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People Development – Stewarding People

A primary factor in most business’ success is the people who work for the business. Caring for the people who work for your business by investing in their education, training, compensation, motivation and empowerment creates a culture and environment where people will want to give their best work for the company.

The idea of people development has gone through many changes and descriptions over the past one hundred years. I believe words matter and when people are called assets and capital it conveys a sense of ownership by the company over its employees. In my mind these terms are completely opposite of what stewardship and people development represent. People should not be considered an asset to be used, given occasional repair and maintenance, depreciated and eventually replaced.

The concept of managing people and being aware of training and compensation strategies is not new in the business world. The idea of managing personnel emerged as a clearly defined field by the 1920s. It began largely as addressing the technical aspects of hiring, evaluating, training, and compensating employees. Personnel management did not typically focus on the relationship of employment practices on overall organizational performance.
Economist Theodore Schultz invented the term “human capital” in the 1960s to reflect the value of human capacities. He believed human capital was like any other type of capital; it could be invested in through education, training and enhanced benefits that lead to an improvement in the quality and level of production. The term Human Capital is a measure of the economic value of an employee’s skill set. The concept of human capital recognizes that not all labor is equal and that the quality of employees can be improved by investing in them; the education, experience and abilities of employees have economic value for employers and for the economy as a whole.

In recent years companies have been emphasizing that the most important asset at their company isn’t something they can put their hands on. It isn’t equipment or the physical plant, and it isn’t data, technology, or intellectual property. The most valuable part of their company is the people. They use the term human capital to describe this asset and believe any plans to move their business forward has to start there.

Human Resource Management began to develop in the late 1970s in response to the increase in competitive pressures in American business as a result of such factors as globalization, deregulation, and rapid technological change. These pressures prompted businesses to begin to engage in strategic planning. This was a process of anticipating future changes in the conditions of the working environment and aligning the various components of the organization in such a way as to promote organizational effectiveness. William R. Tracey, in The Human Resources Glossary, defines Human Resources as: “The people that staff and operate an organization,” as contrasted with the financial and material resources of an organization. A Human Resource is a single person or employee within your organization.

Today companies are starting to see that an effective people development strategy is an important key for business success. This strategy needs to be able to react to changing business conditions. However, people development is not an easy strategy to implement. Many firms think they are training their people. Unfortunately many of their people do not think they get enough training.

People development strategy is about growing and developing the business. If the business does not grow and change, then there will be no business. Development of business processes needs to be in step with developing our people. The goal is to develop people at the same time as the business changes or adapts.

If the business changes but people don’t, the people in the business can feel threatened or stresses. When businesses develop their people but the jobs and roles do not change, then often people get frustrated and leave. Or they forget the training they have been given! The idea is to develop people just ahead of when they need new skills or knowledge. Train too early and people forget. Train too late and mistakes or safety implications occur whilst people learn. An effective People Development Strategy will ensure that the changes a business needs to grow and be successful are linked to appropriate people development.

You may have heard the quote by Zig Ziglar “What’s worse than training your workers and losing them? Not training them and keeping them.” I would suggest that being a good steward of people is to train them regardless of whether you think they may move to a different job. People move to new jobs for many reasons, but the majority of them don’t leave because you have invested in developing them as better workers and people. Besides, people development makes for a better community as a whole and therefore will be better for your business.

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Blue Ocean Strategy Book Review

Blue Ocean Strategy was written with the aim of challenging companies to create uncontested market space by executing a strategy that is both systematic and actionable. It is the author’s contention that many companies could break out of their current competitive, often-times shrinking market, and create new markets that render the competition irrelevant. The cornerstone of the blue ocean strategy is what the authors call value innovation. The conventional wisdom in business is that if a business person increases value to his/her customers through innovation, then that person is also going to be increasing his/her cost. Likewise if a business person uses a strategy that decreases cost he/she is going to have to lessen the value he/she can provide to his/her customer. The blue ocean strategy suggests that a company can pursue both innovation and low cost simultaneously. Value innovation occurs only when companies align innovation with utility, price and cost positions.

