Drucker’s classic business model

“Management is about doing things right and leadership is about doing the right things” according to Peter Drucker, the man who is widely regarded as the grandfather of all modern business management ideas. If you want to go back further than the 1930s you’ll find that a lot of business management logic has been derived from military systems. In traditional businesses the discipline, the people management and the structures have largely been borrowed from the army. Why? Because it’s been proven that it works!

A mini renaissance began in the 1970s and, by the 1990s, the emergence of “the flexible firm” demonstrated that Drucker’s approach to business management is not the only one that works. Nonetheless, you’re not going to be able to implement “the flexible firm” until you’ve reached a certain critical mass, and it could be argued that you’d need between 100 and 200 employees before venturing beyond the proven traditional structure. Even at the 100 level it is often the case that businesses are just becoming settled with things like a dedicated HR manager or IT manager.

The keys to moving forward and moving upward are to recognise that a fully functioning business has multiple facets and to plan accordingly. That means that you need to build a plan to expand in a proportionate way, and to have clear objectives in mind.

Traditional businesses have three divisions . . . Operations, Finance and Marketing. Drucker’s classic business model also includes the CEO (a visionary) and the Managing Director (a strategist). Then in the 1970s some business gurus came up with the idea of a fourth division which they called Soft Systems, and which we now call HR.

More recently Soft Systems has morphed into two divisions, HR and IT, and we now have seven divisions in total.

Even though CEO and MD are not really divisions in the true sense, they do command special attention when it comes to organisational structure. And where is the detail about your organisational structure? In your Operations Manual.

The Operations Manual is divided into these seven divisions and it sets out what they do and how they do it. As explained elsewhere in this blog, the biggest reason that people don’t do things is that they don’t know how. Having an Operations Manual is the most important thing you can do in order to ensure that none of your staff have the “don’t know how” problem.

Even a sole trader benefits from having an Operations Manual.

By setting out what is done, and how it is done, a business of any size can ensure that there is consistency in its operations. All customers receive the same level of service. All customers receive a product which is equally as good as that of any other customer. Credit control procedures follow the same pattern and favouritism and neglect are reduced. Most importantly the business owner, by following the Operations Manual, sets aside some time to focus on the strategic management of the business.

Occasionally, you need to get on the bridge and steer the ship. If you spend all your time in the boiler room stoking the boiler you may end up discovering that your ship is operating at full steam ahead . . . in the wrong direction. You can’t afford to spend 99% of your time on production. Get on the bridge sometimes, work on the plan, because management is about doing things right and leadership is about doing the right things.

Do you have an Operations Manual? Does it work for you? Does it put you “in the zone”?

What is the biggest reason that people don’t do things?

Members of parliament, small children, the driver two cars in front of you, some of your work colleagues. What is the biggest reason that people don’t do things? And, even you. Sometimes you don’t do what you want! Why not?

What is the biggest reason? The short answer is “they don’t know how”.

And there are two principal ways to fix this. The first one is probably everything you need if you’re trying to design a personal plan. The second one is the one which will be of particular help to anybody who needs to put the fundamentals of a business into place. That means a sound business plan, and that will lead to a sound business. Whether you’re reading this for personal reasons or for business reasons, everybody needs to start with 7 habits.

This blog has no affiliation with either of the two authors mentioned below. Nor is any commission received for these two recommendations. They are simply two brilliant books, and that’s why this blog is devoting attention to them.

The ones in the photo are old editions. Both have been read and re-read a number of times. When you’re a business coach it pays to reinforce the basics, regularly. The clients always want to start with the basics!

Stephen Covey – The 7 Habits of Highly Effective People

One thing that you need to understand at the outset is that when highly effective people read the book “The 7 Habits of Highly Effective People” they follow it carefully and they do exactly what is says. That means using a pen and paper exactly as directed. It means looking at the correct pages at exactly the right time. No cheating! There are no shortcuts to becoming highly effective!

Moreover, there is no advantage to be gained in skipping things. Quite the reverse actually! The book must be read in the order it’s laid out, and in the manner it prescribes. Highly effective people will secure great benefits by doing this just right.

Pay particular attention when (early in the book) you’re asked to do the funeral exercise. Do exactly what it says. Then persevere and read everything . . . properly . . . and later (in the second half) the story about the sand, the stones and the rocks will help all your plans fall into place.

