Tag Archive for: #planning

Productivity: Uncovering Hidden Opportunities for Growth

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In today’s dynamic economic environment, business owners constantly seek ways to enhance efficiency and drive growth. One of the most effective approaches to achieving these goals is through the strategic use of performance metrics. Among these, ‘Revenue Per Hour Paid’ is a potent tool. Originally from the realm of professional services, this simple yet profound metric reveals hidden productivity insights that are applicable across various industries. This blog explores how implementing this key metric can improve business productivity, providing owners with actionable insights into optimising their operations.

“What gets measured gets managed.”  Peter Drucker

The Metric: Revenue Per Hour Paid

‘Revenue Per Hour Paid’ calculates the revenue generated per paid working hour, offering a clear view of how effectively a company utilises its human resources in relation to its revenue generation. It’s a straightforward calculation: divide top-line revenue by the total hours paid to employees. This approach highlights the direct relationship between workforce efficiency and revenue output.

Broadening the Metric’s Horizons: A Recent Case Study

The metric ‘Revenue Per Hour Paid’ is highly adaptable across various industries and provides crucial insights into operational efficiency. One Advisory Board client experienced financial discrepancies where there was an increase in top-line revenue but a declining cash bank balance. Initially, this was attributed to the need for increased working capital to fund growth. However, further analysis of ‘Revenue Per Hour Paid’ revealed that there were deeper issues at play. The metric showed a significant drop in revenue per hour, from $350 to $270 over time, indicating that rising revenues were masking a decline in productivity. This insight was instrumental in addressing the inefficiencies that were inflating operational costs and depleting cash reserves. It highlighted the metric’s value beyond traditional productivity assessment.

How to Calculate Productivity

Consider “ConstructCo,” a hypothetical company, which reported an annual revenue of $27,600,000. The company employs 50 workers, each working 40 hours a week.

  1. Calculate Total Hours Worked Annually:
    • Total hours worked annually = 50 employees x 40 hours/week x 52 weeks = 104,000 hours
  2. Calculate Revenue Per Hour Paid:
    • Revenue per hour paid = $27,600,000 / 104,000 hours = approximately $265.38 per hour

This calculation shows that for every hour worked at ConstructCo, the company earns about $265.38, providing a clear measure of workforce productivity.

Expanding the Calculation to Capital Investments:

For industries reliant on heavy machinery or plant equipment, the same formula can be applied to assess the productivity of these investments. For example, if ConstructCo also wants to measure the productivity of a specific piece of machinery:

  1. Calculate Total Operating Hours for the Machinery:
    • Total operating hours annually = 30 hours/week x 52 weeks = 1,560 hours
  2. Attribute Revenue to this Machinery:
    • Revenue per operating hour = $5,500,000 / 1,560 hours = approximately $3,525.64 per hour

This helps ConstructCo determine how effectively their capital investments are contributing to the company’s revenue.

Conclusion

The ‘Revenue Per Hour Paid’ metric extends beyond traditional financial metrics by offering a clear, actionable indicator of how effectively revenue is being earned. It provides businesses not only with a method to measure success accurately but also drives them towards it more effectively. By integrating this metric into their strategic review, companies can diagnose the underlying issues, steering towards more sustainable profitability and operational efficiency.

Guide to Strategic Planning: Part 3 – Defining Strategic Imperatives

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Unlocking Strategic Success: The Role of Strategic Imperatives

Strategic imperatives are the cornerstone of any robust strategic plan, acting as the fulcrum around which all strategic efforts pivot. Identifying these imperatives is not just a step in the strategic planning process; it’s the very heart of it, providing the clarity needed to focus on what truly matters for your business.

“A goal without a plan is just a wish.”  Antoine de Saint-Exupéry

The Seesaw of Strategic Planning

Imagine strategic planning as a seesaw, with your vision, mission, and purpose on one end and the key jobs that need to be done to realise that vision on the other. Strategic imperatives are the pivot point—the fulcrum—of this seesaw. They represent the critical tasks and initiatives that, if executed, will naturally unlock significant value and propel your business towards its goals.

Identifying Strategic Imperatives: Best Practices

  1. External and Internal Assessments: Utilise tools like PESTEL analysis for an external viewpoint or SWOT analysis to understand your strengths, weaknesses, opportunities, and threats. This holistic perspective helps float strategic imperatives to the surface.
  2. Capabilities Gap Analysis: Identify the essential capabilities your business needs to achieve its vision but currently lacks. This gap analysis highlights areas for development that are imperative for strategic success.
  3. Synthesising Insights: Rather than transcribing every output of your analyses into a to-do list, aim to distil them into a concise set of four to six strategic imperatives. These should be the transformative tasks that will drive the most significant impact.

