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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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?

A lesson in taking information at face value.

“Get your facts first, then you can distort them as you please”

Mark Twain – American author and humorist

Many years ago we were staying with some distant relatives in the Orkney Islands. Our visit became a lesson in not taking alleged ‘facts’ at face value.

Over a few drinks we were asked: “Have you heard of the island of St Kilda?”

No.

This sparked our interest as at the time we were living in the Melbourne bayside suburb of St Kilda. The local Australian Rules Football club were called ‘the Saints’ with a saint as their emblem.

Was the suburb named after a Christian saint?

No.

St Kilda is a group of wind swept, isolated and now uninhabited islands in the Outer Hebrides of Scotland. The main island of Hirta, until 1930 had been inhabited for hundreds of years and was a breeding ground for millions of seabirds, from gannets, puffins to fulmars.

It appears that the word St Kilda is derived from the Norse or Vikings ‘sunt kelda’ meaning ‘sweet well water’ and was not named after a Christian saint. I could guarantee that very few if any St Kilda Football Club supporters would know that there was never a saint called St Kilda.

Our relatives gave us a book to read about the history of St Kilda. It was a fascinating story about a group of islanders who had a hunter gatherer lifestyle. During the summer and spring months the men gathered sea birds, collecting them for feathers for pillows and bedding, and oil to sell to the occasional passing ship.  They clambered up and down the 300 or more metre cliffs in bare feet – assisted by large prehensile toes allowing them to climb on the cliffs more easily.

Was the suburb of St Kilda named after the islands of St Kilda?

Not exactly.

In the 1840s a trading ship called ‘The Lady of St Kilda’ was anchored in Melbourne for many months. The area was referred to locally as ‘The St Kilda foreshore.’ Legend has it, that the then Governor La Trobe named the new village St Kilda.

Not from a Saint, or an island but a ship.

However, the ship had a link to the islands of St Kilda. The owner of the ship, Sir Thomas Dyke Acland named the ship to commemorate a visit to the island of St Kilda by his wife, Lydia, in 1810. Acland had named the vessel in honour of Lady Grange, the wife of a Jacobite Noblemen, who in 1734 who was about to reveal her husband’s treachery. She was imprisoned on St Kilda for 17 years. It is hard to imagine how the noblewoman endured years of living alone in extremely primitive conditions in a stone dwelling with an earthen floor, amongst a small local population who spoke no English (the islanders spoke Gaelic) in the island’s harsh climate and lifestyle.

What are the management lessons from the St Kilda story?

As managers we should never accept things at face value as what are believed to be ‘facts’ may not be true. This could affect how we effectively manage the many situations that arise in the course of our managerial responsibilities. Furthermore, it is important to be curious, do your homework and ask questions.  Looking back on my career, at times I certainly have been guilty of not heeding this advice.

If you would like read a book about the history of St Kilda (not the Australian Rules Football Club), the book below is recommended.

“Island on the Edge of the World: The Story of St. Kilda,” by Charles Maclean

If it’s not written down, it didn’t happen!

“If it is not written down, it does not exist.”

Philippe Kruchten –  Academic and software engineer

If it is not written down it didn’t happen. Now that’s a big statement.

Does this sound absurd?

Is it the truth?

Many years ago, I was listening to a recording of oral family history. It was claimed by a distant cousin that her father (my great grandfather) met the bushranger Thunderbolt (bushrangers were outlaws and highwaymen) as a young boy. Thunderbolt arrived unexpectedly early one morning on his father’s small land holding in the New England district of NSW. The story goes that Thunderbolt joined them for breakfast and while having breakfast he kept looking nervously out the window. Thanking them for their hospitality he gave them a gold sovereign, mounted his horse and rode off. Not long afterwards some mounted police arrived.  Apparently, this occurred in 1864. When I checked the dates, I found that my great grandfather was not born until 1866 and Thunderbolt was in jail in 1864. Although the event probably happened, it did not happen in 1864.

There is business lesson here that should not be under estimated.

My advice is to write down and record the most important things.

If a legal issue arises, the written word is far more reliable than someone’s recollection. It is important particularly with issues of people management and workplace health and safety.

Let me give you an example.

