What are the foundations of a good business?

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“You can’t build a great building on a weak foundation. You must have a solid foundation if you’re going to have a strong superstructure”

Gordon B. Hinckley – American religious leader

Deciding to go into business is the first step. The second step is to ensure that from the beginning the business has solid foundations. This is critical and is relevant whether your business is a start-up, or you are purchasing an existing business. Like a building constructed on solid rock, a business with a solid foundation will have a better chance of surviving the inevitable challenges, than one built on unstable foundations. Cracks will inevitably appear in a business over time, as they do in a building. By solid foundations I don’t mean a market niche, systems and processes, skilled employees and loyal customers which can be easily found in ‘how to’ management books, and on the internet.

When my partners and I were going into business, it involved a management buyout of an unprofitable business. We were eager to ‘have a go’ on our own and prove we could build a successful business. This leap of faith meant mortgaging our houses to raise the capital, not an unusual practice for funding new businesses. This certainly focussed our attention. Failure could mean losing the family home and all the implications associated with family life.

As with an elephant’s legs supporting the world’s largest land animal, having a solid foundation on which to build and support a business is essential. Luckily the previous owner had an excellent financial director who provided us, with some practical and useful advice;

”Protect your assets and limit your risks and liabilities”.

We also sought advice from external experts. As owners and managers, we didn’t know what we didn’t know. Seeking external expertise is essential. From our experience in setting up in business, the disciplines where external assistance is required in the following disciplines:

  1. Legal advice in setting up the business’ legal entities, including each owner’s private company which were shareholders in the business, establishing corporate structures that reduce the exposure to legal claims from avaricious ambulance chasing lawyers, completing shareholder’s, agreements, terms and conditions and suppliers’ agreement.

One of the lessons learnt was whilst the structure of the founding team set out the entitlements of each founder, we did not clearly outline our roles and responsibilities which lead to. performance and accountability becoming issues and was complicated by two family tragedies. This could have been managed more effectively if roles and responsibilities had been more clearly set out and a company board that held the executive team and founders to account had been established.

  1. Financial advice from a chartered accountant on business related finance issues, including insurance, taxation, banking and recommended corporate structure in combination with legal advice .

The main lesson learnt was to separate the business entity from personal affairs is essential. Unfortunately, I have witnessed some businesses getting into financial difficulty by not separating private and business affairs as well as a lack of discipline and  no clear understanding of the importance of keeping this separate. This is particularly relevant to family businesses.

  1. Strategic business advice from an advisor with business owner experience. There are two issues here;
    • seeking external advice
    • ensuring it comes from a consultant or advisor who has practical experience in managing and owning a business.

Too often there are consultants who do not have this experience and do not understand what it is like to have their money and house on the line.

In retrospect we should have sought in our logistics business external assistance in strategic planning.  Our annual budgets were built from the ground up and served as our business plan. The weakness became apparent in the vital areas of values, vision and a mission statement which underpin the budgets and business plan. These were missing. We did not recognise their importance. Values, vision and mission statement were only created when we established a webpage. We would have benefited immensely from engaging an external advisor earlier in the piece. The business although profitable would have been more profitable and would have developed more strategically. Professional external advice would have opened up opportunities through identifying strategic long-term customers, obtaining government grants and developing new networks.

In conclusion, the message is seek advice from those with expertise so the business has solid foundations, so when inevitably the storm comes the business has a greater chance of survival. Seeking external advice is not a sign of weaknesses. Elite athletes and sporting teams all have coaches. A business is no different. Also as a manager and business owner, on-going education is essential for continual success.

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Management lessons from the sinking of the Bismarck

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“Sink the Bismarck”

Quote attributed to British Prime Minster, Winston Churchill in 1941

Just over 80 years ago this month, the Bismarck was sunk.

What was the Bismarck?

The Bismarck was a World War II German battleship. With over 2000 sailors, it was the flagship of the German Navy and was the largest battleship then commissioned. In late May 1941, the recently launched Bismarck and another German warship, the Prinz Eugen evaded the British Navy and escaped from the Baltic Sea into the Atlantic Ocean. Their mission was to destroy as much Allied shipping as possible, and together with the U-boats, force the suspension of the supply convoys from the USA, vital for Britain’s survival.

