Deconstructing Leadership Development

Developing leadership is the most effective investment any enterprise can make in its people. It is the most effective investment any organisation can invest in, but it is also one of the most misunderstood investments organisations often make. 

For organisations to achieve success across the complete basket of performance measures, from top-line sales growth, operations through to shareholder returns, developing the current and next generation of leadership is the core driver of tangible and intangible success.

The challenge for organizations is to understand the context of the leadership they need which varies over time. This is one of the key challenges I face when working with organizations, what type of skills do they need to develop within their organization; all depend upon where they are today and where they are trying to get to tomorrow. That context defines organizations immediate and foreseeable skill needs in its leadership, which once delivered, will open up the next set of leadership skills, which an organization then needs to deploy.

There are a huge number of leadership skills which leaders will need and use at differing times, these can be broken into three main groups.

Strategic Leadership Skills

The traditional skills leaders are most often selected for by shareholders to deliver and therefore need to develop are in defining the vision of the organization and in shaping the organization to achieve that vision. These primary role of the leader as a strategic business developer are often the most challenging to leaders as it is the most difficult role to deliver, mainly because it is the one undertaken the least and the most high risk to undertake.

Operational Leadership Skills

The second set of leadership skills based around day-to-day operational skills include acting as a role modeling, decision maker, situational leadership, and shaper create leaders who are good at adapting to changing circumstances.

Advanced Leadership Skills

The third set of leadership skills often defined as the soft skills, which always include communication at there core, are have been defined under skill sets such as emotional intelligence, motivation skills and succession planning. These skills, often seen as higher skill sets are often the defining ones in what makes leaders stand out in their field and why some organizations become benchmarks of success.

By redefining leadership skills into these three sets of strategic, operational and advanced skills, it helps leaders see what skills they need to develop to be effective in context to their needs and the organisations requirements. Leaders are not only real people, but they operate in real time within their organizations business cycles. Where the business is in that cycle drives the types of key performance characteristics, which the leadership skills need to deliver. That makes the definition of what skills a leader needs to deliver harder to define; it all depends of where the organization is in terms of performance results.      

Too many leadership support programs are sheep dip sessions of theoretical skills rather than bespoke packages focused around defined needs at stages of organizational and person needs.  This is often why leadership and development programs don’t deliver the anticipated results. The second reason why many leadership programs not deliver results is because they are theoretical in nature, rather than practical in application. So leaders don’t get to apply what they have learnt relative to their precise situation. This is compounded by a third failure of leadership development programs is that too many are in reality mutual support clinics, piling leaders into a mixed group of leaders and potential leaders all with differing skill development needs.

In constructing leadership development programs it is therefore important to put the context of where the organization is within the business cycle as well as the individual needs to the leaders themselves. The range of skills which leaders need across the three types of skill sets are significant, and while all are important, recent studies by McKinsey and others show that the most effective four skills that ultimately define leadership effectiveness are:-

1. Diverse Network Perspectives   

Successful effective leadership relies upon being outward looking by establishing effective networks with other leaders in differing sectors, differing cycles, sectors, and personality types, this provides leaders with the ability to base their decisions on sound outward viewing analysis and avoid the many biases to which inwards decisions are often prone. 

2. Being Results focused

Nothing succeeds like success in business; successful leaders follow through their plans with a passion and determination, by being results orientated leaders drive their people forward improving other aspects of their organization to support results through efficiency and productivity towards those results.  

3. Effective Problem Solving

The skill in in gathering relevant information from the tidal wave of data and converting it into intelligence necessary through effective analysis to be able to solve problems effectively is a vitally effective skill. This skill set enables effective leaders to take control of situations with one touch decision making.

4. Supportive Leaders

Giving time to listen to others, with an open mindedness to understand others challenges builds trust and is seen to inspire subordinates in their performance. Investing time in people and teams providing them with ideas to overcome blocks and supporting progress, is the final vital skill leaders need to have to be effective.  

These four core skills make the biggest impact upon leadership effectiveness, but do not distract for the need to focus on the context in which the leadership operates.  Different business situations require different styles of leadership, but the four core leadership behaviours above are a constant across all leadership situations and transcend the three sets of leadership skills which all leaders face in their role, strategic, operational and advanced. 

By developing diverse networks leaders build core skills in understanding strategic perspectives. While both being results focused and effective in problem solving leaders drive their operational skill sets and through being supportive as a leader, they enable themselves to develop their advanced leadership skills in getting the most out of their people at every level. So these four core skills drive the top-line behaviours of leaders under which all other skills can be developed and delivered. Without these four core skills todays and future leaders will struggle to be truly effective leaders.

If you are looking to develop leadership skills then click here 

The TOP TWELVE Business Planning Mistakes

Business planning is often talked about as a challenging process to go through either to start a new business or as the essential process of taking ownership of an existing business. Many business plans fail to achieve their objective, not because they represent a bad idea but because they fall into classic business planning pitfalls or fall over blinding obvious credibility cliffs.

