Category Archives: Business Health

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Why healthy businesses are better

Can you recognise which businesses are better than their competitors? The ones that are most profitable? Perhaps those that are growing fastest? Or generating the highest returns to shareholders? What about the ones with the most satisfied customers? Or employees? As soon as you start to think about it, there are many ways of measuring businesses.

Of course recent performance, whether measured by profitability, return on capital or shareholder value, is important as it keeps stakeholders satisfied and generates the resources to invest for the future. But most performance measures tend to be backward-looking and say little about future potential. We therefore believe that the best measure of a business is its overall health.

Research by McKinsey suggests that at least 50% of long-term business success is driven by organisational health. Good business health propels sustainable good business performance. In addition to outstanding performance, two key features characterise healthy businesses: top quality capabilities and a first-class ability to manage change.

Business capabilities, namely resources, organisational skills and management practices, effectively determine the potential level of performance that can be achieved in the immediate future. The level of performance a business actually achieves is a measure of how well it uses those resources and capabilities within the constraints of its competitive environment. Improving capabilities should lead to better future performance. That is why our business health checks cover topics such as skills, competences, logistics and infrastructure.

Agility, Adaptability + Flexibility – our label for the ability to manage change – determine how well a business can shape and react to its competitive environment. This environment is always dynamic and often turbulent. All businesses need to react to changing customer needs, competitors’ behaviour and new entrants. And even the smallest businesses can influence other players in their market through innovation. The ability to proactively and reactively manage change is critical to successful performance over the medium- and longer-term. Our business health checks cover all the important components of the ability to manage change, such as business strategy, organisation design, governance and innovation.

A neat way of thinking about these three elements of business health is that recent performance relates to the past, business capabilities to the present, and agility, adaptability + flexibility to the future. Healthy businesses typically have a superior track record of recent performance, have the capabilities to continue operating at this high level, and have the agility, adaptability + flexibility to continue excelling over the longer-term. The most successful businesses will demonstrate excellent all-round business health.

However, only a few businesses excel in all areas – most have room for improvement. A business health check is a great way to find out how healthy your business is and where it can improve.

Our unique framework delivers an all-round evaluation of your business health presented as a balanced scorecard that highlights areas for improvement. We back this up with a set of practical and actionable recommendations for improving your business health. You can start your business health check now by clicking here.

The best businesses demonstrate superior all-round business health. Part of being healthy is an awareness of their own strengths and weaknesses, along with a determination to minimise any deficiencies. And because they understand the importance of business health, healthy businesses are able to sustain great performance over the long-term.

 

 


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Company Pulse gold silver or bronze

Which health check is best for my business?

Perhaps you’re about to make an important change in your business: entering a new market or launching a new product line; considering an acquisition or merger; or planning for succession or an exit. Or maybe you know there’s a problem but you can’t quite put your finger on it. Perhaps you just want to take stock of your business and plan for the future. In any event, you think it’s a good time to check the commercial and financial health of your business. But which business health check should you choose?

Obviously, we hope that you’d choose one from Company Pulse. All our business health checks:
• Provide an independent and objective review of your business
• Present our findings in the form of a balanced scorecard
• Use intuitive graphics and charts to highlight relative performance
• Benchmark your business against other businesses of a similar type and size
• Evaluate your business strengths, weaknesses, opportunities and threats
• Identify areas for improvement and sources of untapped potential
• Help to develop action plans and set priorities for implementation

But we offer three different levels of business health check, so you need to find the right one for your business.

Our Gold and Silver business health checks are all-round business reviews that provide you with a detailed and comprehensive report using our unique PULSE evaluation framework:
People + Processes
Utilisations + Outcomes
Logistics + Infrastructure
Strategy + Finance
Ethos + Relationships

Our Gold business health check is our premium service in which:
• Our experienced advisors will meet your senior management on-site to review your business in-depth, giving you plentiful personal contact time
• We use scenario analysis to review forecast financial performance and highlight a range of potential outcomes
• Our advisors present and discuss our findings in person with your Board
We think our Gold service is most appropriate for more complex businesses, such as those with multiple brands or product categories, or those trading internationally in several territories.

Our Silver business health check has the same scope as our Gold service. The key differences are:
• Only one of our experienced advisors will meet you to review your business
• A simpler review of forecast financial performance
• The presentation and discussion of our findings is via video-conference
A Silver business health check is cheaper and quicker to complete than the Gold and is most appropriate for smaller and/or simpler businesses, typically with a single brand and product category, and probably not (yet) exporting to a significant degree.

