Thursday, 21 August 2014

The High Growth Challenge: Are You Winning on the Cultural Battleground?

Every business has a cultural battleground, for most the battle is little more than a skirmish. Even that, for many businesses, is something they struggle to win. For High Growth Businesses, winning on the cultural battleground is vital to their survival.

,Are you winning on the cultural battleground?
Are You Winning on the Cultural Battleground? (Photo credit: Wikipedia)
The first question you're probably asking is "where is the cultural battleground?". The answer is anywhere a new recruit comes into contact with your company. So in a small start up it is most likely to be the founders of the business. For a larger company it would most likely be their direct reports and for a business that is bigger still it will be the next level down. In general, it tends to be at the lowest levels of the company hierarchy where most interactions take place.  The cultural battleground is where new recruits come up against your company culture and will try to add their own influence the intensity  of the skirmish will be based on their own history and closeness to your business's culture. The further away the recruits culture from yours the more intense the skirmish.

For the business, winning on this battleground is vital, after all if it cannot integrate new staff into its existing culture readily, then individual skirmishes will persist and the existing staff will become battle weary and be even less effective in protecting your culture. More importantly for a High Growth Business, at some point this new recruit will become the company's face for other new recruits, who will want to push their own cultural norms. It is easy to see on this basis, how quickly a company's culture can be undermined and changed. Very often this can happen without the senior management being aware of the issue. It will only become apparent as they see employees become less committed not only to the company's values but also those processes put in place to make sure the culture remains embedded in the business.

So far we have only looked at this issue on an individual basis, now let's imagine the problem from the aspect of numbers. For example, over the next 18 months you expect to grow from 32 to 44 people. That assumes a growth rate of a little over 20% per annum. It involves taking on 12 people at a rate of 1 person every 6 weeks over 18 months. 

This strategy carries a risk to your current culture and customer experience; unless you can convert your new recruits to buy into your culture quickly enough, to prevent them from being polluted by other new recruits.  So in this case time is of the essence. Using our previous example, if it takes you 18 months to integrate a new recruit, you'll have a business with potentially up to 12 heretics in a group of 44 as none will have yet been integrated.  Under those circumstances it would be almost impossible to preserve your cultural values and you'd certainly lose the cultural battle. However, if you can integrate your new recruits in say 6 months then you'll only have 4 heretics in a group of 44, that's a much more manageable number.  Better still with the short integration time certainly 1 and possibly 2 of those five will be very close to integration giving you a great chance of winning on the cultural battleground.

As a High Growth Business it may be that you will be taking on new people about every month for the foreseeable future. Then this becomes a real concerted and incessant battle. No doubt your success has in part been achieved by the application of your cultural values and you’ll want to protect them to ensure your continued success, then winning on this battleground is a matter of survival. In which case to support your side you need to provide your “troops” with the best equipment. That will include:

1) A clear and strong recruitment process that seeks to take on only the best talent with the best cultural fit.
2) A comprehensive operations document which describes in detail “the way we do things here” and is what I call "The Big Colouring Book" of your business.
3) A well thought out and considered statement on your cultural values. Or what might be described as “why we do things the way we do things here”.
4) An induction and integration process which enables new recruits to understand “the why” thereby making it easier to accept “the how”.

The better prepared and supported your troops the more new recruits you can manage. If you get this right you can cope with almost any number of new recruits. I can give you two examples based on my own experience:

1) A company with a planned growth of 7 new starters per month for a year with a starting number of 120.
2) A subsidiary which, on the back of a big contact win, grew from 28 to 81 staff in a little over 10 months. 

Exigent Consulting provides specialist services for Managing High GrowthBusiness Turnaround, and Mentoring to the Small and Medium Business. We help business owners improve the profit performance of their business. 

Friday, 18 July 2014

How a Strong Culture Improves Your ROI with New Recruits

How a Strong Culture Improves Your ROI with New Recruits
How Strong Is Your Business Culture?
Over the last couple of weeks I've had a number of discussions about how to integrate new people into a business, or "onboarding" as the Americans term it.  Where discussions got interesting was how a business’s culture or lack of it, influenced the speed with which new staff became integrated.

So how does culture influence post recruitment integration and what else if anything will have an impact? My experience with high performing businesses has confirmed the importance of culture in the process. The reason for this is that taking on new staff can be seen as the key battleground between the existing culture of the business and the culture of the new hire. The stronger the business culture then the more influence it will have and either the new hire will integrate quickly or leave.  Those with a strong culture will quickly show new starters that they will not be able to change or modify the culture. This can be seen most obviously in the military where new recruits have no input at all and must submit completely to the prevailing culture.

