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.
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!
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!
