Thriving as a business requires looking outward and looking inward.
9th July 2024
One nonfinancial ratio that could be added to the financial ratios we all track is the ratio of external to internal priorities.
Priorities that reach outward include anything to do with customers or clients, market positioning, and products and services; those that reach inward include organisational structure, operational processes and policies, systems, staffing and accounting.
Both are essential and work best when kept in balance. Too frantic a focus on outward-facing priorities can seem mission-focused and exciting, but without internal support, can lead to over-reach, service failures, collapse of capacity, and death by explosion.
Too bureaucratic a focus on internal-facing priorities may seem responsible, but can lead to slowing down, losing purpose, inability to respond quickly to changes in the business environment, and death by implosion.
This ratio is a concept rather than a number, and clearly is not as precise as financial ratios. But it is important to keep in mind, particularly during a period of rapid growth.
There are several places to look for signs of the balance. One is in the agenda and amount of time spent in meetings. Are we focused more on what we are doing with customers/clients or on how we organise ourselves and relate to each other?
Another is how we allocate resources, such as how the budget is decided, what the tech spend is for, and the number of executive and staff positions created to do things for customers, versus internal processes. Then we could consider what the executive team focuses on and what we measure and celebrate.
Of course this should be a false dichotomy, as organisations ideally organise internally to reach externally; but we have all seen companies lose balance, so it’s a ratio worth tracking.
Evidence that the ratio is too external is pretty obvious. People burn out, staff make recurring mistakes, customers complain about failures in product and service, and foreseeable problems take us by surprise through inadequate planning and budgeting.
Evidence that the ratio is too internal appears more subtly in signs like slowing down, hanging on to merely good products or processes that could be replaced by better ones, recruiting staff for external-facing roles who are clever in maintaining processes rather than hungry to grow, lacking courage to grab opportunities for fear of failing, not being prepared to look beyond KPIs to tackle a wonderful opportunity, because of the need to report formally at the end of the quarter.
These are not signs that are easy to spot, so one of the CEO’s duties is to stand back and think about the balance. Like keeping balance while walking, balance in an organisation is never static. It requires continual, often unconscious, adjustments.
To change the metaphor, the driver needs to avoid either setting out in an unroadworthy vehicle, or fussing so much over the vehicle that they forget to drive towards the destination.
I have been writing in recent columns about managing diversity of many different kinds, and this is another example. Some people (such as Operations and HR) should love an internal focus, while others (such as Marketing and Business Development) should have a passionate external focus. But their effectiveness is determined by their appreciation of the contribution of others.
The CEO conducts this orchestra in a way that allows individual contributions to shine, while ensuring harmony and mutual support. If people in Operations create onerous processes that kill initiative, they are out of tune and killing the company. If people in Sales refuse to follow policy or report their prospects, they expose the company to potentially terminal mistakes or liability.
We need each other. One key job of the leader is continually to demonstrate the value of difference and require the team to support and celebrate those others whose contribution complements their own.
Jonathan Cook, a counselling psychologist, chairs the African Management Institute. This is a coaching column for Business Day, published on 9th July 2024 (https://www.businesslive.co.za/bd/opinion/columnists/2024-07-09-jonathan-cook-looking-both-outward-and-inward-helps-businesses-to-thrive/).
If you’d like to read previous columns in this series or ask Jonathan a question please visit
https://africanmanagers.com/jonathan-cook
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