This week we continue looking at the critical transformation activities all organisations must consider if they wish to achieve high performance by building on Step 1 (Building the Team) and moving to Step 2 - measure, control and improve.
Here we introduce you to this second step - undertaking a diagnosis of all areas of the business to understand how you are performing. Sounds simple? It is difficult in practice! Why? Again, because too many leaders fail to roll their sleeves up to truly understand what is working and not working in their organisations.
Businesses that really want to drive the change agenda and are serious about moving towards world-class / high performance / best-in-class audit the functions in all of their departments. In effect, they x-ray the company to find out how the patient is. Some call it an audit but please do not confuse that word with the annual financial audit that medium and large size companies do. I am suggesting that the x-ray is more than an audit as it covers all areas of the organisation. A thorough analysis of all the key operations needs to be carried out and a diagnosis undertaken.
In essence, to protect and control the cash flow and profitability (or surplus if you are a charity or a trust) you must have or undertake:
- Financial health check – undertake a sales and profit mix analysis. Do you truly know where you make money?
- Weekly cash flow forecasts with a rolling three month forecast (or longer depending on your industry / sector)
- Credit control procedures
- Debtor management system
- Managing suppliers (fewer, improved input prices, extended terms, settlement discounts etc.)
- Managing and reducing stocks, work-in-progress and lead times
- Identify bottlenecks and instigate throughput targets
- Establish key performance indicators (KPIs)
Put simply, if you cannot measure it, how can you improve it?
As you read the above prompts, consider the question, ‘how does this work in my business?’ Do not simply nod and convince yourself that they are in place as that may blind you from moving towards world-class / high performance / best-in-class i.e. financial returns beyond those typically found in your industry / sector.
Good luck in this vital step on the change agenda!
Measures, controls and creating high performance are subjects we explore on our leadership and business development program, LEAD™.
As you consider the opportunities and challenges you are currently facing, why not get in touch to find out more about LEAD™ and how we may be able to help you. Our next program starts in November.
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