The Bismarck was the most advanced battleship at the time. More modern, faster and more heavily armed than any ship in the British Navy. The Bismarck had a special anti-torpedo belt made of nickel-chrome steel. The Germans believed that no torpedo could penetrate the shield and were convinced that the Bismarck was almost unsinkable. Furthermore, the Bismarck had a sophisticated anti-aircraft fire control system to protect it from attacking aircraft.

The British Navy sent the flagship of the Home Fleet and their largest warship, the HMS Hood and another ship the Prince of Wales to hunt down the Bismarck. In the ensuing battle in the North Atlantic, the Hood was sunk within three minutes and over 1400 sailors lives were lost. Only three survived. The loss of the Hood was a significant blow to British morale. Although also hit, the Prince of Wales managed to damage the Bismarck before retreating from the battle. This forced the Bismarck to abandon its raiding plans.

The British Prime Minister Winston Churchill then issued the order “Sink the Bismarck!” and the relentless pursuit of the two German warships by dozens of British Navy ships began.

The damaged Bismarck, leaking oil, limped towards Nazi occupied France where protective air cover and a destroyer escort were waiting. However, by a stroke of luck an RAF Catalonia flying boat sighted the Bismarck’s oil slick and reported her position. From then on, the British Navy used radar to track it and over a dozen warships followed the battleship.

One of the British ships shadowing the Bismarck was the aircraft carrier Ark Royal. On it were 16 obsolete open cockpit Swordfish bi-planes. With time running out, and with the Ark Royal being the closest ship to the Bismarck it was decided to attack the Bismarck from the air. In atrocious weather and in the fading light the slow-moving Swordfish attacked using torpedoes. Bismarck’s sophisticated anti-aircraft guns were too advanced to shoot down the slow-moving bi-planes. In the final attack, a single torpedo hit the Bismarck’s rudder and steering gear, and from then on it was unable to maneuver. It could only steam in a wide circle.

Unable to repair its rudder and steaming in a circle the Bismarck was doomed. The next morning the British Navy opened fire on the crippled battleship. With its large guns partially out of action, and unable to maneuver, the Bismarck was sunk within two hours, on its maiden voyage, with the loss of over 2,000 men.

What do you think are the management lessons from the sinking of the Bismarck?

Here are three lessons to consider.

1. Do not rely on technology.  The Germans considered the Bismarck as virtually unsinkable with superior firepower, advanced torpedo shields and sophisticated anti-aircraft guns. However, the low-level technology of the Swordfish bi-planes managed to cripple the Bismarck.

2. Technology is an enabler. It indirectly resulted in the sinking of the ship. The British used radar, which was a very new technology to track the Bismarck. Without it, the Bismarck would have escaped to the safety of Occupied France.

3. Persistence pays off. Despite the superiority and perceived danger of the Bismarck to Britain and its navy, a well-planned and persistent chase managed to find and sink the Bismarck. Furthermore, in the dying light in atrocious weather and against all odds, a single outdated Swordfish bi-plane managed to damage the Bismarck just when it looked like the Bismarck would escape the Royal Navy.

What other lessons can you find?

Remember: We can learn from history.  The use of well-known historic examples helps paint a more vivid picture and storytelling helps communication.

What is a KPI?

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Key Performance indicator

The most important performance information that enables organisations or their stakeholders to understand whether the organisation is on track or not.’

Bernard Marr – author and futurist

What is a KPI?

A KPI (Key Performance Indicator) is used to measure the process towards an organisation’s goals.

Most managers and business owners know what KPIs are, based on the concept that ‘what gets measured gets done’. However, in many instances, organisations do not know what to measure and this results in poor management, mixed messages and focusing on the wrong things. One mistake is to confuse KPIs with goals. The goal of a business may be to increase sales to $20 million – however, it is not a KPI.

One of our first customers in our logistics business was a major Australian retailer who built a new store in a major shopping centre. Retailers normally have a KPI which measures sales per metre of their retail area. The ‘whiz kids’ at the retailer’s head office decided to minimise the ‘in-store’ storage areas to increase the total sales area. Within weeks of opening the new store, sales were suffering. The stock could not be replenished from the back of the store because not enough stock could be stored there. This resulted in reduced staff morale and new requirement to operate an off-site warehouse to replenish the store daily, which increased costs considerably. This is an example of a poor implementation of a KPI. The challenge is to select the right KPIs.

