As business leaders, we admit that it is hard not to be wearing rose-colored glasses when it comes to assessing our teams. They work hard and invest a significant effort to deliver goods and services to the market. In addition, they are our work family, in many cases people we have coached and mentored over the years. We are proud of their growth and development. Assessing the business, however, requires that we ask the hard questions about what the organization has accomplished, what its unique capabilities are and what the financials are saying about trends and the business’s future. At the end of the day, it doesn’t matter how nice we are or how hard we work; the business will rise and fall by how customers respond to what we offer.
There are three key areas involved in business assessment:
1. Evaluation of organizational goal achievement. Has the organization accomplished what it said it would? If not, why not? So often when working with clients, I find that they will assess their progress against goals and give themselves high grades when, in fact, the goals were not achieved. So why the high grades? Because they worked hard. They made some progress. They meant well. Unfortunately, there are no A’s for effort; progress can only be measured by results. Either the outcome was achieved or not. That is not to suggest that mistakes aren’t valuable indeed they are. It doesn’t mean that hard work isn’t noteworthy. I made sure to be in the stands to honor the “Iron Man”, Cal Ripken, Jr., for his record breaking number of consecutive games played when the Orioles were in town to play the Royals. But I don’t remember anyone getting an A on a college test when they failed it because they worked hard. If we fail, we need to respond by changing the people, the process, or the goal. It is an opportunity for transformation. It is not the role of leadership to avoid mistakes, but rather, to not repeat them. Learn from them to improve business performance.
It is important to determine if there is something systemically getting in the way of goal achievement. It might be a leader who is easily distracted by the next big idea; a process of collaboration that has evolved into a nightmare of everyone having to decide everything together; an organization with too many silos, or too many things on the plate at the same time. Any of these can increase the challenge of successful and consistent implementation. It is even possible that the challenges are being created internally by how an organization works rather than by the market itself. Remember whac-a-mole?
2. Assessment of internal capabilities. Understanding relative strengths and weaknesses of your company is important in defining the growth opportunities that are the best fit. What are your biggest strengths and greatest competencies? What do you do better than your competitors (and that your customers give you credit for)? What do your competitors do better than you? Often, clients will start with a list of many things they believe their business must do well to be successful. Most times, that list of capabilities is standard business discipline and not unique to the organization. Once we generate a list of capabilities we vet it for: (a) how good are you at that? and (b) is that capability unique to you? At the end of that discussion, there is a much greater understanding of what the opportunity ahead might be to distinguish the organization from competitors in a manner that is meaningful in the minds of target customers.
3. Analysis of financial performance and trends. Every business must ask themselves how they are doing against plan: what costs are rising the fastest, which customers are contributing the most to profit, and which products contribute the most to revenue (see the resource section at end of book for templates). These are all important things to understand in the diagnostic phase. Developing a plan to overcome problems that doesn’t consider your financial model and how you make money is not likely to maximize success.
Lack of information or erroneous information means you are making bad, high-risk, or at best, uninformed decisions. When information isn’t available may be when there is the greatest temptation to stick close to what you know in spite of changes in the market. Unfortunately, if others—either customers or competitors are embracing change—sticking with what you know is the wrong course.