Strategy Three: Acknowledge and Address Limitations
Smart CEOS stay on top of cashflow and have a 13-week rolling forecast to identify concerns before they become issues.
This is my third column on “what” a CEO needs to do to have a better business versus getting ‘how to’ advice.
When companies go through the annual planning process, assumptions are shared. These tend to be optimistic statements backing the desired increases in revenue, volume and profits.
What is never on the agenda are the limitations facing the company. A limitation is a constraint preventing the business from achieving its goals.
Limitations are the core of the “brutal facts” that most CEOS don’t enjoy talking about. Managers are also aware of these same limitations but do not bring them up in meetings, hoping these issues will go away.
News flash — limitations won’t go away until bankruptcy papers are filed. Opting to challenge limitations requires a concerted, focused and energetic effort to do so, accepting that it will take time to see meaningful change.
What are the limitations facing your company today? Let me address my top two concerns.
First: Employees. My belief is that everyone on the payroll either helps the company or they hurt the company. There is no middle ground, no in-between. Every non-contributor places a limitation on the ability of your company to perform, to execute, to grow. Likewise, every contributor needs be coached to contribute more for the company.
The people discussion rarely takes place, but with payroll and related expenses being the largest expense category of most businesses, it should be a regular topic. The CEO needs to lead the charge.
About tenure in a company: just because someone has been receiving a check from a company for any length of time does not mean that they are more loyal, dedicated or contribute more than others. The loyalty may exist simply for the paycheck and the associated benefits. I am concerned that tenure breeds entitlement, and entitlement brings an attitude of contributing less and believing that is acceptable when it is not.
When people don’t perform, neither does the company they work for. It’s up to the CEO and the management team to deal with human capital and to maximize that return on investment.
I follow people with cash as a significant limitation. Employees think about cash flow from a very personal perspective, defined as a regular paycheck, a pay increase and possibly some kind of bonus.
But cash (or lack of it) determines the ability of the company not just to meet its financial obligations but to invest in growth opportunities as well.
Sadly, many CEOS treat cash like a new tube of toothpaste. A lot of the paste gets wasted when the tube is first opened but when there is only a little bit left at the bottom, the CEO becomes very conservative, trying to make every little bit count.
Smart CEOS stay on top of cashflow and have a 13-week rolling forecast to identify concerns before they become issues. These same CEOS are always looking for ways to grow access to capital, reduce costs and pay bills when they are due but not before to maintain cash balances.
There are other limitations such as information technology (hardware and software); physical plant and location; capacity to deliver; slow decision-making; and my favorite, the CEO has too many distractions and too little time to run the business properly. Any of this sound familiar?
Ken Keller is an executive coach who works with small- and midsize B2B company owners, CEOS and entrepreneurs. He facilitates formal top executive peer groups for business expansion, including revenue growth, improved internal efficiencies and greater profitability. Email:ken.keller@ strategicadvisoryboards.com. Keller’s column reflects his own views and not necessarily those of the SCVBJ.