Business Head's dilemma: Profit or Growth ?

One of the dilemmas some of the small, emerging CEOs have is whether to focus more on profitability or looking for growth opportunities and scale up the business sales turnover.

The reason behind the dilemma is when the organization is small, most of the activities are directly monitored, executed by the business head and he/ she has direct control over profitability. They use to enjoy comfort. At the same time, there is an aspiration to grow big and also the fear of maintaining the same level of profitability and comfort. Because maintaining healthy profitability within a controlled environment is different from maintaining the same profitability when the organization is exposed to different customers, product lines, markets during the growth phase.

In my view, the business head should aspire and balance both profitability and growth for both short term survival and long term sustainability of the business.

Profitability is a measure of your efficiency, effectiveness and the excess cash will give a strength to take the organization to the next level. Whereas Growth, even though it seems to change management in the initial time, is required to generate more cash reserve for sustaining the business. when you ensure the higher or same comfortable profitability in a growth stage, that will help you to grow further into a new orbit. That is cycle and that is the nature of personal and business growth.

Hence both profitability and growth is required. There is no guarantee that the existing comfort or profitability is sustainable if the business is not exploring growth options.

paradigm shift required on the role of operator in small, emerging organizations

In some of the small, emerging organizations, operators who are working in machines or assembly lines are still perceived as Unskilled, and capability is restricted to loading and unloading of components. The other aspects of machine operators like quality checking, machine basic conditions monitoring, tool setting, and parameter monitoring or adjustment are taken by other teams like quality functions, programmers, setters, maintenance crew, and so on.

Here, more than the operator's skill and development, the mindset of supervisors or shopfloor managers needs to be changed. They believe that if we ask more from the operator other than necessary loading and unloading activities, the operator will not do or leave the organization. 

The flipside of this scenario is the operator will soon lose interest in the job as he/she is not learning anything new other than loading/ unloading. For any human being, the inner desire is to learn and contribute and get recognized for the contribution.

when the operator is not given an opportunity to learn more about quality, setting, and machine, he feels the lack of learning and looks for alternative or sometimes accept the situation as it is and becomes complacent.

From an organization perspective, when we have many people responsible for ensuring quality of the product and process adherence, machine basic condition monitoring, the ownership is totally shifted to someone, and they are not fully accountable for the causes of poor quality or poor maintenance. And the cost of manpower also increases, and engagement to the product or process quality becomes low at the operator level. That becomes a waste for the organization.

Since the operator is close to the job, he must be made accountable for OUTPUT, QUALITY AND BASIC HOUSEKEEPING OF THE SURROUNDINGS AND MACHINE. 

when we made this condition as a rule and develop the operator as one point source for improvement, this will enable the operators to learn the skill about quality and machine basic requirements monitoring, and the organization also benefits from waste elimination and reduction.

The starting point is how the organization defining the roles and responsibilities of the operators and the change in the belief system that the operator is capable of developing the required skill if it is warranted.

Cultivating winning culture in small, emerging organization

Who is cultivating culture? In one of my client organization, the CEO starts his monthly review meeting first by reviewing the employee engagement aspects like safety issues, employee participation levels, recognition, and then only he reviews other business deliverables. Over a period, "employees first" becomes the culture of the organization. The people under him also are giving first preference to employee engagement aspects. Similarly, in another organization, the business head always keens at delivery performance irrespective of any factors. His team also oriented to the practice. Now the culture of the organization is to deliver target" somehow" irrespective of profitability, quality level, or process adherence. Even in the home, if parents watch TV while eating, then the children also follow the same, then, over a period, it will become a culture of that family. The point is that the person at influencing level cultivates the culture either good or bad, not the other way around as followers cultivate the culture. Irrespective of title, you are the leader in your work or home. Influence positive, right things consistently, that will become a practice & culture.

In the personal front, what you do consistently becomes a habit. Similarly, in an organizational setup, what you do always becomes the culture.

culture is nothing but how people behave, relate to your business challenges in the organization.

It is the leadership team that is establishing the culture. When I say leadership team, not only CEO, senior-level managers, whoever is leading a team are leaders. When they demonstrate consistent behavior in some aspects, that will become the culture of the organization.

For example, if the leader believes in data transparency in everyday interaction, then the team also start thinking in data collection, analysis, sharing, and taking decision based on the data.

is it difficult to change the culture?