Why are KPIs important?

KPIs, if structured correctly and measuring activities towards a business’s goals, can have a positive impact on performance at all levels of a business. For example, KPIs can empower staff by showing how they can make a difference to the business, as well as holding them accountable.

In our logistics business, we designed a system that collected productivity data by customer, job and product category. The warehouses were divided into sections, each headed by a supervisor responsible for the customers and staff in their section. Each week, we produced productivity data by job and customer – which we called ‘the marking rate’. This information was shared with the supervisor, empowering them to make a difference to the business, holding them accountable, involving their team and demonstrating how important their team was in the business. They were empowered, which increased their levels of job satisfaction immeasurably. The marking rate was a measure which drove the business’s profits.

Not only do some organisations have the wrong KPIs, they often too many KPIs. In my experience, the number of KPIs should be restricted to between three and five, otherwise they can become too hard to measure and manage. I have seen large companies with literally dozens of KPIs, which rarely relate to the company’s goals. The challenge is to identify the key indicators that help the business succeed.

What are the three main considerations in setting KPIs?

  1. Ensure they are simple and are easily measurable and understood.

For example, in long-distance road transport, KPIs could be revenue per kilometre, kilometre per vehicle and fuel cost per kilometre. These performance indicators are easily understood and measurable.

  1. The measures must be key indicators of performance and directly linked to strategy.

Using road transport, the strategy is to maximise both kilometres travelled and revenue – so measuring revenue per kilometre is sensible.

  1. Minimise the number of KPIs, thereby making them relevant to all.

KPIs can be more precisely developed by using Key Performance Questions (KPQ), which assist in objectively developing activity measures that lead towards meeting the business’s goals. Here are some examples:

  • What are the activities we should measure that lead to high customer retention?
  • What should we measure that indicates profitability by customer?
  • Are the current productivity measures linked to the business’s goals?

Can we learn anything as managers from the 1975 film, Monty Python and the Holy Grail?

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“I am invincible!” said the Black Knight

This British comedy film concerns the legend of King Arthur travelling throughout Britain seeking men to join the Knights of the Round Table in the search for the Holy Grail.  In medieval British legend, the Holy Grail was the cup that Jesus used at the Last Supper. Beliefs at the time said it could heal wounds, deliver eternal youth and grant everlasting happiness. Today, it is a term used to describe a goal or object that is elusive and can never be found or achieved.

It is one of my favorite movies which I must admit I have watched at least 10 times and has a cult following. In watching it again last month, I realised that it had some important lessons for us as managers.

  1. The Black Knight. (https://www.youtube.com/watch?v=ZmInkxbvlCs)

King Arthur approaches the Black Knight who says: “none shall pass”. Despite pleas to be reasonable King Arthur is forced into a joust, resulting in the Black Knight losing all his limbs in the ensuing sword fight. He refuses all offers by King Arthur to cease the one-sided contest. One of my former business partners refused to accept that a manager was having detrimental effects on morale and profitability, despite being presented with the facts. It was only when the partner went on holidays that we were able to take action and dismiss the manager.

What is the lesson for managers here?

Clearly, the stupidity of the Black Knight resulted in him losing all his limbs. Stubbornness, refusal to face facts, bloody mindedness, denial and continuing poor decision making is not a sound managerial strategy. Managers should be realistic when confronted with facts, however unpalatable.

  1. The Man called Dennis. (https://www.youtube.com/watch?v=-8bqQ-C1PSE).

King Arthur approaches some peasants on the way to a castle on the horizon and mistaken calls one of the peasants an “old woman”. He then makes excuses for not knowing the peasant’s name (Dennis), age (not old he’s 37) or the fact that he was a man.

Can you spot the poor management here?

Managers should make the effort to know their staff. It’s the attention to detail and often the small things that are important and appreciated. I remember witnessing a manager whom the staff had no respect for walking around a warehouse pretending to know their names and be interested. It became a game to get him to call the person the wrong name.

