Managing any change is tough. Get it wrong and your business may not recover. Often the desire to make a change is driven by the perceived need to cut costs. But focusing on cost-cutting alone is where danger can lie. The simple yet key equation is: Profits = Revenue – Costs. You need to focus on increasing your revenue manage your costs while also managing your costs.
Here are my six tips on building profitability during your change project:
Choose the right performance indicators
Of course you want to track your cost reductions but make your top measurements revenue and profit increase. Growing revenues/profits should be the key focus of your change initiative. Set fair and reasonable performance indicators in the best interests of the business as a whole.
Get everyone focused on a positive future
Everyone in the business needs to be working towards a positive future and taking actions that are best for the organisation overall – not for any one individual or team.
This is why I recommend strategy away-days. They are a great opportunity to communicate with the whole team. Everyone needs to understand the new vision for the business as well as the detail of how they can contribute in their roles to make it happen. Armed with this information everyone should be able to answer routine questions from customers, for example. They will also understand the need for and support necessary innovations. Days like these have a cost but they will deliver benefits that will more than compensate.
Use remuneration and incentives wisely
Remuneration and incentives reinforce focus on the actions needed to achieve the proposed change and the new vision. For example, if you have a bonus scheme make sure a high percentage (say 80%) relates to the businesses overall performance. You want the scheme to aid cooperation rather than competition between individuals and keep everyone focused on implementing the change while keeping your customers and shareholders happy. Well -designed remuneration will help keep everyone pulling in the same direction.
Check if you need to hire in help
Sometimes you will need to hire in help to achieve your change objectives. Getting work done as cheaply as possible may end up being very expensive in the long run. For example, if you hire contractors on day-rates don’t then cut the time spent on co-ordinating/managing their work.
Look at the overall project and the benefits it will bring, and work out the most effective way to achieve them. Especially in a small business it’s important to factor in, for example, your own time, missing deadlines, having to re-do work, etc. With a fully scoped the project you’ll be able to make informed choices on the cost vs. benefit of bringing in help.
Remember your customers
Too often people can destroy business value by not looking at the impact a change will have on customers. Any change should be organised around a clear company vision and strategy – and these always need to include considering the customers’ needs. A lack of attention customers by adopting only the “big picture” view can lead to business owners being “out of touch” with their own customer-base. Many businesses have lost their edge, and their profitability, this way.
Be nice and have fun
Work should be fun. Imagine if all your staff were empowered and happy at work. Would they go the extra mile? Of course! I believe that if you make use of these tips they will help you not just manage but increase profitability as your business navigates through major change.
Clive Hyman is an expert in change management and is chair of the 528 Advisory.