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HOW TO AVOID MAKING STUPID DECISIONS IN BUSINESS

THE TACTICAL PLAN BEYOND THE PROCESS AUDIT

https://morrieshechtman.com/
MORRIE SHECHTMAN

An extraordinary Lecturer, Global Speaker and Guru of personal transformation and productivity is without a doubt, Morrie Shechtman (click here), whose WEB page is very attractive and unique, since it begins with a very clear objective in its consulting process to its clients: "Prevent smart people from doing stupid things".


Morrie's Mission is to help people transform their personal and professional lives.

For 45 years, Morrie has been helping clients establish a connection between personal growth, bottom line profitability, and stakeholder value. From the C-Suite to Main Street, Morrie’s clientele has spanned the globe throughout the United States, Canada, Mexico, Latin America, Europe, Africa, Australia, and India. He’s appeared on major media for decades – and is recognized as one of the most influential minds of our generation.

Morrie adds: There are no business problems, there are just personal problems that are brought to work.


I have the honor of knowing Morrie for 25 years and his philosophy as a consultant and way of thinking was an extraordinary source of inspiration in my career as a strategic consultant, however, what has captivated me most is his objective in your consulting process to your clients Prevent smart people from doing stupid things.


In Mexico, in companies SMEs - Medium, it is common to find owners, who find it difficult to obtain better profitability and/or institutionalize the company, due to do not understand factors that might sound stupid to them ...however they are not, so I allow myself to list them below:


🆘Their lack of experience as administrators; Sometimes the owners feel they have sufficient knowledge in all areas of the business, and they reject any suggestion of advice or support that contradicts their way of thinking, and this is how they put their future at stake for the comfort of the present.


🆘The lack of adequate controls; Sometimes there is a belief that only with good wishes will the company be able to improve its sales performance and profitability, without taking into account that, to improve the company, a tactical plan derived from a diagnosis is required, in addition to , an audit of processes and policies.


🆘Excessive focus on the present, losing sight of the risks and challenges of the future; lacking competitive intelligence, the business Mission becomes a slogan to be painted on the wall or placed in a striking on the WEB page.

The vast majority of the time, owners and/or managers are taken by surprise, in situations that could have been prevented, through good knowledge of the market that would have allowed them to implement clear and safe strategies to increase their profitability.


🆘The "Founder's Trap", refusing to delegate and "let go of control of the company" because they feel that, if their collaborators do not consult them with most of the decisions to be made, they lose importance and hierarchy in the company, feeling that they are no longer necessary; There is also a fear of being robbed.


🆘The "Snow White and the Seven Dwarfs Syndrome, where it is common to observe that some companies in their first attempts at institutionalization have incorporated some acceptably well-paid management, but creating a polarization between managers and the positions below them; There are organizations that, in order to save costs, have few qualified intermediate levels and tend to pay little to the lower - operational levels.

The above means that they usually hire "cheap" personnel without any formal technique, which is normally inadequate, giving poor results and who, in addition, lack empowerment on the part of managers.


🆘The "Glamour" and the false belief that all their collaborators love them, without stopping to think, that, on some occasions, the collaborators (especially those of medium and low level) It is not that they "love them as bosses", but simply out of fear or incompetence they do not dare to resign and look for better job offers; These types of employees think "Better bad because you know, than good because you know.


🆘Lack of an expense plan for continuous improvement in administration; this situation arises due to the absence of adequate planning of resource needs.

It is very common to observe how some companies spend on fixed assets (expensive machines) and operating expenses, neglecting some expenses such as improving systems, computers, paying for software licenses using pirated programs, bathrooms, company cafeteria and offices.


🆘Lack of strategic alignment; designing a Business Mission, is not just knowing it by heart, putting it in a frame on the office wall and placing it on the WEB page, you have to work on it involving all collaborators of the company.

If business owners and their managers accept the challenge and believe that it is possible to permeate their entire company with the Mission, they and their directors or managers will be able to ensure successful results, because a company with a well-established Mission and permeated in the entire organization, generate 30% more results in its financial indicators than those that do not have it.

For the above it is essential:

  1. Align periodically the performance planning, monitoring, feedback and evaluation systems and do not confuse Human Capital with Talent Management.

  2. Communicate to all collaborators the perspective on how long they should take to implement the tactics proposed in the Mission and if performance is on track. For this, it is essential to have a tactical plan of at least 18 months.

  3. Provide training and advice on how to implement the necessary changes, remembering that technical training in hard skills is different from formative training in soft skills.

  4. Look for small victories and recognize progress, avoiding expressions when faced with a victory such as That's your job!

  5. Share the enthusiasm and optimism about the goal of becoming a World Class Company.

World-class organizations are those that strive daily to generate a positive impact on the lives of others, without Regardless of the size of the company: micro, medium or large company.

As such, the most important factor in becoming a world-class organization is company leadership.

Once people have resolved their concerns and fears about implementing changes, they are more likely to be open and willing to change and allow themselves to be evaluated based on their merits in the impact of the change.

