On repeated occasions, a Business Administration professor faces the dilemma of the poor acceptance of the managers who take his subjects, manifested in vague assent to the main concepts, methods and tools that the “Academy” proposes to help and facilitate work in the management of organizations Local content.
The approach presented generally revolves around the following argument: “it could be true, but no, there are too many things to attend to here to stop at these overly scientific but very impractical matters.”
This article seeks to shed light, from a practical starting point and based on deep and careful observation for a period of time greater than one year to the management processes of an organization, on the value of taking into account academic recommendations: management of organizations can be greatly enhanced. The opposite can also promote success, but… why deny the value of the work of others who have observed organizations and systematized their functioning.
Specifically, the case analyzed is not one of the happiest in the field of Business Administration. The proposed title shows the result of the story: the transition from a business that promised resounding success to total failure.
The New Business Development Process .
Under current conditions , business competition is very intense, large companies are already strongly established in the industry and markets, so the emergence of new businesses consists of small companies based on a novel venture due to the discovery of an unmet need in customers not served by the big companies, or by the idea of a totally revolutionary product . If said venture is accepted in the market, strengthening and growth of the new company can be expected.
When the history of an organization of the aforementioned type is analyzed, it can be seen that the main management problems that it entails are the result of not having changed its management processes in parallel with the growth experienced.
The reason is simple but not always visible to the entrepreneur: when a company emerges and is successful, both achievements are undoubtedly due to the presence of effective personal leadership that has allowed the entrepreneurial idea to become a personal objective , which It is pursued with great force and leads to the transition from entrepreneurship to business.
However, there is a big difference between a successful idea or business and a successful company: a successful business can be achieved quickly, but its duration can be short-lived; A successful company is one that knows how to sustain itself over time in an increasing manner with a clear vision of the future and core values aimed at customer satisfaction , for which it requires trained personnel, available resources tailored to the needs, and adequate processes that allow the effective interrelation of all parts of the system.
The model presented in Figure 1 shows the ideal to follow in the transition from a successful business to a successful company, seen from the management point of view. The opposite usually occurs when the entrepreneur fails to overcome the tension that is generated between the desired growth and the needs for change in the management of the organization.
The observed case that serves as the basis for the preparation of this work followed a process quite different from that illustrated in Figure 1, which, in a brief summary, I narrate below and without going into specific details of the organization.
An entrepreneur had a good idea about developing a product for a certain market. The idea was not totally new, however, the competitors at that time were very weak as they could not respond effectively to customer needs with current products.
Based on previous experiences and a deep knowledge of the activity, the entrepreneur developed his idea in an attractive way so it was not difficult to obtain the legal and financial support that the business required to compete in the industry for the target market.
Initially all management activities were executed by the entrepreneur: the numbers, the processes, the connections with suppliers and clients, and most importantly… the strategy to follow.
As expected, good materialized ideas are well accepted by clients. This acceptance led to growth of considerable magnitude, so in order to respond to it, it was necessary to incorporate new doses of financing and people to support the magnitude of the activity.
From this moment on, the tensions mentioned above were generated: the incorporation of new people was carried out without knowledge on the part of the entrepreneur of the skills and competencies of the new personnel; and on the other hand without knowledge by the new people of the goals and strategy of the organization, as well as without detailed clarity of responsibilities and expectations on the part of management.
Essentially the problem was that the entrepreneur knew what he wanted, however, the rest of the people did not. Like almost every entrepreneur, he hated procedure manuals, strategic planning, drawing up policies and exercising leadership over others. When he worked alone those problems did not exist: he was the parts and the whole of the system.
Many entered and left the organization, several held “positions,” but in the end almost none managed to align with what the entrepreneur wanted. He didn’t understand what was happening. Before he managed to do everything well, now, that he had more people and resources, things turned out worse.
The moment for strategic reflection was absent from his daily work, since much of his time had to be dedicated to correcting the errors made by his work team. The control systems, too rudimentary for the growth achieved, did not timely report existing deviations from the plans, which were also non-existent: paradoxical? But true.
All of the above led to the chain of making a series of poor decisions, the loss of credibility and image with customers and consequently a deterioration in the results of the company’s operations. Even with the possibility of advice from an academic point of view, there was so little time dedicated to reading or simply listening to being advised, that the path increasingly became a crossroads with no exit. End result: business failure and a story from which to learn what not to do.
