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!

Three primary responsibilities of Business Head

As a business head or CEO of your organization, literally, you are responsible for all activities and outcomes in your organization. However, when the organization is growing, you may delegate some of the activities and responsibilities to others and you may overview of those responsibilities.

some of the responsibilities you can not delegate fully to others and you must be the primary responsible person.

In my views, three primary responsibilities of the business head of  any small, emerging organization are

1. Creating Performance-Oriented Culture

2. Maximizing the Profitability and make the organization future-fit or growth-oriented

3. Meeting all the Stakeholder's Expectation on time

Why is Lost Order Analysis important for Organization?

Keeping continuous order pipeline is one of the healthiest indications of the organization. Even though ensuring order pipeline is perceived as accountability of marketing or sales function, it is actually cross-functional deliverables. 

Typically in a medium size organization, the following functions involved in order procurement process

1. Marketing or customer relationship 
2. Sales 
3. Engineering & 
4. Finance / Cost estimation 
5. Business head or pricing committee

Order procurement process indicates the speed, flexibility in decision making, teamwork, cost competitiveness and disciplined approach of the cross-functional team and management. One of the analysis indicates the organizational speed, decision making is "Lost Order Analysis."


What is meant by Lost order Analysis?:

Even though Lost Order Analysis is reactive, it analyses the reason for losing the prospective customer order. The reason could be a technical reason or regret from a technical perspective, pricing issues, delay in response from the organization, perception of the customer and so on.

This analysis will give clarity of why the organization is losing the potential customer's order.

What are the parameters to be analyzed? :

As said, this is cross-functional deliverables, and the business head must review the cross-functional team on the following parameters and the gap 

1.No of potential customers asked for queries  Vs. No of queries responded on time
2.No of quotes responded Vs. No of quotes converted into a sales order
3.Reasons for losing the potential orders

this analysis will give an insight about the organization on the following 

1. The effectiveness of marketing function to identify, grasp the opportunities
2. The cross-functional effort in ascertaining technical, commercial feasibility on time
3. decision-making ability on pricing 
4. Speed in responding and followup with prospective customers
5. Cost & Quality competitiveness in the market from customer's perspective


How frequently the organization needs to do  Lost order Analysis?

The frequency depends on the industry type, customer 's profile, lead time to respond. Generally, we suggest to our client to do the lost order analysis at least once in a quarter, as it is a reasonable time frame to understand the losses.

Role of business head:

The role of a business head is critical to conducting lost order analysis reviews as typically the functions point each other for losing orders and most of the time from our experience, the organization losing the orders due to both strategic and operational reasons.

The frequent review by business head will help the organization to improve the policies, business processes and of course to improve sales turnover of the business.

For example, when we initiate this analysis in one of our client, the team had realized that the majority of the orders lost due to High pricing. When we did deep analysis on the pricing, the cause identified was on the "cost estimation method" in which "lot size" was given overemphasis while costing in engineering function as well as at business head level. Once team identified the mistake and policies were framed on " lot size" in costing. After the corrective action,  we could see the reduction in the quote value and subsequently order conversion rate was increased significantly. 

The point is as a business head, if you do the lost order analysis frequently along with your cross-functional team, you will get a lot of insights about your order procurement process, and you can improve your business turnover.

 Also, this type of analysis will improve your cross-functional working cultures towards speed on decision making and execution

How to maximize profitability in SME organizations?

Most of the SME organizations can be classified as either Tier 2 or Tier 3 level vendors to OEM. Those organizations are adding value to the final product either by way of partial manufacturing or manual content addition in the material. That is mostly the scope of the SME’s restricted to manufacturing or assembly and may not have much leverage on design, procurement aspects on the value chain.In some organizations, value addition is limited only to the manual work.

Unlike large size organizations, SME’s does not have the bandwidth to design and development of the product, RM selection and procurement, process planning and manufacturing, Assembly and Testing on its own.If the scope of SME’s on revenue is relatively smaller than large size organization, how can SME’s maximize the profitability?

Given below some of the proven methods from our experience with SME’s and the critical aspects of each method.