The Power of Clarity

With a clear set of strategic imperatives, your business gains razor-sharp focus on what needs to be accomplished. This clarity enables you to direct resources and efforts towards these pivotal areas effectively, ensuring that every action taken is aligned with your strategic goals.

Starting with Sophistication

Strategic imperatives can begin at any level of sophistication. Often, business owners instinctively know the key tasks for the year. However, the challenge lies in elevating this understanding from immediate, known issues to a broader, opportunity-centric view that unlocks growth and transformation.

Beyond the Imperatives: Implementation

Once your strategic imperatives are defined, the planning process shifts to implementation: who will do it, how it will be done, and when. Understanding your strategic imperatives simplifies these subsequent steps, making the path to achieving your goals clearer and more straightforward.

Conclusion: The Fulcrum of Strategic Planning

By centring your strategic planning around identifying strategic imperatives, you position your business to navigate the next three to five years with confidence and purpose. This approach simplifies the strategic planning process and ensures that every effort is aligned with your ultimate vision for success.

Join the Conversation

Board Associates is committed to education and fostering a dialogue around strategic planning so we invite you to join us in this conversation. Monthly, from February to April, we will host a lunch & learn session dedicated to discussing strategic planning in an informal setting. This is an opportunity to delve deeper into strategic planning, ask questions, and share insights with peers. If you’d like to participate, you can register for one of the upcoming lunch & learn sessions here:

Guide to Strategic Planning: Part 2 – Setting a Vision

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Setting a Clear Direction: The Foundation of Strategic Planning Success

In the landscape of business strategy, the importance of a clear direction cannot be overstressed. It’s the compass that guides every decision, action, and investment in your business. Yet, establishing this direction is often where many stumble, not for lack of ambition, but due to the overwhelming pressure to define a grand vision.

“Effort and courage are not enough without purpose and direction.”
John F Kennedy

The Myth of the Moonshot

Many leaders feel the pressure to articulate a “big, hairy, audacious goal” or a moonshot vision for their business. While having such a goal can be inspiring, it’s not the only path to success. The reality is, not every business is aiming to redefine an industry or capture a global market. For many, the ambition to improve incrementally—to be slightly better this year than the last—is a perfectly valid and admirable goal.

Embracing Your Business’s True Intent

The core of strategic planning lies in understanding your business’s intent. What role does it play in the market, the community, or in the lives of your customers? If defining a long-term vision feels daunting, narrow your focus. Concentrate on what you can achieve now or in the near future. This approach doesn’t diminish your aspirations; it clarifies them, making your goals more attainable and relevant – from small things, big things grow!

Avoiding the Common Pitfall: Misaligned Goals

A critical error in setting business direction is adopting goals that don’t resonate with your values or the essence of your business. Claims of wanting to be a “market leader” abound, but if such a position doesn’t align with what you genuinely care about, then it’s a hollow aim. Your strategic plan should reflect your business’s authentic aspirations, not just what you think should be your goals.

The Value of Every Vision

For those who see their business primarily as a means to provide for themselves, their families, or their employees, your reason for being is clear and as significant as any. Whether your business was chosen or inherited, it holds the potential for impact. The value you create, the jobs you provide, and the community you serve—all of these are critical contributions.

Join the Conversation

I am committed to education and fostering a dialogue around strategic planning so I invite you to join me in this conversation. Monthly, from February to April, I will host a lunch & learn session dedicated to discussing strategic planning in an informal setting. This is an opportunity to delve deeper into strategic planning, ask questions, and share insights with peers. If you’d like to participate, you can register for one of the upcoming lunch & learn sessions here:

Conclusion: Finding Your Strategic North Star

Setting a clear direction for your business doesn’t require an earth-shattering vision. It requires honesty about what you want to achieve and why. Whether your goals are monumental or modest, they are yours to define and pursue. As we continue to explore strategic planning, remember that the journey is as unique as your business. Stay tuned for more insights on navigating this path effectively.

Guide to Strategic Planning: Part 1

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The art of strategic planning is not just about forecasting the future but creating a roadmap that navigates through uncertainties to achieve sustainable growth.  But unfortunately for most, strategic planning rarely delivers on the promise.  At best, it provides some general direction and guidance.  At worst, it’s an expensive and unproductive day that could have been spent better serving customers.

My journey in strategic planning began in 1992, and since then, I’ve had the privilege of crafting over one hundred strategic plans. This experience spans my tenure as an employee responsible for strategic planning, later evolving into roles at PwC, and culminating as the principal of Board Associates. Throughout these roles, I’ve created good plans and bad plans, concise plans, voluminous plans and even plans in posters and murals.  In the spirit of giving back to the business community, I offer this series of articles on strategic planning with the aim of educating and sharing my experiences and mistakes so that we can all learn together.

