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Ken Keller: How to diagnose if your company underperforming

Brain Food for Business People

Posted: March 23, 2010 9:51 p.m.
Updated: March 24, 2010 4:55 a.m.
 
There is often a gap between performance and potential. On Saturday, the No. 1-ranked college basketball team was eliminated from the NCAA tournament by an underdog. Did Kansas underperform compared to past results, full potential and expectations? Yes.  

We are in the middle of March Madness. One significant outcome of the tournament is that those who have the ability to perform when needed move to the next bracket, and those that do not exit. Those that underperform do so for a variety of reasons. Players and coaches alike will spend ample time considering those reasons and work to rectify them before the 2011 tournament.  

Businesses also underperform for a variety of reasons. Probably the single biggest reason is that “winning” is never defined for the company. In sports, winning is easily defined; in business, it’s more of a “basket-by-basket” or “account-by-account” kind of thing and not a longer-term, bigger-picture concern.  

Individuals can define what winning is but often fail to do so. Smaller, privately held companies find the task of defining winning more difficult so many owners never try.

Jack Welch defined it for GE when he announced that the companies within the corporation should be ranked either first or second in market share. Over time, Welch sold off or closed down the companies that did not meet the criteria.

Owners of companies would be wise to take the time to define what winning means for the company and require each department head, in conjunction with the employees, to determine what winning is at the department and individual levels. This helps to gain alignment and eliminates conflict, which is critical for daily execution as a team.

A second reason for underperformance is that even though winning is defined, the rewards for doing so for employees are not clear. In fact, rewards often do not exist, with the possible exception of the tired and worn-out phrase “you get to keep your job.”

The third and perhaps most interesting reason is that the owner of the business is either distracted or is in a comfortable place regarding the business and personal financial strength. When this stage is reached, and the owner believes that the right people and processes are in place, the owner is more likely to divert time and focus away from the core business.

When owners become distracted by activities and interests that occur outside of the core business, the core business is almost guaranteed to suffer.  

The fact that the owner is either distracted or in a comfort zone works well for many managers and employees. There aren’t too many employees who mind the owner not constantly looking over their shoulders. When the owner is present, people keep focused and moving. No one does it with the same sort of zest that the owner does; managers are supposed to perform this function but they are people, too, and usually don’t mind the owner being absent.

In the mind of the owner, leaving people in charge who can be trusted is paramount.  

If the management staff is trustworthy, the owner has no worries; if someone in management turns out to be less than honorable, trouble will occur. This trouble will be of a financial nature; some sort of theft of value, which includes time, inventory, cash and assets, including good will with vendors and clients.

Fourth, high-performing businesses don’t place trust as much in people as they do in processes and procedures. Significant checks and balances are put in place to prevent any one individual or individuals from having sole control.  

Underperforming businesses tend to lack the policies and procedures to maximize productivity, use of assets and execution.  

A fifth reason for under performance is a lack of clear goals at any level of the organization. Those in sales usually have clear goals, but most other departments and the individuals working in those departments do not.

A sixth reason is a lack of motivation by employees. If they underperform, there is no incentive to do a better job. In this situation, people tend to follow the path of least resistance, which is to do whatever it takes, usually the minimum, to avoid being terminated.

Managers and employees alike tend to seek and maintain the status quo and guarantee continuing underperformance of their employer.

Is your business underperforming? What can you do about it? What do you want to do about it?

It all depends on the reason for the underperformance, and most business owners would be wise to start by performing a reality check to see just how comfortable they are.

Ken Keller is president of Renaissance Executive Forums, which brings business owners together in facilitated peer advisory boards. His column reflects his own views and not necessarily those of The Signal. “Brain Food for Business People” appears Wednesdays in The Signal.

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