The business-planning process is in itself a very worthwhile pursuit, while they take a lot of effort and resources they are an excellent way for business owners to undergo. A business plan's primary purpose is to convey an idea with a view to achieving a specific goal, most typically in securing funding. 

What makes a good business plan is less clearly defined. 

Always remember that a business plan needs to be tailored to its target audience, if you have different audiences you will need to be able to flex your plan to that audiences specific needs. That means shaping it, edit it and amending it to achieve your objective. 

If you would like to know how to avoid these top ten pitfalls and credibility cliff edges then click on the subject titles which are links at any time to see my step-by-step videos on how to avoid these pitfalls and credibility cliff edges. I have over the last 30 years been involved with hundreds of business developing business strategy, reviewing business plans and advising clients on how to implement a business plan. Below are my top 12 business planning mistakes business owners most often make, along with my thoughts on how to avoid them happening. 

Here's the top twelve business planning mistakes I come across:- 

1. Lack of Viable Opportunity

Every business plan needs to describe the opportunity in detail. It must also detail how that opportunity can, and will by this plan, be exploited profitably, effectively and successfully.  A good business plan can visualise the opportunity and articulate the company’s ability to reach a viable opportunity, this is a credibility cliff.

Tomorrow is a difficult place to plan for, but being able to identify and make that opportunity viable is the most critical test any business plan has. It is also the most common reason they fail. Your executive summary and the wider plan describes the viability of the opportunity in terms such as:-

1. What is the problem which people  will pay to have solved?
2. Does your solution solve this issue for a specific target market?
3. Why would someone buy your solution over someone else's?
4. Why are the benefits of your offering so compelling?
5. Can you reach that target market with a compelling message quickly and directly?

2. Unbelievable / Unsupported Financial Numbers

Where any assessment of a business starts and often finishes is at the numbers, specifically on the projected Income Statement or Profit & Loss. Projections are just that, but they are vital and must be based upon clearly stated assumptions. Many business plans are written with numbers which just do not stand up even to a first glance. 

Dream numbers: in overestimating income and understating costs. 

Your numbers have to make sense and be realistic, if you are a new start-up then they must grow rationally from nothing, but costs will be incurred before turnover is generated, these need to be realised and recognised in your financials.

The financials must also make sense and be presented in a format which presents a clear case for the investment and the return you will deliver. Ultimately, they need to be credible, defensible and consistent. 

3. No Accessible Route(s) to Market

All opportunities are only prospective ones without evidence that the target market can be accessed profitably, this is a big cliff to fall over.

Entrepreneurs are inherently product focused, concentrating their energies on ‘the winning idea’ to the exclusion of many other important elements such as how they intend to access their customer base, a classic cliff edge for any plan.

"Built and they will come" is a great dream but a poor plan. 

A business plan must include a comprehensive, credible and costed analysis of how the company is going to access their target market in a cost effective manner. 

For that to happen your plan needs to really understand the target customers, their needs, and purchasing priorities. Turning historical data into information and drawing knowledge from it ascertain insight into their future purchasing habits. Only then can you demonstrate cost effective routes to market within a business plan.

4. Executive Summaries Which Aren't

Somewhere between a pitfall and a cliff edge, is the failure of the Executive Summary, to be either a summary or aimed at executives. The only part of any plan that will certainly be read is the Executive Summary and yet they rarely provide an effective summary of the business plan. A good plan highlights the key proposition of the plan and sells the proposal. 

Too many Executive Summaries either throw everything down in a jumbled mess, making them pages long and randomly pulling facts together, or they are so bland they say nothing!  

What's a good Executive Summary, one that states the proposition clearly and succinctly, a page is sufficient for any plan. The Executive Summary should clearly explain the whole picture including what investment is required and what it will deliver. The point of an Executive Summary is to inform the executives, so many it punchy, outcome focused and only ever write it at the end.  
     

5. Over Estimating Turnover 

Another associated key element of the plan which relates to this element is the estimations of projected turnover. 

While every business plan talks in positive terms (hopefully), the obvious and persistent danger is that the innate optimism of all entrepreneurs and their tendency to exaggerate every business opportunity. 

This pitfall is most easily managed using a realistic method for estimating income is to calculate the number of customers the business intends to capture and the average revenues. These two averaged inputs are easier to calculate and also to justify within a business plan.

6. Absence of Clear Objectives 

I could have put this pitfall at number one very easily. What is the main purpose of the plan?

If the plan's objective is to seek funding then it is vitally important to clearly describe the investment opportunity. While the plan describes the concept in detail, it must also address the primary purpose of the plan. So many plans fail to make it explicitly clear what the company's needs to be successful or what the investment will mean to the company.

