Edition 87 – Efficiently Broke

Over more than a quarter of a century, I’ve worked with hundreds of family businesses. I’ve seen a lot of what works and lots of what doesn’t. I’ve seen good businesses turn bad and I’ve seen bad businesses turn around and storm ahead.

A recent experience inside a family business that I work closely with had me thinking about why good businesses turn bad. It also reminded me of another business I’d been made aware of that lost the key focus of the business – which was to serve the customer.

In the first example, a management appointment to a family business was made after much discussion as to the future direction of the business. It was time to develop the management structure and enable the owners to develop the areas of the business they wanted to focus on.

A job advertisement was placed, resumes were received, candidates were interviewed and one, who appeared to fit the bill, was appointed to the role.

Within the first week, this appointment was identifying “problems” that he saw in the business. A business that has grown for 15 years and been profitable in every one of them.

The appointment determined the business’ systems were lacking (they weren’t) and needed immediate rectification (they didn’t). The more “problems” he identified, the more he convinced himself the reporting systems inside of the business were poor (they weren’t), needed overhauling (they didn’t) and he should take the task on without delay or consulting the owners.

When the owners quizzed him as to what he was up to, he was not backward in coming forward and suggesting that without proper reporting, they couldn’t get to the heart of all the issues in the business. Proper reporting, that is, that suited him, not the owners, and was to be done at the expense of serving the customers in this retail focussed business.

As the days grew into weeks, we quickly identified that this chap was more about re-jigging existing reports and designing new ones rather than spending time with the customer – one of the key requirements of his role. Clients walked into this business because they had an issue (and sometimes a problem) that needed solving and with some attention to their needs, almost everyone would leave with their issue resolved. Except that as this chap spent more time on re-jigging reports, more people were leaving the business with their issues unresolved.

Clients come to your business because they have a problem and you have a solution. If you merely tell them their problem needs to wait a little longer whilst you sort out all the macros in your Excel spreadsheet, they will go elsewhere. Ultimately, you will lose a client – and if that persists, you could lose a business.

In the second example, a refugee from corporate life invested his family’s life savings in a business in a field that he was unfamiliar with. He determined the business that he paid good coin for, needed fine tuning (begging the question why did he pay so much?) So, he spent 18 months re-designing the business’ procedures.

Whilst the systems manual ultimately looked picture perfect, there was a major problem facing the business – the owner had spent little time engaging with the customers. He’d been and seen very few of them. At first, a steady trickle, and ultimately, a flood of clients moved away from the business. This owner didn’t look after his customers, so they chose to go somewhere where they would feel loved, appreciated and have their demands met.

All of this made me reflect on how some people focus on efficiency whilst they’re driving their business towards a cliff. Efficiently broke!

This Week’s Tip

Are you spending time in your business getting your systems and processes “just right” at the expense of looking after your customers?