Why Knowledge alone is Not enough?

 KPL002 blog

I have often been surprised by the reluctance of SME’s to make use of the tools routinely employed by larger corporate organisations.

Tools such as CRM (Client Relationship Management), forecasting and scenario planning, and accounting software are all now relatively inexpensive, and are invaluable as tools to making businesses more effective.

You could almost be excused for thinking that SME’s want to stay SME’s!

In many SME operations life is difficult because there are not enough people engaged to delegate tasks to, and often the CEO is the key player making his vision happen.

The business often starts out with best intentions, buys the necessary software and hardware tools, needed to run efficiently, then becomes busy or overloaded, and the tools are used as day to day recording vehicles, rather than as part of a management regime of business reporting and control.

It simply becomes too much to worry about, even though the processes invented at start up are now being duplicated in various departments and the effort to get a regular report is challenging!

The problem is that most businesses need expertise that is not available within the business, to fix issues that arise, even if they don’t realise it!

The information and knowledge is most likely within the business, but simply needs to be filtered and presented in a managed fashion, and staff are just too busy, or occupied, to waste precious time working on management information!

I have been shocked to find that many of the CEO’s that I work with don’t know who their best clients are, or what their next 3 months forward sales orders forecast is, or what their cash position will be next week. These are not businesses that are mismanaged, indeed many of them are very successful, but the CEO simply assumes that others know this information, and when asked for it will be able to advise him. The critical issue is that unless this type of information is routinely required it soon becomes something that no one does and then no-one actually knows the answer to these fundamental questions!

As an interim manager, I regularly become involved with organisations that have the technology, the knowhow and the information that would tell them if the Key Performance parameters of the business are healthy or in need of attention. It is not until someone asks, often simple questions, that the momentum to generate up to date management information is initiated. This is frustrating because very often the management information is already available if you know where to look! For example Sage Line 50 – the  most used SME accounting software in the UK, contains some 500+ readymade reports a few of which if used and run regularly would identify  trends and impending challenges or pleasant or not so pleasant surprises.

The best way to ensure that you maximise the use of the information already within your business is to simply ask the simple questions that you think you already know the answer to.

By developing a regular (monthly) deadline for information to be presented in summary format, the CEO can force the company to be focussed on issues that previously would not have been identified.

The definition and implementation of a KPI (key performance indicator) approach has proven highly successful to a number of the clients I have worked with and focussed otherwise transparent issues to ensure a solution is identified and implemented before the ‘problem’ hits.

As an example, I recently worked with a company that was doing very well, growing rapidly and profitably. The operations team were exceptionally busy with Sales Turnover at record levels for the previous 6 months. When we investigated the sales orders received and the open order book, the company recognised that the business would run out of work within 3 months, rather than their assumed 6 month open order book norm. The sales targets were adjusted to new higher levels to rebalance the business, and growth has continued.

As an interim manger I am regularly asked what the KPI’s for a business should be, but in my experience it is really not possible to advise a generic set of KPI’s that work for every organisation.

If you ask an accountant you will of course get the standard financials – ROCE / Acid Ratios etc, but here I refer more to those KPI’s which will enable you to manage your business more effectively day to day and to recognise and make adjustments along the way. Most software has a dashboard and reporting package that enables deep interrogation of your data, and presentation in easy to assimilate charts and graphics – you just need to know what questions to ask!

I have used the Business Model Canvas to model organisations and to establish KPI’s for different parts of the business, from Sales to Post delivery support, and I strongly recommend that you take a fresh look at your organisation, make better use of the existing tools and data that you most likely already have and implement a regular reporting regime to monitor those KPIs that will make a difference to your business.

I know that many SME’s will take the view that corporates have the resources to enable these processes, and that their market or sector or business  problems are different and unique, to them, but I can assure that you corporates have at least as many challenges and the major difference is adopting and maintaining a management reporting discipline!

If you as the CEO can’t or wont set a standard who will? The data, knowhow and knowledge most likely reside within your business, but how you interpret that information is the critical part of the process. This is why Knowledge alone is not enough!

If you believe that I am wrong I would really like to hear your views and if you think I have something here I would also like to hear how you have improved matters in your business


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