A good business plan answers:

• Why investors should investing in this business rather than anywhere else?
• When will they recoup their initial investment and how and when it can be realised?
• What is their expected return on investment?
• How the company has managed all aspects of risk? 
• Is the investment merely cash or do they need to bring other assets such as expertise to the table?

If you can answer these key questions, the intended audience will feel comfortable and be able to recognise that they fit the brief.

7. Non-Existent Cashflow Management

Particularly relevant to a new business, this is often an invisible cliff edge which business plans fall over on, is the ability of the business to articulate the differences between cash and profit. Running out of cash is the highest risk any new business or re-engineered business faces.

Good, positive, and conservative cash flow management is vital when businesses pursue investment opportunities where there are significant cash flows out, in advance of the cash flows coming in. This is the classic business plan cliff, which sends potential investors running.

If a business plan’s financial model is based upon selling on credit, then they receive the cash in the future, but need cask to pay expenses before that income hits their account, then they have a cashflow risk. This outflow of cash is the single biggest reason companies fail, its not margin, its rarely the product, it is invariably that they run out of cash.     

8. Non existent Management Teams

Throwing a few CV's into a business plan does not create a delivery team. Likewise a generic organisational chart with missing pieces and TBC (To Be Confirmed) is not going to inspire confidence  with investors to part with their cash.

Entrepreneurs can often sell an idea but they do not always inspire they can select a balanced team of people with the right skill mix, from the financial management to key leadership roles and the right operational team to deliver your ambitious plan.

Having a structured management team with operational structures is essential for success. Track records matter, as much as having clear roles and responsibilities laid out in delivering the operational plan which underpins the business plan.  

9. Poor Evidence of Demand

A significant area of concern when planning is justifying the sales forecast or demand levels for a product or service. This breaks down into the two main elements used in forecasting: the use of historical facts and the dependency of subjective assessment.

Sales forecasting, is the vital tool to identify the basis of all projected revenue figures that can be considered credible in the wider context of the plan. Unless there is verifiable demand for the idea, the risks grow out of all proportion, particularly if the initial start-up or investment costs are high.

Minimising risk in a business plan is all about gaining an understanding the potential demand and how the company will with this plan create or drive that demand rather than concentrate on ‘the product or the idea’. This classic cliff edge is a silent killer for investors, they don't believe in it.

10. Gaping Inconsistencies

An effective business plan needs to be consistent throughout as all the various strands are brought together into one single entity, the plan. It is pitfall which entrepreneurs gloss over, but investors relentlessly prod before committing to any plan.

If there are multiple authors of the plan the risks of inconsistencies will exponentially increase. Extrapolating data can also cause problems, using research data and then jumping from possible market size to sales potential and then sales forecast are classic pitfalls which need to be thought through. 

Presenters of the plan must have a simple narrative that runs through their plan, using key facts and staying ‘on script’ so as to ensure that a cohesive story is communicated. The numbers must also be consistent with the broader content so that there are no contradictions between them.

11. Not Appreciating the Competition 

There is always competition. Yet the number of times the phrase “there are  no competitors” appears in plans is considerable.

It does not matter how unique the proposition is there will also be some other business competing for people’s money. While there may not be a direct competitor it will certainly be a transfer investment that customers will be making. The business plan must recognise where the customers invest is coming from. If competitors are not identified in a business plan then the only credible assessment is that the company has not been diligent enough in its research.

Also remember that no company lives in a vacuum, as soon as you launch (or before) the marketplace will change. What will the competitive landscape look like in a few days, weeks, months or years? Can you create or establish significant barriers to entry, or is it likely that a successful market entry will be followed by better-placed competitors with greater resources, etc

12. Throwing Your Plan Out Too Soon

You never get a second chance to make a great first impression. Your plan needs to be right the first time and the content needs to be accurate, clear, concise and correct.

More often than not business plans need to be completed by a certain date and hence the final stages can be rushed, a classic pitfall.

Consequently, in many instances the final output does not do justice to the plan. Attention to detail at the end is vital, so ensure you have a completed plan with references and formatted correctly. Also ensure the content of the plan has been edited down to a digestible size, use appendices for details.

Get someone removed from the process to proof the plan. If a presentation is part of the process, it should reflect the Executive Summary.

In Summary

Business plans by definition have a purpose of communicating a course of action so make sure they do that primary role. Support inevitably means resources with the primary aim of the plan often being to secure financial investment. Explain the invest what it will be used for and how it will be protected from these classic pitfalls and cliff edges.

Writing a successful business plan is all about preparation, about being as thorough in your research and planning as is possible. By avoiding the cliff edges and pitfalls above, the chances of the plan objectives being met increase substantially.

Read more or get in touch to learn how Richard Gourlay can support your business growth. Or read more about strategic planning and business planning in my blog.