Of course, if you don’t want to follow this advice then you don’t have to. But then again, you may not become as highly effective as you would like to. And we’re back to the title of this blogpost “what is the biggest reason that people don’t do things”? You can’t claim that you don’t know how to read a book properly!

There’s an old African proverb “give advice, if people don’t listen, let adversity teach them”.

Kevin Duncan – Running Your Own Business

When you’re trying to build your first business plan this book is a great place to start. It quickly cuts through the fog of unhelpful bank style business plans and instead focuses on what you need for your business. And that’s a business plan that works for you. Your plan will probably start off as a couple of pages and that’s enough. Highly refined, deeply purposeful, incisive and above all, meaningful.

Nobody ever shouted from the rooftops about the value of the plan that their bank demanded! If, later on, you need more finance and have to go to the bank to get it, then you’ll probably have to do a “business plan” for them as well. It’s not the same thing!

For a start, Duncan tells you to be “brutally honest” with yourself. Would you ever want to be “brutally honest” with your bank? You can see how Duncan’s mind works – this is for your benefit and nobody else’s!

Like Covey, Duncan is also an advocate of pen and paper. When he tells you to do a pen and paper exercise just do it. Don’t hang around looking for inspiration. If you wait around for the clouds to part and a bolt of lightning to strike you in the brain, you are not going to get much done.

All the best ideas come out of the process, they come out of the work itself. Things occur to you as you write your plan and by the time you finish you’ll be so glad you adopted the “just do it” approach. Inspiration is absolutely unnecessary and somehow deceptive. You may feel like you need this great idea before you can get down to work, though in real life that is almost never the case.

This book will help demystify what a business plan really is. It’s a marketing plan! OK, it has a bit about finance, and a bit about operations, but essentially it’s a “get more business” plan. So that means it’s just a glorified marketing plan!

The modern Chinese proverb about effective marketing says “man who stand on top of hill with mouth wide open wait long time for aromatic duck to fly in”.

Cost Benefit Analysis

Have you logged onto Amazon and bought these two books yet? The worst thing that can happen if you buy them (and don’t value them) is that your bank balance will be about £20 lower. The best thing that can happen is that you read them, understand them, adopt all the best bits, implement all the best bits, and increase your bank balance immeasurably!

You’re welcome! All business coaches offer a bit of free advice like this!

So the short answer to the original question “why” is that “they don’t know how”. By highlighting the short answer, and by outlining two practical steps that you can take, this blogpost has attempted to help you overcome the question “why”.

The long answer to the original question “why” is an “operations manual”. That’s merely a logical next step from a business plan. The two words “operations manual” are innocuous in themselves when they’re stated simply. However, this exercise may involve a bit more effort. In a regular business the “operations manual” may run to 30 pages, or 300 pages, or more. Are you willing to take that step?

The best laid plans

Where would a business end up if it didn’t have a plan? More than 50% of businesses cease trading before they reach their 3rd anniversary. And it’s reasonable to assume that the ones which fail quickly either didn’t have a plan, or didn’t follow one.

It’s unfortunate that most early stage businesses are working without a plan, or with a plan which is inside the head of the founder. Only 5% of UK businesses have ever committed their plan to writing, and they are the ones that are most likely to succeed.

So, if you want to elevate your business into the top 5% of UK businesses, then all you need to do is write down your plan! On paper or in a digital document, but write it down you must. And then revisit it, regularly. Your business plan should set out how you’re going to keep continuously moving things in the right direction, and hence part of your plan will be how “the plan” will form an important tool in that process.

Nobody writes a business plan to fail: “securing orders in our first year will be tough – and we’ll be living hand to mouth – the second year will start like the first – and then it’ll go downhill rapidly – leading to a really bad year 3 where we won’t be able to pay our creditors and the business will cease abruptly”!

Quite the reverse really. Everybody writes a plan (meaning the ones who actually write it down) which says – struggle in year 1 – then get better in year 2 – then really take off in year 3! So, if you really want to succeed in business, all you need to do is follow your own plan. The one you wrote down. The one which says things will always be getting better.

Sounds easy doesn’t it? Then why’s it so hard to persuade people to write down a plan? As any business coach will tell you “implementation is everything”. That’s what business coaches do – write their own plans – implement their own plans – whilst using various techniques to try to guide, motivate, incentivise, cajole and persuade their clients to do exactly the same. Write it! Implement it!

If your business needs a bit of a boost, then take this advice, plan the work and work the plan. But you must get it down in writing!