Businesses Need To Stay In Shape To Qualify For Loans

Businesses Need To Stay in Shape To Qualify For Loans

Recently the Bank of Ireland approved €1.2Bn in new credit for SMEs in the first quarter of the year. But businesses need to stay in shape to qualify for loans in terms of structure and strategy, as well as being efficient in their daily operations. Business advisor John Raftery explains why focusing on the bigger picture is crucial for companies seeking funding to grow their companies.

John why is it important for businesses to be in good health all the time to access funds?
Many companies don’t think about getting themselves into the right shape until they want to access funds, or put themselves on the market to sell the business. I would argue that companies need be in the right shape all the time, right throughout their lifespan. By that I mean companies need a very clear set of performance metrics that drive the company’s performance. These KPIs need to be visible and shared with as many of the staff as possible, if not the entire workforce.

In order to get to that point quite a lot of work needs to be done to make sure you are measuring the right things i.e. your KPIs are the correct ones. This goes back to what I’ve learned from working with SMEs throughout Ireland; that information is assumed to be available but often the information is in people’s heads or it’s stored away on laptops or in spreadsheets. Various individuals have certain pieces of the information, but there isn’t one overall document or format containing all the information for everybody to follow.

A lack of focus on the big picture
A lot of companies are very busy with day to day operations delivering their products and services. This ‘busy’ environment results in a lack of focus on the big picture. I think innately companies know they need to address that issue. They are aware they need to be better organised and create more efficiencies and focus more on the bigger picture, and they need access to information more readily. It’s always in the back of their minds to do that but they never get around to doing it because day-to- day activities take over and a lot of firefighting takes place. One of the reasons so many companies end up firefighting problems is because they don’t take the time to stand back and look at the bigger picture, and get themselves organised and more focused.

What are the consequences for companies who don’t share information like KPIs?
The consequences are more and more inefficiencies, a lack of communication between people and tasks getting completed with the same issues and problems arising again and again. A lot of companies are solving the same problem repeatedly without ever taking the time to do some root cause analysis. Information is often misinterpreted; people assume that what they are doing is the right thing.

For example, I was working with a white goods company who had a team of engineers taking care of service repairs. But the information regarding each engineer’s call out performance was not relayed back to management. It turned out that the first-time repair rate of the engineers was very poor, somewhere between 55 – 60{aa1e4c34c9c0f46e0a1f04e30c2eb1b9efaea7a47ed6ca6f324476e114da37f4}. The company owner never took the time to step back and examine that first time call-out rate because he was too busy firefighting problems within the business. As a result there were a lot of issues around this from customer complaints to rescheduling of visits, wasted time and problems with availability of materials. The company was very busy but unless they share information and step back to analyse and understand that information properly, and understand the issues that are causing the poor performance, they won’t be able to find the right solutions.

So companies can appear to be very busy but they‘re busy doing all the wrong things.
Yes, ‘busy fools’ is a term often used to describe companies in that situation. I always get uncomfortable when I see a company whose staff are doing a lot of firefighting. Now firefighting may be understandable sometimes when a business is going through a particularly busy period, or something dramatic has happened to the business. But firefighting should only be carried out for a short period of time. Then it should be back to normality, back to the organisation’s disciplined behaviours by everybody in the business. Unfortunately some companies are firefighting all the time. Some people even derive satisfaction from firefighting; they say a good firefighter always carries his own box of matches. There are people who think of themselves as heroes – MacGyver types – who like dramatic solutions, rescuing a situation and pulling it out of the fire.

Company Culture
It’s all to do with the culture of the organisation. You can walk into some businesses and everything is very calm because it’s very well organised. People know exactly what they are about and what they are required to do. If you ask them to report on their activities they can articulate exactly what their roles and responsibilities are, and tell you the performance of their department in relation to the overall performance of the business. You go into other companies and they tell you their tale of woe, how busy they are and all the hours they’re working, how they can’t take a holiday, the stress etc. But they are all over the place, there is no central core in the organisation to keep them focused and no disciplined approach that gets them to report back on a regular basis.

