Organisation Performance and Value
With any organisation, once you have set the Vision and Strategy, there are five levers that you can pull to improve organsiation performance and its value: Revenue, Profitability, People Performance, Asset Utilisation, and Manage and Learn.
Each of the levers sits over a series of best practices that can be applied to help you deliver better organisation performance and in turn, grow the value of the organisation. For example:
- Build Revenue includes: Marketing planning, promotions, sales process and pricing
- Deliver Profitability addresses: improving gross margins, reducing manufacturing/service input costs, supplier performance and managing expenditure
- Support People Performance talks to: leading and developing the organisation, the team and ourselves
- Drive Asset Returns looks at: managing working capital (debtors and inventory), and brand IP
- Develop Organisation Learning focuses on: budgeting, business unit analysis and, performance monitoring.
Each of these levers is described below.
Create Strategy
Those who fail to plan, plan to fail (Benjamin Franklin).
I believe it is vital to do some basic strategic planning, annually, to answer the big questions that will help guide our decision making and provide focus throughout each year. We should do this at an organisation and at a personal/professional level. Here, we talk only to matters relating to the business:
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- What is the Vision for the organisation in 20xx(+3 years)? What will we be celebrating at that time? What will have been achieved
- What is the Strategy and Planning to deliver the Vision?
- What is the Business model and how will that have changed to reflect the changes in industry, the web, customer segments and needs, product and service offerings, innovation, and our business ownership aspirations?
- What are the critical few priorities for the current 12 months, and their associated milestones or measures of success?
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Build Revenue
There are three key elements to building revenue:
- Marketing – Create Demand by attracting and retaining through effective marketing. This includes: having a clear marketing plan to communicate our brand in meaningful and engaging ways with our defined customer segments
- Grow the product range and increase the level and breadth of services delivered; knowing what our product/service offer or roadmap is for each customer segment, offering the right customer experience and the right pricing levels
- Grow Sales by following effective selling and customer delight processes that address their specific wants and needs via the channels that they wish to interact with us, giving them complete solutions to their problems.
Deliver Profitability
Profitability is the result of careful management of two levels of expenditure in serving the customer:
- Delivering Gross Profit dollars through delivering product and services to a defined plan; that we know the costs of each and that that cost matches what we expect in our speed/quality/volume matrix; that our supply chain is working effectively; that our distribution meets the customers’ needs and that quality is matching the customers and our expectations
- Retaining Net Profit dollars after paying all of the non-product/service delivery expenditure as planned, such as our people, premises, information and IT, General & Administration costs, financing and taxation costs.
Support People Performance
Key to providing a successful organisation is providing the environment where you and your people can thrive, strive, self-direct and enjoy their achievements and growth. This is typically enabled by organisations that:
- Have a solid and supported Organisation Leadership team that defines the organisation needed (the right people on the bus in the right sets); role models the behaviours of the desired culture, and communicates effectively to the organisation the required expectations and standards
- Are deliberate about attracting, recruiting, managing, training, and retaining staff whilst also, assessing, appreciating and encouraging the required Team Performance. This needs to be supported by the right enabling IT systems, processes and policies, fair working environment and communications.
- Are led by a leader who optimises her/his own performance and leadership skills.
Drive Asset Returns
An organisation’s investment in its Assets can be a significant drain on the investor’s resources, whilst at the same time creating immense value and significant barriers to entry for new or existing competitors. Successful organisations look to Drive Asset Returns by:
- Improving the Organisations Value by protecting, developing managing its brands and intellectual property, evolving its business model and organisation, developing, improving and codifying its intellectual property, and managing its risk and regulatory compliance frameworks
- Improving Asset Utilisation to ensure that funds are well directed and managed, particularly that Working Capital is not consumed due to poor cash flow, debtor and inventories management, and that the organisation is getting the best utilisation from its IT, web and facilities.
Develop Organisation Learning
- The leaders of the organisation have a responsibility to ensure that it is well governed, accountable and constantly seeking to self-improve. It does this through setting up a framework for self-empowerment and accountability via a leadership and reporting governance structure coupled with a clearly articulated and communicated Vision, Values and Behaviours, a rolling three year strategic business plan supported by Business Unit/ Functional area leader annual business plans, targets and incentives. This framework is collaboratively developed with regular review and coaching points throughout the year so that it is a constant source of inspiration and reflective learning and improvement