“The essence of strategy is choosing what not to do” Michael Porter

The Foundation of Strategic Excellence

As we approach the time of year when businesses start to think about their strategic direction, I want to share resources that have significantly influenced my approach to strategic planning.  In the first instance, I want to refer you to two cornerstone books that provide both foundational knowledge and actionable steps for crafting effective strategic plans.

Great by Choice by Jim Collins is an indispensable resource that delves into the essence of successful business strategy. This book is my favourite and a must-read for business owners, offering insights into creating environments where businesses not only survive but thrive. It’s an entertaining read, backed by rigorous research comparing businesses that have outperformed their peers by leaps and bounds. “Great by Choice” is an essential read for those seeking to understand the ingredients that underpin exceptional performance and best practice.

Playing to Win by A.G. Lafley provides a pragmatic approach to strategic planning. Having used and been trained in numerous methodologies over the years, I regard this book as a distillation of the strategic planning process to its most effective elements. It serves as a guide that demystifies the strategic planning process, making it accessible to all. This book is particularly beneficial for those looking to create strategic plans that are both impactful and straightforward.

Moving Forward with Strategic Planning

This post essentially directs you to my favourite “primers” for strategic planning. In future posts, I will delve deeper into the nuances of strategic planning, sharing my insights and best practices honed from decades of experience (and mistakes!). Expect to explore tips and strategies that will help you craft strategic plans that are both concise and potent, enabling you to avoid common pitfalls and inefficiencies that the majority of owners suffer from.

Join the Conversation

I am committed to education and fostering a dialogue around strategic planning so I invite you to join me in this conversation. Monthly, from February to April, I will host a lunch & learn session dedicated to discussing strategic planning in an informal setting. This is an opportunity to delve deeper into strategic planning, ask questions, and share insights with peers. If you’d like to participate, you can register for one of the upcoming lunch & learn sessions here:

Final Thoughts

Strategic planning is more than a task; it’s a journey of discovery and adaptation. As you embark on or continue this journey, “Great by Choice” and “Playing to Win” are invaluable companions that offer wisdom and guidance. I look forward to sharing more insights and engaging with the business community to enhance our collective understanding of this important ‘guide rail’ for business success.

Transformation: The Board’s Missing Agenda Item

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Yet another corporate collapse brings into sharp relief an issue which seems to be missing from the agenda in Boardrooms around Australia: Stewardship of Transformation.

Disruptive consumer and competitive trends are not new and yet many fail to respond. I wonder then, how active this discussion is in the Boardroom?  In my view there is a clear imperative to “re-tool” our organisations for the business models of the future. It is fundamental to the sustainability of our organisations and to our duty as Directors.

 there is a clear imperative to “re-tool” our organisations

But what to do about it… I’d like to offer my own perspectives and “questions for the Board” as follows:

  1. Board Composition: is there sufficient cognitive diversity on the Board? Are there skills & experience in innovation and new business models (not just IT)?
  2. Market Sensing: Is the voice of the customer present at Board meetings (beyond NPS and satisfaction surveys). How are we detecting, reporting and responding to emerging trends?
  3. Strategy Development: How are we leading or responding to disruption? Are we looking at ways to disrupt ourselves? Are we planning for transformation or resting on the laurels of past success?
  4. Resource Allocation: Have we provided the means to foster innovation & experimentation? Have we invested sufficiently in our future selves?

In my view, the transformation imperative is clear and so to is the Board’s responsibility for the stewardship of that transformation. The challenge is that the skills to transform don’t reside in the traditional roles of marketing, HR or IT.  Instead, new disciplines such as human centred design, lean and design thinking have emerged to confront this challenge; but few organisations have them and they certainly aren’t represented in the Boardroom.

https://www.abc.net.au/news/2018-10-18/menswear-chain-roger-david-enters-administration-jobs-at-risk/10390760

What Our Clients Say

We would like to take a moment to say thanks.

The knowledge and advice provided by Board Associates provided clarity for our business strategy and allowed us to navigate a successful exit via trade sale.

The time and information provided to us was invaluable to reaching the goals and outcomes that were set out.
We would strongly recommend your services to other companies as it provided information that we hadn’t even thought of.

Challenged us to think of the business in new ways and helped bring our growth strategy into focus

Our Advisory Board challenges our thinking, provides the confidence to grow and the brains around the table to do it responsibly.

Their work brought clarity and insight to our strategic planning workshops and advisory board meetings. They were particularly adept at navigating tricky issues with tact and sensitivity. I’d have no hesitation in recommending Board Associates in this capacity… they were well suited to unraveling issues back to their core.

The knowledge and connections we were were able to access through the Growing 100 program have contributed to new partnerships and clarity in our business’ direction. Board Associates insight to the business world and in particular, start-ups, has been incredibly helpful. Not only did they give us strategic guidance on how to grow the business, but they also gave us the reassurance and encouragement we needed to know that we are on the right track.

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