The author suggests that if a company understands the principles and strategies behind creating blue ocean markets, it will be able to maximize the opportunities while simultaneously minimizing the risks in the execution of a blue ocean strategy. The strategies fit within what the author calls the four actions framework. A company must identify factors that have under served or compromised value to customers. A company must identify factors that could be created that the industry has never offered. A company must eliminate factors in its industry that are taken for granted even though they no longer add value to the customer. Finally, the company must identify factors that provide products or services to its customers with little or no benefit but increases costs.

One of the key principles of blue ocean strategy is to successfully identify commercial opportunities that will reconstruct market boundaries and break away from the competition. The author has identified six basic approaches to remake the market boundaries. First a company must look across alternate industries that fulfill the same basic purpose as their own industries but is in a different form. Second a company must look across strategic groups within their own industry. Third, a company must look across the chain of buyers, looking at the purchaser, the user and the influencer. Fourth, the company must look across complimentary product and service offerings. Fifth, the company must look at the functional or emotional appeal to the buyer. If a company’s product is traditionally functional then how can it appeal to the emotional buyer, and if the company’s product is primarily sold because of its emotional appeal, how can the company market to the functional buyer. Finally the company must look across time. It must look at trends with the right perspective to take advantage of blue ocean markets.

The challenge with following these principles and strategies is how to influence the majority of people within an organization to want to think outside the box. Many times a company may have an innovative marketer or manager who comes up with a great idea, but lacks the support and structure to implement the idea. With the faced pace environment that we work in, there seldom seems to be time to think deeply and innovatively about blue ocean strategies. The author admits that companies have a tough time translating thought into action, particularly when the blue ocean strategy is a significant departure from the status quo. The author identifies four major hurdles to overcome in order to execute a blue ocean strategy. First, the employees must be made aware that there is a need for a strategic shift. Second, there seldom is an abundance of resources to tap into to execute a new strategy. Third, is the ability to motivate key employees to work hard and fast to accomplish a strategy that may seem unorthodox. Finally, with most companies the political environment is such that most people do not want to change for fear of losing their own power or position.

The bottom line for a company to have a chance at succeeding in the execution of a blue ocean strategy is that trust must be built deep into the ranks of employees. They must feel that the execution strategy is fair. Key employees must be engaged in the process. There needs to be a clear explanation as to why things will be done a certain way. Finally, an expectation of playing by a new set of rules must be instilled.

https://www.blueoceanstrategy.com/

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Your Business Life Cycle

From the moment you make the decision to set up a business, you’re in the “business lifecycle.” This lifecycle will see your journey go from idea to startup, to the growth and maturity phases, and finally if all goes well, to a successful exit.

Starting and growing a business has multiple challenges. As we look at each of the stages of the business lifecycle we will see a unique set of obstacles to deal with and overcome. You will have to be flexible in your thinking and adapt your strategy as you move along. Indeed, different approaches are required for market penetration versus, for example, what may be required to achieve growth or retain market share.

According to the recent Startup Genome Report, an estimated 90% of those startups that fail do so primarily due to self-destruction. It was their founders’ own bad choices or lack of preparedness rather than so-called “bad luck” or market conditions that were out of their control. Understanding your position in the business lifecycle just might help you stay a bit ahead of the game here and defy the odds, as you anticipate the potential challenges and obstacles that are upon you or are on the way depending on what phase you are in or about to transition to.

Simply put, as your business grows and develops, so too do your business aims, objectives, priorities and strategies– and that’s why an awareness of what stage of the business lifecycle you are currently in can be helpful.