Those, however, with a weaker cultural tradition will have greater difficulties in getting new hires to conform, resulting in increased costs of integration and greater disruption to the business as new hires continue to argue their corner.  This is because those businesses with a weaker cultural tradition will have greater difficulty in persuading a new hire to conform to the way they do things, mainly because they don’t have clear processes or a strong philosophical underpinning as to why things are done in a particular way. Faced with inconsistencies and often contradictory assertions of the recruiting business a new hire with a strong personality may be able to readily persuade existing staff members that they have a better way. This state of affairs can easily upset existing settled staff who were happily doing things the “old way”.

Nevertheless, culture on its own will not do the job, although it helps by clarifying your approach. Just as important, however, is having a good description of not only "why we do the things this way" but also "how we do things here". I describe it as the big colouring book for your business. You might call it an operations manual or a knowledge bank. Whatever you call it having a written process is infinitely better than a verbal explanation.

There are two key reasons for this, first people tend to argue less if something is written down. It gives the words a level of gravitas that is seldom achieved with the spoken word. Second, is it allows the new staff member to try things out without the same high level of reliance on, interaction with, and consequent disruption of existing staff when you are reliant on verbal communication.
If, therefore, you are embarking on, or are indeed in, a period of high growth the strength of your cultural values and your ability to create a written operational manual will be significant factors in integration of new people and therefore your ability to maintain your growth.

Exigent Consulting provides specialist services for Managing High GrowthBusiness Turnaround, and Mentoring to the Small and Medium Business. We help business owners improve the profit performance of their business. 

Friday, 6 June 2014

How Sub Contractors Can Steal Your Profit

Its very common these days to sub contract some services on the grounds that it frees your time and enables you concentrate on developing your business. Whilst this is true and often very helpful, one should always "do the maths" to see if the extra time and convenience is not outweighed by the transfer of your profits to the subcontractor.

Here are three examples from three different businesses that illustrate this issue nicely.

how sub contractors can steal your profit

Case 1 A business outsources some key components of a contract resulting in the subcontractor billing an amount equal to 50% of the subcontracting company's total monthly turnover for three consecutive months. The results for the period were, turnover up by 50% but profit down by 98%.

Case 2 A services business employed a team of subcontractors to  undertake some high level consultancy. This was a 6 month contract which made a respectable £282,000 profit. Employing equivalent staff for the same contract, however, would have delivered a profit of £452,000

Case 3 A construction business hired a subcontractor with specialist machinery at £1900 per day. Purchasing the same machinery under finance would cost £1300 per month.

In my experience in dealing with high growth companies these situations are by no means exceptional and illustrate nicely the risks of subcontracting without "doing the maths". Why do these situations arise? There seems to be two main answers firstly the subcontracting business doesn't understand the financial implications of its decisions. Secondly and perhaps more surprising is the worry about the financial commitment of taking on extra people.

Understanding the financial situation is of course "doing the maths". Often this is no more complicated that calculating the cost of subcontracting  against the cost of doing it yourself. The problem for many is they don't have any current financial information on their business. Consequently decisions are driven by the need to find resources without looking at the longer term implications. "Doing the maths" should indicate when it becomes more profitable to do it yourself. This cross over point is often sooner than one might think; for example in case 3 if the business could use that subcontracted machinery for as little as three days per month it becomes cheaper to employ a person and buy (on finance) the machinery rather than subcontract.

The inertia around taking on staff is an altogether more significant. A lot of this is to do with peoples expectations of the future and for the past few years its been rather cautious if not pessimistic. Despite clear signs that we are emerging from the economic doldrums many business owners hold very conservative views about the future. Consequently they are very reluctant to take on more staff. Part of this is because they don't have a clear view of the future trends and demand and what that means for their business.

Those business owners who have processes and systems in place to peer into the fog of the future will gain extra advantage over their competition because they will able to access information which will give the insight into what is going to happen in the future and have more confidence in the benefits of recruiting additional staff.

For the rest the convenience of and inertia of moving employing subcontractors will provide them with the illusion of additional flexibility whilst exporting the potential profit of additional work from themselves to their sub contractors.

