Managerial Efficiency in Owner Managed Businesses

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This article, discussing managerial efficiency in
owner managed businesses, first appeared in
Better Business magazine. It is reproduced by
kind permission.
Mungo Dunnett Associates 11 Polstead Road, Oxford
OX2 6TW Tel [phone] Email
info_at_md-as.com Web www.md-as.com We operate
across a range of businesses, large and small.
Our focus is on ensuring that your activities
are geared towards the areas that are most
commercially valuable.
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February 2004
Its up to you
BY MUNGO DUNNETT
Would it reassure you to hear that the problems
experienced by small businesses are nearly all
shared by big businesses too except that big
businesses have them on a bigger scale? So
youre not alone. And the good news is that,
because you are smaller, you are actually better
placed to address these issues. But its up to
you.   Let me paint the picture. Youll know if
this is you. The dominant theme is fire-fighting
too few people chasing too many details on too
many activities. Precious little time available
for discussion of the longer-term issues. People
now too busy to do the work they used to enjoy
or that theyre actually best at, or the things
that customers really appreciate the most, or the
things that actually make the most money. No
clear sense of who does what, whats going on,
and what needs to be done. Critically, no clear
sense of where the buck stops on certain of the
most important elements of the business. And
outside the front door, local businesses chipping
away at your customer base, and your own
customers increasingly demanding extra value.
(See Is This You?) What would an outsider say
about your business? Its not just you, of
course. These are endemic traits that affect the
majority of all businesses. But why is it
allowed to happen? Because youre not getting
tough on your business. Taking the next step
up   The strange thing is that, more often than
not, these are actually things that only become a
problem once the business itself has started to
be successful. Its the complexity of running a
growing business that causes proliferating
bureaucracy, and causes the boss to be inundated
with
unnecessary problems, paperwork and decisions.
But the growth of the business has actually
started putting new demands on you. So, while
its quite possible that your business is keeping
busy, and you know how to sell (and are good at
it), and your brand is well known in the areas
where you operate, you are nevertheless not
really Your business may have arrived at
something of a plateau. Its got as far as
it can reasonably be expected to, based on
your own start-up skills running the firm like
a business. In other words, your success has
come largely from your own efforts your
enthusiasm, your persistence, your technical
skills in the area you work in but in spite of
all these assets, you dont actually have
training as a business person. The result of all
this is that your business may have arrived at
something of a plateau. Its got as far as it
can reasonably be expected to, based on your own
start-up skills. Do you want to increase your
profit, take the next step up, and bring your
business with you? If so, youre going to have
to address some fairly familiar issues. Its all
about costs and revenues. Ill talk about the
revenue side in more detail in a future article,
but for now give some thought to the headline
issues what actually brings in your sales
revenue? How good is your marketing and,
indeed, does it actually make you any money, or
simply cost you money? How good are your
salespeople? and in a small business, your
salespeople are everyone in the business that the
customer is affected by. Why do your customers
buy from you? Why did you lose
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the customers you have lost recently? And why do
your competitors customers not come to you?
Finally, how sensitive are your customers to
price and have you thought of changing your
prices? particularly, of putting them up, as
theres nothing that goes to the bottom line like
a successful price increase. Normally there is
neither the time, nor the management information,
to enable you to answer these questions and
without them, of course, youre flying blind with
a critical part of your business. Your business
efficiency   Now the costs. This is all to do
with the efficiency of your business. Like 99
of businesses, you will know perfectly well
already where the major issues lie but there is
never enough time to get them fixed. This is a
hopeless trap, and the only way out is to break
the working patterns around you. First, think of
time as a vital asset. There is a rule of thumb
here which is ridiculously
simple, but focuses the mind get the key people
the expensive people to do the things they
are best at, and that make the firm the most
profit. If less important activities can be
delegated downwards, do it and if there isnt a
junior assistant, get one. Too often there is a
reluctance to hire a junior member of staff, in
an effort to protect Where are the same issues
recurring? You will know perfectly well what
these are but if you dont lock horns with
them, the only certainty is that they are going
to carry on recurring costs the result
being that every single person in the firm gets
dragged down one level too far into
administrative work. Its is a case of investing
sensibly so as to protect your money-making
assets, and recognising the potentially huge
opportunity cost of swamping key people with
time-consuming tasks. Then think about the
things that actually take up all the time. Many
will be to do with bad communication, bad
delegation or simply habits that need to be
broken. Have a look at all the things that eat
up time. More importantly, think about the
things that tend to go wrong. What are the
patterns that tend to be repeated? Where are the
same issues recurring? You will know perfectly
well what these are but if you dont lock horns
with them, the only certainty is that they are
going to carry on recurring. If you have more
than a handful of staff, it may be worth taking
soundings from your people, either informally or
at a meeting. But the chances are that the
issues they bring up are the ones you
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had spotted already. People issues In the main,
they will be people issues. Whilst it always
appears that I.T. or premises are the
showstoppers, it usually comes down to people.