  1. The Rabbit Cave. (https://www.youtube.com/watch?v=TnOdAT6H94s&bpctr=1588724390)

King Arthur and his Knights are directed to a cave by Tim the Enchanter. Inside the cave are the directions to the site of the Holy Grail. The entrance to the cave is littered with bones and is guarded by a killer rabbit. Tim warns the Knights that rabbit is a killer and they ignore his advice. They choose to ignore, they attack, which results in the deaths of several knights.

As managers, what can we learn here?

Why did the Knights attack despite being warned and seeing the bones outside the cave? Because they didn’t listen to advice and ignored the evidence. Often as managers we make these fundamental errors, sometimes because our egos get in the way or we don’t wish to face the facts. When managing a transport business, I remember discounting the option that theft from motor vehicles was occurring in our depot even though the evidence seemed to suggest otherwise. A private investigator proved me wrong

In conclusion, the final lesson is within the film itself. Faced with budget constraints, the use of real horses was deemed prohibitive. Instead the Knights ‘travel’ on invisible horses with the sound of the horses’ hooves clopping coming from the clapping coconuts. The idea came from an old radio technique of  using coconut halves as sound effects for horses. Yes, as managers we should all be prepared to compromise, improvise and find solutions that could be just as suitable and more affordable. In our logistics business we were confronted with excessive waiting costs at a retailers’ distribution centre and could not recoup the costs. After some experimentation initially with shipping containers we negotiated a drop-out system for a van trailer, thereby eliminating waiting time and significantly increasing our returns.

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Is a code of conduct important?

Code of Conduct

‘Don’t violate your own code of values and ethics, but don’t waste energy trying to make other people violate theirs.

Melody Beattie – American self-help author

What is a code of conduct and is it important for a business?

A code of conduct is a set of rules or standards that capture the beliefs and ethics on behavioural expectations in the organisation. There are many types of business codes ranging from financial reporting, conflicts of interest, health and safety, and communication to employment discrimination. A code of conduct sets out a common standard of performance for employees, while respecting the rights of employees and providing a framework for acceptable behaviour.

One of the best examples of a code of conduct is Rotary International’s Four-Way Test for use in professional and personal relationships:

  1. Is it the TRUTH?
  2. Is it FAIR to all concerned?
  3. Will it build GOODWILL and BETTER FRIENDSHIPS?
  4. Will it be BENEFICIAL to all concerned?

Codes of conduct are linked to corporate or organisational values and the mission statement. A good demonstration of the use of corporate values as a guide for decision-making is this example from one of the transport companies I worked for:

‘If you ask yourself the following five questions and you can answer ‘yes’ to all of them confidently, you should go ahead and make the decision:

  • Will the decision help me exceed customer expectations?
  • Is it respectful to all individuals – customers, suppliers, employees and community residents?
  • Does it further our goal of continuous improvement?
  • Is it in the long-term best financial interests of the company?
  • Can I do it safely and ethically?’

If the answer to any of these questions is ‘no’, then the decision you are about to make is unacceptable.

The values, in the form of a card that could fit into a wallet, were given to all staff so that the values could be referred to when required.

In our logistics business, we had a values statement which was as follows:

‘Customers and employees are our greatest assets. The company is committed to providing the highest level of service by working with its customers in an environment of continuous improvement through the introduction of new technology, superior systems, staff training and development.

Work performance and service quality is enhanced by giving responsibility to supervisors on the shop floor. The flat management structure drives the efficiency and effectiveness of the business. It has enabled the company to react quickly to opportunities and requests from current and potential customers.’

However, the statement did not set out specific values driving organisational behaviour – such as work standards, accountability, being open and fair, or personal interactions and behaviour. It did not summarise what needed to be done – for example, ‘we will celebrate success and encourage initiative’ – and what will not be done – for example, ‘we will not tolerate poor performance or rude and condescending behaviour towards others’.

Why was this important?

Because we did not have these values clearly defined, we could not use it as a basis for managing interpersonal conflict when the business was struggling in one area. The failure to accept responsibility for continuing unacceptable performance by a senior manager  who was in denial, and not having a clear values statement, resulted in an acrimonious and deteriorating situation.  Unfortunately, I did not manage the situation constructively at the time and, out of sheer frustration, I allowed my emotions to override a common sense approach to resolving the situation satisfactorily for the business.

