In many small and medium-sized businesses there is little or no strategy to improve the fortunes of the organization. This can happen in good times as well as bad and can result from the belief that:
- If it is not broke, do not fix it
- The business is in a niche market with no competition.
- There are no skills available internally to make the proposed changes.
- The business owner retires, it will be someone else’s problem
- And so
The lack of desire to continually develop and improve the business fosters a reactionary mode within the business, rather than a more desirable proactive stance. Why is this important? Typically, a reactionary organization does not take business planning seriously and focuses more on solving current problems than on establishing a mechanism to anticipate problems and act before they become a problem. The importance of this can be found by comparing organizations that:
- continually succeed
- are able to more easily attract qualified staff
- train staff to increase the skill set within the business
- they have set their goals and know how they are going to be achieved
with those companies that do not. Proactively focused companies are usually the winners. Businesses move into a proactive mode, but what inspires the business owner to take that step? Ten of the most frequent reasons for change within a company are:
1. Third party intervention
A financial institution that has supported the business may seek improvements in business performance to reduce a potential risk to its investment. This can prompt business leaders to take previously unrelated improvement actions to satisfy the institution and de-risk their own assets that they may hold as collateral against the investment.
2. Sales decline
There may be a serious decline in sales. Competition, new technologies, failure to meet customer needs and expectations, a history of poor product development and introduction, or poor marketing can all be contributing factors to declining sales and be the catalyst for the owner to change the focus of business development. .
3. Management Buyout
The CEO is removed through a buyout by the other directors and there is a change in business focus.
4. Acquisition
The business is acquired and the policies and practices of the acquiring business are adopted and a proactive approach to the business is introduced. This may follow the appointment of new CEOs.
5. Lack of internal skills
The shortage of management skills within the business can trigger the appointment of an external senior executive who brings new methodologies, planning and enterprise to the business.
;6. The ‘turbulence’ of the family business
Sometimes the autocratic control of an owner can only change if permanent family divisions are understood to be undesirable. It may well be the opportunity for perhaps the ‘next generation of college-educated families’ to demonstrate their skills in establishing and achieving sustainable growth strategies and managing cultural change.
7. Raise capital
The success of raising new funds may depend on the appointment of an executive or non-executive director to oversee the business on behalf of the provider. Such an appointment will add new skills to the management team and promote better business practices.
8. Exit Strategy
A business owner may realize that in order to optimize the value of the business at the expected time of its exit, changes in the way the business is run will be necessary. The delegation of responsibilities, the training of staff and the execution of strategic plans can be areas exploited to reduce dependence on the business owner.
9. Delegation or waived action
When the owner of the company does not have the necessary skills to effectively manage the organization, the authorities can be delegated or dimensioned by an opportunistic director to manage the company. A weak and unskilled business owner may be relieved that some responsibilities have been reassigned; however, if the delegate or opportunist does not meet expectations, more serious difficulties may arise for the company.
10. Project-Based Change
If implementation of an improvement project is planned, but internal resources are insufficient or unable to manage the change, the appointment of a consultant or interim manager on a fixed-term contract may be a desirable option. The change can be implemented with fewer interruptions to staff performing their normal duties.
The business owner should always be in control of the business and this is easier to achieve if the change is planned, managed well and aligned with the goals of the organization.