What solutions can you offer companies that are stuck in firefighting mode?
Well LEAP has a product called futureSME which is a business solution developed by researchers at the University of Stratclyde using European Union funding. It takes the best practice methodologies of the most successful large companies from around the world and applies them to small and medium enterprises. The futureSME method is the ideal tool to help businesses achieve clarity about their current performance and their vision for the company.

The methodology is divided into two sections

1. Visual Strategy
The first section looks at visual strategy which is about creating a vision for the company, and understanding what the company mission is in terms of its values and behaviours. It also examines the business model by performing a SWOT analysis to help business owners and senior managers create a clear strategy for the business going forward, and understand what their priorities are.

2. Visual Management
Once that company vision has been clarified you can move to the second step which is about visual management. This is where you set four or five goals for the company and those goals have to be succinct and clearly articulated and, most importantly of all, they must be measureable. Without measurement the staff and management teams won’t be able to gauge if progress is being made or not. You then need to create lines of action which prioritize various activities of the company. You assign owners to those activities and set timelines for completion of activities and outcomes. You also look at what type of results those activities will bring you in terms of efficiencies or cost savings. You will then be able to measure progress against your goals by using those lines of activities. Most importantly you will be able to use KPIs that will tell you if you are on track or not. Visual management will allow you to see where you are successful, but also tell you where you are falling behind and who is responsible.

Management Discipline
Once you have a clear set of KPIs they will drive performance of the company. But what you really need to underpin all of that is management discipline. The management team should meet on a regular basis, weekly or monthly, to review overall performance using the visual management tools. They should review the same things each month like their sales pipeline, their customer service performance, financial performance, operations and staff performance.

You have to have a very disciplined approach to it so that you are continuously monitoring your performance and progress in relation to your goals. If you want to approach a bank to raise cash then the bank can see very clearly how the company is performing. They can see what its direction is, what its goals are, what its strategy is. Rather than deciding that you need money and then creating more work for yourself by developing some business plan on-the-fly to get funding from the bank. That is not the most effective use of people’s time.

Are companies more likely to qualify for loans if they provide evidence of a visual strategy?
Well it’s not the only factor. They also take into account the market the business is in, that also has an influence. But if you require the money for investment because you believe you can improve your business performance, then you will need to be able to articulate what your strategy is, what your current performance is, what your goals are and what you are tracking to measure those goals. So it’s not the only factor but it’s a vital one to get right.

Why should business owners contact LEAP before trying to access funds?
We help businesses get into the right shape so they can access the funds they need to grow. LEAP is the sole licensed provider for delivering the futureSME business model to companies in Ireland. We have an excellent record of transforming businesses particularly in the SME sector. The tools we use were designed specifically for SMEs, and we have a very experienced business team who have worked with a wide variety of companies around the country.

 

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In interview with Des Kirby 

How to make team meetings more effective

How to make team meetings more effective_John Raftery blogIn this part of John Raftery’s series on visual management he addresses the problem of team meetings that lack purpose, and have little effect on performance. Due to a lack of delegation and accountability meetings will often drift off the agenda, with team members no better off after the meeting than they were before it. What can managers do to correct this? Here John explains how to make team meetings more effective, and how a simple visual aid like a Gantt Chart can transform meetings.

Team leaders must track performance

‘What companies need are not meetings for meetings sake. Meetings do have a bad name and the reason they have a bad name is because they go on too long and tend to go off track. People often come in ill-prepared for the meeting, then minutes are taken and issued out. People don’t look at those minutes until just before the next meeting takes place, so nobody really takes any action. The meetings just go on and on indefinitely, without really achieving anything. There is no tracking mechanism to see how effective the meetings are.

Visual Management

The simplest and most effective way to make meetings useful and efficient is, once again, to introduce the concept of visual management. If you were to do a Google search on work plans you will probably see lots of different examples of plans which are basically Gantt Charts. Instead of issuing minutes to the team after a meeting, all you need to do is take your weekly or monthly meeting and divide it up into 4 or 5 core areas.

Creating accountability

Under each of those core areas you will have different lines of action in the left hand column. The next column will show who the owners of the lines of action are, in other words who’s responsible for implementing those actions. Then divide up the right hand side of the page with a timeline of 12 months or 52 weeks. There you track the activities by colour coding them using green, orange and red. Green indicating actions completed successfully within the timeline, orange indicating actions delayed or postponed and red indicating actions incomplete within the timeline.