Conflicts within organisations are inevitable. The challenge is to manage conflicts when they arise in a constructive way.

Does your business have a code of conduct?

Does it clearly set out the acceptable standards of behaviour as well as a framework to manage conflict?

For example, does it say ‘we will respect and support each other as individuals and members of the team’ and ‘we will recognise both group and individual results’ and ‘we will not ignore achievements or tolerate poor performance’?

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What is a SWOT?

‘Proper planning and preparation prevents poor performance. ’

Stephen Keague – Irish author

The aim of this section is to explain the benefits of performing a SWOT analysis on your organisation. It is not how to perform a SWOT – which can be found on the internet and in management books – but why SWOTs should be done and who should conduct them to achieve the best outcome.

What is a SWOT analysis?

SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is an organised list of a business’s greatest strengths, weaknesses, opportunities, and threats. It is a planning tool which businesses can use at any time to assess a changing environment and respond proactively.

Here are some important SWOT concepts:

  1. SWOT analysis is part of a business review.
  2. Strengths and weaknesses are generally internal to the business – for example, internal resources and capabilities such as people’s skill levels, business processes and assets.
  3. Opportunities and threats tend to be external to the business – such as the economy, competitors, new technology and suppliers.
  4. Strengths and opportunities are positive to the business.
  5. Threats and weaknesses are normally negative to the business.
  6. The outcome of a SWOT analysis should result in a dynamic action plan, not a static statement.

The major problem with a SWOT is that too often it results in a list of statements for each of the four components. It is not an action plan. This is the challenge for management. Each of the four sections of the quadrant are linked to each other, so a list of actions can be created. These are shown below.

 Figure 6: Four Quadrants of a SWOT

Here are the six questions that should be asked:

  1. Strengths – Weaknesses: What actions can be implemented using the organisation’s strengths to overcome the identified weaknesses?
  2. Opportunities – Threats: What actions resulting from the identified opportunities can be used to overcome or reduce the threats?
  3. Strengths – Opportunities:  What are the actions that can leverage off your organisation’s strengths and take advantage of the identified opportunities?
  4. Strengths – Threats:  Using the organisation’s strengths, what actions can eliminate or reduce threats to your organisation?
  5. Opportunities – Weaknesses: Considering the opportunities, what actions can be taken to overcome the organisation’s weaknesses?
  6. Weaknesses – Threats: What actions are required to overcome the organisation’s weaknesses, to assist in preparing to face threats, both now and in the future?

Action Plans from a SWOT

In answering these questions and forming the resulting actions, plans can be developed which can then become part of the strategic business plan. Performing a SWOT analysis is a vital part of creating a business plan and should be done every 12 months. I recommend conducting a strategy review meeting at least once a year, beginning with a SWOT analysis. In my experience, SWOT sessions should be performed with the management team, preferably with an independent facilitator. The independent facilitator is less likely to have a personal agenda and can impartially manage the discussions. When a new client first meets with me, we normally complete a SWOT session. This session may extend over two to three meetings depending on what is found. This establishes the groundwork for understanding the business and the foundations of a business plan.

In over 15 years in our logistics business, we only performed a SWOT session twice. Looking back, this was a major strategic error. We missed out on opportunities and failed to act on some of our weaknesses. There were many reasons for this, including the reluctance to face the brutal facts, less than rigorous discipline by some partners and reluctance to seek professional external advice and assistance. We did, however, compile an annual budget in which our performance was measured each month but, in hindsight, a SWOT with a corresponding business plan would have been more beneficial.

When was the last time you performed a SWOT analysis session with your team?

Were the resulting plans of action completed?

Did they form part of the business plan?

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Who’s managing the meeting?

Meetings

‘Meetings are indispensable when you don’t want to do anything’

John Kenneth Galbraith – Canadian writer and economist

Each December we send out the monthly management blog early, and not on 21st of the month as is the standard. Here is the December blog:

The quotation by Galbraith sums up what many of us experience with meetings. Are meetings of value and do they contribute to improving the operation of a business?

