A business leader is constantly challenged by a myriad of actions and activities that they can work on at any given time. It’s a juggling act to keep the business in balance for ultimate success. Like a juggler keeping three balls in the air at once, leaders need to pay attention to three crucial areas in their businesses at all times.
Healthy Company Ball
For the purpose of this analogy, the first ball is labeled “Healthy Company” and draws comparison to the human body. Just as a person may seem reasonably healthy today but may not have the physical condition for the rigors of a long and active life, companies that are profitable today may not have what it takes to perform well year after year.
Managing a business for success across a range of time frames is requisite for achieving both current performance and long-term health, and is one of the toughest challenges business leaders face. Recently this has been especially true: turbulent economic conditions, for example, have concentrated the collective minds of many executives on pure survival in the short-term.
The key to keeping this ball in the air is to focus on the right metrics. Most organizations have a myopic approach to the Healthy Company ball. Typically, organizational focus on revenue generation is far too short sighted. Running a business solely by focusing on financial metrics is akin to driving a car on a winding road by only looking through the rearview mirror! For most companies, financial metrics are “old news”, often lagging 30 to 60 days or more by the time they can be properly analyzed. What is needed is a manageable set of leading indicators. These are indicators which are directly predictive of the outcome metrics that the leadership team has set for the organization.
A robust set of leading metrics or Key Performance Indicators [KPI’s] allows executives to monitor company performance for short or long term health. It is critical that leaders have a manageable number of metrics which strike a balance among different areas of the business and are linked directly to whatever drives its value. Too vast an assortment of metrics is self-defeating.
Consider a real case where a business had determined 96 key performance indicators at the end of a two-year initiative. This list was effectively dead on arrival when it was rolled out for implementation. Senior-management teams ended up responding only to revenue targets with this exhaustive list of KPI’s, while deliberately ignoring broader metrics that will actually indicate organizational health.
Imagine how easy it would be to keep the Healthy Company ball in the air if business leaders understood how many sales calls were made this week? Or the overall quality of customer relationships, quality of employee engagement, quality of relationships with external parties [suppliers, regulators], bid win/loss ratios, or brand strength in operational markets? Crucially, what is important to measure will vary greatly by company and industry.
Constant fine-tuning is needed to determine the right mix of metrics. For a typical business unit, top management should monitor no more than three to five metrics representing different areas of the business for each time frame. To make sure that the metrics are appropriate, the finance department or the performance-management group should regularly validate the metrics for their “predictive” quality, and make changes as necessary.
Value Systems Ball
The second ball is called “Value Systems”. This ball helps drive consistency through the business. It encompasses the tools defined for the organization to support its way of doing things. An example of this ball is found with an organization’s core values. These principles provide the moral compass for the organization. The main challenge for business leaders while juggling this ball is ensuring that core values are well known by everyone in the business, and also why these values are important to the firm.
Core values need to be embedded or entrenched in the organization to the level that stories are being told weekly, including who is modelling the values, and then sharing these stories in performance discussions, or screening new employee candidates to ensure that company values are shared by all. Business leaders can keep the Value Systems ball in the air by ensuring that these values are modelled daily, and that they are preserved and reinforced at all times- even if taking a financial hit may be necessary to uphold them.
Other examples of Value Systems are the simple, methodical and consistent practices that have been defined for the organization. Ensuring adherence to these practices will clearly support consistency across the organization. While this may seem simple in theory, too many organizations take a multitude of approaches to simple things such as RFP’s, safety management, project management, or human resource procedures. This often causes chaos across the organization, can increase confusion among personnel, and typically wastes a significant amount of time and energy in the process.
A sterling example of the Value Systems ball in practice can be seen in Southwest Airlines, which in 1979 defined a few crucial Value Based Systems to ensure consistency across the entire organization:
- Remain a short-haul carrier, under two-hour segments.
- Utilize the 737 as our primary aircraft for ten to twelve years.
- Continued high aircraft utilization and quick turnovers, ten minutes in most cases.
- The passenger is our #1 product. Do not carry air freight or mail, only small packages which have high profitability and low handling costs.
By focusing on a few simple, key values and foregrounding these throughout the organization, Southwest Airlines has remained a successful, sustainable operation for decades since, as evidenced in Jim Collin’s seminal read, ‘Built To Last’.
Executing Strategy Ball
Going back to the first ball, Healthy Company, note that this one is anchored in the present. The second ball, Value Systems, is designed for a very long time, even forever. The third ball is anchored clearly in the future, and is called “Executing Strategy”. This ball is the game plan that will bring business leaders closer to an envisioned future. What is important to recognize is that simply having strategy is not good enough. Leaders have to be executing that strategy, which refers to the small and significant progress that must be delivered every day, week, month and quarter to successfully achieve any planned-for strategy. Each strategic milestone is accumulated one on top of another and will transform the business from where it presently exists to where it seeks to be.
The key to keep this ball in the air is by engaging activities after strategy has been developed. What activities have been planned and completed today or this week to execute the strategy? What are the daily activities to communicate, reinforce and align the whole organization to the company strategy? What is being done to track the progress of strategy fulfillment, and how are leaders and personnel accountable to executing the strategy? How is learning being documented throughout this process? What is being done to adapt the strategy to the ever changing business environment? If these questions can be answered with commitment and deep satisfaction then the third ball is being juggled effectively.
Imagine for a moment that only two of the three balls are being kept in the air at your organization. What kind of situation will your firm be in? If you neglect the Healthy Company ball, you may not have a business much longer. If you neglect the Value Systems ball your organization will be wasting a lot of valuable time and energy through inconsistency, and cracks will form in the foundation of your business that may never be repairable. If you neglect the Executing Strategy ball then your business has a very uncertain future. You will be at the will of the winds of competition and the economic environment, and may never achieve the vision you so carefully crafted for you business.
It’s time to learn to juggle, and find benefit from the knowledge that the ability to keep these three balls in the air will translate to a very successful business in the future. Happy Juggling!
Article by Scott Aberg
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