After some time of reflecting on what happened, I have been able to extract the following practical experiences, which I would like to describe from the point of view of Administrative Science regarding the following aspects: Ownership and Management, Strategic Reflection, Strategic Orientation, Customer Orientation, Leadership and Entrepreneurship, Working with People, Control, Decision Making and finally Help from External Agents (researchers and consultants).
It is necessary to clarify that from here on, some of the recommendations I will make may seem very crude or too harsh to you. I assure you that I have been an eyewitness of business failure due to non-application of them. It is in your hands to take them or leave them, the choice is yours.
Ownership and Management
- Preferably ownership and management should be separate.
Entrepreneurs do not necessarily have knowledge of Administrative Sciences. Nor do the owners of a company or the holders of capital have to know about it. If we start from the point of view that Administration is Science, Art and Profession, then we can ensure that there are personnel specialized in this profession, with scientific knowledge and know-how that can achieve better performance in management than someone who does not have this desirable combination.
On the other hand, directing an organization in which the entrepreneur or owner has very strong emotions involved can, at times, blind his or her systemic vision. However, a management professional who meets the aforementioned qualities is in a position to carry out more objective analyzes of the problematic situations that arise in the Administration.
Therefore, the recommendation is not to completely distance yourself from management, but rather to delegate it in the hands of more qualified people and ensure that they execute it correctly.
Strategic Reflection
- Strategic thinking is important, please dedicate a few hours of your time to it so that you have clarity in your goals and strategies.
Whether you are an entrepreneur, a business owner or a professional administrator, you will always be faced with the dilemma of strategic versus operational. The manager always finds great tension between these two important but opposite and at the same time complementary planes of management.
Given the current dynamism of the business world, the tendency is to prioritize the operational over the strategic. However, the operational can mean today’s sale, while the strategic will define the future of your organization in the target markets you have selected.
Although it may seem of little value, the simple activity of getting involved in a strategic reflection process, even if it does not amount to a formal, structured and written statement of the same, can enhance superior capabilities for strategic decision making in the manager.
Therefore, despite the tightness of your schedule and the need to get involved in the operation of your businesses, set aside time for strategic reflection: it can lead to business success.
- You can have clarity in your organization’s strategy, if others do not have it and you do not know how to lead them along that path, failure is most likely.
Generally, the type of strategy prevailing in a new company, launched on the market with an entrepreneurial idea, corresponds to a large extent with the vision that the entrepreneur had at the time of his conception of the business, which, from a theoretical perspective of the matter, can be framed within the Business school of strategy.
With the passage of time, in which people are incorporated into the new organization, it is most likely that said vision and strategy will still be enshrined in the mind of the entrepreneur. Absorbed in the operation of the business, which is why it has been essential to hire those who now accompany him, he does not have time or methods to share his vision in a clear and involving way, much less so that the rest can visualize what the path is. that can lead you, as a company, to reach the desired state.
And that is a criticism that can be made of this form of strategy: the strategy, in the form of vision, is locked in the head of a single individual.
In this way, new employees will work routinely and wait to receive orders, without deploying the full potential that can contribute to the achievement of organizational objectives. If they do the opposite, they could be contradicting the vision that exists in the entrepreneur’s mind.
In short, the entrepreneur knows where he is going: the rest does not, they only follow him. The entrepreneur may be following a path: the rest a direction somewhat removed from said path.
So be communicative: make your vision the vision of your company; Allow others to contribute to it, allow them to make it theirs too. In this way, the achievement of the desired state will be guaranteed in a much shorter period of time.
Customer orientation
- Selling is not your best business alternative, but rather detecting and fully satisfying your customers’ needs.
An entrepreneurial idea is always based on the discovery of a new way to satisfy an unmet need in the market. This promotes the success of the business and consumer preference, which is consequently followed by an increase in sales, which in turn generates new desires to continue selling.
However, the competition, and especially the big ones, are always on the lookout for something new; and under current conditions, most innovations are easily reproducible.
If your focus is primarily focused on continuing to sell, increasing your sales more and more, continuing to sell… the most likely thing is that you will soon be displaced from the market by someone stronger than you, who with greater amounts of resources, will be able to overcome and make the standard. what was once its innovative or distinctive product.
