I suffer from high expectations of others and myself. I’m an entrepreneur — I take risks and hold myself accountable for the outcome of those risks.
 
I take my lead from the likes of George Washington, Benjamin Franklin, and Thomas Jefferson. The founding fathers were entrepreneurs and innovators in every sense of the way we think of those words today. The risks they took to establish the United States of America required personal initiative and accountability of themselves and those around them.
 
It appears that we are getting further away from that type of accountability as a society, specifically within the business community. Almost on a daily basis, I witness a lack of responsibility being fostered and tolerated by businesses leaders. The irony is, as leaders, they are not doing any favours to the employees they are not holding accountable or to the company they work for. Deep down, everybody knows and, often, key people are watching the inept behaviour of the leaders in charge.
 
From my experience, there are some key “accountability” pitfalls that business leaders typically fall into. Some of them don’t even appear to be accountability-related on the surface, which is why they’re so insidious. If you want a high-performance organization make sure you avoid them:

1. Unclear responsibility. This is probably the most common pitfall. Show me an underperforming organisation and I’ll show you managers with misaligned goals, employees with vague responsibilities, and a lack of measurement processes to make sure things get done. The key is to ensure goals and responsibilities are properly aligned. Due to the lack of clear responsibilities, employees and leaders will start covering their behinds, pointing fingers, and acting passive aggressively — all sorts of dysfunctional behavior that wreaks havoc with organizational performance.

1. No follow up. This is practically an epidemic in organizations. Executives are great at coming up with goals, strategies, even metrics. Unfortunately, they’re also notoriously bad at following up. Without follow up, nothing good happens. Companies must have a relatively objective and strict process for both setting and scoring employee performance, including the leadership team. If an employee does not feel that they are going to be held accountable, what is the incentive to keep a project on time and on budget? The result is mediocre projects, services, and firm profits.

1. Management misbehaviour. When it comes to poor behaviour of the managers in charge, most high level leaders and boards just look the other way. They are conflict avoiders. I recently witnessed a board ignore the behavior of a key board member who missed a crucial deadline by almost two months without a plausible explanation. Rather than remove him from his position, he was left in place, despite his failure to execute. It was decided that the best course of action was to give him “one more chance.”

 
That lack of accountability plays a key role in business failures because dysfunctional leadership results in bad strategic decision-making and poor employee performance and execution. Granted, coming up with metrics for this sort of thing is challenging, but I think key performance indicators and quarterly (reviews) are pretty effective.

1. Flawed corporate strategy. This is rarely seen as an accountability problem, but it is. When company leaders push a flawed strategy, smart people in the organisation call them on it — publicly or privately — word gets around, and management credibility suffers, big-time.

1. Territorialism and silos. We recently had a client have a long-term manager conduct initial interviews of potential key hires. This person badmouthed his company with our candidates during the entire interview. When we brought this behaviour to the attention of senior management, we were greeted with a chorus of “that’s just the way so-and-so is,” and “he always does the first interviews, we can’t take that responsibility from him.” This client was focused on the needs (ego) of the inept employee, not the needs of the organisation.

 
To locate a strong example of 20th century leader, consider James Burke of Johnson & Johnson and how he deftly handled the Tylenol tampering of 1981. Burke placed consumers first by recalling 31 million bottles of Tylenol capsules from store shelves and offering replacement product in the safer tablet form, free of charge. The move cost Johnson & Johnson more than $100 million. He focused on keeping people safe first, and profits second. Burke received the Presidential Medal of Freedom from President Bill Clinton in 2000. In 2003, Fortune magazine named him one of history’s 10 greatest CEOs. He made difficult decisions that held to the company values.
 
I find that executive management teams at consistently successful companies make accountability a priority and, therefore, avoid these accountability pitfalls.

Over the last few weeks we have noted the importance of PEOPLE and PROCESSES to ensuring a business / organisation generates real success and adds value for all stakeholders in the business. However many fail to look at that most important of items - the product we offer.

Product
Your company is producing widgets at a cost of $1 each and selling them at $3 each. Your income statement has reported positive net income every year for the past ten years. Yet, you are now filing for bankruptcy. There are so many seemingly successful businesses that have failed. Why? Because they were using profits as their measuring stick, but profit is not synonymous with cash. You sell your product and report the revenue, yet you never collect payment. You constantly outlay cash for capital improvements and spread the depreciation expense over twenty years. Your debt matures in a tight credit market and you can't refinance. There are many scenarios that your income statement and profitability alone won't tell you.
 
