Small can be smart too!

Part – 2

Let us analyse the case I described in the 200th article – the highlights are as follows:

-Amar starts his own business after working for a few years–he develops it well

-When business stabilizes he starts a new venture -hands over reins of the old one to a brother

-After few years the second one reaches stability and he hands that over to another brother

-He moves away to another city to be a part of a much bigger venture started by a friend

-Although returns are good it is not as promised and he does not have much say in the venture

-In the meantime both his profitable ventures have turned into loss-making ones due to neglect

-Amar is weighing his options.

The questions asked at the end of the case were:

1. What do you think is happening here? What went wrong?
2. What would you suggest to Amar to help him get things back under control?

Let us look at all the analyses sent in by readers:

Reader Umashankar Pandey said he wanted to keep the answer ambiguous (his own words)

But he did not mince any words:

1. Amar’s brothers were not serious towards the businesses they are running,
2. They are unprofessional and dishonest too – so their business was destined to fail.
3. Amar himself isn’t successful enough in his latest business.
4. He lacks focus and he is gullible.

Another reader Shajan Varghese shared his thoughts and recommendations:

1. Amar did not build a system / business process. His business was solely depended on him.
2. His pick of his brothers was apt, but he did not hand hold them till they got on and caught on.
3. He should have demanded regular business reports which would have given him up-to-date info.
4. Regaining the old form is going to be difficult because both his brothers will not take Amar’s interference. The option is for him to get the confidence of his next best reliable person in each of the business and work to align business through this person. Tough but only that will work.

My businessman friend PG has this to say:

Owner driven businesses tend to go astray the moment they bring relatives, who do not have financial stake, into the picture. Amar should have made his brothers accountable for their business areas and should have had periodic review meetings; he should have monitored the business through a good MIS. Multi processing in business always seems to be an easy task, but unless you have processes and systems in place it won’t be possible – such things usually aren’t in place in single owner business.

From the Caribbean my regular reader Jamy Lateef sent in this analysis:

Amar should have sat down with his brothers and created a master plan for business No:1 and No:2.

In business, family is only good if they can function efficiently but there should be periodic follow-ups and review meetings; profitability and operations need to be regularly discussed and reviewed.

Amar blindly trusted his brothers to pick the ball and run; since the businesses were given a strong foundation through his efforts Amar felt his brothers can’t go wrong. Hence, THERE WAS NO PROPER HANDOVER OF MANAGEMENT. He urgently needs to sit-down with his brothers and other senior managers in each business to identify the management flaws and then come up with a plan to try and recapture the market.

Kumar clearly needs proper guidance in HR related issues and should be replaced by a Manager with proper business credentials- sounds a bit harsh but if the business is going down because of the man at the top, well, he should be the first one to go.

Manu seems to lose focus and take things easy and also seems to be really bad with his financials- if he has a strong financial controller to guide him in the right direction, he could do well.

Finally, the customers who used to be regulars need to be contacted individually and assured that their needs would be taken care of and even if it takes a bit of a loss appeasing in the beginning would benefit immensely in the long run. Amar needs to concentrate on his own 2 businesses first.

(I think Jamy made a lot of relevant points there.)

Regular blogger Jayashree took time off to leave a lot of useful ideas in her analysis:

When the reins are handed over to someone, there should be periodic reviews supported by facts and close monitoring till a certain point when one is confident that the person can independently take charge, irrespective of whether he is family or not.
There should also have been a proper transition when he handed over charge to build rapport between his staff and his brothers who were taking over the leadership – Amar should have advised both sides as required.
As to what needs to be done, I guess he should stop concentrating on the new venture, get back to the two old ones and get them to report to him and act as their guide for some time till they get the hang of things.

Although Jayashree seemed worried that she was not experienced to make such assessments the set of thoughts shared are very useful.

And then we have a message from another regular reader Vijay – it read:

1. He needs to have systems/processes in place to ensure that business goes on smoothly and service is not affected in his absence.

1. Amar needs to handhold his brothers on their new roles as I feel they were handed over the responsibility without evaluating whether they were fit for the job.

1. He also needs to plan his day in such a manner that he still spends time on each business every day and also ensure that he meets each team regularly to review the business and way forward

A huge thanks also to Raji who was able to take time off during her vacation to leave a crisp message she wanted to leave a bigger analysis but somehow WordPress was at its fractious best just then:

–          Gist of my message: I am no Sales Professional but Amar’s actions somehow seem to be lacking in simple common sense. A bright, focused and hardworking man let down by his own lack of common sense. Sad!