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Exigent Consulting provides specialist services to the Small and Medium Business including Managing High GrowthBusiness Turnaround, and Mentoring. We help business owners improve the profit performance of their business. 

Monday, 12 May 2014

Does Spending More On Marketing Equal More Success ?

There is no doubt that many surveys show that an increase in marketing spend leads to an increase in growth. However there seems to be only a limited correlation. Take this statistic for example; if we compare at High Growth businesses (defined as growing at 20%+pa for 2 years or more) with average growth companies we get a radically different picture. The figures collated from a recent survey on High Growth businesses by Hinge Marketing is that an average business, that is one that grows at less than 20% per annum, spends about 5.1% of its turnover on marketing. At the top end of average businesses marketing spend can be as much as 12% of sales. The average of the high growth firms surveyed showed their average spend was 4.9% of sales. Slightly lower than the median for the average business! A bit of a surprise given that they are growing up to 5 times faster than the top spenders of the average business and spending much less on marketing.

That leads to the obvious question. Why? In short its to do with how High Growth businesses address their market. For one thing they are much more focused on meeting clients needs than the average business. For another they have a much clearer understanding of who they were selling to and what their needs are. Basically these high growth businesses have recognised more than the average business, that their clients and prospects are only interested in themselves and concentrated on answering two questions: 

What problem do I solve for my customer?
Why should my customers buy from me rather than my competitors?

These High Growth businesses seemed to have recognised two things. Firstly that customers are selfish and are really only interested on what suppliers can do to help them overcome their own problems. Secondly High Growth businesses have spent a considerable amount of time and effort answering the question why me? 

High Growth Businesses Spend Less on MarketingThis really sets them apart. In a recent workshop I asked the 20 or so participants to answer the question “why should my customers buy from me rather than my competitors?” and without exception they all struggled. Some actually admitted they couldn't answer it at all. 

This was further demonstrated when the same survey rate the elevator pitch. They asked each CEO to give us their brief elevator pitch. They then rated their response on a 5-point scale based on three criteria:

1) Clarity of the firm’s capabilities and purpose
2) Clarity of the target market
3) Articulation of the firm’s competitive advantage

High Growth businesses scored an average of 72.7%
Average growth businesses scored an average of 45.2%

What this signifies is that successful sales and marketing has more to do with the clarity and uniqueness of your proposition than the size of your wallet.

To get a full copy of the report from Hinge Marketing go here

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Exigent Consulting provides specialist services to the Small and Medium Business including Managing High GrowthBusiness Turnaround, and Mentoring. We help business owners improve the profit performance of their business. 

Tuesday, 1 April 2014

What Do High Growth Businesses Do Differently?

Percent Symbols - Best Percentage Growth or In...
That’s a question that most of us find intriguing because we all want to know the secret of success. Many business owners I know, whom others might consider successful, are themselves a little nervous as they don’t really understand why they got to where they are now. Their problem, obviously, is that if they don't understand why they got there in the first place; they won’t know what to do if things go wrong.

You might have noticed that more recently I have been focusing on ambitious business owners that are seeking to rapidly grow their business. These High Growth businesses provide us with some valuable insights about how to be successful. A recent survey of High Growth businesses in the USA by Hinge Marketing concluded that there were 4 things that high growth businesses do differently from others, which contributed to their growth.

1. They focus on delivering client’s desired outcomes. They were not touting the firm’s qualifications or their products or service strengths but rather what the results were of providing their product or services and what it meant to the client. This idea of focusing on outcomes makes them much more likely to deliver as they have their eyes on the prize.

2. They are truly customer focused; their job is to make the client’s life easier. You won’t hear complaints about customer attitude or how clients are making their life difficult. They see a problem with a customer as an opportunity for them to improve. Some businesses are actually disappointed if they don’t get negative feedback from their clients as it doesn't give them the opportunity to further improve their business.

3. They are flexible. They recognise how much, both prospects and clients, value flexibility and very many high growth businesses feature flexibility in their marketing and sales material.

4. They focus on their reputation. They work very hard at promoting and protecting their reputation and their brand.

There is a 5th thing that High Growth businesses do, or rather and interestingly what they don’t do and that is spend excessive amounts on marketing. Surprisingly, High Growth businesses spend slightly less than the average business on marketing. You'd intuitively expect that High Growth businesses (in this case growing @ 20% plus pa over 2 years) would be spending disproportionately more. However the survey indicated that these " High Growth " businesses spent only 4.9% of their revenues on marketing as opposed to 5.1% for the average business.

