All businesses have problems, just as all large families have some dysfunction somewhere…even if not obvious. As owners or executives, we often believe we intuitively know where the company’s weaknesses are that are in need of repair. I think that experienced individuals will most often get that diagnosis right. However, some problems are more than skin deep and require more extensive testing to ensure that the underlying problem requiring treatment is not misinterpreted by the symptoms. Similarly, it is tempting to reach for the Tylenol to kill the pain when a trip to your doctor or an x-ray might reveal something more serious.
Businesses are relatively complex structures. Sometimes you can’t fiddle with one aspect without causing issues somewhere else. Every fiddle (just like every medical drug) has its side effects. I use the analogy of an NHL hockey team to illustrate the point. I loathe a team that uses a “dump and chase” style of play or the “trap”, as I personally find that boring to watch (…everyone has their own preferences). I prefer watching more wide open skilled passing and puck possession style of games (I also like fights when warranted, but please don’t tell anyone I said that). Without mentioning team names, I have lived in three NHL cities over my life (…check out my bio for clues) that for lengthy periods of time embraced the style of hockey I loathe. Ultimately each of them moved away from that strategy to a faster, more fluid style of play to become more successful and to provide the on-ice product their fans want to see and pay for. If team management consider the problem to be “boring hockey”, the treatment is complex and different than if the problem was designated as “not enough goal scoring”. I am not an NHL hockey executive, so I won’t assert any opinions whether the underlying problem was the coach, the players, the system or something else. Each of these items required a different treatment plan or set of priorities to getting the team back to “health”.
Situations like this do not lend themselves to an easy set of “jump to conclusion” action plans. Changes to the forwards lead to possible issues with the defence. Changes with the defence lead to impacts on the goalie. Changes in the executive or coaching staff leads to impacts with relationships. Businesses are no different. Few businesses can be run with a bunch of robots or rhesus monkeys. For better or worse, people are usually involved. Sad news for the misanthrope entrepreneurs out there, but people are usually critical to achievement of strong corporate performance. In businesses, there are strong interactions between the “offense” (e.g. marketing, sales, business development) and the “defense” (e.g. oversight, business processes, systems, controls, approvals, admin) as well as the “coaching staff” (e.g. owners, executives, managers), production/manufacturing, field staff and other bits in between.
Some common problems (or symptoms?) that business owners and executives face in parts or all of their business include:
Sales are declining
Margins are shrinking
Costs are increasing
Key employees are leaving
Competitors are looming
Departments or managers are fighting
Owner is not having any fun anymore in the business
Most of these are likely caused by more than one underlying problem. Detecting the right problem to fix is often the biggest challenge to improving your business. Every company has a limited amount of resources and time, so it becomes important to right-size the effort of analyzing the problems and symptoms to mark which to focus on. You don’t want to kill a fly with a sledgehammer or swat an elephant with a flyswatter.
Over my years of experience as an executive, consultant and entrepreneur, I have found the use of a particular process or tool to be helpful for me to detect and characterize problems. The tool I often use is commonly known as a “reverse due diligence process”. It is commonly used when a company performs due diligence on itself to assess the company's readiness for sale before being presented to prospective buyers. I use it often in exit, succession and sales process engagements to not only get all the ducks in order prior to kicking off a sales process, but also to provide the owner with an opportunity to make identified improvement opportunities to his business that improve the valuation or mitigate risks. In simpler terms, in a consulting or advisory engagement, I will act as a mock buyer and evaluate the business line or company from the perspective of a buyer looking for the primary attributes of existing value and ways to add value after I buy it. I will ask all the same questions and request all the same info and documents from the client that a sophisticated buyer would ask for from a seller to determine interest, valuation and risks of a business, business line or company. From that process, I can identify gaps that detract from value, opportunities to improve business processes and value, as well as risks that can be mitigated or minimized. Generally, these improvement opportunities can be monetized to the extent practical to assist with the prioritization. High priority items are then selected by the client for more detailed evaluation, decision making, corrective action planning and implementation.
I appreciate this may sound like a lot of effort, but sometimes you get what you pay for. If your business has significant value or is the primary source of the wealth for your retirement, then a more serious effort at improvement to its value is likely a good investment. Ensuring you are fixing the right problems or issues and not just treating symptoms is worth the extra effort. There are no doubt other tools and ways to go about tackling the subject of this blog. Whatever your approach, I believe that using a systematic approach will serve you best. Just winging it is or ignoring it is valid for many aspects of life, but not usually effective for business improvement. As I have told my kids over the years, if you hear a clunk in the engine, go get it checked out. Some things in life don’t just fix themselves with the passage of time. Going back to a hockey analogy, sometimes you need to get down and dirty in the corners to win the game.
A feature article by Dwayne Coben of Coben Advisory Inc. (www.coben.ca). Coben Advisory is a specialized corporate & executive advisory firm that offers services to help our clients plan, improve, grow and/or exit their businesses.
