“The directions and turns the world will take are embedded in the past and in the present. We often recognise them retrospectively, but our purpose is to anticipate what lies ahead. To do that successfully, we need to keep a distance and a clear eye. ”
John Naisbitt[1]
When we lose sight of the goal, we get stuck in obstacles. I came across this phrase a few years ago and have found it to be invaluable ever since. Goals give you direction, keep you focused and on track, provided you keep your eye on the ball!
The devil is in the detail. You need to think ahead meticulously, taking into account key deliverables and performance indicators that must be accomplished along the way to achieving set goals and objectives.
In an intensely competitive and challenging environment, it has become even more important to keep an eye on the fundamentals of business, in other words, keep your eyes on the ball, and by this I mean don’t lose sight of the ‘vital few’: 1) cash flows; 2) customer satisfaction; & 3) employee satisfaction. One supports the other and the connection between the three is crucial.
Of course, these three dimensions are not the only elements that a manager attends to; there are many more, for example, quality, productivity, inventory management, supply chain, regulatory requirements, profitability, IT, etc. The problem starts when you get lost in details and forget the basics of running a sound business.
Why do businesses, big and small, end up filing for bankruptcy? Because their managers fail to keep their eye on the ball! They ignore the fundamentals — cash flow. Cash is the very life-blood of any business. Just look at the staggering sums of money being dished out as stimulus packages by governments around the world to keep key businesses alive in their respective economies.
Here is a simple fact. Your company’s cash flow grows, when people pay attention to identifying and fulfilling implicit and explicit needs of your customers by providing them quality services and products. This in turn enables your organisation to fairly reward and compensate people who perform, invest in product development, training, process improvements and R&D, thus strengthening organisational capability to serve your customers even better. The ‘ball’ becomes a virtuous circle.
Keeping your eye on the ball is the best way to stay ahead of competition. This is done by remaining focused on your customers unfolding needs. The key lies in consistently delivering on your promises, while surpassing customer expectations. Make it your mission to add ever-greater value to your customers through timely delivery of innovative products and services.
All this requires continuing investments of time and money. Time, you will find… but it all comes to nothing when the cash runs out! Why keep an eye on your cash flows? Because looking at profitability alone is not enough! Profits can so easily turn into losses when debtors don’t pay up!
Liquidity is king, particularly nowadays when banks are also tight on cash and not as amenable to lending. All types and size of businesses, including corner shops, borrow money when they need to; to get their inventory, produce products and services and sell them at a profit, pay off their interest and other overheads by increasing the velocity of their sales. They make sure they have cash in hand at the end of the day, instead of unsold goods and services. It doesn’t take an MBA graduate to work this out.
You need to see your organisation in its entirety to ensure that its overall performance improves through better decision making and execution. To this end, it is important for you to do two things: 1) keep a distance (helicopter view) in order to think strategically, and 2) make time to be close to the action and observe the nuts and bolts of what’s making your organisation tick. For example, observe the daily sales calls, coordination and cooperation between the different functions, customer feedback at points of sale at your call centre, and how everyday decisions are being taken at every level that impact yours and your customers’ bottom line. This requires you and your senior executives to, more than occasionally, leave the comfort of your plush offices, to be with and around your troops – observing, supporting, guiding and encouraging.
All your employees need to feel a sense of ownership that comes from them being able to relate how, what they do individually and collectively, truly makes a difference to their business. Your hands-on leadership style is essential and can be augmented by training provided to everyone in your organisation, which covers core concepts of accounting, such as familiarisation with the balance sheet, the income statement, cash flows, break-even analysis etc.
Once your managers and staff are better able to connect with the big picture through improved numerical literacy, they will make more sense of the data they receive periodically. This will motivate them to negotiate better terms with customers by cutting down, say, a 60 days receivables to 30 days or less. Likewise, you will find them leveraging their relationships with suppliers by buying more time for payments from them; staff in the canteen will take care to switch off the air-conditioning and lights during lunch hours without being told. A point will come when all these little things will add up to present you with better cash flows and a stronger enterprise.
Positive cash flows will be achieved when everyone in your company thinks like an entrepreneur and learns to keep their eye on the ball!
[1] In his book: Mindset – Reset your Thinking and See the Future (p.20), published by Collins, 2006
