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How Do I Link Succession and Business Performance?
February 14, 2008
Please allow me to begin with what sounds like the obvious: Business/Organizational performance and financial performance are strongly related to succession success.
Not too long ago, The McKinsey Quarterly reported that there are nine key factors related to business (organizational) performance. These nine, along with their thumbnail descriptions, are:
- Accountability - reporting relationships and business measures;
- Capabilities – enough talent for competitive advantage;
- Coordination and control – measurement and reporting of business performance and risk;
- Culture – employees have a stakeholder mentality;
- Direction – individual and organizational goals are aligned;
- External Orientation – ability to seek and listen to customers, vendors, boards members;
- Innovation – using change as an ally to sustain momentum and growth;
- Leadership - coaching to drive better performance; and,
- Motivation – to excel and remain with the company.
Now you don’t need to be a superstar with each of these factors to begin seeing improvement in business and financial performance. However, the more of these factors you bring into play on a daily basis, the more likely you are to be viewed as an industry leader and a force to be reckoned with in the marketplace. Equally, if not more importantly, the more likely you are to have a business that becomes multi-generational.
In my previous post, you saw some of the measures and metrics commonly associated with high performing businesses headed toward succession success. If some of the measures didn’t seem all that important to you, substitute your own. The three most important things about the performance measures are, first, have them; second, make them focus on results; and third, share the information. Sounds a little like the “coordination and control” factor mentioned earlier, doesn’t it?
Overall, your ability to weave these nine factors together will make a significant difference in several key business performance measures:
- EBITDA
- Real Value
- Real Value to Book Value
- Net Income to Sales
- Real Value to Sales
- Book Value to Sales
What’s the secret to developing these key factors to increase the value of your business? First, it takes DISCIPLINE. Use or buy planning and project management skills that give people a sense of direction and an understanding of business priorities.
Once priorities are understood, it takes FOCUS – the kind provided by a scorecard that tells you whether you’re on target to hit the moon or stand a good chance of drifting off in farther reaches of space. Use your business and performance measures as the main agenda for all operational meetings. It’s the only way to keep the main thing the main thing.
Finally, it takes BALANCE. Remember that the family is not the business and the business is not the family. Because you’re already a successful entrepreneur, that may be the most difficult of the three to use to your advantage.
Posted by Dan Schneider on February 14, 2008 | Comments (0)
