Loyalty vs Intolerance to low performance

A dilemma most of the family-owned business head has is how to deal with a mediocre performer who is coincidentally the relative or loyalist to the family.

This is a real concern for the business head as today's mediocre performer might have been with the organization from early-stage and might have contributed to the growth of the organization even at tough periods. In today's scenario, the person may not be able to cope with business challenges and modern business practices. Sometimes the behavior and performance of the person affect the decision making capability in the organization and may impact the morale of the people who strive for delivering performance.

What should be the way out for the business head to deal with those people?

1 First, the business head must realize the fact that the purpose of the business to maximize all the stakeholder's interests. The organization exists to serve all, and the organization will exist only when it is competitive.No individual is vital than the bigger purpose of the organization. This realization is a must for the organization's head.

2. Second, the business head spends quality time with the mediocre person by giving the perspective about the change in the way an organization works in early times and the now in the competitive environment. The person's challenges to cope with the current business challenges need to be understood, and the necessary exposure can be given by training, coaching, and mentoring.

3. Also, the person must be given some time to perform well as per expectation mutually set. This time duration can be a year or a couple of years, depending upon the role the person plays in the organization.

4. If the person copes up with the modern business practices and delivering the expected results, that is a piece of good news for all, and the person can be groomed for further development.

Incase even after meticulous training, coaching, and development efforts, if the person is not willing to unlearn and learn, not intending to deliver the result as expected, the business head must speak up to the person and be prepared to separate the relationship and business.

If the business head prolongs the decision to separate the business and relationship, it will inevitably affect the overall business performance, which is not suitable for anyone. The survival itself will be challenging for the business head and the entire stakeholders of the organization.

The key is balanced, quick decision making from the business head is vital for the meeting the larger purpose of the organization.

How does Project Management apply to New Product development?

As discussed in Typical problems in new product development in a manufacturing environment, we have observed some patterns of challenges. Project management is all about the application of different management knowledge, skill, tools, and techniques in each phase of the projects.

Hence, the following principles of project management can be applied in new product development also.

Some of the principles are given below

1. Starting the project with END GOAL in mind
2. Involving all stakeholders at an early stage
3. Define project scope with a set of key performance indicators
4. Tracking Key Performance Indicators throughout the project phase
5. Defining the phases or steps in the project 
6. Proactive risk assessment and mitigation plan
7. Review and communication process
8. Active Change Management Practices
9. Engaging people with team/leader structure

Those principles can be applied in new product development as well.

Growth Vs Survival Mindset

     As head of the organization, your belief  about your business either as growth oriented or survival oriented  determines your business growth.

     If you look at your business only as profit making motive, you tend to make profit somehow, irrespective of adhering to process,ethics,considering the interest of all stakeholders, long-term sustainability  of business.

      Instead, if you can change your perspective  to look at the  purpose of business as to  “Enhance the value to all stakeholders”. This will improve your thought process towards long-term sustainable business decisions. As there are many stakeholders like employees, customers, suppliers, banking finance institutions, promoters, Government ,society etc  and each stakeholder has different interest or value expectation from the organization. For example , as employee, the value expectation would be good pay, learning, and growth opportunities, as customers, the value expectation would be best product or service for the money, as suppliers, the value expectation would be regular orders, on time payment etc. It is your prime responsibility to enhance the value to stakeholders in a sustainable basis for which sustainable wealth creation is the path.

     If you have this perspective about the purpose of the business, your  approach and thought process would be on building solid foundation on process, systems, technology and talent management , in turn your visionary approach would be long term oriented even though sometimes you lose in short term. That is the Growth mindset of a a CEO of successful organization in the world.

Why do some organizations engage in business transformation drive and others are not...?

Unlike large organizations, small organizations are governed and managed by promoter, family members, or the CEO as hand-picked by the promoter. The growth of the organization mostly depends on the mindset, managerial style of the promoter and CEO. We can classify smaller size organizations into three types based on the mindset of the leadership team.

Growth Mindset:

 The leadership  team continually strives for growth and eventually transforms the organization from small to  mid size and large organization. They continuously engage in transformation initiatives across the organizations.

