Any business other than a family or local one in which “everyone does everything” requires management literacy. Depending on the size of the business, the industry, the specific markets in which the company or group operates, different management competencies are required. For example, a food manufacturing or auditing firm is quite capable of handling projects if its employees read PMBoK, understand it and apply the general principles of the project management. At the same time, the construction and installation group of companies needs a completely different level. The next level is more difficult. If the company builds only typical cottages and townhouses, it will be enough to apply the basic principles and some carefully tuned project management tools. However, construction of a complex of unique buildings will require close to the maximum level of maturity of project management.
At the same time, any company manages processes in many interconnected areas. In each functional area of a particular business – marketing, finance, sales, etc. – there is a minimum required level of competences. If the competences are insufficient, it can affect both the efficiency of the business and its future. At the same time, redundant management tools burden the company’s balance sheet and, due to their excess, and used ineffectively, wasting the efforts and time of employees, degenerating and “dulling” over time.
A properly selected and balanced set of management tools plays one of the key roles in a creation and maintenance of competitive advantages. If a company operates in a low-price segment and is prone to low cost strategy, excessive management systems will aggravate the price battle. When working in growing markets, the lack of management competence often leads to a slowdown in business growth and, as a result, a reduction in market share. Every business has many nuances that define the requirements for a level of management competencies. Competences include not only the experience and knowledge of employees performing individual processes, but also the processes themselves, their management systems, methods, approaches and other tools, including organizational ones.
How to find a balance between necessity and sufficiency?
Like any complex organism, the company requires periodic prophylaxis and revision. Sometimes it is enough to listen to yourself and understand that the anxiety is caused by shortness of breath, overweight and tobacco, and stop smoking, as well as limit the consumption of fat and fried. Sometimes things that are not so obvious cause for concern.
For example, one of my clients, a construction and installation company, was concerned about the slowdown in business growth. The shareholder, who built the business from scratch, rightly reasoned that the underlying causes might lay in the internal structure of the company, its imperfection. As a result of the diagnostic project, in addition to the obvious gaps with planning and budget management and personnel work, I was able to identify certain management weaknesses in marketing, sales and a number of other shortcomings. It should be noted that until the last day of the project, the company’s management did not recognize the existing problems in the identified areas, believing that they are not a limitation in development. Only a detailed analysis and visual presentation of the missing processes, comparison with similar companies and a meaningful discussion lasting many hours convinced the management of the necessity of serious improvements.
When you, as a manager or shareholder of a company, begin to feel anxious about the life of the business, and the reasons that cause it are not obvious to you, you should think about management diagnostics.
Management diagnostics is a tool that allows you to determine the range of current problems and issues of your business
It helps to identify the causes of problems, show the relationship between existing gaps in the management situation and desired goals. According to its results, there is an unstable, but an unbiased image of the management reality and a guide on further competence development become evident. This tool allows a balanced and economical approach to development. Before initiating complex, long-term and costly development projects, such as strategy development, information system implementation or sales system reorganization, it is worth reconsidering the competencies and understanding what you really need. In addition, management diagnostics will allow you to articulate the requirements for future changes accurately and more clearly define expectations from such projects.
Where to start with a management diagnostics of a business?
First of all, you need to determine the range of questions that you want to get answers to. Try to formulate your worries and concerns in a long list. Hold a brainstorming meeting, where you can try to generate problems and their causes. This is a good start.
Choose approaches and methods for collecting and analysing information for the list of questions you have prepared. Understand how, where, when and in what way you will collect information, how to process it. Identify the analysis tools that will help you get answers to the questions.
Identify the personalities who can do the work. Depending on the size of your business, you may need a small team. Calculate the amount of work needed to get answers to your abilities and the workload of the people. If the diagnosis requires several months, you may want to think about increasing the number of people who will do it.
There are many ways to conduct a management diagnostic. There is no one correct and true way, there are only approaches and techniques that are useful in a given situation. Their combination will be determined by your questions, goals and expectations.
Should consultants be involved for this purpose? No unambiguous answer to this question
It is safe to say that after spending some time and effort it is possible to create a diagnostic technique that meets your requirements. If the company has serious analytical competence, as a result of the application of such a technique you will be able to get a sufficiently deep and objective picture of the facts. After all, you and your employees know your business better than anyone. However, interpreting the facts and comparing them with other companies will remain outside the scope of such analysis or, at best, will be partial.
