The past few years have been as challenging an economy as most of us have ever seen. And the competitive pressures do not seem likely to ease greatly – at least in the short term. One approach that many successful businesses take to remain competitive and profitable is to periodically review and assess the alignment of their business. In particular, they check to make sure that their people, processes and technology are working well together and delivering as planned. Just like regularly aligning your car tires to minimize wear and get the most miles per gallon of gas, you need to make sure that your fundamental business resources and activities are well balanced and working together smoothly with respect to your particular marketplace, operational goals and strategic objectives.
And just as uneven tread wear or obvious shimmy tells you when to schedule a service appointment, there are a number of common business symptoms that indicate that your people, processes, systems and technologies are not properly aligned:
Common Symptoms of Misalignment in Your Business:
Lengthy and Laborious Period Closes:
One of the reasons that business software exists is to avoid laborious manual processes and provide a way to directly connect financial results and transactions with the underlying operational business events. If you cannot get your books closed within a week, you need to consider why. The issue may be a system issue…or it may just be a staff, process and a “we’ve always done it this way” issue. And as shown below, the value of all types of financial information only erodes over time!
Islands of Information:
You rely on information to understand the health of your business in terms of profitability, growth, cost controls and other financial and operational matters. If you are assessing the health of your business based on multiple spreadsheets provided by multiple people with no clear tie back to your business systems, is your assessment really accurate?. Other common symptoms of misalignment include:
- Your marketing and sales reports (closed deals, pipeline, open opportunities) disagree…by a lot!
- In order to understand the change in margin over the past quarter, you need to wade through six different spreadsheets.
- Your financial budget is separate and distinct from the sales budget, the marketing budget and the production budget.
- Your controller wants to double the size of your inventory reserve and cannot show you why
Auditors’ Management Comments:
As self-evident as this symptom would seem, if you are receiving recurring management comments from your auditors and accountants, you are likely suffering from at least some degree of misalignment. They are your business allies, and it makes sense to truly pay attention to what they are telling you.
Although the direct benefits of alignment will vary per situation, think about whether these situations might apply to your organization:
It’s March 10th, and you just heard that your largest competitor is in some financial distress. You have been considering an acquisition and have had some preliminary discussions already with your banker. He was receptive, but will need updated financial statements to be able to increase your line of credit. Because of your work last year to directly align and integrate your planning and inventory control system with your financial software, you can now get updated financial statements in 2 days. So you take the reports to your banker and get started buying out your competitor.
At your sales meeting last quarter, you rolled out a targeted direct mail campaign to sell your newest product line to the top 20% of your current clients. Your marketing supervisor has been thrilled with the results, predicting a very strong product uptake. However, the sales manager just brought in the latest monthly sales snapshots, and although the targeted product sales are up in seven of your eight territories, the southwest region is showing a sales loss. You set up a call the next day with the territory manager, your marketing lead to determine what the issue is before the next phase of the campaign kicks off.
- Your business operates out of five separate office sites. Because the invoices for janitorial services are per location, you formerly received multiple invoices, and had to cut multiple checks to the same vendor. Now you have the tools to roll up the invoices from each entity into a single vendor payment, while still retaining the AP visibility at the entity level. Not only is your AP process more streamlined and efficient, but the enterprise view of payables has led to improved cash flow management.
Checking the alignment of your business does not need to be a lengthy or costly process, particularly when the scope and target deliverables are defined and confirmed in advance. It is also helpful if your final project deliverables are grouped around needs, risks and opportunity analysis.
Driving down the road when your tires are balanced and aligned is a lot more fun than when you are fighting to stay in your lane. Making sure your business is well aligned can bring many of the same benefits.