Value is often an intangible concept. The best place to start when deciding whether to hold a meeting is to calculate the cost of holding a meeting. Using a ‘back of an envelope’ style calculation, add up the costs of salaries and their on-costs in time spent at the meeting, preparing for the meeting and following up post-meeting – as well as travel to and from the meeting and other costs, including meals and accommodation. The cost can be frightening.

Once calculated, determine the outcome of the meeting. For example, if the meeting cost $2,000, did the outcome to the business exceed this amount and warrant holding the meeting? This can give you a benchmark on whether the meeting is worth holding. Never hold a meeting which does not have an agenda that will lead to a clear outcome. The purpose of the meeting must be clear.

I was consulting to a business which held a weekly meeting by telephone, attended by state managers and operations supervisors. The agenda never changed. Literally dozens of key performance indicators (KPIs) were tabled by branch, the managers were often late calling in and took calls on their phones, the meeting chair rarely kept to the agenda, and the length of the meeting varied from 30 to 60 minutes. Action points were rarely completed on time. Furthermore, the business was in financial trouble. Clearly, these meetings were symptoms of what was wrong with the business.

What are the lessons to be learnt from this example?

  1. Tailor the meeting agenda to achieve the desired outcome.
  2. Clearly communicate the aim of the meeting.
  3. Set strict starting times and allocate minimal meeting time for the agenda.
  4. Only invite the right people to the meeting.
  5. Turn mobile phones off.

Meetings can take up to 40% of a manager’s working time – and much of this time is lost in idle banter, people being late, and people using meetings to delay decisions and offload their responsibilities. Meetings are a necessary evil in an organisation, however the number of meetings held and the way they are conducted must be managed with discipline. Otherwise, money is wasted, staff become demotivated, people are not held accountable and little is achieved to meet the organisation’s overall goals. For example, one of my partners in our former business – who was responsible for an operation that was performing poorly – would claim in the management meeting that he would implement a plan of action to rectify performance by a set date. Each month we were given the same story and, unsurprisingly, the performance never improved. This not only affected our profitability but also demotivated others and sent a poor message about accountability.

Most people are motivated when they see things being achieved. Meetings can do this, providing there are strict disciplines imposed on behaviour, procedures and actions while also holding people to account. Performance and outcomes must be measured. Some of the most effective meetings are short stand up 15-minute meetings, where information is disseminated, issues discussed, and time-bounded action points with assigned responsibilities are included.

There are three golden rules for conducting a successive and constructive meeting:

  1. The chair should conduct the meeting in a disciplined and professional manner, keep on track and have a clear aim or desired outcome.
  2. All participants must be prepared, be on time, have a positive attitude and be respectful.
  3. At the end of the meeting, the outcome should be confirmed, action points with deadlines agreed and assigned.

Are meetings in your business meeting these criteria?

How can you minimise the time spent in meetings and the number of meetings, while achieving the desired outcomes for the business?

In conclusion, meetings are good indicators of the health of an organisation. The responsibility of managing and conducting meetings is up to you. They can be vehicles for desired and positive outcomes or, conversely, an opportunity to avoid responsibility and waste everybody’s time and money.

On behalf of the 5-Dimensionz team, we wish you and your families the blessings of Christmas and for a prosperous and wonderful 2021. Due to the COVID-19 pandemic, this year 2020 has been very difficult for many people throughout the world.

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Does your organisation suffer from Komodo Dragon Syndrome?

“Dragons are creatures of legend, but in a world as fantastic as Indonesia, myths become reality. On a small, 22 mile long island among the thousands of Indonesian isles lives the planet’s only living dragon -the Komodo (Varanus komodoensis)”

Extract from Wild Indonesia

In 1910, in eastern Indonesia on the island of Flores a Dutch colonial administrator, Lieutenant J.K.T. van Steyn van Hensbroek received word of a “land crocodile” living on the nearby island of Komodo. Intrigued, he decided to visit Komodo to investigate. He returned with a photo and a skin. The reptile was not a crocodile, but a large monitor lizard. In 1912, it was recognised as new to science and the first formal description of the lizard was published. It became known as the Komodo Dragon, the world’s largest living lizard.

So, what is Komodo Dragon Syndrome?