As a young manager in my mid 20s, I was managing a concrete plant in Canberra. The fleet of owner drivers continuously threatened and intimidated me. It was an unusual situation when looked at through today’s eyes. The drivers were independent businessmen, who owned a concrete truck. This was the same for four other ready-mix concrete companies also operating in Canberra. Despite being businessmen, the owner drivers were all members of a trade union. With the union’s assistance they restricted the number of trucks operating, thereby restricting competition and increasing the rates they could charge.

It was a business cartel restricting competition.  It was not a legally or government sanctioned cartel such as taxi plate licences. The construction industry was booming and the capacity to deliver concrete was restricted, adversely affecting the construction industry. The situation deteriorated to a point where driver’s representative in our business tried to tell us when and to who we could deliver concrete.

This was clearly illegal under the Trade Practices Act. Businesses were not allowed to collude and restrict competition and increase prices. This “arrangement” was adversely affecting our customers. On several occasions I was confronted and threatened. Having some knowledge of the law and knowing that this ‘arrangement’ was probably illegal, when threatened I quoted back that what they were doing was illegal. I then noted it in my work diary.

More than three years after I had left the business, I received a call from the company’s lawyer. The new CEO had decided to use Canberra as a test case to initially overturn the “arrangements” and then use it as a precedent in the state of NSW, to break up the arrangements there. Luckily, I had kept my work diaries and when called as a court witness, was able to quote the times, dates and conversations. The company won the court case and the cartel arrangement that had been supported by the union was quashed.

This outcome demonstrates the importance of recording events, as the diary entries were one of main reasons the court case was won. Too often in business, we are busy and fail to record important events only to find out later, that they should have been. The ready-mix drivers’ case was an important learning experience for me.

Employee issues such as performance management and safety requirements are areas which are important, and discussions and events must be recorded. Our memories cannot be relied upon as we cannot remember dates, times and actual conversations.

The Thunderbolt story illustrates the unreliability of oral history and memory. As managers, writing down important things is not optional. Many of us hate paperwork, however it is an essential part of our job.

What should you as a manager be recording?

Where should you file these records?

 

How NOT to celebrate Christmas…

“Every Who down in Whoville liked Christmas a lot

But the Grinch who lived just North of Whoville did not!

The Grinch hated Christmas! The whole Christmas season!

Now, please don’t ask why. No one quite knows the reason.

It could be, perhaps, that his shoes were too tight.

It could be his head wasn’t screwed on just right”

From the book “How the Grinch Stole Christmas!” by Dr Suess (Theodor Geisel)

So, what relevance does a children’s book of rhyme about a grumpy, solitary creature who tries to end Christmas by stealing Christmas-themed items from the homes of a nearby town Whoville have for managers?

In previous Christmas blogs, topics covered  included the need to have rules on behaviour, the importance of taking the opportunity to celebrate, thank staff and display leadership as well as a time for renewal and evaluation and setting the tone for the next year

John Cleese the famous comedian and Antony Jay one of the authors of TV show “Yes Minister” made a fortune from training videos that emphasised what not to do. With the large number of articles on management and leadership easily available today, I find it inconceivable that managers still display appalling examples of how not to do things. In these times where communication is spread quickly through social media it is even more important to ensure communication to staff in particular, is considered and done carefully.

This year I was sent a copy of the following Christmas notice posted on a company notice board.

From the text it would appear there have been problems of behaviour at the company’s Christmas parties in the past. As a manager, what do you think of this Christmas message to staff?

Here are some questions to ponder…

What is the underlying message in this Christmas notice?

Is it positive?

Would this communication help lift employees’ morale and get them working to improve performance?

What tone is set for the future?

What do you think of this company’s culture?

Do you think that culture effects profitability?

Between January 2016 and late 2019, the price of the commodity this business mines rose 40%, however in two of these years this company made losses and did not pay a dividend. Anecdotally it would appear that culture could be a contributing factor to less than satisfactory financial performance.

My advice to managers and business owners is “don’t be a Grinch-like at Christmas”. It is traditionally period of goodwill. Celebrate the occasion display graciousness, thank your staff and their families…

Take advantage of the opportunity, provide hope for the future and display leadership.

And to all the readers of this blog, thank you for subscribing and I wish you and your families the compliments of the Season and best wishes for the New Year.

What is Koala Bear Syndrome?

