During a recent business trip I heard four senior directors say a variation of the following statement, “I tell my managers to run their departments like it is their own business.” Sound advice? I don’t think so.
For starters, most people do not know the first thing about what it takes to run a business therefore the suggestion is not very helpful. If someone advised me to, “Run your department like a Swahili-speaking Civil Engineer” I would be as likely to succeed as some of these managers. I don’t speak Swahili and only roughly know what a Civil Engineer does, so it would be impossible for me to gauge if I am doing it correctly. Additionally, 80% of entrepreneurs fail within the first 18 months, so I don’t believe that is the advice to give.
In my opinion, there is a better suggestion for managers looking to become leaders of their teams, and that is; “know your numbers.” When I say this to groups, there are various dubious responses. Managers typically say one of the following:
“I am not good with numbers.” To that my response is usually a flippant “Why not? Numbers are sexy – especially ones with a $ sign in front of them.” The fact is that numbers (a.k.a. money) is the reason most for-profit businesses exist. To say that main section of business is not ‘someone’s thing’ keeps them from being taken seriously.
“I do know my numbers.” Really? Many managers say this, but it takes about five minutes to realize that they only know the basics such as how to read a P&L or worse, how to fill in numbers for a report Corporate Office asks for. While this is a start, numbers without analysis are meaningless time wasters. – No wonder that most people find numbers and statistics annoying!
“I don’t know which numbers are important.” By far my favorite response to receive in a session! It demonstrates an awareness that there is a problem and usually indicates a willingness to learn. No one (certainly not me) knows everything, but keeping an open, curious mind is the first step to improvement.
The numbers that I like to see vary depending on the business, but the main benchmarks would be:
How do sales, costs, and inquiries compare year on year?
What is the sales/success conversion rate compared to previous years and to the competition?
How does the business’ pricing/value compare to the competitive set’s offerings?
What are the measurable benchmarks of each employee’s performance? Are all employees performing optimally or at least improving?
What are the economic indicators of the business and how is it projected to perform over time?
If you can find these sources and answer each question above, action plans, training plans, and marketing plans simply flow. There is a lot of time currently spent in organizations building strategies without any real data to back it up. People want to look busy (often reporting up the chain of command) and therefore instruct their employees and managers to change direction in an attempt to “keep up with the times.” This unfocused method is like throwing pasta at a wall to see what sticks, or playing darts in the dark, both waste resources and can be dangerous. While experimentation is valid, the scope of risk can be decreased by knowing the company challenges first. Naturally there are exceptions to this rule, we often read about founders of companies with no understanding of business who do miraculously make it, and are successful beyond measure. Just remember that the reason someone wrote about them in the first place was the operative word – miraculously. I think we can do better than that.
Leading a team is a lot like reading a map. You need to know where you are before you can find where you are going.