At the outset, anything is difficult in life, but possible with conviction. That is applicable in organizational culture setting and change the culture as well !!

Framework for bringing synergy among people in small, emerging organization

When we complete 12 months transformation intervention with small, emerging organization, the foremost question asked by the business head is " How can we sustain the improvements going forward?

The answer lies in establishing the daily management process in the organization at each level viz CEO& Senior leadership level, Middle-level management team, and operating level. Once if we implemented the system across all levels and executed on a daily/weekly/monthly basis, it creates an opportunity to build the organization as agile and vibrant.

also, it improves the engagement level of people with the organizational objectives, and this creates an opportunity for each individual to bring out the potential.

Target / Agenda / KPI's

In any level, what we measure, that gets focussed and get improved. We need performance metrics for individual/functions and the overall business as such. Measurement drives people behavior.

Right People / Cross functional Team

We need to identify the right people and place them in the right position. That itself solves most of the organizational problem. sometimes to solve the business challenges, we need a cross-functional team

Review forum / Communication 

We need to establish review forums to discuss the challenges. Status and facilitate the team towards the solution. Meeting or review forum is an excellent place to facilitate the solutions.

also, we need to establish different communication process like Management information system/groups for sharing and updating the live information.

when the organization sets the above process and does the cycle more frequently and effectively, the concerns on sustainability, people engagement, speed of response can be addressed.

Business planning process for existing business in a small, emerging organizations

Most of the Small, Emerging firm's business head think that business plan is meant for banks/finance institution to get financial assistance when they start a new business or expanding the existing business.

Actually, in the existing business itself, the business plan needs to be done at least once in a year irrespective of expansion or new plant. This planning process drives your thought process to navigate future opportunities and challenges in a proactive manner.

What is business planning or preparing a master plan is all about?

1. Visualizing the future opportunities/threats
2. Anticipating the risk
3. Proposing counteractions
4. Preparing your organization for next-level growth

How to do business planning for your business?

Inputs required for business plan

• Industry Trend / Changes in the business environment
• Volume forecasting/projection for the next 3 years
• Your organizational goal aspirations on profitability and growth 
• Customer segment or new customer's opportunity 
• 
  

Planning areas

Likely output from business planning Process

• Organization structure / Engagement initiatives
• Financial plan
• Organization development plan
• Initiatives on productivity/cost and quality aspects
• Product portfolio / business model / integration / diversity plan
• Marketing initiatives

This is a collective visualization and introspection process to make your organization to manage any uncertainties as well as to prepare your organization for future!

First, be aware of your pain and constraints

Some time back, I had met the small business owner, and when I asked him, " what is your business pain areas?". He responded that everything is fine. When I asked about his sales turnover, he said almost the same for the last 3 years. When I asked about profitability, he immediately responded, ok as of now, but when I showed him different trend patterns of profitability, he started opened out.

some of the signs as mentioned  by the business head 

• Business profitability had been in a declining trend,
• No sign for new customers order,
• People are not engaged and not listening to his instructions
• Not aware of the monthly performance as he was working based on the customer's pressure and somehow delivering.

Here the key point is as business head, you must know your pain point or constraint in your business which is affecting your delivery performance.

The constraint could be your manufacturing process, flow, equipment downtime, capacity imbalance, material shortage, people non-availability, and so on ... Even at the business level, the constraints could be your marketing or order procurement process or planning process or engineering function, and so on.

You must learn the techniques of identifying the constraints in your business through the following organizational capability.

1.Data collection and Transparency across all levels and functions on plant utilization, People efficiency, and product quality performance 
2.Review  / Communication mechanism at levels about performance 
3.WIP data 
4. The capacity and limitation of each function/process that could be manpower, equipment, working capital  or competency gap 

Developing those systems and process help you to be aware of your constraints 

once you know the constraints very well, you are almost towards the solution since with your expertise, once you the constraints clearly, you could figure out the answers quickly.

The point is, as a business head, you need to sure enough about your pain areas and constraints!

Factors for building winning culture in small, emerging organization

What differentiates the outstanding organization and mediocre organization is how the organization responds to customer's or market's expectation.

The response effectiveness depends on the internal organizational culture.