Flea-ridden, piddling, stinking, scratching, rotten little things”

John Brown – Australian Minister for Tourism

In the 1980s, the Tourism Minister sparked a national outcry when he described the koala bear in a such disparaging way. Koalas are considered a national animal icon in Australia with overseas tourist seeking to view and be photographed holding them. Koalas are not actually bears, but are mammal marsupials (have pouches) and are protected by law.

Koalas are found in the eucalyptus forests of eastern Australia and feast exclusively on eucalyptus leaves, which are tough and not very nutritious. They are covered in grey fur, weigh up to 14 kilograms, have strong clawed feet suitable for climbing and living in trees and are universally considered ‘cute’. Their poor diet means that they get little energy, needing to eat up to one kilogram of leaves per day. They are very docile and sleep up to 18 hours per day. The koala’s brain is very small, and they are considered the least intelligent mammal in the world. In summary the koala is protected, considered ‘cute’, not very intelligent, docile and not very productive.

The concept of the Koala Bear Syndrome© (KBS©) has been developed from a lifetime of work experiences in a range of businesses. Fellow workers often referred to some of their peers, colleagues and bosses as “marsupials”.

They didn’t have pouches, so why call them marsupials?

Because like most marsupials in Australia they appeared to be a “protected species’ and displayed such characteristics as being chronic under performers who could say and do anything without bearing the consequences or being held accountable. However, I consider the characteristics of the koala a better description of such people, particularly those who produce little, under perform, lack energy, are lazy, continually made the same mistakes, are incompetent and more importantly appear to be protected by their managers. They are rarely held to account. Koala bears are another form of disruptive employee, although they are more likely to be less obvious.

Sadly, few organisations are completely free from KBS©. We all have our blind spots and the challenge is to be self-aware enough to recognise them. Looking back, there are times when I have allowed KBS© to exist by failing to recognise it. KBS© tends to manifest itself more in private family companies, where business owners are more emotionally involved and where family members are not held to the same standards as other employees. Employing relatives and friends is also another area where KBS© is more likely exit.

Are there koala bears in your organisation?

How do you recognise them and what are you going to about it?

Value statements, structured performance appraisals, codes of conduct and clear and strong leadership can assist in managing KBS©.

Management lessons from the fall of the Berlin Wall…

“The Wall will be standing in 50 and even in 100 years”

Erich Honecker – East German head of state, January 19th 1989

Almost thirty years ago, the Berlin Wall came down. The Berlin Wall was a guarded concrete barrier that cut off West Berlin from the surrounding Communist State of East Germany. Over 140 kilometres long, it was built in 1961 to prevent East Germans from escaping to West Berlin. From the early 1950s to 1961, nearly 20% of the East German population left the country for West Germany.

On 9th November 1989, with crowds mounting in East Berlin the East German authorities announced the end of travel restrictions and opened up several checkpoints for visits to West Berlin.  Thousands swept through the checkpoints. Soon Berliners from the East and West began dancing on top of the wall and breaking off pieces of the wall. The fall of the Berlin Wall triggered a revolutionary wave that ultimately redrew the map of Europe, bringing down the Iron Curtain and setting millions of people free. Within two years, the Soviet Union and its empire also fell.

For 28 years the wall kept people in, and kept people out, separating and dividing families and friends, dividing Germany and the European continent. Over 5,000 people had escaped over this time and sadly an estimated 200 plus people died trying to escape from East Berlin to West Berlin. No one tried to escape from the West to the East.

My father believed that he would never see the dismantling of the Berlin Wall in his lifetime. I can clearly remember him saying this to us at the family Christmas in 1989. The current thinking at the time was that Communism’s rise was inevitable. Very few ‘experts’ predicted or expected that eventually Communism would collapse, let alone so quickly, and that Russia would lose its status as a world super-power.

What are the three management lessons from the fall of the Berlin Wall?

  1. The power of a vision. On 12th June 1987 US President Ronald Reagan stood at the Brandenburg Gate and demanded “Mr. Gorbachev, tear down this wall.” His words were largely ignored by the international media. Many so-called foreign policy experts dismissed Reagan’s demand as naïve and sensationalist.

There are few things more powerful for a business than having a clear and concise vision. Amazon’s vision is “To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavours to offer its customers the lowest possible prices”. Amazon’s current market penetration and size is testament to their vision.

  1. Things can get better rather than worse. The worst-case scenario may not happen, particularly when people put their minds to achieving positive change. Very often we are subjected to negative media stories. We regularly hear people spreading such sentiments inside organisations.