When engaging consultants, it is important to understand that they, in this case, do not bring expertise to the operational field. Their main role in diagnostics can be reduced to a few important functions:
Determine the objective level of managerial competence in detail
Experience with working on management consulting projects and a creation of various methods and tools develops skills of management competence assessment. As a rule, consultants used different approaches in practice, saw what they led to, and even took a certain amount of knocks. No manager or executive has experience of such intensity, depth and diversity. For this reason, consultants see the level of a particular tool well and relate it to the needs of the company with sufficient accuracy. A good tailor sees not only a bad suit, but also understands why it fits wrong and what should have been done differently.
Compare individual elements of management competence with other companies
Good consultants have extensive experience with a variety of companies. This gives them perspective as well as deep understanding of management tools. With these qualities, they are able to determine the level of competence with good accuracy. If they apply certain proven methods, the accuracy will be even higher. A consultant, for example, implemented budget management or a system of indicators in more than one company and had to interact with other management tools to achieve project goals. As a rule, he or she understood well in which companies the level was high and where, due to the client’s lack of competence in related fields, he or she had difficulties in performing his or her work. A good doctor understands that a spasmolytic might help against one’s headache and a sufficient painkiller will help the other.
Show weaknesses and gaps in the existing management system
Based on the “target” picture of competencies, they will be able to conclude that they are necessary and sufficient in certain functional areas. The right consultants understand that management must be focused on business needs. In other words, when the analysis reveals that there are significant gaps in marketing that hinder growth, it gets in the report. But when the accounting department complains about the number of phone calls, it is worth mentioning, but in the context of the chief accountant’s competence, his or her ability to organize work. A good coach will know when an athlete is strong enough to win the biathlon and it is necessary to concentrate on the accuracy of shooting.
The above examples are, of course, exaggerated to some point for the purpose of simplicity of explanation. But, hopefully, I conveyed the idea. In reality, it is more and more complicated and not so obvious. There is also, of course, a question “Will consultants, under the guise of diagnostics, impose unnecessary services and tools?” However, this is a question of your company’s ability to choose the “right” consultants and manage their work.
If you have decided to involve consultants in the management diagnostics
Besides the wording of the questions, it is important to understand the focus of the effort.
A general diagnostics of business allows to cover the management competences widely, to make a complex system image. In this case, as a rule, you will identify vectors and points of effort, obvious gaps in competences (perhaps, not obvious to you) and will be able to draw up a general plan of their further development. Such an approach is useful for prevention (it can be done once in 1-3 years), for making decisions on initiation of complex projects, for allocation of budget for development and improvement of management competences.
Diagnostics of one business’s functional area allow you to assess competences and tools in one or more functional areas systematically. For example, in strategic management, or personnel management. Such work is useful for making a decision on a specific complex project, for example, the implementation of a CRM-system within the framework of sales development, or setting up strategic management. Its implementation allows you to formulate a detailed and complete plan of work to develop competencies in this area, plan the work and allocate resources for this purpose, including determining the budget.
Specific in-depth diagnostics of a particular tool or process aimed at fine-tuning a management tool that is critical to your business. If you are in the construction business, at some stage of development you will need to adjust your project management system and detail, for example, a resource pool management or a procurement and a supply chain management. It is possible to create a model of a new, modified system and a plan for its modification and development only after a detailed analysis of the existing system.
Pay attention to the specialization of a consulting company, especially for general business diagnostics. If consultants deal with budget management and management accounting, they will give the financier’s perspective of the company, but characterizing sales, marketing, etc. only partly and probably distorted to some extent. You may be “lucky” and they will find “white spots” in non-financial matters that have fallen out of your sight. That also happens from time to time.
In my general diagnostic work, for example, I focus on strategy and strategic objectives, and I view the business as an organization focused on the strategy and long-term goals of shareholders. From this point of view, during the general diagnostics, I manage to take into account practically all essential competences affecting the business.
In any case, whether you choose the path of independent, “from inside” improvement or involving professionals, it is important to take the first step. Recognition of problems or difficulties, even if not yet formulated, is the first step to their solution. And even if you don’t understand how to go this way clearly yet, management diagnostics will help you draw a fairly accurate map of the future route. Remember that refusing to make a decision is also a decision. Only you need the best decision possible, don’t you?