How to make team meetings more effective_visual managementYou can then print this Gantt chart out on an A3 sheet of paper, and this can act as a very effective tool in managing team meetings. Not only does it show what people should be working on and what’s coming up next, it also helps you to track the things you have achieved over the year. As more and more items are shaded green, you get a good overall picture of the progress that’s being made. It’s a very simple but effective tool that gets away from the standard process of meetings that can often drift off course, and where no real progress reporting gets done.’

John Raftery is a business advisor and executive coach at LEAP.

Interview by Des Kirby
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Successful Teams Use Visual Management

What is Visual Management?

Successful teams use visual management_John RafteryHow do you go about developing a visual management system within your business? In our continuing series of visual management training articles, John Raftery delves deeper into the process of visual mapping. Here he discusses how management teams can use visual tools to help them display company goals and the actions that underpin them. Visual aids such as Gantt charts and bar graphs keep management teams focused on strategy and accountable for results.

Visual Strategy

‘I work with management teams and generally what we start with is getting the top 3 – 5 goals of the company articulated. Then under each of those goals we would discuss the strategies needed in order to achieve those goals. The strategies then have to be turned into clear lines of action. If you can imagine a large whiteboard or notice board that has lines of action, as in the form of a Gantt Chart. On the left hand side you have the lines of action, in other words the actions that need to be taken in order to achieve the top level goals. The next column will list the owners of those actions, in other words the people responsible for implementing the agreed actions.

Tracking Activities

There may also be a timeline that could be divided up into 52 weeks or 12 months or whatever is appropriate for that particular team. The chart will show when the various actions are going to occur, and you can flag the actions with a colour coded ‘traffic light’ system. Green means that the action is on target, orange indicates that the action is in difficulty or has been delayed or is still in progress, and red flags indicate the action has not been completed within the time frame agreed.

Gantt Chart_successful teams use visual management

Creating Accountability

This is a very simple but clear mechanism that allows the team to see clearly what activities are taking place within the company, who’s doing what and what progress is being made. The information is displayed on one large whiteboard, and alongside this you can display key performance indicators (KPI) in the form of bar graphs which will indicate how well your lines of action are affecting the performance of the business. Tracking these KPIs is crucial for identifying which lines of action are working and which ones need adjusting.’

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Visualise Your Company Success Story

 

Visualise Your Company Success Story

Visualise Your Company Success Story

In a new management training series business advisor John Raftery discusses Visual Management, a business methodology that has worked wonders for management teams within large corporate organisations. Here he explains how you can visualise your company’s success story and why this visual approach is more successful than traditional methods, and how small and medium businesses can benefit from the ‘display and engage’ approach.

What is Visual Management?

I work a lot with clients in the SME sector and often when I go into their offices or business premises I see little by way of business related posters, graphs, bulletin boards, Key Performance Indicators (KPI) or business charts around the building. But if you walk into a multinational corporation’s building that’s exactly what you find.

Every type of visual mechanism is being used to try and get the message across to the workforce about what the company represents, how it’s performing and what it’s key goals are and what it’s key performance indicators are on a daily basis. So really visual management is about trying to take that culture from the multinational organisations and try to bring it into the SME sector.

Why is visual management better than traditional methods?

Why is visual management better, or an improvement on, the way companies currently work? The answer is simple; the thing is that for the vast majority of companies I work with the key information is being kept in people’s heads, or stored on spreadsheets on their laptops. Everybody in the organisation then assumes that everyone else knows what’s going on, but in actual fact a lot of that key business information remains hidden away and largely ignored.

Visual management is about trying to extract the most important facets of that business information and make it visual. In other words to display the most vital information on a noticeboard or Gantt chart, or to represent KPIs through the use of bar graphs. You get the information out there and this helps engage people more in the business process.

Management Engagement

It distils the information into communicative, more consumable pieces for management team members and team leaders to track, understand and act upon. Remember one of the most important things about trying to communicate with people; people remember what they see and engage with, they recall very little of what they hear. If teams are fully engaged with the company’s goals and vision they come to understand it and that has a powerful effect.

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