Komodo dragons are endemic to eastern Indonesia. They are found only on the northern coast of Flores and on three nearby islands including the island of Komodo. The Komodo Dragon can grow to over 3 metres in length and weigh up to 130 kgs. They are territorial, can run at up to 20 kph, are carnivores and have very sensitive forked tongues that sense prey and food, such as rotting flesh kilometres away. With a powerful tail, large claws and serrated teeth they have a fearsome reputation. Their bite is toxic due to the bacteria in their salvia and glands in their mouth produce a venom that prevents blood clotting and leads to unconsciousness.  Known to occasionally eat humans, they predominantly eat deer and pigs, which they ambush and bite, and wait then for them to succumb to their toxic bite.

No, it’s not about a fierce venomous predatory reptile.

The Dutch had been in Indonesia as a colonial power since the early 17th Century with the establishment of the Dutch East India (VOC) Company in 1602. The VOC was one of the world’s first multi-national companies. By 1800 however, due to mismanagement, corruption and fierce competition from the English East India Company, the VOC was bankrupt and was nationalised by the Dutch state.

The Dutch had been in Indonesia for over 300 years and had not found the Komodo Dragon, the world’s largest and most dangerous lizard. Even Lt van Steyn van Hensbroek, the ‘discoverer’ of the Komodo Dragon who was living on the island of Flores where it also lived, went to the island of Komodo to find it.

This defies explanation.

How could such an animal remain ‘undiscovered’ for so long?

This is what I call Komodo Dragon Syndrome, where the management can be so inward looking that something so obvious can be missed.

Perhaps the Dutch colonial administrators were ostrich managers or were so blinded by their colonial superiority and preconceived ideas that they failed to see what was virtually right under their noses.

The message is, to avoid suffering from Komodo Dragon Syndrome, we as managers need to ask questions, be inquisitive and manage by walking around.

Are you being complacent?

Too comfortable in your position, inward looking and missing the obvious?

Perhaps you have Komodo Dragon Syndrome.

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Business plan – why the journey is more important than the destination?

‘A goal without a plan is just a wish.

Antoine de Saint-Exupéry – French writer and pioneering aviator

What is a business plan?

It is a formal statement of future business goals and a plan for reaching those goals.

In their 2017/18 SME Research Report, Australian financial and business advisory  HLB Mann Judd found a staggering four in five businesses do not have a working business plan. Of those with a business plan, only one in three regularly spends time refining their plan. Similar results were found in the UK  in 2015 in a survey by Barclays Bank. Only 47% of all UK small- to medium-sized enterprises (SMEs) had a formal written business plan.

Should this be of concern?

Yes.

Failing to plan increases the likelihood of failure, whether in business or at a personal or professional level.

What should be in a business plan?

A business plan should commence with a vision, mission and values statement. It should set goals, realistic objectives and attainable targets. These targets should also be stretch targets to challenge management  and include strategies as well as a plan of action.  A business plan is not static. It must be a dynamic living document, providing a mechanism to resolve problems and maintain profitable growth.

What are the benefits of having a dynamic business plan?

Change is inevitable. A dynamic business plan can provide a framework to manage internal change and to  meet the challenges and opportunities of external change. The process of developing a business plan commences with a Strengths Weaknesses Opportunities Threats analysis (SWOT). The SWOT, if performed well, will identify the opportunities and threats to the business and its strengths and weaknesses. My clients tell me the best SWOT sessions should be conducted by an external professional facilitator, who does not necessarily have an intricate knowledge of the business or industry. They are less likely to have internal business agendas or conscious or unconscious biases. The best SWOTs are derived from a well-facilitated process.

How can a business plan fit into the annual running of the business?

In writing a business plan, some of the greatest value is derived from the time spent thinking about the business – understanding its background and the external and internal aspects of the business and industry. A SWOT is a good example of this process.

The next step is to write a business plan. There are many different models and templates that can be used to write a business plan, and the choice of model  is a matter of personal and professional choice. In my experience, the best plans result from a team effort – which includes input from key managers and provides greater scope for involvement and commitment. Even as the business owner or CEO, you may not be  the smartest person in the room.

The ongoing  value of a dynamic business plan is in monitoring the plan. I use the model below  which breaks down the plan into 90-day projects, 1-year goals and a 3-year  vision. This is aligned with the annual budget.