1. Increasing the volume 

2. Increasing the variety and customer’s base

3. Cost optimization from P&L analysis  

4. Rationalizing the product mix or portfolio  

5. Vertical integration  

6. Looking for premium products or market

7. Looking for premium processes

1.Increasing volume:

       One of the typical methods of increasing profitability is doing more volume as it covers up the overheads and there is a possibility of maximizing profitability.The prerequisite for increasing volume of a given customer’s product is the price and quality expectations to be met consistently.Most of the organizations are working internally on quality improvements, delivery plan adherence, and price optimization so that they can approach the customer for 100 % share of the business. Since the demand is a function of external parameters, there is a limited scope to increase the volume beyond a certain level.

2.Increasing the variety and customer’s base:

       One of the favorite ways of increasing the sales turnover, in turn, profitability is by expanding customer’s base and get more orders of the similar product family. For example, if SME’s has modern machining facilities, it looks for different customers and product range to maximize the revenue and profitability.

The advantage is that it helps the organization not to get into the risk of dependence on one customer and also helps the organizations to serve the different product varieties and customers to get more visibility in the market.The downside of this approach, over a period, managing multiple customers with multiple varieties leads to operational inefficiency issues.Most of the organizations fail to plan well and ended with operational issues like more changeovers, higher cycle time, higher WIP's, quality issues, lack of focus on time deliveries low productivity.However, for some organizations with better operational team and practices, this method turns out to be a better method of maximizing the profits

3.Cost Optimization from P&L Analysis:

This is an all-time workable solution, proof from recession or unfavorable external environments. Irrespective of existing customer’s base, volume, product mix and variety, some SME organizations are continuously working on waste elimination, re-engineering the process and identification of opportunities to save the cost of P&L analysis.For example, one of my known organization regularly saves 3-5 % in its conversion cost every year irrespective of volume or external condition only through continuous improvement programmes and finding opportunities to cut down the unnecessary expenses.

Another advantage of this methods, the organization develops the culture of cost consciousness as a way of life.

4.Rationalizing the product mix or portfolio:

This method is mostly last options or impossible options by SME organization as they are vendors to OEM customers and they can not influence on changing the product mix or portfolio.However, wherever the organization supplies directly to end customers influence to choose the right product mix as it maximizes the profitability significantly.

It requires active accounting and cost deployment practices, wherein the organization can precisely know the cost of goods sold for each product mix.Accordingly, the management decides the product mix be continued or dropped.

In one of my client, when we did products costing and selling price analysis, we came to know the some of the product ranges, the organization is making losses as the cost of manufacturing outweigh the selling price. The management took timely decision to drop some of the low-end products, thereby could able to release the capacity for the higher end as well as to increase the profitability.

5.Vertical integration:

One of the common practice prevailing in most of the SME’s over a period, after stabilizing the basic process and get the customer’s confidence, they get into vertical integration as a natural growth.This expansion gives growth and profitability advantages to the organization.

For example, an organization specialized in forging or casting is expanding the horizon to machining and assembly.

This method is workable once the organization establish themselves with the basic process and have a financial and technical bandwidth to expand vertically.However, this method requires continuous reevaluation of product cost and sales realization.

6.Looking for the premium product or new market:

One of the possible option for SME organization to look for premium product lines or new market whereby it enjoys the premium.It calls for expanding the marketing effort to find to find the niche or premium product lines and customers.

7.Looking for the special process:  

Rare and ultimate option for SME organization to get into the special process to enjoy the premium as this must be the entry barrier to others.

In today’s competition and free market environment, the organization can be healthy only by generating sufficient cash reserve through profitability.It is the business head or CEO's prime responsibility to revisit the model continuously!!

What must every SME business head know about his business?

As we are working with more SME organizations, we are observing two kinds of business heads or owners.One type of business owners involves themselves almost full time on managing all aspects of operational activities on a daily basis and not giving much focus on the business aspects of profitability and growth.The other type of business owners or heads delegate entire activities to second levels and not much familiar with business aspects. In both types of personalities, we see benefits and drawbacks as well. Only a few smart business heads able to balance the priorities between survival and growth-related activities.

The point is irrespective of the personal style of management, the business head must know some of the aspects of the business at a macro level, and in a fixed interval he must review along with his team. His macro level business acumen and reviews will help the organization to prepare proactively for any uncertainties or opportunities which impact profitability and growth.

The following business aspects the business head must be familiar and review frequently.

1. Profitability
2. Cash flow
3. Capacity constraints 
4. People capability and development
5. Next level growth plan 

1. Profitability :

He must have a practice of reviewing P&L once in a month along with the team. Reviewing P&L will give a fair idea about the healthiness of the organization regarding cost, product mix, and pricing

Also, he must be aware of his cost structure or value chain and its impact on the profitability.