Never under estimate what positive outcomes can be achieved with great leadership and teamwork. Everyday we are subjected to non-positive messages that make us believe our future is not in our hands. Like the East Berliners in 1989, by believing that we can escape from a prison-like environment, whether physical or mental, we can set ourselves free and make positive change.  The dismantling of the Berlin Wall is a reminder of how the seemingly impossible can became the inevitable and if there is the will to make it happen.

  1. Predicting the future is dangerous. Sadly, we tend to lean on so-called ‘experts’ who advise us and write books predicting the future. However, the fall of the Berlin Wall and the associated collapse of Communism caught almost everyone by surprise. We should be sceptical of people who claim they can predict the future.

In the late 1800s The Times predicted that “In 50 years, every street in London will be buried under nine feet of manure”. This became known as the “Great Horse Manure Crisis of 1894”.  The invention of the motor transport and Henry Ford’s assembly line production of motorcars at affordable prices changed this ‘expert’ prediction. By 1912, less than 20 years after this prediction there were more cars than horses in London. Furthermore, they were cheaper to own and use than a horse.

What are the 3 concluding messages from the fall of the Berlin Wall?

  • Change is evitable.
  • Things do not remain the same.
  • Whatever you are doing today will not be good enough for the future.

Certainly, the failure of Communism to adapt and change assisted in its downfall. This is the same for organisations. Many of the great corporations of times past no longer exist.

So, what is your business doing to recognise the evitability of change?

What should you be changing so your business not only survives but thrives?

Is an annual budget really all that important?

“The budget is not just a collection of numbers, but an expression of our values and aspirations”

Jack Lew – US Secretary of the Treasury

Many small businesses (SMEs) do not have annual budgets. In fact, I have come across some multi-million dollar businesses that do not have budgets, including several of my past clients.

What is a business budget?

A business budget is ‘a financial plan and prediction of future revenue and expenditure’. A budget is a goal for the business over the next 12 months.

Why are budgets important?

They serve a goal, or a plan…with 3 main purposes:

  • To forecast income and expenditure, and by extension profitability; (i.e. where are the costs incurred and where does the revenue come from to make a profit)
  • A tool for decision making that establishes a financial framework for the decision-making process, and assists in determining courses of action that can be either planned or unplanned over the year.
  • To monitor and measure business performance, where the actual business performance is measured against the forecast business performance.

In simple terms, all good businesses MUST have an annual budget, otherwise management and staff will not know what is expected of them, or the business.

How should budgets be compiled?

There are two main ways of compiling a budget; top down or bottom up:

  1. Top down is the less rigorous way of setting budgets and is more suitable for very small businesses. Often last years’ results are reviewed, and a percentage is added to revenue and costs for the following year.
  2. Bottom up entails reviewing costs, customers, revenue, sales and other Profit and Loss (P&L) items at a micro-level and determining what can be and what is likely to be achieved next year.

In my experience based on having my own business and on feedback from my clients, bottom up budgeting is the best method. It is important to invest the time in creating a comprehensive and realistic budget as it will be easier to manage and ultimately more effective than top down budgeting.

What are the suggested steps?

  1. Involve the right people, including financial, sales and operational staff. Their involvement will help gain their commitment to meeting the budget.
  2. Ask them for their estimates on sales, production costs or specific projects based on first principles by referring to each line item and customer in the P&L.
  3. Rigorously question each assumption, get agreement and then a commitment from those team members who are responsible for each part of the business. Ask questions such as:
    • Which customers will increase their purchases next year?
    • Where and how can we increase sales?
    • Will we be able to increase prices?
    • How can we reduce our fixed costs?
    • What staff will get pay increases next year?
  4. Use last year’s figures as a guide only, and do not simply make broad estimates from these figures.
  5. Complete the budget and share it with key staff.

In conclusion, the compiling of the annual budget is an opportunity to review and understand the business more thoroughly. A budget provides structure for the next 12 months, imposes discipline and holds people accountable for the business’ performance. What resources are required? How many staff are required? What customers are the most profitable? Where can we reduce overheads and still increase sales?

Overall budgets must be realistic and achievable and should also be aspirational and not too easy to achieve. A budget should have ‘stretch targets’, to ensure the business grows. In all my years in business, I have never set a budget where revenue or sales were less than the previous year.