Our Bronze business health check is a distinct service that:
• Covers only the financial aspects of your business, notably analysis of the current financial position and forecasts of future financial results
• Includes a review financial planning and controls
• Is conducted exclusively online
A Bronze business health check is the cheapest and quickest to complete and is most appropriate for businesses whose prime concern is their finances.

Of course, if you can’t decide between our business health checks or want to sample our services before you buy, you can always start with our Free Trial Diagnostic!


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Company Pulse business health check

Prevention is better than cure

Most of us recognise that preventative care is cheaper than curative care (or treatment), and more effective than palliative care (which just reduces the impact of symptoms). And not just in medicine, but in many activities. That’s why we have routine services for our cars, planned maintenance for our infrastructure and quality assurance in manufacturing.

It’s the reason why at Company Pulse we offer business health checks as the primary tool for improving the commercial and financial health of businesses. We think that if you want to help a business grow, step up to the next level, or even just survive, you need to know its strengths and weaknesses and how it can use them. One of our business health checks is the first step in understanding business potential, helping the management team think strategically about their business and actively planning its future direction.

The easy option, of course, in not to check your business health. But can you afford not to?

Back in the day, most people thought quality management systems were a nice-to-have that added costs to a business. But Armand V. Feigenbaum (in a 1956 Harvard Business Review article) showed to the contrary, that the costs of NOT taking preventative actions were almost always higher. The cost of quality failures generally far outweighed the costs of prevention. Feigenbaum’s work lead directly to the development Total Quality Management and Six Sigma. He defined four main cost areas (with typically increasing overall cost to the business):

Costs of Control
Prevention (planning, training, process control)
Appraisal (inspection, testing)

Costs of Failure
Internal failure (scrap, rework)
External failure (complaint handing, servicing, warranty, reputation)

A business health check falls under the costs of control, with elements of both prevention and appraisal. Analysis of the business environment is an essential element of strategic planning, and such elements of a business health check are pure prevention, as is the review of business capabilities. Benchmarking business performance comes under appraisal in the quality costs model and will highlight potential deficiencies and areas for improvement.

A Company Pulse business health check is an independent and objective review of your business that should lead to real performance and profitability improvements, enhancing business value and delivering a positive return on investment. And because our business health checks are low cost and fixed-price, the initial investment will probably be less than you expect and almost certainly less than the costs of not taking a precautionary check-up.

Unlike an MOT or filing your accounts, there’s no fixed schedule for checking the health of your business. Best practice is to take regular (say, biennial) health checks of your business. But if you haven’t got into that routine yet, when is a good time to take its pulse? The two main triggers are whenever you are considering major change; and when you know there is a problem, but you’re not exactly sure what it is.

The sorts of major or strategic change in your business, when a prior business health check is advisable, include:
• Entering a new market
• Launching a new product line / category
• Acquiring or merging with another business
• Raising new finance or refinancing existing debt
• A fundamental change to existing business strategy
• Implementing a turnaround
• Succession planning
• Seeking an exit (through selling your business)

If you’re about to embark on one of these potentially risky ventures, a modest investment in a business health check, which should alert you to any hidden problems and steer you towards a better outcome, is likely to be time and money well spent. After all, prevention is better than cure.


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Company Pulse business health check

Start improving the commercial and financial health of your business

The turn of the year is a good time to reflect on past achievements and to plan for the future. For most business people, that means thinking about how to improve the commercial and financial health of their business.

As we’ve discussed previously, a healthy business needs more than just good financial results. The healthiest companies are characterised by strong performance across a range of measures, including sales growth, profitability, balance sheet, employee skills and motivation, supply chain efficiency and customer satisfaction. This all-round fitness allows them to reap sustained, long-term rewards.

Long-term success in business means being better adapted to your environment than your competitors. This requires fitness in the past, present and future – as demonstrated by recent performance; current capabilities; and adaptability and flexibility.

So if you want to take stock of your business and start preparing for a prosperous new year, how should you start? The best way is to see how your business shapes up by taking a business health check.

A Company Pulse business health check uses our unique PULSE evaluation framework: People + Processes; Utilisations + Outcomes; Logistics + Infrastructure; Strategy + Finance; and Ethos + Relationships. We benchmark your business performance using this framework against other businesses of a similar type and size to help you understand your comparative strengths and weaknesses. As good business health derives from a combination of factors, we present our findings in the form of a balanced scorecard showing your benchmarked performance across multiple dimensions. We will also develop with you a prioritised action plan of how to improve the financial and commercial health of your business.

A business health check is the ideal start to improving the commercial and financial health of your business. Once you have established where you are and what you could do to improve, you can start implementing your action plan. And that would be a really rewarding way to start the year.