Stage 1: Seed And Development
This is the very beginning of the business lifecycle, before your startup is even officially in existence. You’ve got your business idea and you are ready to take the plunge. But first you must assess just how viable your startup is likely to be.
At this stage, you should garner advice and opinion as to the potential of your business idea from as many sources as possible: friends, family, colleagues, business associates, or any industry specialists you may have access to. Ultimately the success of your business will come down to many factors– including your own abilities, the readiness of the market you wish to enter and, of course, the financial foundation in place (how are you going to finance your launch?).
In some ways, this is the soul-searching phase. It’s where you take a step back and consider the feasibility of your business idea, and also ask yourself if you have what it takes to make it a success.

Stage 2: Startup
Once you have thoroughly canvassed and tested your business idea and are satisfied that it is ready to go, it’s time to make it official and launch your startup. Many believe this is the riskiest stage of the entire lifecycle. In fact, it is believed that mistakes made at this stage impact the company years down the line, and are the primary reason why 25% of startups do not reach their fifth birthday.

Adaptability is key here, and much of your time in this stage will be spent tweaking your products or services based on the initial feedback of your first customers. It can even get to the point where you are making so many changes to your offering that you start to feel a bit of confusion. That’s just noise, and the main advice here is to power through the blurriness, because extreme iterations upfront will naturally seem confusing. Rest assured the clarity will once again come.

Stage 3: Growth And Establishment
If you’re at this stage, your business should now be generating a consistent source of income and regularly taking on new customers. Cash flow should start to improve as recurring revenues help to cover ongoing expenses, and you should be looking forward to seeing your profits improve slowly and steadily.

The biggest challenge for entrepreneurs in this stage is dividing time between a whole new range of demands requiring your attention– managing increasing levels of revenue, attending to customers, dealing with the competition, accommodating an expanding workforce, etc.

Hiring smart people with complementary skillsets is necessary to make the most of your company’s potential during this phase, and so any good founder will be spending a lot of time directly involved in the recruitment process.

It is essential that you start to come into your role as head of the company in this stage. While you’ll still be on the front lines often enough, you need to be aware of how your expanding and highly qualified team is going to be taking over a great deal of the responsibilities that were previously tightly under your control. It is your job now to start establishing real order and cohesion as you mobilize the teams according to clearly defined and communicated goals.

Stage 4: Expansion
At this stage you might feel there is almost a routine-like feel to running your business. Staff is in place to handle the areas that you no longer have the time to manage (nor should you be managing), and your business has now firmly established its presence within the industry. Here you might start to think about capitalizing on this certain level of stability by broadening your horizons with expanded offerings and entry into new geographies.

Businesses in this stage often see rapid growth in both revenue and cash flow as the blueprint has now been established, but be warned about getting too comfortable. In business, if you are not moving forward you are moving backwards, and without a constant, almost nervous itch or desire to expand, complacency can set in, and you might get caught off guard.

There are, of course, two sides to this coin, with the other involving a risk of expanding too carelessly. While there is no crystal ball and it is very hard to get an idea of what will be the results of your undertakings, you can give yourself the best possible chance of continued success through careful planning. Look at your resources, be realistic about the effort and cost and potential returns, and always keep an expert eye on how expansion might impact the current quality of service you provide your existing customers.

Remember, while having a successful business model behind you is undoubtedly an advantage, it is not a guarantee that it will work elsewhere within other markets, or that new offerings will result in the same success. The business graveyard is littered with organizations that took on too much and failed. Your task is indeed to take on new challenges as you look to constantly expand, but measure your risk and do your best to secure the company for all eventualities.

Stage 5: Maturity And Possible Exit
Having navigated the expansion stage of the business lifecycle successfully, your company should now be seeing stable profits year-on-year. While some companies continue to grow the top line at a decent pace, others struggle to enjoy those same high growth rates.

It could be said that entrepreneurs here are faced with two choices: push for further expansion, or exit the business. If you decide to expand further, you will need to ask yourself the same questions you did at the expansion stage: Can the business sustain further growth? Are there enough opportunities out there for expansion? Is your business financially stable enough to cover an unsuccessful attempt at expansion?

