Ambition Magazine - March/April 2009

Posted by jpayne on May 10, 2009 under Business - In The Press, Business Growth |

Julia Payne In The Press

Know Your Roles

Ambition Magazine March/April 2009

Could your lack of a structured business growth strategy be costing you a fortune?  By Julia Payne of Julia Payne Associates 

Businesses today operate in very competitive environments and being able to respond to market changes is vital in achieving profitable growth or even survival throughout 2009. However, how often do you find yourself fire-fighting? How often do you find yourself handling day to day tasks that should be handled by someone other than you? If your business’ growth strategy is something that is fitted in on a weekend around family commitments, what chance do you think you are giving you or your business of success and more importantly, what can you do about it?

Take a moment and think how your business has grown. Have you been able to structure it as you wish in a manner that’s best for business growth, or have you simply reacted and hired staff to cope with your expansion? If it’s the latter, you could have a structure that resembles spaghetti , with those departments that shouted the loudest having the most staff, perhaps even being over-resourced, leaving others feeling there’s not enough time in the day .  This type of structure normally results in duplication of effort, excessive management time being taken to make decisions, staff frustration about not being able to work efficiently, management selected for tasks which do not match their skills and no clearly defined lines of communication.

Businesses do not grow uniformly, but in chunks and the key to your success is how you manage those chunks. Resourcing a business should be a strategic function, not one that is dictated from the bottom up.

Your starting point is to identify the best functional structure for your business.

A functional structure is a means of strategically managing resources or activities within a business. All activities within an organisation fall into one of three groups, Infrastructure, Revenue (Sales) and Strategy. These can then be colour coded by red, blue or black - extremely simple but highly effective.

Red activities support the infrastructure and are non- revenue generating, for example, HR, IT, Legal, Accounting and Administration

Blue activities include all revenue generating functions and are client related, marketing, advertising, and relationship management are good examples

Black activities are the strategic functions related to business growth such as positioning, new product development strategies, joint ventures, or merger activities

Red and blue activities create growth in revenue, whilst black creates growth in capacity which in turn delivers business growth. When capacity growth comes into play, companies see a longer-term increase in margins which lifts profit and in turn, increases the valuation of the business.  All too often though management will say, ‘we’re not getting enough growth’, or ‘our profit isn’t high enough’. The answer translates as too little resources employed in the strategic or black areas of their business.  Similarly, an MD who says, ‘there’s not enough time in the day’, is probably doing too many red activities.

Too often companies are busy handling red and blue activities to the detriment of black. Think how many times during the course of the day you have to deal with matters such as sorting out IT, handling a stock problem or a client issue. Are these adding to the growth of the company or are you shouldering the responsibility which should lie elsewhere? If you’re not sure, then try this very simple exercise.  Have a look at your diary and highlight each meeting or activity over the course of a week in red, blue or black. Does that tell you what you need to know? Alternatively, keep a kind of ‘diet diary’ and write down everything you do during the course of a week. A picture will very quickly emerge as to where you spend your time. Try the exercise across your entire management team or your sales team. Are they focusing on pure sales related activities or are they spending a high proportion of their time on administrative tasks to support the sales process? Is this the best use of their time?

In determining the functional structure, it is important to consider two further key areas:

1. The percentage split across red, blue and black for the entire business.  Theoretically, each hour of each day for every staff member could be colour coded. Whilst initially it will not be necessary to delve into such detail, it is essential to understand the percentage split necessary for the effective and efficient running and growth of the business. Over resourced in red will increase costs which hits both the P & L and profit, whilst under resourcing will not provide a strong enough infrastructure to service the business and its clients. Too much blue will provide much needed work, but does the business have the infrastructure to support it? Too little and cash flow will be poor.  Following this to its conclusion, over resourcing in black will mean future growth but no cash flow this year, whilst under resourcing could mean no growth in future years.

It is important for a business to know and discuss the business variables that affect these percentages. These could include: business size, structure and plan, exit strategy, funding, capability and economy etc. However once agreed upon, it is management critical to know these percentages in order to maximise business benefit. A business needs a working system that will provide them with the management information on these percentages every month.

2. The fears of implementing a functional structure. Functionality is a discipline and a structure. It is not ego-based, meaning no roles are more important than others. It is a tool to create clarity. It is therefore important to put aside the fear of having not having got the balance right in the past and the fear of not wanting others to find this out. It really is not important. What is important is to place the business on a sound footing for future growth. Similarly there may be fears around creating additional work in training and education. However, fear encourages prevarication and this will do nothing but stunt what may prove to the key to your future success.  

Now picture your future success.

Picture your  company having clear priorities, the right people in the right roles, an external focus and your senior management  focusing on strategic activity to drive both profit and build equity.  Add to this picture another, where your staff are taking personal responsibility for their actions, have improved communication, improved job satisfaction and an increased connection to your company and your clients.

This does not just have to be a picture, it can become a reality. Your reality.

In these straightened times, putting the correct functional structure in place can yield major business benefits, not only in commercial terms with a honed, efficient and effective organisation increasing profits and building equity,  but also in developing a culture where employees feel valued and fulfilled.

Remember, it’s your reality, why risk making it your competitors’?