Therefore, sell with all your strength, but dedicate a large part of your energy to studying the market, its preferences, and continuous innovation in order to discover better ways to satisfy all of your needs, which will guarantee its durability over time. .
- Customers highly value the additional services provided to them when a product is sold to them.
Generally, good products succeed in the market, but when the Product Life Cycle enters the maturity phase, the competition has already penetrated the sector and the markets, since no product is exclusively inimitable.
Therefore, for its maintenance, continuous innovation and product extension are essential, which to a large extent can be achieved by adding certain customer services, which may not have been conceived in the initial idea, but which can increase the value perceived by the customer.
An example that can illustrate this approach is in the business of distribution and marketing of goods: this type of company can arise from the detection of an opportunity to connect several industries with a market that is being served individually by each industry.
Distribution provides value for the client by itself, by allowing the connection between producers and clients, reducing the number of exchanges and therefore the cost of transactions.
However, this does not turn out to be a complex business. Therefore, to remain competitive in their markets, commercial companies can think of ways to add value for the client, such as including in their services assistance for the preparation of mixed orders in which the conjugation becomes very cumbersome. of the different restrictions to which the client is subject: budget, specific needs of the markets it serves, renewal of the portfolio of products offered, prices, profitability margins, etc.
Therefore, being customer-oriented in this sector could mean the inclusion of a customer support service in determining the optimal order that the customer requires.
- A “good sale” today for you and not for your client can turn into hell tomorrow. Therefore, be polite, do not impose your criteria, let your client be the one to embark if he is not clear about what he wants.
Generally, when a company emerges, its founders, businessmen or entrepreneurs have three great interests: selling, selling and selling. And it is logical, only through considerably important levels of sales, will the new company achieve its permanence in the sector, its growth, the fulfillment of its financial commitments and the profitability returns that the parties involved expect.
However, sales processes should not be carried out in an uncontrolled manner and without prior planning. On many occasions, in order to achieve the projected sales levels, errors are usually made such as lower quality in the products and services than what is offered to the client; failure to comply with contracted delivery terms; failure to comply with the agreed amounts; variations in prices due to the need to resort to other sources of supplies that may have higher costs than expected, and therefore increase the price of the final goods; among other.
In the event that one or more of the above problems arise in the organization in terms of serving its current clients or new clients, what guarantees you that the client will be satisfied? What guarantees you that the purchase will be repeated? What guarantees you that the customer will not switch to the competition? Unpredictable questions, but if they are answered in the negative, everything you have built can collapse like a house of cards with a simple wind caused by yourself.
Therefore, it guarantees more than the sale itself, customer satisfaction, in which the delivery of goods is one of the last steps.
- Client-seller relationships are good, but they last as long as there are interests between both parties. Don’t trust too much, your client is not your best friend.
Although the previous statement may seem too harsh, it has real implications for business and particularly for new companies. I will explain below.
Under current conditions, the emergence of a new business, idea, venture or company is given by a network of relationships that entrepreneurs are capable of weaving . Think about several ideas: Obtaining financing: who is willing to risk their money on a business for which success is not known with certainty? On many occasions, entrepreneurs go to acquaintances from the business world, former classmates from the University; all people, in short, with whom a network of relationships has been established on other occasions.
The same usually happens with clients. Who takes the risk of buying a new product, which it is not known if it will be successful in the market or not? What guarantees market acceptance? Since all the answers include large doses of uncertainty, obtaining a client generally takes work, a lot of work, and those who take a risk with the new idea are appreciated by the organization as “good friends.”
However, be careful, do not confuse friendship with customer-seller relationships. A good customer-seller relationship is based on what both parties can provide each other. And as long as there are values perceived by both parties, negotiations and relationships will be good.
Friendship, on the other hand, is a higher concept that implies that both parties do not have anything to give. A friend is a person to whom the other party will sometimes have nothing to give, however, they will be willing to listen to you, serve you, pay attention to you without receiving anything in return.
For certain, can you affirm that the conditions in the previous paragraph will be accepted by your client?
Obviously the answer is NO. Therefore, even if clients seem very friendly, interested in you and your organization, etc., do not trust them, if you do not have anything of value to offer them, you may lose them, because they are not your best friend.