When it comes to your product (or service), your net cash is determined by what it costs, how much you can sell it for, and, as mentioned previously, when you pay and when you collect. When you collect is not only a function of your billing practices (which you control), but also the quality of your customers. In a retail environment, you can't really control the quality of your customers, but then again retail is typically a POS, so it doesn't matter. In other businesses, you would want a good procedure for conducting credit checks for new customers, as well as monitoring performance for existing customers. You may be tempted to offer prompt pay discounts, but keep in mind that if taking such a discount is good for you, then giving such a discount might not be. Instead, consider less attractive pricing for slow payers. If you happen to lose a bad customer along the way, you might be doing yourself a favor. There are simply some customers you can't afford to do business with.
 
On the payment side, in addition to striking the right balance between price and terms as discussed earlier, consider alliances with strategic suppliers. Again, perhaps a bit more difficult for the smaller company, as the key is to identify suppliers for whom you represent a significant amount of business. Your success is therefore vital to their success. I have seen some successful cases where the key supplier was allowed to set up shop on the company's premises, with on-site inventory and personnel dedicated to exclusively serving the company. In such cases though, one needs to keep a close eye on the controls around the transactions between the two parties.
here to edit.

In the last blog we looked at how PEOPLE help develop a successful business. In this second look at creating real business success we look at how the development of PROCESSES are an essential building block for any business to generate real and sustainable success.

Processes
It goes without saying that whenever cash is involved, internal controls are key. There are entire books on controls, so I won't delve into the nuts and bolts here. Instead, I will only mention that the effectiveness of most controls is determined by the organizational culture. So, in addition to structural things like segregation of duties, which is often difficult in smaller companies, the attitude and mindset, and particularly the "tone from the top", play a vital role in the company's overall control environment.
 
Also on the topic of controls, as with anything else, it is important to measure. The effectiveness of controls is typically measured by auditing. Many think of auditing as a process to detect flaws in controls, but I find it more useful to think of auditing as a control itself. Again, many smaller companies find it difficult to assign the resources to carry out an audit, or many do not feel the need, as "we're all family here". But an audit does not need to be big and fancy, as long as an effective, impartial review of some kind is performed. Remove the personal aspect from it, and start out with a simple one-page "audit plan" that spells out the objective of the review and the steps that are to be taken. Somehow, when you have a checklist in hand, it's harder to hurt somebody's feelings.
 
Finally, one of the key attributes of any process is its timing. In talking about cash flow, the phrase "time is money" couldn't be more true. When you think about it in simple terms (which is what I do best), you possess significant influence over the two key drivers in cash flow: collections and disbursements. With disbursements, it is up to you as the leader of the company to work with your suppliers to determine the best payment terms for both of you. Fortunately, with existing suppliers, you have a baseline of pricing and terms based on your history. You would want to see how far you can extend those terms without affecting price.
 
Conversely, if the supplier is willing to offer discounts for early payment (e.g. 2/10 net 30), it is often advantageous to take those discounts. And with the ultra-low interest rates of today, it sometimes even makes sense to borrow funds through a line of credit in order to take the discounts.
 
But how do you influence collections? Simply put, your customer can not promptly pay an invoice that he does not promptly receive. You might be surprised, but many companies do great at everything else, but then for whatever reason, drop the ball when it comes to getting the invoice out the door. But there are two aspects even here. It is one thing to issue an invoice promptly, and another thing to issue a correct invoice promptly. Organize your billing function to issue invoices as soon as contractually allowed, but with a heightened emphasis on quality so you don't give your customer an excuse to drag his feet.

We have all read countless articles or blogs about how we learn from failure and how it makes us stronger, and therefore the more we fail, the greater we will succeed. But the converse may also be true. If you don't keep your eye on the right kind of success, you are likely to fail. And sadly, it will catch you by surprise, as you really thought you were doing great.
 
So what is the "right kind of success"?
 
Most of us have probably heard the phrase "Cash is King", perhaps more times than we would have liked. But there is no denying the important message that is so tightly packed in those three little words. But still, to the dismay and bewilderment of us "financial types", we watch as companies devote little attention to serving the king.
 
Many might say it is the job of the CFO to handle it; but when did you ever see a king with only one servant? Sure, depending on the organization, the CFO may be tasked with managing the overall cash flow of the company, but the effort requires the support of the entire organization.
 
I thought it would be interesting to look at ways of appreciating (in both senses of the word) cash and what help develop your business for real success.
 
