Unless You Run Your Business, It Will Run You!

In the course of my work as a Chartered Accountant, I have worked with literally hundreds of directors. I have assessed the detailed workings of their companies and how they personally drive them. In this time I have witnessed both the excellent and the very poor performers, and I am going to outline examples to illustrate this exact point.

The very best example of director performance was an aluminium processing company in Bletchley that I worked with very early in my career. Here the Managing Director was totally focused on forward planning for the company. With a 31st December year end he would always hold a 2 day conference for the six members of his senior management team (“SMT”) on the 1st and 2nd of December, on whatever days they fell, where he would lay out the most comprehensive plans for the forthcoming year. He would go through it in fine detail such that everyone knew exactly their individual role in achieving the required outcome. I always likened the whole event to a military campaign where he was the General summarising his heads of staff to engage the regiment in its activities for the next year! For the 6 members of the “SMT” their remuneration package was made up of an 80% basic element with a 10% bonus for achieving their individual targets and a further 10% if the overall performance was achieved.

The company was financially successful and within 5 years of his appointment as Managing Director turnover grew from £1.5m to £3.75m! It was not a surprise to me when a major public company purchased the company in 1990 and then within 2 years he became the CEO of the acquiring company.

So what were the main elements of his business strategy?

1. He set down a detailed plan for the company.

2. Each member of the “SMT” knew precisely their own roles.

3. It was a team effort with a real emphasis on working together.

4. There was a financial reward for achievement.

5. Most importantly he provided strong and respected leadership.

For those reading this article who can then say, well look at his resources and the size of the business…. no wonder he succeeded, I would say sure, point taken but nevertheless look how you run your business?…Is there a plan? Are you looking as to how you can improve your business? Do you delegate enough? Do you reward financial success? It does not matter whoever you are, you can always improve your business performance and the minute you think that you cannot then you really are in trouble!

So what is the other side of the coin that I have witnessed? Rather than quoting a number of horror stories I am going to set out my main criticisms of proprietors where there has not been the success that there otherwise would have been:-

1. Owners who do not provide leadership and who do not react quickly enough to external events. By and large employees do want to see the direction in which their company is going and want to embrace it and feel part of it.

2. Owners scared of charging the correct level for their goods and services. So many times I hear the comments, “I can’t possibly charge that” or “I can’t increase my prices” when their own direct costs are increasing by 5% or more.

3. Owners who meddle in their day to day operations who do not let their staff get on with what they are supposed to do. Given responsibility employees will generally respond favourably.

4. Businesses being under capitalised with far too much emphasis on borrowed monies.

5. Owners spending too much on their troublesome customers who very often are their worst payers whilst not properly looking after their most profitable customers. This is a very common problem!

So what happens to those in charge of businesses where you have all or any of these weaknesses? If you are not very careful it is a downward spiral which once started is very hard to reverse. You start to lose control of the business, you are as I say “continually putting out fires”, morale within the organisation starts to ebb away, customer dissatisfaction starts to creep in and financial pressures soon emerge as the business starts to run out of money. In most cases the business pressures then spill over to family life with sometimes very sad consequences. Sadly for those businesses that have not survived, these points will be a familiar story.

The truth is that you have to run your business, you have to be in charge of what happens in your organisation, and you have to spend time looking ahead and planning for the future. For sure in today’s financial climate it is a tough call but you really have to be fully focused on the business and not get distracted by anything else that takes away your valuable time. Be assured that if you don’t run your business, then it will certainly run you.


Note - Charles Little is prepared to run discussion groups around this topic. If you're interested, get in touch!