Fooled by past business success

Anthony Chang, Guest Columnist

Many hikers after a successful trek over challenging terrain and trails place caution in their backpacks and fail to put it upfront in their heads. They do so at their peril, as they are lulled into complacency. Past successes and great performance can lull many into this comprising position, as around the bend could be a new opportunity or a new peril — usually both.

Many large and small enterprises are faced with this tendency to be complacent, so this organisational behaviour is not the sole domain of successful entrepreneurs.

There ought to be no time for organisational arrogance, as this blinds the firms to what is out there and around the bend.

Many years ago, the auto industry was dominated by a few North American firms, today this is not so. The new competitors, at the time, were often jokingly dismissed as 'upstarts'. Well, you know the end of this story.

It is difficult to fight this tendency when faced with fantastic performance numbers; growing sales, healthy profits, high stock price and above return on equity and so on.

The change begins in the organisation's mind and starts with its leaders. A simple fact ought to be etched into the culture of the firm- performance numbers measure history. These results may not be a good predictor for the future.

Let us celebrate 'wins', as it is important as a motivator, but afterwards dust off the party confetti and look ahead.

Leaders will have to continually remind and reinforce staff on the need to look down the trail and not get drunk with the latest numbers. Do so in simple conversations with team members; ask the appropriate questions about performance, and do it over and over again! Repetition if done correctly will help to change behaviour and approach.

Ensure that management meetings are structured around results, performance and action: what happened, why, where you are going in the future and how.

Warning signals

Review the numbers for warning signals. The numbers of fortune may actually show numbers of potential demise. For example, the typical sales report measures dollars and with it price increases.

You ought to determine if in fact you are growing in units or volume. A useful measure is to convert as close as possible your sales and performance in constant dollars; such as cases or non-dollar units, so as to remove the inflation out of the numbers. Adjusting for inflation reveals the real sales trend as it reflects a more honest position of your revenue story.

Even if your inflation-adjusted numbers are trending correctly, what is the state of your market share? Many analysts, CEOs, and thought leaders, foolishly or purposefully disregard share numbers.

A declining market share can lead to short-term challenges and points to possible weakness in the company's operations, products, employee motivation and/or execution. It is harder for a company to compete in the downside of a slide and if you are coasting you are going downhill.

In the Caribbean, we have a data-poor environment. Getting this information is typically tough for most industries. Overcoming this deficit requires making a best case estimate and how you do this depends on your industry and the information available.

At a minimum, one should at least know who the competitors are and make a best case estimate of their share and by extrapolation your market share.

Even if the results are on target, management should continually ask questions about their operations as they may find opportunities for improvements or threats. What is working and what is not?

Determining the company's location on the trail depends on the right questions being asked and the willingness of the management to face the answers - pleasant or not.

The goal of management is to focus on performance and results. So focus your questions around how to get the results you want and the performance required in getting these results.

A good question to ask is this: "If I could start from scratch, would I be doing what I am doing with what I now know?"

You may find by getting granular with your probing that part of your organisation such as your product line, your administrative functions, or key staff are not performing up to the results required and thus fixing action is required.

If correct action is taken, the company may surpass the existing performance.

Face the music

Facing the music and knowing where your company's position is can be the most exhilarating, humbling or eye-opening experience.

This is typically so as for these individuals who have not embraced the practice of continually checking the position of their firms. This experience is not unique to any one set of individuals' as many of us have faced these journeys during our careers.

Periodic diagnostic testing of your company is a healthy practice as it avoids the unpleasant surprises and can reveal opportunities.

Conducting this exercise does not require as many resources as one may think. It first begins with a commitment typically by the CEO and allocating time to do it. Review your results and the trends, including share. Scan the internal and external. If capacity is truly not available, seek help.

The eye-opening process will establish the location of the business with regard to both proximity to the 'precipice', 'stumbling rocks', and opportunities and dangers around the 'bend'.

As the journey continues, with a good handle on your position and if you are indeed close to the precipice, you have a better chance of turning around and running up the 'mountain' and gaining greater and greater height!

Anthony Chang is a businessman and past president of Jamaica Chamber of Commerce.changtransform@gmail.com