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• 07-06-2023

Owner Managed Companies – 4 Mantras for Building & Sustaining

Today is an era of high growth as well de-growth. For the last 5 years, I have been closely working with owner-managed businesses and have found that there are 4 key Mantras to “corporate immortality” that allow businesses to make it through industry and economic fluctuations, as well as successfully transfer ownership from one generation to another.

Mantra #1: Business Reinvention

One of the fundamental and increasingly important requirements for business longevity is a company’s ability to reinvent itself every 3 to 4 years to keep pace with today’s rate.

“A principal goal, and defining characteristic, of reinvention is that it provides value to the customer in a way that’s profitable to the provider — despite changes in the market over years. In order to maintain a continual competitive cutting edge, businesses must constantly ask themselves: How do we target our customers? How do we determine their needs? How do we provide value in a way that’s profitable?” Answers to these questions will help transition businesses over time from one profitable value formula to another.

Sometimes business owners get on a wave of business prosperity by being at the right place at the right time. Yet to ride wave after wave of business success requires always looking into the future to where the next wave is coming from, and to decide when it’s the right time to plunge onto it. This usually takes a combination of entrepreneurial skill and gut feel of the marketplace.

Action 1: Look at Purpose, Vision-Mission-Values and Create Strategy Map for next 3-5 years

Mantra #2: Building Business Human Resource

Organizations work on Financials, Customers and Human capital. Most ignored out of these is Human Capital, though people are the prime movers today. Over the years, owner managed companies have been considering HR as a Time Office and for completing compliances. But today, the challenges of HR are different. Right person for the right job, engaged employees, KRAs and Performance Management Systems, are critical as they not only bring in transparency but also increase accountability. HR Policy and PMS should facilitate organization’s vision/mission and aligned to the year on year goals. Need of the hour is ‘Business’ Human Resource, impacting results like other departments and not just a passive support function. Organization’s Competency Frame work and Talent Management is another important key for sustained success.

Action 2: Have a Business HR policy, Job Descriptions, Competency Framework, Key Result Areas, Performance Management System, Employee Engagement and other compliance policy related relevant to the business goals and implement.

Mantra #3: Organizational Redesign

For economic survival, companies continually need to become sleeker and meaner. A distributor wants greater flexibility and economy in delivering vendor products directly to its customers’ retail stores, instead of their warehouses. This change will require a major redesign of their distribution operations and logistics so that they may get the right products delivered in the right amounts at the right time onto retail store shelves. The business redesign will need to align with the organization structure.

Customers will continually demand lower prices and greater customization and flexibility in their vendors’ operations. Thus, to stay viable for the long haul, every company must learn to redesign its internal workings to remain both, valued by their customers and internally profitable in business.

Action 3: Look at Organization Structure and make necessary changes as per strategy map. Always keep an eye on critical positions and its back up through a robust Talent Management process.

Mantra #4: Management Succession

Any company is only as good as its management team. As you think about how your company needs to reinvent its business strategy, and how it needs to redesign its internal organization, can you envision your management team having the right players with the appropriate capabilities to move your company forward into that desired future?

Most owner-managed businesses rely on the leadership of one to three people in order to keep that company moving forward. But unless you make your business more self-managed, and less dependent upon the original founders, its long-term future will be in jeopardy. Many owner-managers hope to leave their business to one or more of their children. More often than not, however, the children are not capable enough to lead the business forward as the parent heads into retirement. Management succession in owner-managed companies often requires 10 to 20 years of continual effort in planning and implementation. Procrastination in this effort is deadly to the business continuity.

Business continuity may not only come from family succession. Only the most fortunate and adaptive businesses last. Longevity requires that the company’s business’s strategy be continually reinvented, its operations be continually redesigned, and its management be continually reconfigured. This way, the company’s future can become a reality and not just a pipe dream.

Action 4: Have a succession plan and Invest regularly in the Talent Enhancement of not only top management but also middle management to get ready. Create a learning culture in the organization.

These 4 mantra would help owner managed companies or even start ups to become stronger in terms of people and processes, ensuring building of the vision and sustained profitable growth.