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Company Pulse business health check

What is known and what is unknown? Or how Donald Rumsfeld, the Johari window and a business health check are linked

Donald Rumsfeld’s famous quote about “knowns” and “unknowns” (reproduced in full below) was illuminating in that he missed out “unknown knowns”!

The Johari window is a useful psychology tool for understanding relationships between a subject (self) and others (peers) that categorises awareness of information (in the psychologists’ case, character traits) into 4 quadrants:

• Open or Arena, where both the subject and others are aware;
• Hidden or Façade, where information is known by the subject but not by others;
• Blind Spot, where the subject is not aware, but others are; and
• Unknown, where neither the subject nor others are aware.

This tool can also be applied to companies in respect of knowledge in the business environment. The Open quadrant contains information in the public domain, such as statutory accounts or demographic trends; the Hidden may include trade secrets, commercially sensitive data and pricing algorithms; the Blind Spot could comprise customer sentiments being aired on social media, new entrants or processes that you are not (yet) aware of; and the Unknown hold anything from future fashion trends to undiscovered new technologies.

As in personal relationships, the main benefits to business from using the Johari window are in becoming aware of things in the Blind Spot and tackling them appropriately.

In business, many items of information move from one quadrant to another, whereas your personality traits tend not to change much. Your new invention will start in the Hidden quadrant until you register a patent, when it moves into the Open quadrant (albeit protected from exploitation by others). Much information moves from your Blind Spot to the Open quadrant as you learn more about your customers and competitors. But things can also get forgotten or overlooked and move the other way – material once considered important but now buried in a dusty file. And, of course, new technologies, business processes and market trends emerge from the Unknown. Because of these movements, businesses should not consider their Johari window as a one-off exercise, but should keep reviewing it for changes, perhaps annually.

One major benefit from taking one of our business health checks is that it will normally reveal to you things currently in your Blind Spot. These are issues that you have never been aware of or not paid much attention to, but that our market and industry intelligence can bring to your attention. We may also remind you about important factors that have dropped off your radar. Whilst, as Rumsfeld acknowledged, you can’t do much about things that are Unknown, you can improve your business performance by minimising your Blind Spot.

When Rumsfeld talked about “known knowns” (Open quadrant), “known unknowns” (Hidden) and “unknown unknowns” (Unknown), he failed to mention “unknown knowns” (the Blind Spot). Perhaps this was his subconscious Blind Spot?

So don’t get caught out by things in your Blind Spot. Uncovering them and dealing with them effectively is vital, especially as the business environment changes an “unknown known” becomes significant to your business.

Donald Rumsfeld quotation (Feb-2002 at a US Department of Defense briefing)

“Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.”


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Company Pulse business health check

How a business health check is like a personal health check – and how it differs

A question posed the other day was “A business health check: is that like a personal health check-up?” And the answer is broadly “Yes” but with some important differences.

Many will have experienced a personal health check-up with their GP or a private healthcare provider and will be familiar with the process. There’s usually a preliminary questionnaire into your lifestyle (diet and exercise) and family medical history. The appointment with the nurse or doctor starts with an interview, probing your questionnaire answers and assessing your mental health and wellbeing. Then measurements are taken: blood pressure, pulse, height and weight, body fat percentage. Blood and urine samples may be taken and sent for analysis (checking for cholesterol or liver problems); you are screened, where relevant, for specific diseases and function (thyroid, prostate, cervical smear); and sometimes other tests (cardio-respiratory exercise, motor reactions) may be carried out. After the consultation, calculations (such as BMI and metabolic rate) and diagnoses are made. You are given feedback on your health, an assessment of key risks (such as heart attack or stroke) and recommendations in an action plan for improving your lifestyle and overall health.

A Company Pulse business health check follows a similar process. You answer our online questionnaire into your business health, provide us with hard data (for example your statutory accounts). During our Gold business health check we meet you and your senior management team to probe your questionnaire answers in more detail and to explore any opportunities or concerns. We analyse your data and calculate key ratios (such as productivity, staff turnover, financial returns) and benchmark these against comparable companies. We project your finances forward and highlight any areas of potential risk. We provide our feedback to you in the form of a balanced scorecard with an intuitive, graphical dashboard of your business health. All this is summarised in a report containing our recommendations which we discuss with you and agree on a prioritised action plan for improving your business health.

Where our business health checks differ from a personal health check is in the area of adaptability and flexibility. Here, we stop thinking about your company as a single organism and instead consider it as a species. Businesses, like species, have an advantage over individual organisms in their ability to evolve in response to a changing environment. We take the view that companies are in a continual struggle: “survival of the best adapted” (to their business environment).