This leads to the obvious question; how do they do that? Whilst I have no empirical evidence I can anecdotally, at least, support this finding. If I look at those High Growth businesses I've worked with virtually all of them spent much less on marketing than you’d expect. Having looked into this further it seems to me that many High Growth businesses have accidentally locked on to something which fits the market demands better than the competition and the clarity of their proposition has got prospects pounding at their door. 

I can think of two obvious examples; one a construction business that is currently experiencing an 80%pa growth over this year and forecasting similar next with no marketing spend at all. In fact they are receiving so many enquiries that they are hard pressed to respond at all.  Looking at it for the first time you might even think that their sales process was broken. Yet despite all of that their growth is and continues to be phenomenal. Why, "word of mouth". They will move heaven and earth to get things right first time. This attitude marks them out from their competition and keeps both existing and new customers approaching them for proposals.

The second is a services business which has landed several strategic contracts with some very high profile companies in the UK, with no formal sales function and more startlingly having no one with any formal sales training. Its success once again appears purely based on what it can deliver and “word of mouth” from a couple of existing clients.

What I find interesting is that the results of this report suggest that a business’s success has much more to do with how well they had thought through why and how they deliver their product or service and their value proposition and much less to do with the size of their wallet.

For a full download of the Hinge Marketing report click here.

Exigent Consulting provides specialist services to the Small and Medium Business including Managing High GrowthBusiness Turnaround, and Mentoring. We help business owners improve the profit performance of their business. 

Monday, 10 February 2014

Time To Review Your Value Proposition.

We can at last say with some confidence that we are seeing some "green shoots of recovery". Recent figures have indicated an acceleration in growth and this points towards a more buoyant economy. Let's not get carried away as we are still operating at levels below the pre 2008 crash. Nevertheless, the supply side of the economy is optimistic that interest in its products and services and hopefully sales will increase next year, as potential  buyers at last dip into their cash hoardings and start investing in their businesses.

A direct consequence of this improvement in sentiment is that many companies will gear up their sales machines in anticipation of improved demand. Collectively that means increased competition for sales.

Also, as buyers start to loosen the purse strings, their years in a very tight market will have changed their perceptions of what is important to them and their expectations of their suppliers and their solutions. This means that your product or service may no longer fit the market as well as it once did. As a result the value you bring to your market may be reduced resulting in a poorer take up of your services and offering your competitors a chance to get ahead.
Identifying your Unique Value Proposition
Identifying your Unique Value Proposition (Photo credit: Intern. Forum Of Visual Practitioners

New entrants into the market will also be seeking ways to differentiate their product to better reflect buyers changing needs. All these pressures should lead you to the conclusion that you need to review your value. More explicitly you should be reconsidering your value proposition and testing its relevance to a changing market.

Your Value Proposition

Your value proposition is a short statement which explains to your target audience what problem you solve and why they should buy it from you instead of your competition. What is different about your solution or offering compared to your competition. It is sometimes called an elevator pitch or positioning statement. However you want to describe it, now is the time to give it a review.

It's easy to become a little blasé about your value proposition after all you know and love your product. Your target market doesn't have the same attachment and will go after what they want and will not hesitate to ignore you if you no longer meet their needs.

I remember listening to an interview with Jack Nicklaus where he said every year at the beginning of the golf season he would go to his coach and go through the basics of his grip, his stance and his swing in minute detail to make sure that he hadn't picked up any bad habits that might affect his future performance.  Taking that analogy forward we should regularly review our value proposition to ensure its relevance.

Your Value Proposition Components

Lets just remind ourselves what should be included in our value proposition.

What is our target market? Has this changed? Is our market bigger or smaller than before?

What is the current problem we are solving for our target market? Is it an important consideration for customers in our market? For those of you who don’t have a formal value proposition, start with the biggest issue customers have with your industry and see if you address this. If your product or solution is less important to your market than previously, then you’ll have a tough time selling it.

What are we offering? Is it a new product or service? Can we explain it easily?

What is different about our solution? At this point many people talk about a unique selling point. For most businesses finding something that is unique is almost impossible. What you want to isolate is what you do differently or what additional capability you have, that will make them buy from you rather than your competition.

Which brings me to the last point what alternatives are there to what you offer? Why is your offering superior to the competitions? What is the Return on Investment from adopting your solution?