- Favorable relationships with suppliers foster favorable relationships with customers.
Customer orientation does not exclusively mean establishing good relationships with customers. An organization may have the best relationships with customers, which, if not supported by proper relationships with suppliers, can be destroyed.
Inadequate raw materials, untimely deliveries of supplies, high prices of materials, non-payment to suppliers, inadequate information management between suppliers and the organization can hinder your business and management processes, which in the long run will not allow you to adequately serve your customers. .
Therefore, it is necessary to take a proactive approach to the marketing of the organization and not only market forward, but backward, that is, with its suppliers.
Leadership and Entrepreneurship
- Although it is true that possession of entrepreneurial capacity is expected of every leader, being a good entrepreneur is not necessarily directly proportional to the ability to be a good leader to work with groups.
An entrepreneur is someone who has good ideas and knows how to put them into practice. However, a leader is the person who has the ability to influence and influence others so that they do what he wants.
In the case of business organizations, the leader is the one who can lead others towards the fulfillment of organizational objectives.
Therefore, if you are a great entrepreneur but you don’t know how to direct, don’t worry: find someone who will do it, stand aside and allow it to be done.
Work with People
- Financial assets are not the most valuable thing your organization has: people are, so don’t give away your best to the competition.
Both the practice of business management and the academic field that is responsible for the study of this science recognize that currently the most valuable thing in an organization is people. However, how many times, after receiving that statement from a businessman, are completely opposite management styles not observed in the same business.
Therefore, it is not so important to be aware of the value of people in the organization, but rather to appreciate them as such. You are not capable of giving away your company’s financial resources to anyone “in need.” However, on many occasions a management style that does not take into account that people are simply but profoundly and complexly that: people, can encourage, even unconsciously, its most valuable resources to switch to the competition.
And it is really the only alternative they have, since it is the only way to guarantee their existence and reproduction as a social being.
You must look at people as your greatest investment: you have invested in them, you have trained them, you have provided them with well-being, a way of development, etc. You don’t throw something away that you have dedicated time and energy to, but instead try to value it more every day.
Therefore, do not give away what has cost you so much work: your people.
- The creation of friendly relationships between employee and manager enhances useful and long-lasting businesses.
The value of interpersonal relationships for the management of an organization is indispensable: good relations between subordinate and boss can become an element of motivation for its employees.
Motivated employees mean people more willing to do more for the organization, to transmit their good cheer to customers and suppliers and to make business more effective and lasting.
Therefore, be sure to establish and maintain a work environment of good interpersonal relationships in the organization; no matter the character of the people, you are the most interested and the one who gains the most.
- Never hire anyone if you are not sure that they are the right person for the job you need: be clear about the skills required to perform well in the position.
In their desire to make the organization grow, entrepreneurs often hire people who are not always the most suitable for the objectives sought or the results expected to be achieved.
When a business is small or in the growth phase, entrepreneurs do not have the knowledge and tools available to recruit people with the exact skills required for good job performance.
Therefore, it is essential, at least, to know the degree to which certain capabilities, skills, past knowledge, and experiences of the person you want to hire are present and even if you want it to be that one and not another, if it is not appropriate, Don’t take risks, remember that people are your best investment, therefore, you have to know the “feasibility” of your “investment”.
- A person in the organization who is supposed to be supportive of you and is not, should be “released” as soon as possible.
You must be aware of the people in your organization. Generally you expect support, acceptance of responsibility in delegating tasks, physical and psychological support to carry them out, etc. However, not everyone may be on the same page with your goals.
Therefore, if you detect that, having knowledge of the vision, strategies and objectives of the organization, someone is not being the expected support, it is best to look for the medium or activity for which they can perform positively, contributing their greatest value. Otherwise, she must be “released.”
I have heard managers proclaiming that “we are all good for something” and this may be true, what is not certain is that we are all good for something anywhere. Everyone should be where they belong and feel comfortable, where they can perform best and their capabilities and qualities best harmonize with the organization’s objectives.
This is easy to understand in the profession of musician. You can own a rock band in which you have recruited the best drummer of the moment. However, this individual does not like rock, as he prefers jazz. Wouldn’t it be best to find a drummer, perhaps not the best, but very passionate about rock, and let this star shine brighter in the genre of music he prefers?
