How to monitor your business and keep it safe
Managing a business is always a difficult task, from market influences to staffing issues, keeping one’s business on track to succeed and grow is a true balancing act.
Sometimes, however, despite best efforts, things don’t go to plan and the balance tips towards uncertainty for the business. It is essential therefore for early warning signs to be recognised and acted upon.
Usually business owners, especially those that maintain close links to good quality external advisers, will spot the symptoms themselves and take early corrective action. It only becomes a problem when any issues are not noticed or, even worse, ignored and that symptom turns into a potentially fatal illness for the business.
We will be highlighting the triggers to watch out for in a series of news items to be published over the coming months.
The first trigger to highlight is with management and internal structure.
The role of a business owner or managing director (MD) is as a visionary leader, a motivator and co-coordinator of the management team. However, consistently sound and rational decision making is far more likely to be the outcome of several minds working in unison than one in isolation.
It is always good practice to ensure that decisions made can be discussed and even challenged by the wider management team to ensure holistic plans can be made for the business’s future.
Businesses may go so far with just one mind at the helm in favorable business conditions but, when the problems arise, the voice and brains of many can help to prevent failure and take some pressure off the shoulders of the MD.
That being said, if you do have a management team, a balanced structure and spread of abilities is always important for a business’s success.
Management researchers and occupational psychologists long ago recognised that the most effective team comprises people who have widely differing skills and personalities but who can, in spite of those differences, work closely with one another.
In the smaller business with, say, only two directors, it will not be possible to have a complete range of skills but a good balance of opposites is desirable.
Possible combinations are:
- A salesman and an accountant
- An extrovert and an introvert
- An optimist and a pessimist
- An entrepreneurial type and an organisation type
Potentially disastrous combinations can be:
- Two salesmen (too optimistic)
- Two engineers (may lack marketing and organisational skills)
- Any combination that does not include a finance director!
It may be prudent to examine the balance of your management structure to see if bringing in another director or a non-executive influence could fix or prevent a potentially bad combination.
The long term future of any business depends on the continuity of capable management.
Two problems can arise – automatic succession of unsuitable people (e.g. in family businesses where the second and third generation automatically assume command, whether they are competent or not) or failure to develop successors. The development of successors is largely achieved by the process of devolving power gradually. Sometimes an MD tends to control everything leaving an “ability vacuum” in the layers of management beneath them.
Succession planning and exit strategy should be discussed and formed with your business adviser to ensure a successful plan for both the owner and the business. This plan needs to be structured and implemented well in advance to ensure the continued success of the company.
The wider team
The people on the inside of a business are the best judges of the quality of the management. A high staff turnover is a sure sign of business problems within the company.
It is perhaps ironic that too little staff turnover can also be a problem in a business. The danger is that the company may become set in its ways and miss out on new ideas and efficiencies, where everyone has spent their whole working life in the one organisation.
The relationship between the workforce and management is crucial to the success of the business. A disaffected workforce can sabotage the best laid plans of management if only indirectly by simply not caring about what they are doing day to day. It is therefore imperative that management encourages full and free communication downwards as well as upwards in the organisation.
At Baldwins Restructuring & Insolvency we consider that assisting directors and stakeholders manage their businesses in difficult trading conditions is essential to survival, recovery and future success.
Sadly, not all businesses thrive under competitive pressures, but with the right advice at the right time they can survive – and even continue to grow.
Our experienced team are well versed in all aspects of business recovery and can help businesses in financial adversity to appraise their situation and decide on a realistic course of action before it’s too late.
If you would like to discuss the future of your own business please contact me on either of the details below.