The key questions are who is underperforming?
Who is working in their comfort zone? Who is not
doing the things they are best at? Who is
wasting their time and your money? Who In far
too many cases personnel issues are allowed to
drift and get worse because there is no
appetite to address them, or a mistaken belief
that the problem cannot be solved does
not get on with somebody they have to be able to
get on with? And who is actually causing more
trouble than theyre worth? These are
time-consuming issues, and of course they are
neither pleasant nor particularly easy. And yet
theyre really not that difficult either. In far
too many cases personnel issues are allowed to
drift and get worse because there is no
appetite to address them, or a mistaken belief
that the problem cannot be solved. Again, its
up to
you. If people are the problem, either manage
them back into the business, through a
combination of action plans, development plans
and close attention or manage them out. Take
employment law advice, but manage them out. I
will only touch briefly here on business strategy
here, to say that unless you have a clear idea of
where the business is going, what it is there to
achieve, what it ought to be focusing on selling,
and who it ought to be selling to, you will not
be able to establish the kind of clear roles and
key activities you need for your staff, and
indeed for you yourself. Once you have
established this, and clarified it with your
people, you will be much better placed to create
an efficient structure where the payroll cost is
geared towards making money, not simply keeping
people busy. And this means making clear that
the people You cannot afford to run a loose,
laissez-faire performance management structure,
whether you have three staff or three
hundred who will get noticed (and rewarded) in
future are those who deliver the key things that
the business is trying to achieve. You cannot
afford to run a loose, laissez-faire performance
management structure, whether you have three
staff or three hundred. Make sure that you
have defined what it is you want your people to
do (and not to do), where the buck stops, and
what are the specific things you require them to
work on, or deliver, from one appraisal period to
the next. This period should never be longer than
Unnecessary activities absorbing valuable time
Inefficient small businesses
Focus on being busy, not being profitable
Ambiguity in roles and responsibilities
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three months avoiding performance appraisals in
a small company is sheer sloppiness, and at the
heart of so many of the apparently intractable
people issues. For most staff this need not be
unpleasant or police-oriented it simply gives
people a sense of control and structure, for
which people in inefficient environments are
always thankful. Your two options Finally, your
own role. Why do so many firms struggle with the
basics of running a streamlined business?
Because people tend to do what theyve done
before and because theres always a higher
priority needing attention today. Without
structure clarity and focus you will never
maximise your commercial potential. (See
Inefficient Small Businesses) The only question
is are you going to give it the attention it
needs? because the efficient running of your
business isnt something you can delegate to
anyone else its your responsibility.   If you
are the boss, let me guess what that entails.
You are the chief salesperson in the firm. You
are also the firms best-known name. You have
more experience than Without structure clarity
and focus you will never maximise your
commercial potential anyone else on the team.
You make all the key decisions on salaries,
marketing, pricing, premises, I.T., human
resources issues, and so on. In short you need
a
manager! What this means is that, even more than
for your key staff, you need to think of your own
time as a vital asset. You are a vital profit
centre for your own company. Every minute youre
stuck behind a desk, wading through
correspondence or responding to silly queries,
youre wasting your own value to the firm.
Imagine that you did have a manager would you
be encouraged to do all the things you ended up
doing at work last week?   Part of the burden of
running a small business is that you have to act
as your own conscience. It may be that You are
a vital profit centre for your own company.
Every minute youre stuck behind a desk, wading
through correspondence or responding to silly
queries, youre wasting your own value to the
firm at heart youre an entrepreneur, and youre
not really detail-minded, or interested in people
issues and administration. If this is the case,
then its hurting you and you wont get as far
as you should because of it. It leaves you with
two options. The first is to cash in your chips
or step aside, and hire a General Manager. The
second is to stick at it, and make the effort to
lift both yourself and your business to a new
level. Can you do it? Of course you can. Its
your job.