Therefore, if your case is similar to the above, make the process easier, do not hinder it or hinder yourself.
Control
- Confidence is good, but control is better.
You, owner of a good idea, but of something that appears small, for which you have had to resort to third parties, cannot afford to lose what you have achieved.
On many occasions, when businesses are small, as in the diagram shown, control can be carried out by a single person and in his own head: the entrepreneur is usually a person of surprising capabilities!
However, when the company grows, it requires more than a prodigious mind to control the development of the organization. Both an appropriate control philosophy and effective controls are required.
- Your counter can be your right hand, but also the ax that leaves you limbless.
One of the oldest control tools is accounting. However, how many times do you not hear about frauds behind which the organization’s accountant, his right-hand man, has been involved. The interests of a businessman are not safe in the hands of a single person.
Therefore, ensure the application of the principle that above someone with authority there must be another with a higher authority, and above that other a third must watch over.
- Wanting to control everything when nothing has been controlled is not effective.
Although control is important, sometimes the mistake of resorting to extremes is made. As shown in Figure 1, the different stages that the small business must go through to consolidate and grow imply a process of change. At the same time, every process of change implies resistance.
Specifically about control, most human beings resist control. It is rare to find someone who, with total willingness, accepts control in various spheres of their life, including work.
Therefore, this process of organizational change must be carried out gradually, recognizing the possibility of resistance, and visualizing the ways to reduce it.
Decision making
- When you make a decision, be clear that it will have future repercussions, sometimes unimaginable.
Decision making is one of the fundamental activities in the management of an organization. However, sometimes decisions are made without following a rational model that considers the commitments that a decision generates. This process must be carried out with a clear vision of the impact that the current decision may have in the future.
Sometimes, an entrepreneur, in his desire to grow in his market and become a strong company, makes decisions without having all the information and without anticipating its future results. A business decision generally always involves future commitments with clients, with suppliers, with financing sources; commitments that must be taken seriously and fulfilled at the agreed time.
Therefore, when making decisions, be more reflective, visualize the future repercussions and inform yourself appropriately.
- If information is the most valuable input for management and decision making, create mechanisms that allow you to be informed about the information itself and what is done with it in the organization, lest one day someone I pulled an unexpected card up my sleeve.
Information is a resource that must be shared by everyone in the organization, from the bottom up and from the top down. Top management, however, may reserve the right not to share certain types of information downwards. What cannot happen is the opposite.
Therefore, design mechanisms and information systems that allow you to be informed about the information that your subordinates have. This is a valuable resource that everyone knows can determine success or failure in the business world.
An employee of your company should never possess information that you do not know, and if it is relevant to decision making, it should be shared. However, information is not obtained by force; mechanisms must be created for it to be shared.
Help from External Agents
- When you have management problems in your organization, do not change your management team with people who do not know the processes and people.
As the organization has grown, you may have incorporated management positions through external recruitment or internal promotion. However, you realize that the organization’s objectives are not being achieved effectively.
When this takes place, on many occasions the temptation suggests changing the management team, and on many other occasions, the way in which it is planned to do so is by bringing in “more experienced” managers from other organizations.
However, this can be a serious mistake. An effective leader in an organization organization, and if you do not know the fundamental processes of your business, you can be evaluated by the rest as inexperienced or unaware.
This may mean that some of your effective staff reject the new direction, and therefore, performance levels decline; in addition to generating many conflicts between managers and subordinates.
Therefore, evaluate the possibility of providing a solution to your management problems, to the extent possible, with your current management team and using other tools such as training or consulting, which is discussed in the next point.
- Never fear the presence of external researchers or consultants: their mission is to help, not destroy.
Generally in countries where there is no strong general culture about the value of organizational researchers and consultants, this work may be seen as unnecessary.
However, both researchers and external consultants can make solidly based proposals that provide improvements to the organization. The reason lies in the fact that an external vision, more rational and less emotional, can lead to the detection of real management problems and, given the knowledge and experience of these professionals, the proposed solutions can effectively hit the target of the problem.
So far the presentation of some problems that can occur in the transition from a small organization to a larger business, as well as the recommendations for their eradication. My intention has been to put them in your hands for your evaluation.