When the organizational culture is a positive and winning spirit, the response would be quick, reliable, and with cost-effective solutions or product. Whereas if the organization culture is more of victimized culture, then the response would be late, non-reliable and less cost-effective solutions or product. 

How the people are feeling themselves and working towards the customer is all about the indication of winning culture.

Building a winning culture is the time-consuming process, and it is a continuous effort, and predominantly, it is the prime responsibility of the business head than the followers.

Building a winning culture does not have a single factor, and it is a combination of multiple factors, as mentioned below. 

1.Respect
2.Environment 
3.Education
4.Forum for reviews and feedback
5.Communication process
6.Risk-taking and experimentation
7.Process and Standards
8.Recognition and appreciation

Balanced focus on Value addition and Value creation

In most of the small, emerging organizations, the business head is comfortable in dealing with day to day routine management activities and some extent, in improving one side of the business, that is on value addition or effectiveness improvement initiatives. Nothing wrong in developing in operational capabilities, however in this process, the other side of the business, that is on value creation activities get back seat.

Value creation activities include customer pipeline development, new product development, or improving NPD activities, working on strategic initiatives.

As long as the existing customer gives sales order and business also grows along with a few customers, there is no problem for the business head and his organization. The real problem starts when the current customer slows down in their business due to the economic cycle or reduces the share of the business; the business head feels the impact directly in terms of low sales turnover, profitability and cashflow challenges.

It is always prudent and proactiveness to focus equally on value addition and value creation for both survival and sustainable growth of the business.

The balanced approach calls for the mindset to come out of the comfort zone of the business head during good times.

How do you look at your people?

One of the concerns, most of the small, emerging organization  CEO or business head is " high level of attritions."

When we go in-depth of an attrition analysis, we may realize that people are leaving the organization in a short period of joining, say within a year. 

There could be many reasons for high attrition rate like compensation not matching with individual's expectation /potential, growth opportunities in the external world; people are not liking the work culture, safety, lack of learning opportunity. Those are the reasons for the employee or from an individual/employee point of view.

From the management point of view, I can attribute the reason for high attrition is the top leadership's mindset towards PEOPLE.

As a business head or leadership team, how do you look at your people?

Are you looking at them as a commodity or an asset? 

That perspective makes much difference in the way you conduct your business and treat the people.

If you look at the  People as a commodity:

• Your belief will be "there are many more talents in the market."
• If " x " is not there, I will take " Y." 
• You treat people cost as expenses and You do not show interest in developing
• You are reluctant to create a learning environment for people as you think  as expenses

If you look at the people as an asset:

• Your belief will be whoever is working for you is an asset to the organization
• You will look at each one's strength and look for leveraging and start developing further.
• People get respect for their uniqueness.
• You will build the organizational environment for learning where people will get recognized for taking the risk and delivering results. 

The point is "High-level attrition within short duration" is fundamentally the outcome of how people are treated or respected inside the organization for their uniqueness, effort, learning, risk-taking. If many individuals feel there is a scarcity of respect and the internal environment is conducive for basic survival and growth, then they find an alternative.

Business head or leadership responsibility is to ensure the conducive environment, and the intention of creating a climate comes from the belief and how you look at the people.

Hence, change your perspective on how you are looking at people, either a commodity or an asset!

How much can i do?

One of the clarity, most of the small, emerging organizations CEO / Business head should have is " How much sales turnover I can make? 

From a long term perspective, with existing and new market potential, the answer could be that sales turnover is infinite. 

However, realistic clarity is that with given the facility, infrastructure, installed equipment, with existing resources like working capital and people, how much sales turnover I can make?

Why the business head need have clarity?

• The sales turnover potential with given facilities will give the potential to be tapped.
• The clarity will provide the gap in existing performance and potential sale turnover
• Helps to drive the team towards achieving the potential target with conviction

How does the business head estimate the potential?

Data collection and analysis on the following aspects will help you to arrive at your potential capacity. 

1. The capacity of  all machines based on cycle time and existing Utilisation & efficiency
2. Understanding the constraint machine and its capacity  
3. Exact working capital required for an existing volume 
4. Function-wise human resources details and capacity 

The data may vary depends on the product mix and cost structure. Hence, the CEO or Business head must periodically ask this question and needs to understand his real capacity and existing status!

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