People
Everything starts with the people. When it comes to focusing your business on cash, it is more important than ever to put the right people in the right roles. Training is important, but not all talents are trainable, and there's no point in training someone whose mind is not in the right space. Find those employees that share the passion and vision of the business, and who are also always thinking about the fiscal implications of every decision or every action. Find the ones who tend to treat the company's assets as their own. Find the ones who appreciate the numbers to the right of the decimal point as much as the numbers to the left. Those will typically be the ones who will flourish in roles that are more closely aligned with the company's cash. I am talking about roles, for example, in collections, treasury, payables, and commercial activities.
 
Once you've identified the right people, only then should you invest in training. Be sure that your training program highlights the monetary aspect in every function, as every function has it. These topics will vary depending on type of business (service, manufacturing, etc.), but the key is to drive home the notion of how the fiscal outcome is determined from the very beginning of the process, and is either enhanced or diminished with every other decision along the way. It is also important to get people thinking in terms of the overall enterprise, and not within individual silos.
 
How do you know if you've been successful? Besides your increasing cash flow (if that weren't enough), you would want to develop metrics for evaluating employees' performance. Many metrics are already in place in your standard performance appraisal systems, but you might now want to incorporate some of the cash-focused metrics. You would want metrics that can be measured at the individual level, as well as some at the enterprise level to reinforce the no-silo culture.
 
Over the next 2 weeks we will look at how process and product will drive real success – increasing the value of your business, creating strong cash flows and CASH!

We all know that leaders need to make tough decisions every day. Yet it’s how they make those decisions that set the best leaders apart. When tackling a difficult decision, a person’s skills and experience will only get them so far. That’s why the best leaders surround themselves with people who offer diverse opinions, complement their abilities, and aren’t afraid to suggest a different approach.
 
That’s why a leader must strive to foster an environment where you can get the best thinking from my team, hear the best advice from the experts, and make the best decisions for the organization. Of course, you don’t need to be an executive to make important decisions. Every position comes with critical choices every single day. Here are three ways you can ensure you are always making smart decisions, whatever your role.

1. Surround yourself with people who are different from you. Legendary entrepreneur and business leader Richard Branson once said, “Don’t be afraid of hiring mavericks. Somebody who thinks a little differently can help to see problems as opportunities and inspire creative energy within a group.” It’s human nature to gravitate toward people who are similar to you. Yet if you rely on the same types of people all the time, you will never move beyond the status quo.
 
Diversity is the key to innovation. Seek out people with different backgrounds, different experiences, and different points of view. Then make sure that all these unique perspectives are heard and included in your work. When you foster an environment that embraces and celebrates differences, your team will come up with more creative ideas and better ways of moving forward.
 
By cultivating a culture of inclusion, where everyone’s experience is valued for the insights they can bring, you’ll have the best information available when the time comes to make a decision.
 
2. Know what you don’t know. Hire people smarter than you, and listen to them. Great leaders have to know their strengths, their weaknesses, and how to succeed with both. President Ronald Reagan is quoted as saying, “Surround yourself with great people, delegate authority and get out of the way.” If you convince yourself you know everything, two things will happen. First, you’ll be wrong. And second, you’ll make the wrong decisions.
 
So if you’re a leader, don’t feel threatened by experts who are smarter in certain subject areas or better at certain skills. Seek them out! Build a team full of people who complement your skills and fill in your gaps.
3. Say yes to people who can tell you no. The higher you rise in an organization, the farther you are from the front line. So you need people at every level who have the courage to honestly tell you what’s working and what’s not. And when they disagree with you, they can’t be afraid to say so.
 
Of course, this is easier said than done. You don’t want to build a combative culture – where people find fault just for the sake of it. Instead, you want to foster a collaborative culture – where everyone feels a shared stake in forging the best path toward success.
 
Kelly Johnson, is one of the great aviation pioneers and one of Lockheed Martin’s legendary leaders. Nearly every aeronautical breakthrough for half a century had Kelly’s fingerprints on it – in large part because he knew exactly how to bring out the best from his teams. Kelly would carry around a pocket full of quarters almost everywhere he went. Why? Because he had a standing bet with everyone who worked for him. If they wanted to disagree with him—to offer a better suggestion or a different point of view—Kelly was ready to listen. And if they were right, he would pay up with a quarter.
 
The act was simple, but the message was clear. A good idea could come from anywhere. Anyone who wanted to speak up would be heard – even if that meant disagreeing with the boss.  Look for leaders who value diverse teams, who know what they don’t know, and who aren’t afraid to hear the word “no,” the benefits to your business will be more than can be imagined.