As well as examining your business health under our five PULSE dimensions (People + Processes; Utilisations + Outcomes; Logistics + Infrastructure; Strategy + Finance; and Ethos + Relationships), we analyse across the dimensions of current capabilities, recent performance, and adaptability and flexibility. For us, adaptability and flexibility is vital. In a rapidly changing business environment, healthy businesses need to be able to change to keep up with, or stay ahead of the competition. Being better adapted could mean or being better at satisfying customers, having more efficient operational processes, or being better at innovating. And the targets keep moving (for example due to rising customer expectations), so healthy businesses need strategic-thinking, continual development and a nimble response to any new opportunities.

The main difference between one of our business health checks and a personal health check is that, in addition to an assessment of your current health and prospects, we also focus on how adaptable and flexible your business is to take on the challenge of a rapidly changing business environment.


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Company Pulse business health check

Benchmarking is not just for large corporations

Benchmarking is a well -known and oft-used technique in large corporations, but relatively few smaller companies take advantage of this valuable business tool. Many SMEs think it is too difficult, too expensive or not worth the effort. This is a missed opportunity as SMEs often benefit more from benchmarking than their larger counterparts.

Benchmarking is a technique for comparing various aspects of your business (such as financial results, input costs or process outputs) with those of other businesses, ideally of a similar size or in the same industry. Performance benchmarking is one of the best ways to see how your business compares with best practice and therefore understand your relative strengths and weaknesses. Best practice refers to a process or methodology that delivers better results and is consequently the target benchmark to aspire to. There is a whole industry of management and process consultants who can provide benchmarking tools and/or advice on best practice. And because there are many benchmarking consultants, competition keeps prices keen – although you need to be careful in selecting the right advisor.

The advantages of benchmarking are clear: it provides quantifiable targets for business improvement; allows progress to be measured; and provides estimates of the benefits that should be realised (so the most valuable improvements can be prioritised) – all of which should enhance competitiveness and improve returns. Benchmarking also tends to have a positive impact on business culture: by opening minds to new ideas, it sets your company further on the path of continuous improvement that leads to a learning, and therefore healthy organisation (See our previous blog on the key indicators of business health).

SMEs have relatively more to gain from benchmarking than larger organisations: many don’t have the embedded systems and processes for continuous improvement and first steps in this direction often deliver large benefits; SMEs can usually set clearer objectives and targets more complex businesses; and, if their peers aren’t doing much benchmarking, the competitive advantages are likely to be more significant. (If all the competitors in an industry achieve best practice, doesn’t that make best practice is just average?)

However, there are some disadvantages: benchmarks need to be relevant, and therefore be derived from a similar peer-group – if not, inappropriate practices may be proposed or unrealistic targets set; benchmarking has a tendency to become an end in itself, and not a means to business improvement; and, probably most importantly, benchmarking and related business improvements tend to focus on specifics but need to be managed holistically – otherwise, the business can become lop-sided with a few best practices constrained by many mediocre processes.

SMEs should worry less about this last point than larger, more complex, organisations. Having a single line of business makes concurrent management of the specifics and the whole a lot easier. The second reservation is also less of a problem for SMEs, where the risk of building a bureaucracy is lower.

SMEs do, however, suffer from a lack of relevant and comparable benchmarks. Not because there are few comparable companies (there are usually many) but because the population of SMEs as a whole is less engaged in benchmarking. This can be overcome by starting with benchmarks that are readily available for your relevant peer-group (such as financial benchmarks) or by carefully selecting a benchmarking advisor who has access to a relevant data set.

Indeed, for SMEs who are new to benchmarking, it is often advisable to start with high-level benchmarks and then to drill down into more detailed and specific measures when you become familiar with the benchmarking process. Our business health checks also provide an entry point by benchmarking all key areas of the business against comparable organisations and presenting the results in a balanced scorecard format.

SMEs shouldn’t miss out on the opportunities afforded by benchmarking. It’s a cost-effective way of prioritising what and how to improve in your business. And SMEs often generate proportionally greater benefits from benchmarking than large corporations do.


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Company Pulse business health check

What are the key indicators of business health?

Category : Business Health

At Company Pulse, we are focused on improving business health. But what do we mean by “business health”? And how can you tell whether a business is healthy – what are the key signs to look out for?

We have taken to heart McKinsey’s work on business health, and they have offered the following description: “Healthy organizations don’t merely learn to adjust themselves to their current context or to challenges that lie just ahead; they create a capacity to learn and keep changing over time.”
(McKinsey Quarterly, June 2011).

