Silent Success: what we learn when nothing happens

|

Goalkeepers are paid significantly less than strikers. This is true even though a striker may miss many times and score once to win the game, whereas a keeper may make many saves but fumble once and lose the game.

How is this relevant to SME businesses? Our bookshelves, e-readers and podcast feeds may be full of stories of spectacular business successes (that overhead kick in the last minute of added time) or dramatic downfalls (the keeper caught off their line). But you rarely read headlines about those businesses which quietly get on with building value and delivering returns to shareholders.

Glenn Mills is a specialist in manufacturing and service operations with particular experience in delivering performance improvement, change programme management and preparation for transactions. Here he looks at lessons we can learn from unheralded success stories.

The Quiet Compounders

These consistent companies are sometimes referred to as the “quiet compounders”. Halma plc, for example has returned profit growth every year for over 20 years and dividend growth every year for over 40. It has achieved this through a focus on resilient markets, financial discipline and strong talent management. Not the kind of strategy to get the blood racing but outperforming many of its rivals who have riskier but less consistent returns.

Other UK manufacturing or distribution companies who have delivered strong long-term returns are Spirax-Sarco, Rotork, Diploma, Spectris and Renishaw: none exactly a household name, but providing examples which SMEs in manufacturing and operational businesses can draw from.

Here are three key lessons which are not only about avoiding a catastrophe. They also increase value and attractiveness to potential investors and provide a stable platform for an acquisition strategy.

1. Scanning the horizon

A good goalkeeper is constantly on the lookout for potential threats, then ready to create an opportunity when they gain possession. Likewise, successful businesses don’t just tediously compile a SWOT analysis each year so they can tick a box. They get the team together to think rigorously about key trends, perhaps using the PESTLE framework (Political, Economic, Social, Technological, Legal, Environmental). Then they put measures in place to minimise the risks and plans to deal with them if they arise.

Reviewing external trends may identify opportunities as well as threats. But opportunities for improvements in the top and bottom lines can also be found from product development initiatives, technology breakthroughs and from reviewing business performance metrics. Let’s look at this last point next.

Takeaway: Regularly assess external trends and internal initiatives, then act to mitigate the threats and exploit the opportunities.

2. Getting the basics right

Football managers nowadays have a wealth of stats with which to measure the performance of the team and their competitors. Yet I’ve encountered several growing companies whose CEO was managing the business armed only with the order book and bank statement. They are essentially “flying blind”.

Part of the growth process for a business is putting in place the controls and performance measures which allow the leadership team to gauge how the business is progressing: management accounting, contract management, quality, health and safety, environment, information security, people management and so on.

Nowadays, even small businesses are also required to have a suite of policies in place. Creating these can feel like a headache, but there are many organisations who can help with templates or writing and maintaining policies as legislation changes.

Controls and policies may seem tedious, but here are three reasons why it’s worth paying attention to them. Firstly, many are legal requirements, or required by customers and public bodies. Secondly, you will be so glad you have them in place if a problem arises. And thirdly, anyone who is interested in your business, such as a lender or investor, will see them as adding to its value.

Takeaway: Implement robust controls and performance metrics and put policies in place to protect the business and enhance investor confidence.

3. Leading the initiative

Many business leaders prefer to delegate these measures to someone else, and they may receive no more than a cursory review at a board or executive meeting. Of course, the CEO cannot carry out the detailed work of creating and maintaining controls and policies. But their leadership in ensuring that they are taken seriously is essential.

The leader must also ensure that their team take time out from their urgent commitments to think more broadly about the performance and future of the business. In other words, scanning the horizon.

The organisation needs to know that the leader values the quiet dedication of the goalkeepers. How about celebrating when “nothing happens”? Perhaps even awarding a Golden Glove award alongside “Salesperson of the Month”.

Takeaway: Implement robust controls and performance metrics and put policies in place to protect the business and enhance investor confidence.

Conclusion

There are important lessons we can learn from those businesses who quietly get on with creating value. They rigorously scan the horizon for threats and opportunities. They have meaningful measures, controls and policies in place. And their leaders demonstrate that they value their unsung heroes.

Glenn Mills is a highly experienced executive advising businesses on:

  • Strategy development
  • Performance improvement
  • Preparation for a business sale
  • Assessment of an acquisition target
  • Transition management

If you would like to discuss any of the above, please call us on 01273 945 984 or email Glenn.Mills@emcltd.co.uk