Are People the Key to Business Optimization?
Once any business has gone beyond the rollercoaster ride that can be experienced at the start-up stage, no matter what its size or type, the primary task of every leader is to optimize performance in a multitude of ways on a day-to-day, week-to-week and month-to-month basis. Most businesses try to do this on a largely unstructured basis by asking leaders to set their own broad standards and goals (in whatever way they deem to be appropriate) and then check whether or not these have been met. This usually leads to a lot of written objectives and targets, operating instructions and performance indicators against which performance can be measured and adjusted. The problem with this “loose” and highly variable approach across an entire organization, however, is that the business as a whole may be going forward in some areas, backward in others and in many others changing very little over what might be very long periods of time.
A much better way to ensure that business performance is both improving consistently over time and doing so on a consistent basis across the enterprise is to think of it in terms of four key “realms” or major business “levers”. These are the levers of “Prospects”, “Processes”, “People” and “Profits”. This provides a convenient (and easily remembered given they all start with the letter “P”) way to remember this set of four levers and not lose sight of the fact that although we can and should engage in structured optimization effort in any one of them, all four levers also need to be considered collectively, or with the overall impact of one on another being carefully thought about, in order to start to successfully optimize a business. So, let’s look briefly at what each lever or “realm” covers.
“Prospects” is often the first lever to consider because every business needs to know where its future sales prospects (or fund raising sources in the case of a non-profit organization) are coming from. There is no guarantee that even a strong customer base that has bought or utilized a business’s products or services on a regular basis in the past will continue to do so in the future. In addition a business may be serving the wrong kind of customers and missing new ones that would be highly profitable to it. In today’s fast moving and highly competitive economy, continual awareness of customer expectations and the shifting needs landscape of its present and future customer base is therefore essential.
“Processes” are the means by which a business manages its internal operations as a whole so as to deliver the products or services it has promised its customers. In the modern world, these processes can encompass many internal functions and teams and so require effective coordination at all levels of the organization and even outside it, as external suppliers and other partners to the enterprise can also be part of the overall process.
“People” are the individuals and teams who work in the business, directly and indirectly, on a part or full-time basis, to appropriately address the prospect, process, and profit realms so that they perform at their best. If these individuals and teams are not sufficiently focused and effectively aligned, the business will inevitably operate sub-optimally.
“Profit,” the final realm, determines whether or not a business not only has enough liquid capital to supply the products or services it sells to its customers but can also earn a profit. Much of the initial focus, in this realm, is therefore on such hard issues as the planning and control of investments, revenues, and costs, but a strong focus on the areas of governance and risk management is also necessary for optimization purposes.
Although all four of the above levers are important, and are suggested to be best dealt with in the order in which they are presented in most circumstances, this approach mistakenly conveys that each of the four has equal weight or significance and should be consequently given equal attention. This is far from the case.
While customers (prospects), operations (processes) and finance (profits) are all equally important and have to work well together for any organization to be successful, it is the people realm that is most critical. This is for two primary reasons:
- It is people, both individually and collectively, who support customers, manage operations and control finances. This is not only a tactical responsibly but a strategic one whereby the creative insight of individuals at all levels will make the difference between success and failure.
- Sub-optimization in the people realm is most quickly felt in the organization, with mistakes, errors of judgment, oversights, poor decisions and failures to act appropriately (to name just a few) having an often immediate impact in all three of the other realms.
Simply put, all performance optimization efforts should begin with people at all levels if we want to get the most from all four realms individually and collectively. So what does this mean in practical terms?
At the most basic level, our goal in the people realm as the first and most critical realm in which to get it right is fivefold. We need to:
- Create clarity about what the organization is trying to achieve (especially in the medium to long term)
- Bring about as much employee engagement as possible, both when we hire or select people for jobs in the first place and then in terms of managing ongoing performance
- Establish a positive climate or culture in which communications can flow openly and well in all directions all the time
- Ensure that all employees from the CEO to the front-line workers are as competent as possible and engaging in life long learning
- Work hard to align teams as much as possible and set fair but stretching targets as collaboratively as we can
One of the best ways to achieve every one of the above is to ask all senior leaders to keep asking open questions about what is likely to work best with the people for whom they are responsible. If this is done genuinely and openly and is accompanied by attentive listening to the responses, you’ll be amazed how much optimization effort will start to occur in all realms.