Her message is direct and blunt – and sadly for Amar, true too!

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It is obvious that Amar has a huge mountain to climb. The businesses he sweated to build are facing an uncertain future, not on account of poor market conditions but due to poor business decisions.

But let us remember first that Amar could sense a good opportunity a mile away and he had ample amounts of guts and risk-taking ability to pursue them. He jumped out of a safe job and set about developing not one, but three revenue streams for himself.

That he is a good Salesperson is evident from his success not only at a Sales Executive but as an entrepreneur too.

We also know that he was good to his people – his employees liked working with him and when his siblings came knocking he gave them plum positions in the businesses he had grown from nothing.

However, being a nice person or being a smart Salesman aren’t qualities that can automatically make you a good business man. It takes much more.

Like many of my readers have pointed out:

–          Amar trusted people too easily and he was gullible too in some ways – his brothers, and later his friend, misused this weakness to the extreme.

–          Amar wasn’t able to separate personal priorities with business priorities – he was blinded by the love he had for his siblings and believed that his brothers were capable of running a business; his belief was that they would return the favour by running it the way he used to.

–          He did not have the other skills needed in business, like being able to run processes, setting targets and conducting reviews.

Amar did not have any experience in delegation of responsibility – that is what he should have done.

Amar should have called each brother and defined the terms of engagement – he should have stated with no ambiguity what was expected of each one of them and to what extent he was empowering them to take decisions; remember that he was still the business owner and the brothers had only been made the Managers to run it. However, he had given them the carte blanche to do as they pleased and they ran it into the ground.

Sales was not tracked, business development was ignored, there was no prudence in the usage of funds and employees were neither being tasked appropriately nor was their experience being valued – it was a shambles all around.

What was more damning was Amar’s unwillingness to step in and take corrective action even when news reached him from various sources. He hoped that it was a blip and the situation would get back under control on its own – a grave mistake.

To cap it all the big risk he took in chasing the rainbow turned into an exercise of futility – like in the case of his own business Amar failed to ask his friend to express in black and white how he was involved in the project – there was no clarity on his role or on the returns; he was drifting in an unknown sea.

The solution:

Amar needs to take the lead in the corrective action process. It is surely going to be a painful process but it has to be done.

1. FOCUS: Amar should stick close to the knitting – dissociate from the friend’s business completely and focus on the revival of his own projects.

2.  INVOLVEMENT: He needs to work his strengths – personally meet all his big customers, promise them service and try to retain / bring them back to the fold.

3.  STRONG TEAM: He needs to coax as many of the employees who walked out in frustration to return to the fold – they were part and parcel of the success story and had left only due to the terrible situation created by the brothers who mismanaged the business.

4. BUSiNESS LEADERSHIP: But the biggest step for him would be the Management of his business – the first step was to spell out the terms of engagement to his brothers; however, like one of my readers pointed out they may be used to living comfortably and hence unwilling to bite the bullet. The option then for Amar would be to serve an ultimatum and bring in managers who would run the affairs professionally.

5. SYSTEMS & PROCESSES: No matter who ran the daily affairs of the business Amar needs to know what is being done – a good MIS that is updated every day. He needs to be a part of all key decisions and reviews. His employees need to know there is someone in charge and the customers need to feel assured that their concerns will be resolved.

Amar’s situation can be seen repeated in so many small and medium family run businesses in India. They run without clearly defined business objectives and have no processes. Ownership and responsibility are allocated based on blood relation, without taking into account acumen and attitude. Corrections are brought in like knee-jerk reactions when things spiral out of control.

What the organisations / owners don’t realise is the huge negative impact created in the market and the opportunities they are losing on account of poor business practices.

I have personally seen this happening in so many organisations and my endeavours it to try and help some of them take corrective action. India needs many more successful small and medium businesses – today the money is going into the hands of a few behemoths and that is not good.

Amar’s eagerness to enter the big league caused the unravelling of the businesses he built with so such enthusiasm and love – he squandered a huge opportunity to make a mark in the business community; it is still not too late for him. If he can shift focus once again to what is essential and take charge of the situation the ventures he started many years ago can see glory days once again.

I wish to thank the seven readers who made useful contributions – in fact most of what I’ve offered as solution have been mentioned by one of them.