Mediocre Mindset:

The leadership  team focuses more on maintaining the legacy and feel comfort with the status quo, even though they aspire to grow. Occasionally, they drive localized, standalone productivity, cost efficiency initiatives to manage the external demand especially from its customers.

Survival Mindset:

The management team struggles for survival itself due to  deficiency of financial funding or lack of market for product etc. Sooner than never, they disappear from current business or switch to an alternative.

Out of all three types of organizations, more education, facilitation  and hand holding are required for mediocre organizations. They could not drive organizational transformation initiatives  due to the following factors.
  
Before getting into factors, let us  understand the meaning of organizational transformation drive.It is  holistically looking at the value chain of the business with the intention of enhancing value to all stakeholders. In this initiative, the business and functional process would be reengineered  in terms of  performance measurement and tracking , constraints in the entire value chain, roadmap for eliminating the constraints and improving the value, ease of communication process with  both  internal and external customers etc. 

Typically, this organizational transformation effort result in radical change in either one or all of the following aspects 

1.Increase in business sales performance and profitability on a sustainable basis
2.A major shift in delivering the product or service experience to customers
3.Shift in people’s  thinking, engagement  towards business process and results



Organizational transformation happens in stages, after which there is no look back to the previous level.

Organizational  transformation is not a

1. Small, incremental productivity improvement in a localized area
2. Standalone initiative, which brings down cost or  improves product / service quality one time


Factors affecting organizational  transformation Initiatives


The Head of the business or CEO’s belief and involvement is vital for the business transformation initiative.

The following factors contribute to the success of  organizational  transformation initiatives

1. Compelling need or urge to CEO or head of the organization to transform. This need can be SURVIVAL threat or pressure from customers to be competitive.
2. Firm belief in the future prospects of the business 3. Willingness to learn and experiment new methods or practices, ability to forego short-term losses against long-term benefits
4. Belief and support from the second level  management  team about the transformation process
5. External facilitation to teach, facilitate, guide, criticize and handhold the team during the transition.

In the absence of the above, the organization finds difficult to pursue any  transformation initiatives

Solutions approach to bring the mindset change:

There is a need for creating awareness to leadership team  about their management style and its impact on the long-term survival of the organization.

They  need to be educated to diagnose the health of the organization in a quantitative  and qualitative manner, as from our experience with many SME’s, most of the small size promoters or CEO  do  not have the exposure to look at the all business performance from long term perspectives. 

They need to be exposed to the different industries and its practices, lean system thinking, employee engagement practices, modern performance management process and customer relationship practices. Here only the role of business associations, external facilitators, or coaches comes in a big way.

In today’s globalized competitive environment, sustaining the profitability through transformational initiative is no more an option. It becomes a survival need!

Paradigm shift on the purpose of the organization

      When we ask the question to  senior people in the organization, the most of them responds as “making  profits”. Of course it is one of the objectives and vital for survival. If CEO also thinks in the same direction, somehow the organization can fulfill  the  objective. But the sustainability becomes vulnerable. Hence, the CEO needs to redefine his definition of running an organization as “To Enhance the value to all stakeholders.” 

This paradigm shift in thinking process will guide the CEO and his team towards Process Excellence and stakeholder’s centric in whatever they do..

The stakeholders can be customers, employees, suppliers, financial institutions, Government, and statutory regulation bodies, and so forth. Each stakeholder is expecting a different value of the organization.

For example,

The Customer is expecting value from the organization in terms of  best product with superior quality and best price etc.

The Employee is expecting value in terms of pleasant / safe working environment, good pay and career growth and learning experience etc.

The Vendor  is expecting value in terms of regular schedules / order inflow, regular payment and cordial relationship etc.

The Financial institutions are expecting value in terms of credit worthiness and repayment of loans etc.

The Government /Statutory bodies are  expecting regular revenues from taxes, employment opportunities and cordial industrial relationship, environment preserving  etc.

   Even though the value expectations of each stakeholder are different, it can be met only when the business is creating SURPLUS in the form of PROFIT

The central challenge for CEO or business owners is to generate profit in a sustainable manner irrespective of outside factors like competition, macroeconomic condition, supply demand balance etc and enhance the value of all stakeholders.