He must have a clear idea of the product mix or customer mix which gives maximum profitability. This clarity will help him to focus on customer or product rationalization

2. Cash flow : 

One of the pain areas for most of the SME organization is poor cash flow management result into affecting day to day operations, sometimes, finding difficult to pay even salaries on time. This delay seems to be a regular event from the management point of view as multiple transactions happening across the supply chain, but from an employee point of view, these delays some time affect the morale and engagement. Better cash flow management is required to avoid hand to mouth situation of cash flow.

The business head must know his breakeven point, cash flow transactions, and payables/ receivables outstanding in a regular frequency through MIS so that he can intervene at right time with right people to mitigate the risk before it occurs

3. Capacity constraints : 

One of the competitive edges for the organization is speed and delivery flexibility, and this is going to be a major expectation from customers. The business head must know his organization constraint points and work continuously on debottlenecking or improving the capacity to stay ahead of the competition. The constraints could be anywhere in his operational and business processes.

Meeting the customer’s expectation on time must be one of the key performance indicators of business head

4. People capability and development : 

Today one of the significant challenges for SME’s is people management. It includes selecting the right people, compensating them at par with industry and retaining them. As most of the organizations realize the cost of replacement and training the new entrants, it is one of the critical priorities for business head to identify the people talent on time and develop them for cost efficiency and future fit point of view.As a business head, he must continuously invest in people capability development initiatives. 

5. Next level growth plan  : 

Since most of the team members in SME’s are working on operational issues and someone must think about sustainability, the growth of the organization. It is the responsibility of the business head to think ahead and work on the growth opportunities. To work on growth, he must be aware of the external environment, trends, customer’s expectation.

Organizational profitability and growth depend on the amount of time, the energy the business head spends in all aspects of business !!!

Three important rituals a (SME) business head must do in the first week of every month?

Getting into business is relatively easier than running it successfully by fulfilling all the stakeholder's expectations.It requires disciplined approach in managing business processes. As we witness in most of the small, medium size organizations, the business head seems to be busy in managing the business outcome, but with little focus on the business performance review.Despite multiple priorities and engagement with different stakeholders, the business head must do some important ritual or activities which he can not entirely rely on others.

This important ritual or activities can be classified into monthly, weekly and daily basis.When the business head is missing the routine or not doing at a specified interval, it brings chaos into the system and pulls his time, energy to bring back the business to healthy.

Let us discuss only the three important rituals or activities a business head must do in the first week of every month 

1. Reviewing monthly operational profit & loss 
2. Reviewing outstanding payables & receivables
3. Reviewing the operational plan & performance

1. Reviewing monthly operational profit & loss :

Evaluating monthly profit and loss statement is the most important job of a business head as this gives the overall performance of his operations of the previous month. As this review will give clarity on what product mix made him make profit or loss, what kind of expenses he is incurring to realize the profit and losses.

Once he knows this trend or pattern on a regular basis, he can take right call on the following

1. Choosing a right product mix
2. Right initiative on cost optimization projects
3. Knowing his cost drivers and plan accordingly 

Since most of the #SME ‘s equipped with enterprise software like Tally, it is easy to fetch the P&L statements.Sometimes, it may not be as accurate and covered all the transactions as business units used to get at the end of the financial year. However, it will give a fair idea about the health of the organization on a monthly basis.

2. Reviewing outstanding payables and receivables :

      Cash flow management as this is one of the pitfalls most of the business head trap and spends most of the time to run the day to day affair.The reason could be lack of structured review and follow up on the receivables and payables areas. Timely intervention of business head on receivables and payables will help in managing the business smoothly as well improve his creditability in the suppliers.Like profit and loss statement, it is easy to get instant data on the outstanding payables and receivables from any accounting software.

We have seen from our experience, wherever business head is keen on the cash flow improvement, he runs the overall business very well.I think managing cash flow very well gives much quality time to concentrate in other value additions.Hence, this needs to be reviewed by business head at-least once in a month if he delegates to his second level on a daily basis.