And, perhaps most importantly, are you the type of leader who is up for the task of further expansion at this stage? In fact, many companies change leadership here, bringing in a seasoned CEO who is more fit to navigate the new challenges.
Many at this stage also look to move on through a sale. This could be a partial or full sale, and of course depending on the company type (for example, public or private), the negotiation may be a whole new journey in itself.

Navigating The Business Lifecycle
Not all businesses will experience every stage of the business lifecycle, and those that do may not necessarily experience them in chronological order. For example, some businesses may see astronomical growth right after startup, and the founders may decide to cash out right away, jumping straight to that “exit” stage.
For many companies, though, there will be some sort of resemblance to the stages defined above, and awareness may help you anticipate what is coming next and how you can best prepare yourself and your team to maximize your chance of success. Making the right decisions at each stage is another thing altogether, however, and that will require your usual mix of gut instinct and practical business sense.

Contributions to this article are primarily from
NEIL PETCH the Chairman at Virtugroup.

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Season’s Greeting

This is the season for me to reflect on the past year and look forward to what 2017 will bring. I am now entering my 5th year as an independent CFO serving small businesses in the Puget Sound area. As I reflect on my journey, I am extremely grateful for each of you that are part of my extended network. I can honestly say that without your willingness to have coffee with me, connect with me on LinkedIn, and share your wisdom and experience with me, I would not have been successful in this business. So thank you, thank you, thank you!

2017 will be a year of bringing on several new clients. As part of this initiative to grow my business, I am using a new tool called Refer.com. This tool will help me track and organize referrals that you give me as well as help me do a better job of keeping in touch with many of you. Would you do me a favor? Would you be willing to take a short survey that rates me in several key categories? In addition, if have experienced my work or character, would you be willing to offer a brief testimonial? And finally, if you know of a business owner that could benefit from a conversation with me, please leave me the name and contact info at the end of the survey. Thank you again.

Please enter the survey at this link https://refer.com/ArtZylstra/survey/bqQb6t

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CFO Book Review – Drive by Daniel Pink

The Industrial Revolution gave the world a new found efficiency in production and distribution in business. This revolution had a profound impact on employees and how they were motivated to produce an ever increasing supply of goods. Our current business operating system, in many ways, remains unchanged from over a hundred years ago.

The primary approach to employee engagement over the years has been built around external, carrot-and-stick motivators. Science has long recognized that humans respond to rewards and punishments in our environment. However history suggests that this approach in business doesn’t usually work long-term and in many cases can actually do harm and become counter-productive.

Daniel Pink expands on the research of behavioral scientists of the last few decades that have discovered a different human drive. Motivation in the past has been fueled more by extrinsic desires than intrinsic ones. Motivational behavior was concerned more about external rewards to which an activity leads rather than the inherent satisfaction of the activity itself.

Daniel Pink suggests that business today needs to take a different approach. This new approach has three essential elements: Autonomy, Mastery, and Purpose.

1. Give Employees Autonomy
By nature, humans want to be “autonomous and self-directed.” Pink suggests empowering employees to explore new ideas, allowing them to work flexible schedules, giving them a say in hiring new talent, and letting them decide how they want to tackle a problem.

2. Give Employees Mastery Opportunities.
Pink says “making progress in one’s work turns out to be the single most motivating aspect of many jobs.” You can help employees achieve a sense of progress by working closely with them to assign tasks that match their skill levels, so employees are neither anxious nor bored.

3. Give Employees a Sense of Purpose.
“Humans, by their nature, seek purpose—to make a contribution and be a part of a cause greater and more enduring than themselves,” says Pink. You can fulfill your employees’ sense of purpose by making community service part of your corporate culture. Try organizing in-office food drives, or inviting the team to spend a day volunteering.

This new motivational drive, if business owners understand and can tap into, will strengthen our companies, elevate our lives, and improve the world.

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