recruited to bring a change in the work culture, business practices and as a promoter, if you expect to continue the same culture even under the new business head, that will bring conflict.

But the point needs to be understood in a right, balanced context.

As an organization, you have some good practices as culture and some areas to be changed as you perceive it poor culture for business growth. Hence you need to check the compatible in some of the right practices.

For example, you are a person with soft-spoken, respecting individuals, involving all in the decision-making process, looking for the long term even loss in short term, the same thing you might have inculcated in your organization as a culture. Now check with the candidate about the compatibility on those parameters by checking his past work experience, asking him to share his approach in dealing with some challenges, narrate your recent incident and check his thought process of dealing with the incident. Those kinds of conversations during the interview process will give an idea about the personal ideology, behavior to some extent. As said, understanding the person’s attitude during the interview is very difficult and this skill needs to be learned by experience only.

The point is as a promotor, you need to check the compatibility on the values during the interview process to avoid disappointment at a later stage which is not good for anyone.

Ultimately, as a promoter or entrepreneur, you are accountable to bring the right successor to you and you want to take the organization to next level. You must be prepared enough in identifying and selecting the right candidate as a business head or CEO to your organization.

Why as a leader you need to be more disciplined?

One of the phrases i often hear from most of the business heads of a small, emerging business is “My people are not disciplined”.

When  i  go in-depth on this conversation, i  realize that the business head himself is not disciplined enough and i can correlate the people’s behavior in the so-called discipline aspects.

Let us understand what is meant by discipline in the organizational context.

Most of us relate the word discipline with personal conduct or in more specific to the punctuality to the organization and to the meetings. I accept this as a discipline, however, in my opinion, this is a must for any individual, but this is a low order of discipline. This must-have adhered 100 % and no compromise on it.

What is a high order level discipline that is  really required for the organization?

1.       Consistency in doing in any activities
2.       Alignment in what is being told and the action being done

The above disciplines must be demonstrated by the leaders.

There only the leader’s role comes in a big way.

I know one CEO is very punctual to the organization and not consistent in other business-related activities like conducting reviews regularly, frequently switching on and off on any new initiatives, not adhering to his commitments to the team. When he is not disciplined enough, the team also behaves in a less disciplined way because people are watching their role model always. In the organizational setup, the business head is a role model.

People and organizational culture will be in line with the leader’s way of working even though the leadership team can preach many motivational contents to the team.

As a leader, you need to be more disciplined, that is maintaining consistency in your thoughts, behaviors, and actions because people are watching you!