By asking yourselves these questions you should get a good understanding of changes in the market and how that might affect your value proposition. You may be affected by such things as changes in legislation, new products entering the market or your industry being more interested in other problems. Unless you answer these questions, you may well find your value proposition increasingly irrelevant at a time when your target market will be more active than it has been for years.

Exigent Consulting provides specialist services to the Small and Medium Business including Managing High GrowthBusiness Turnaround, and Mentoring. We help business owners improve the profit performance of their business. 

Friday, 6 December 2013

How Poor Recruitment Kills High Growth

Recruiting is often overlooked as a major limiting factor to sustaining high growth, but it is often at this hurdle that high growth businesses fall over. To meet the growing needs of your business you will have to be successful in recruiting and retaining staff. In order to achieve this you will need to consider two critical factors. 

How poor recruitment affects high growth
Poor integration of new hires is an unnecessary drag on growth
Firstly, that you have an effective recruitment process and secondly, how quickly you can assimilate new employees into the business.This post recruitment activity is a fundamental driver to sustaining high growth. Get it wrong, or do it poorly and you'll struggle to sustain any sort of growth at all.

This article is not intending to go into detail about the processes you may want to adopt but rather to highlight the implications of getting it wrong. The two issues we're looking at are recruiting the wrong people and the impact of not being able to integrate them into your business, and how these factors if not addressed act as a stall on growth.

The Recruitment Process

Firstly, as the title indicates, you should a have a process. Not a hand crafted set of actions but a repeatable process. This, amongst other things gives you consistency and quality control. When recruiting you should consider two things, how well the candidate will fit into your organisation and their capability or skills to do the job. 

I deliberately put fit first; if you are growing fast and taking people on you don't want them to be antagonising the rest of the team, you want them to fit right in. Only after you are confident of their fit should you investigate their capability.  Getting fit right first will increase the speed with which they are assimilated into the business, the quicker this happens the more staff you can recruit before they create a drag on your business.

Integrating New Recruits into the Business

Once recruited you should consider how quickly you can integrate this new recruit into your business. I think we would all accept that there is a period after you take on a new employee where they act as a drag on your resources rather than contributing to it. This is normally seen as on the job training. How effective you are in bringing new employees up to speed and integrating them into your business will determine the rate with which you can recruit to support growth. So like recruiting you need a post recruitment integration process

The two key factors in a post recruitment process are training and a culture process, which is about the alignment of values.  

If you have no post recruitment process or, more politely, an informal one, it will take you a long time to get returns from your new recruit. Typically you'll see a lot of frustration in the business as the new employee is largely left to their own devices and the necessary training comes in fits and starts with little or no coherence. This makes it more difficult for the new starter to:
1) learn enough about his job to be a net contributor to the business; and
2) integrate into the company, that is absorb and identify with the companies aims and culture. 

The consequences are often:

1) the new hire leaves because they've become disillusioned with your company (what a waste of time and effort) 
2) your existing staff see taking on new staff as a chore and therefore don't put in the effort they should, often resulting in the new employee becoming disillusioned and leaving. 

Even if they stay, the whole process has been unsatisfactory for everybody and will have inevitably consumed more resources that it should and taken much longer that it needed to. In a high growth environment it simply leads to an unacceptable drag on growth.

The culture process or alignment of values is equally, if not more important than the training. It's crucial to get new staff who share the businesses' cultural values.

I'm sure at this point there are some of you are scratching your head at the moment and are saying to themselves but I'm only looking to recruit 1 or 2 people a year; what's the problem? My answer is that whilst the numbers are low a new recruit will most likely be a member of a small team. This is where being a small number works against you. Think of the recruit as a percentage of your workforce; if it's 5 a new recruit represents about 20% and if its 10 its 10%. Now image the damage to your business if 20% of your workforce were not engaged with the business. Worse still, what if that new recruit is actively trying to promote an entirely alien set of values to the rest of your team, think about the disruption then.

To mitigate against this problem your post recruitment process must include an amount of orientation about how you do things in your business and what is and what is not acceptable. It is inevitable that new recruits are going to question what you do and why you do it, either because they are likely to have come from a business that did things differently or because they are interested in how your business does things. Either way you need to have an answer.

At some time you will get a recruitment wrong, however if you don't have a recruitment or integration process you will make more mistakes and have created a lot more unnecessary problems for your business. 

If you would like to find out more us and how we can support your business, you can contact us via Exigent Consulting or Managing High Growth,  We help business owners improve the profit performance of their business.