 Dynamic Business Plan

The business plan is presented in manageable and achievable bites, like eating an elephant. At monthly management meetings, 90-day projects are monitored to check progress towards the overall vision. Small projects build towards the 1-year goals, which in turn form part of the 3-year vision. The power of this approach is that those involved can measure the progress against the plan and are therefore more committed. At the same time, financial performance is checked against the annual budget. If circumstances change, priorities can be easily adjusted. With our logistics business, our goal was to be recognised as the pre-eminent provider of floor-ready merchandise services for suppliers to major retailers. When the retailers established distribution centres in Asia, we were forced to change our strategy to providing full warehousing services to SMEs.

Remember: business planning – like life – is a journey, not a project.

Do you have a business plan for one year or three years?

 

Do you a have business risk management plan?

16. Example of Risk Matrix V4

‘The kinds of errors that cause plane crashes are invariably errors of teamwork and communication.

 Malcolm Gladwell – Canadian author and journalist

Being in business is a risk, and it is a challenge for businesses to manage that risk. Risk varies from business to business, from industry to industry and from country to country. Every business will have inherent risks. A business that handles cash, for example, is more susceptible to theft than a quarrying business with stockpiles of raw materials.

What is business risk?

It is an event or situation that has a negative effect on your business. This can range from additional costs caused by the risk to situations that threaten the business itself. Risks can never be completely eliminated. However, they can be managed and controlled.

There are two broad types of risk:

  • internal risks that are primarily related to what happens inside the business
  • external risks where events and actions affect the business from the outside.

As business owners and managers, it is our responsibility to manage business risk. For example, workplace safety is a managerial responsibility and a serious incident can have a substantial negative impact on the business.

How can business risks be identified?

  • The first step is identifying all the risks that could potentially negatively affect the business. Discuss these initially with the management team, dividing them into internal and external risks. For example, in a mining company, external risks could include country or sovereign risk, weather risk, exchange rate risk and economic risk. Internal risks could include operational risk, safety, people, customers, events such as power outages and fire, and reputational risks.
  • The second step, after identifying the risks, is to assess each of the risks. In my experience, the most effective method is to develop a risk matrix where severity or consequence is rated against the likelihood of the event occurring. Effective communication and consultation with the management team and other stakeholders will improve the quality of the risk assessment. For example, involve an expert in IT to help assess the risk of data breaches and system breakdowns.

Risk Management Matrix

  • The third step, after assessing and ranking the risks, is to develop a risk management plan. There is an international standard (IEC/ISO 31010for risk management, which covers identification, analysis, evaluation, monitoring and reviewing risk. This process is very detailed and involves other disciplines such as finance, safety and human resources.

The management of risks falls into four main areas:

  1. Avoidance – eliminate the risk. A good example is decommissioning dangerous machinery.
  2. Reduce – actions that mitigate the risk. In warehousing, where the risks of manual handling injuries are high, place limits on carton weights and have regular ‘toolbox’ safety meetings to reinforce the importance of using equipment safely and reporting heavy or awkward stock items.
  3. Share – transfer, insure or outsource. Some obvious examples include insuring against events such as fire and accidents, and outsourcing transport services to a third party who have managerial expertise in this area.
  4. Retain – accept the risk and have a plan to manage it. In transport, this could include improved selection of drivers, driver training and ensuring vehicles are maintained to the highest standard.

The risk management plan should have the identified risks listed in a risk register. It should include the following:

  1. Responses – actions to mitigate the risk
  2. Contingency plan – plan if mitigation strategy fails
  3. Risk rating – severity, likelihood and residual
  4. Trigger – what is likely to trigger the risk occurring
  5. Owner-manager or person responsible.

Although not all risks can be eliminated – and some risks are inherent in the industry or business – having a plan, monitoring and reviewing the risks regularly, and updating the plan when required is good practice. The collapse of McAleese Transport  is an example of how poor management of mitigating risks can have severe implications on a business and its employees. In conclusion, the risk management plan should include a crisis management plan.

What are the risks in your business?

Can you categorise the risks easily into consequence and likelihood?

Are they in your risk management plan?