The Darwinian cliché is “survival of the fittest”. In business, as in Darwin’s view of natural selection, we incline to “survival of the best adapted”. (The phrase “survival of the fittest” was coined by Herbert Spencer and accepted by Darwin on the basis that “fittest” meant “better adapted for the environment”, not the common modern meaning of “in the best shape”.) A healthy business is one that is better adapted to its environment than its competitors. This could mean satisfying customers better, having a more efficient supply chain, being better at innovating, or one of a host of other characteristics, depending on market and industry conditions. A healthy business should have the appropriate current capabilities to meet the challenges of its business environment, including operating efficiently, and being able to learn from mistakes and build on successes.

The results of being well-adapted should be demonstrated by recent performance. A healthy business is one that generates resources for the future. A sound track-record does not just mean growth (whose importance if often exaggerated), but consistently strong results and the ability to turn a good top line into solid profits and, most importantly, cash.

Then we need to take into account that the environment is continually changing, and this change drives natural and business evolution. Change in the business environment is faster now than ever before, and accelerating. So, in addition to being well-adapted to the current environment, healthy businesses need to be able to change to keep up with, or stay ahead of the competition. We therefore look for adaptability and flexibility, as shown by strategic-thinking and innovation, along with a nimble response to any new opportunities.

So what are the specific indicators of business health? Under the 3 headings of current capabilities; recent performance; and adaptability + potential, Company Pulse business health checks include measures of the following:

Current Capabilities
– Staff skills and competences
– Property plant and equipment
– Supply chain
– Management information systems
– Customer service and complaint management

Recent Performance
– Capacity management
– Productivity
– Financial results
– Customer satisfaction levels
– Compliance

Adaptability + Flexibility
– Recruitment and training
– Cost base flexibility
– Business innovation, research and development
– Business strategy
– Corporate governance and accountability

We have measures and benchmarks across multiple dimensions so that topics can be aggregated in different ways (notably also under PULSE: People + Processes; Utilisations + Outcomes; Logistics + Infrastructure; Strategy + Finance; and Ethos + Relationships). As good business health is a balance between a number of factors, we present our findings in the form of a balanced scorecard covering these different dimensions.

There is no one measure of business health. But we believe our approach of benchmarking a range of measures and analysing across multiple dimensions allows you to draw the appropriate conclusions about how well your organisation is adapted to its current business environment and its fitness to face potential future business challenges.

 

 


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Company Pulse business health check

There’s more to business health than financial results

Ask a manager or owner how business is going and the chances are that you’ll get an answer about sales, profits or growth. But there’s a lot more to being a healthy business than financial results.

Healthy businesses should naturally post healthy results. But the characteristics of healthy businesses mean that they will post consistently good results and be better able to cope with adverse changes than less healthy competitors.

So what characterises a healthy business?

  • Strong sales growth
  • High levels of profitability and returns to equity
  • Solid balance sheet
  • Satisfied customers
  • Top quality employees
  • Best-practice management
  • Effective use of the latest technology
  • Adaptable organisation and strategy
  • Resilient infrastructure

Of course, the correct answer is all of the above.

Nowadays there is an increasing emphasis on a holistic approach to business health. Research by McKinsey (see the link below) indicates that the best performing businesses “don’t merely learn to adjust themselves to their current context or to challenges that lie just ahead; they create a
capacity to learn and keep changing over time.” The healthiest companies actively manage all key aspects of their business including some areas that may seem “fluffy” – but this attention to detail across the board allows them to reap sustained and long-term rewards.

And just because a business is small doesn’t mean it can’t have the attributes of successful larger businesses – you don’t need an HR department to have good staff recruitment practices. SMEs may have insufficient resources to put into formal processes, risk management and the like, but well-run SMEs can adopt a mind-set of quality in everything they do without adding unnecessary costs. This sort of enlightened approach leads to better long-term results even in the smallest of companies.

So how should you start the journey to improving your business health? The obvious first step is to measure your current business health by taking a business health check. This should give you a balanced scorecard type assessment of your business across all key dimensions: people, processes, infrastructure, strategy, customer relationships and, yes, financial results. A good business health check will also provide you with an action plan for how to improve, focused on minimising any business weaknesses and exploiting your strengths.

A business health check is just the start to improving your business health. You then need to prioritise, develop and execute your business health improvement plan. And keeping your business healthy won’t just happen, it needs constant attention, monitoring and review – but the rewards are worth it.

McKinsey link: http://www.mckinsey.com/insights/organization/organizational_health_the_ultimate_competitive


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