3. Reviewing the operational plan & key performance indicators (KPI's) :

During the first week, it is the prime responsibility of the business head to review the previous month key performance of operations like delivery, customer ‘s service, project performance and also set the direction for the current month. It includes reviewing the operational plan week-wise, ensuring capacity availability or giving decisions on outsourcing or extending hours, etc.
This review ensures the clarity on the direction and sets the team to perform as there is certainty in the expectation. Most of the time, the team struggles on priority and decision making.In fact, this ritual plays a major role in improving the morale of the team, in turn, engagement.

Initially, this practice of operational performance seems to be difficult. However, we have witnessed in most of the organizations; it helps the team in a big way like 

1.Clarity on the target or direction
2. Improvement in cross functional engagement
3.Improvement in business performance

Ultimately, the business head should know the direction of his #business.More he does the above rituals, more control he has on the business and of course on the business performance.Re look at your rituals for better business performance!

How to develop employee engagement culture in SME organizations?

Employee engagement culture can be understood by the way all the employees involve themselves on an organizational day to day processes, interaction with each other, to customers and other stakeholders, continuously improving the technical, functional, managerial process and continuously contributing to the organizational objectives like profitability, growth. In an engaged culture, the focus of the organization would be on "solutions" rather than on the problems, fixing people, complaining and firefighting mode of working.

Bringing the people together towards a single goal and working together is a real challenge in most of the small, emerging medium size organizations and it requires the sustained commitment and hard work from the head of the organization as well as from the team.

In some organization, as long as they are small, engagement is positive under the close supervision or interaction of the business head. When the organization grows big, the employee engagement becomes complex as increased size of people, the quantum of interaction and communication, different priorities make the engagement as a challenge.

Even then the employee engagement challenge can be managed with a long-term focus, driven by top management, well-defined process, and consistency in execution.This execution must be visible in day to day management, in the quality of interaction between all the stakeholders.

To bring the employee engagement, business head or leadership team must inculcate the fundamental principles in place as follows

1.Respect the individual and accept the diversity
2. Treating people as ASSETS rather than COMMODITY
3.Differentiate performer and non-performer
4.Learning and development as lifelong process


Factors facilitate the employee engagement

There are many factors affecting the engagement irrespective of product lines, business nature; those factors can be categorized into two factors namely

1.Physical Environment inside the organization

2.Structured Management Process & Consistency in Execution

The importance of physical environment on employee engagement 

Environment triggers the positive or negative behavior in people and in- turn as action.When the environment is conducive, it will trigger positive, learning behavior whereas if the environment is not conducive, it triggers only negative, low-level activity among the people.

For example, when we visit a temple or library, our behaviors to silent are different than when we visit a local vegetable market.The environment triggers our behavior, in turn, our actions.

Similarly, some of the physical environmental factors inside the organization drive positive behavior and actions like

1.Uniform that promotes equality among employees

2. Basic amenities like washrooms, drinking water facilities

3. Good ventilation and lightings

3. Facilities for eating foods

5.Good housekeeping and safety layouts

6.Visuals promoting positive thinking and teamwork

The list looks like soft issues or infrastructure and those are all considered as expenses.However, their presence makes an invisible impact on the behavior and actions of the people as we have witnessed in many organizations.

The importance of structured management process & consistency in execution:

In some organizations, we are witnessing that employee engagement programmes are initiated with great enthusiasm by having inauguration event, motivational lectures, and celebrations, etc. However, over a period, the momentum fades. The reason could be the process of administrating the engagement process, engagement framework, assigning responsibility, consistent recognition methods and events are not being thought out and articulated.

Some of the management process that enables employee engagement in a consistent manner

1. Setting the targets for the organization/ functions/ cells

2. Clear Communication to the team

3. Expectation set and articulated

4. Periodic review forums to see the progress

5. Recognizing the talent and visibility of the improvements 

6. Standard operating procedure with details on communication, engagement process, rewarding and recognizing methodology and people responsibility.

Since the organization consists of people from different educational / work experience and different motivational needs, different engagement programmes must be created to cater to different levels and needs.

The general framework for employee engagement programmes/initiatives for different levels of people inside the organization is given below




As said, Engaging the people towards organizational objectives and working towards solutions and growth requires a long time focus and commitment from senior leadership team and all employees. This is a difficult process, but once you establish and sustain the positive engagement culture, your organization will survive any external challenges.The positive, winning mindset culture will become a competitive edge and can not be copied by anyone.Are you ready to invest your time, energy on the long-term asset building?

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!