Friday, November 20, 2009

New Management Strategies For Small Businesses In A Tough Economy

If you have not identified your business Critical Success Factors, you are certainly not using them to optimize the internal processes of your business. CSFs are action oriented management tools aimed at making clear your business goals, and the strategies to achieve them.

Fifty years ago, a business could run on automatic pilot, and yet be profitable. Today, even with a life pilot a business may fail. The adverse changes in the economy followed by the recession of 2008 and 2009, is believed by many to have changed the economy, perhaps, irreversibly. The old ideas no longer work; the formulation of innovative ideas has become imperative.
  • In the forefront of these innovative ideas are what we called the Critical Success Factors of a business. The performance measures within them link daily activities of the business to its goals. By identifying, understanding, measuring and managing the CSFs, a business has a better shot at surviving these turbulent times.
  • To arrive at the CSFs, you should do a brainstorming session with your employees where you put down on paper all the success factors you can think of. Depending on the enthusiasm and exuberance of the participants you may come up with 20 or more new ideas to help increase performance. Pare down these 20 success factors to about 8 critical success factors crafted to bring immediate positive effect on your business.
  • Improving the quality of your product or service is one of those critical success factors. All the effort you make on advertisement, price changes and enhanced customer service will come to nothing, if your competitor next door sells a better product or service than you do.
  • Delivering in full and on time to your major customers. If your customers are confident that you will always supply them with the specific items they ordered, and on time, you will become a reliable partner in the success of their own businesses, and that means more business for you.
  • Give priority to those activities that collect cash quickly from your major customers. You can have the best quality product or service and deliver on time, but if your price is unreasonably high, your cash intake will be low. Reduction in prices with strategic discounts and enhanced customer service will help encourage your major customers to begin spending again.
  • While the satisfaction of the customer is the prime reason for the existence of a business, you need a safe, happy and healthy workforce to achieve that. Many small businesses have had to learn the hard way that making adequate investment in the well-being and happiness of their employees has a direct positive effect on customer satisfaction and prosperity of the business.
  • Your employees are in direct daily contact with the customers. They are the frontline information gatherers, and as a consequence, have relevant information about customers’ preferences that you may not have. Quickly refining and implementing innovative ideas from your employees could turn a bad business year into a good one.
  • In a tough economy where cash flow is slow, invest only in value adding projects that quickly make your product or service more attractive to customers, and increase your cash intake. Put off the long-term projects for later.
  • Training your employees to do more than one task within each department will enhance their adaptability and flexibility. For instance, if for any reason an employee is unable to come to work, there will be another employee adequately trained to performed his task, and avoid a slow down in your business operation.
  • How an employer treats his employees regarding pay, benefits and safety issues get around fast, and soon a body of information will exists that informs high quality job applicants to either stay away from, or gravitate toward that employer. As the quality of your employees has a direct effect on customer satisfaction, and in turn on the profitability of your business, attracting quality employees is a critical success factor.
  • Fully informing all your employees about the CSFs is important to enable them organize their daily activities to maximize their contribution, particularly in providing feedbacks on the implementation of the CSFs.
Some will argue, for instance, that a low quality product or service can be improved with dedicated effort, and poor customer service can be corrected by training the workers, but in an economic recession when customers are not spending: what can a businessperson do?

There is an old Oriental proverb that says: you can go only so far into the forest before you start coming back. Similarly, the economy can get worse only for so long; soon it will start getting better. Small businesses that have identified their critical success factors, and begun implementing them will be the first to reap the benefits of an upswing in the economy.

No comments:

Post a Comment