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A Day In The Diet Of A CEO

Written by: Michael Cook, Executive Contributor

Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.

 

I was recently asked to help discern the actions that a company had to take, to turn part of their business around. Specifically, what a strategy should look at if they were to quickly get some results.

Inevitably I asked more about what they were seeing that they wanted to change, and what they had tried so far. It became clear that a lack of energy wasn’t the issue, it was where the energy was being focused that was the problem.


So, we ran through the Pareto Principle (also known as the 80/20 rule). It is something that many in business instinctively understand and feel. It explains how 80% of the results stem from focussing on just a few key things, often referred to as the 20%. Although the principle originated from an Italian economist many years ago, when referring to the distribution of wealth, it has since been seen as one of those immutable laws of life, applying to a wide variety of contexts. For example, many will have seen how businesses often derive as much as 80% of revenue or profit from a few key accounts. Or where 80% of IT system crashes can be caused by a handful of bugs.


And this is where we started: what were the important things that weren’t happening?


To help bring real clarity to their approach, and to what to measure, we used what they later coined as ‘an Alphabet soup’. Yet while their situation was quite unique, the approach can be rolled out to any business change or improvement you seek to make and is explained here. Your own ‘Alphabet soup’ served up.


KRAs – what are the key result areas? The areas of the business that are causing concern and where you need to see some different or additional results. These could be areas of strategic concern, opportunities untapped, threats to mitigate or weaknesses to minimise or eradicate. Even strengths that aren’t being leveraged fully.


KRIs – these are the key risk indicators. When planning any change in the business, it’s very prudent to understand the risk profile that might come with it, and what the company’s tolerance to those is. For example, staff retention or skills shortages. Will people want to stay in the new environment, and can you easily hire the skills you will need? Perhaps competitor reactions and its impact on pricing and margins? What about supply chain security or the impact of a change in interest rates and currency moves? The indicators are the risk areas to monitor so you don’t leave yourself exposed, an early warning system if you like.


OKR – next comes the objective’s key result. Frequently confused with KRAs and KPIs (see below), you must specifically define the result you expect to see at the end of the change objective. After all what gets measured gets managed. It’s important the result is measurable in numerical terms, whether % or $ or other, and a timeline included.


CSFs – are the critical success factors: what do you believe are the critical things that need to happen to achieve the results you are looking for? Again, not to be confused with KPIs (yes, we are coming to those), these are worth careful thought and managing. McKinsey famously identified 7 crucial areas for a project’s success, and these equally apply here.

When looking at the critical success factors, which of the 7 groups do you most need to focus? These really are your 80/20 gems.


KPIs – so, to the infamous key performance indicators, the popular term in business jargon that many are judged by. In short, what you need to see to know you’ve been successful along the way. So, the KPIs keep you on track and are how you know whether you’re on track.


LLIs – are the leading and lagging indicators. Your business doesn’t operate in a bubble, or a vacuum. The macro-economic picture can change, markets can change, the political environment might change. What are the other indicators you might need to monitor? Leading indicators are predictive, for example consumer confidence, purchasing managers’ index, average hours worked. While lagging indicators are those that change over time such as unemployment rates, corporate profits, labour costs per unit, retention rates.


The success of this approach is embedded in the lesson that all successful companies have learned. Understanding the big causes and focusing ruthlessly on those is what top managers understand how to do. And in a series of articles over the coming weeks we will seek to show how this isn’t an approach that many businesses take.


Because our work regularly reveals that most companies focus so much of their effort and energy on areas that matter very little to the longer-term success. Sometimes even to the detriment of the survival of the business. How to spot this and then correct it matters.


But first, why does this happen?


So many companies succumb blindly, day to day, to the perils of 80/20. Busy being busy, focused on what they believe to be all-consuming and important, while missing the underpinnings of success, securing, and monitoring the essentials, the areas that without which the company will not succeed. Established business thinking, originated by Charles Hummel, coined the expression ‘Tyranny of the Urgent’, and it quickly became a business classic. There is a regular tension between things that are urgent and things that are important—and far too often, the urgent wins. Deeper analysis though will often show that what appears on people’s desks as urgent usually has a familiar feel, and common cause.


Yet the urgent nature of the issue means the ‘step back, pause and reflect’ process doesn’t happen, especially within the cycle of other pressing day-to-day matters. While many organisations help the processes that tackle the actions needed, whether it’s communication, delegation ability or conflict handling, the calm analysis and decision-making often get parked to when things are quieter. And when did we last have a quiet day?


Interested to learn more? Do get in touch.

Follow me on LinkedIn, and visit my website for more info!


 

Michael Cook, Executive Contributor Brainz Magazine

Michael Cook is a leading thinker on how to get out of the weeds of what you do, and into the realm of creating what you want to happen. So why 80/20? The pace of life, not just business, means that we rarely spend the time building a plan, a strategy of how to get to where we are headed. And for understandable reasons. Our desks get filled with the now, whether urgent issues, other people’s problems or simply the habits we’ve grown accustomed to and which is probably the combination of same. Naturally this leads us into reactive mode, rather that the proactivity we need to avoid future issues, build the relationships we need and influence those we need to. His clients are those who see the value in that.

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