SMEs COMPANIES IN MEXICO

In Mexico, SMEs are classified according to the number of jobs and according to the economic sector to which they belong in the following way:

SIZE

INDUSTRY

TRADE

SERVICES

Micro

1 - 10

1 - 10

1 - 10

Small

11 - 50

11 -30

11 - 50

Medium

51 - 250

31 -100

51 - 100

Large

> 250

> 101

> 101

According to some official figures, 99% of all Mexican companies are SMEs, which have the following distribution by economic sector:

Manufacturing 12%

Trade 49%

Services 39%

Total 100%


▶️The form of ownership is mostly sole proprietorship.

▶️ A high percentage of the premises used are rented.

▶️More than half of the companies are more than 5 years old.

▶️ Almost a third of them employ between 1 and 2 people.

▶️ Almost half of the companies are financed with family resources.

▶️ A high percentage of its clients are local consumers.


What is a Medium Enterprise company?

Citing the definition given by the Ministry of Economy:

Medium-sized companies are businesses dedicated to commerce that have from 31 to 100 workers, and annually generate sales that range from 100 million of pesos and can exceed up to 250 million pesos.

They represent almost 1 percent of the country's companies and almost 17 percent of employment; They also generate more than 22 percent of the Gross Domestic Product

Among its characteristics it also has a level of complexity in terms of coordination and control and incorporates people who can assume coordination, control and decision functions; which implies redefining the balance point and simultaneously increasing the degree of commitment of the company.

They are economic units with the opportunity to develop their competitiveness based on the improvement of their organization and processes, as well as to improve their business skills.


There are five common causes that contribute to the failure of SMEs

1) The incompetence or lack of experience of the administrators.

Frequently, many companies arise from a hunch rather than from a significant knowledge of the business and its characteristics. In addition, it is also common for owners to feel they have sufficient knowledge in all areas of the business and reject any suggestion of advice or support.


2) The negligence that often follows the "glamour" or excitement of starting the business.

It is common to observe that, after the "great" opening, some entrepreneurs feel discouraged and do not concentrate as much on the business as they should.


3) Lack of adequate controls is the third common cause of failure. The entrepreneur at the head of the SME generally ignores the need to maintain controls that allow him to anticipate problems. It is common to observe that, the vast majority of the time, administrators are taken by surprise, in situations that could have been anticipated, if they had an adequate control system.


4) The fourth cause of failure is the lack of sufficient capital, a situation that generally arises due to the absence of adequate planning of resource needs. It is common here to observe that managers focus on anticipating investments in fixed assets and some of the operating expenses; However, they do not plan working capital needs or other types of expenses or investments.


5) The fifth and final cause of failure is the lack of correct risk identification. Sometimes, excessive enthusiasm means that future challenges are only partially evaluated, ignoring many of them. the possible risks. Furthermore, it is very common to observe that the need to address daily problems prevents planning for the future and, therefore, reflecting on latent risks. In this type of activity, it is normal to hear that phrase that "what is urgent does not leave time for what is important."

Source: NAFIN CLIC AQUÍ


Despite all of the above and in the face of proposals on how to avoid the decline of some SME companies, it is common to hear the response of some business owners "They Don't Want to See My Stupid Face.


PROCESS AUDIT AND DESIGN OF A TACTICAL PLAN

“Systematic, independent and documented process to obtain evidence and evaluate it objectively, in order to determine the degree to which the audit criteria are met based on policies, procedures or requirements used as a reference”


The most common criteria to evaluate are:

📌Matrix for evaluation of internal factors (strengths and weaknesses)

📌Regulations

📌Policies

📌Strategic plan and balanced scorecard

📌manual of good practices

📌Standards

📌Contingency plan

📌Procedures

📌Operational methods

📌Hazards and risks matrix

📌Programs and projects

📌Work environment evaluation


Audit objectives: Reduce Costs and Expenses to Improve profitability

🔲General objectives:

- Improvement of internal processes; continuous improvement

- Supplier selection program

- Reduction of reprocessing and waste

- Operating leverage


🔲Improving efficiency:

- Determine production costs and identify tactics for their reduction

- Determine raw material costs and identify tactics to reduce them

- Labor productivity (such as the hours per employee required to produce a product)

- The productivity of capital (as income per pesos invested in property, plant and equipment).


🔲 Quality improvement:

- Analysis of the number of rejections and identification of their origins to eliminate them

- The number of defective products returned identifying the rejection to eliminate it

- Analysis of the degree of customer reliability of the company and the products.


🔲Customer sensitive attitude:

- The number of repeat customers.

- Customer defection rates.

- The level of on-time delivery.

- The level of customer service.


🔲Innovation

- The number of new products introduced.

- The percentage of income generated by new products in a defined period.

- The time it takes to develop the next generation of new products compared to that of the competition.

- The productivity of the research and development department (level of research and development expenses required to produce a successful product).


Finally, it is advisable in work environment surveys to include the following questions to assess how good the "Tactical and Strategic Alignment of the Company" is.


GENERAL DIAGNOSIS QUESTIONNAIRE:


Thank you very much for the privilege of your time reading this blog.

Sincerely,



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