How your firm can stand test of time

I read with a lot of angst of the closing of big businesses, specifically in Kenya, some of which have defined our way of life as a country. Most slogans that are popular in Kenya are based on these businesses or their products. My torment comes despite my attachment to the brands and the taglines from these painful realisations; that the economy will be depressed from the unpaid suppliers; jobs will be lost en masse and several families will have their lives changed forever and; whole economies that revolve around some of these businesses will come to a grinding halt!

As a business leader, this has me wondering, “where did the rain start beating us? And more importantly, what lessons can we to take from these businesses? Of course, most of what I know about these businesses and their fall is what is placed in the local dailies or folklore from the said “insiders” or court documents. The accuracy of these sources cannot be overstated and are to be taken with a pinch of salt.

But the question still begs, what are the fundamentals of businesses built to last? What are the basics that an organisation should adhere to so as to buffer themselves from such tragic ends?

Below are my suggestions based on my operational experience.

Compliance

Social and regulatory compliance is not a nice to have, it is a must have. Not for what an organisation could be caught for but for what it could suffer by the lack thereof of its adherence to the requirements. Like insurance – this is a necessary evil – you would rather err in being over complaint than not.

The culture of compliance is also likely to permeate through the human resources and save the organisations millions in employee theft and pilferage. For example, an organisation that has a compliance and sustainability culture will be less keen to bribe corrupt officials to get some certification. Employees will bear witness and appreciate the spirit of the business to do things right even with the outside world. This culture enables employees believe and behave ethically in dealing with the business.

A business that internally encourages tax evasion should not be surprised when its own employees steal from it – there is no honour among thieves after all. I cannot overstate the importance of compliance no matter the age or size of the business.

Strategy

Every organisation must have something it stands for, the reason it exists, call it strategy or plan or even vision. It is the true north of the organisation. This knowledge is not intended to stifle agility but acts as a compass that protects an organisation from extreme diversion from its main core.

In the retail industry we saw the retailers – now fallen - using their cash flow to buy buildings which are fixed assets with long-term returns. This was at a time when the real estate euphoria had engulfed the country. It begs the question, “What was the intent of the boards? “How were they going to service loans from thin margins while paying their suppliers within 60 days and 90 days?”

Organisations must learn to centre themselves by having clarity calls and constantly checking through their governance mechanisms, how far they are at from their true north. It is important that they have the confidence to call themselves out when they veer too far.

Governance

To stand the test of time, an organisations must have good governance. The principles of governance lie on three main dimensions: Authority, Decision-making and Accountability. Governance determines who has power, who makes decisions, how other players make their voice heard and how account is rendered. It includes the mechanisms required to balance the powers of the members (with the associated accountability), and their primary duty of enhancing the prosperity and viability of the organisation.

Investopedia defines corporate governance as the system of rules, practices, and processes by which a firm is directed and controlled. It encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.

Where this system does not exist, anarchy and confusion ensue. What then follows is lack of a knowledge management and transfer system leaving the organisation pegged on the good will of whoever is in charge at the time. Even a good leader works best where structures and systems exist.

While I appreciate that corporate governance is touted as an excess, that is an expensive affair that can be carried on only by large organisation and only those in public positions, I would like to underscore that a good governance process should be a mandatory requirement for any organisation worth its salt and looking to move forward sustainably.

Talent

The importance of hiring the right talent in the right way cannot be overstated. While talent is not managed in isolation to the business and its processes, an organisation could cover half the journey if its pool of talent is the right kind and has been procured in the right way. Most indigenous businesses will mostly start as family businesses or partnerships and flourish due to time and chance. In these cases, most staff holding critical positions are from these ties and are mostly not well capacitated to run the establishment.

I am a big proponent of growing your own talent. Family businesses or partnerships should at the get go initiate a knowledge transfer and development programme within their businesses ab-initio. This will help them develop top talent within their organisations who then help them remain compliant and competitive in the market. The alternative is to be aware of the point at which the business needs professionals. This might aid in bringing the right help in the nick of time, however, better late than never shall not an appropriate saying in this situation.

Operational excellence

I have written a whole article on this matter. Please read it here if interested. I strongly believe that a proper operationally run business is the only business that can achieve strategic fitness. An organisation with concerns on record keeping, bad partners and customer relations, poor internal systems will seldom thrive. Organisations should also stop defining technology as their only indicator of operational efficiency. There must be an interconnectedness in the processes and systems of every organisation for it to thrive. Only then does an organization stop itself from gradual leakage that finally and when it is too late, crumble the cookie.

As previously stated, these are not the only areas of interest, but they offer a starting point that would help an organization to start having a look at its systems and structures and the workings thereof. And hopefully avoid the fatal mistakes we keep witnessing that only depress economies and countries.

I invite business owners, small and big, to start examining their own corporate practices and start making required charges.