Assessing a Business
Ask and Listen
A key tool in assessing a business is diagnostic interviewing. This is a process of asking questions and then carefully listening to the answers. W. Edwards Deming, the man who helped the Japanese recover from World War II, always said, “Ask the people who are closest to the action to find out what was really happening.” This advice has never failed me.
Diagnostic interviewing provides indications and clues as to problems. It is a technique I have used to conduct assessments in countless organizations. Getting business owners and management to open the lines of communication can be difficult, but it’s worth the effort. Employees might be reluctant to open up and provide the “unvarnished truth.” It is essential for management to make it clear that they want the truth and the facts. Tell me like it is.
The real key to success is listening and hearing what people are telling you. Frequently, what people say with body language is more revealing than the words that are spoken.
A business assessment involves more than just looking at financial data. Take time to step back and thoroughly evaluate the business. Find out what hurts and locate the source of the pain.
Assessments should encompass the entire state of the business from every aspect and all points of view. Get an effective understanding of what is happening in the industry and in the business. Get the big picture as fast as possible.
Analysis is performed in order to prioritize problems. Examine problems and then break them into their component parts. Conclusions then can be developed to fit the problem. This is when symptoms are distinguished from problems.
Analysis depends on the specific problems under consideration. Here is my three phase approach:
1. Sort out the facts,
2. Applying analytical techniques, and
3. Use judgment to draw conclusions from the analytical process.
Sorting out the facts is a process of categorizing all the information collected during the assessment. The facts should be sorted based on the assessment parameters. There will be a lot of data to match up including the information gathered from the interviews. Take time with this process and avoid jumping to premature conclusions.
Once the facts are sorted, then start applying analytical techniques. There is both qualitative and quantitative analysis. Qualitative techniques are used to analyze factors which can’t be measured in numerical terms. Examples of qualitative techniques include the development of matrices, asking fundamental questions, and searching for patterns. Additional examples include comparison of events for the purpose of identifying both differences and similarities. Qualitative techniques also include development of flowcharts and fish bone diagrams. Applying analytical techniques is very important so think carefully about the potential range of possibilities.
I developed a Self-Assessment Toolkit for use in my consulting work. You don’t need to use it but the checklists and questionnaires it offers provides a good roadmap. Another component of the toolkit is a team survey to gain feedback regarding employee opinions about the organization.
The 10 Step Process
To get things on a profitable footing I created the 10 Step Process to Building Business Value:
1. Identify and locate the pain.
2. Establish the parameters on what needs to be done.
3. Evaluate your market, products, and services – are they right for your business?
4. Right size the business.
5. Financing the business.
6. Maximize asset utilization and returns.
7. Improve employee productivity.
8. Conduct product and customer analysis.
9. Improve business processes.
10. Measure and monitor performance.
These 10 steps represent the essential components of what every business needs to do to maximize profitability and build the value of their organization. These steps represent a long-term no nonsense approach to value based management that produces results.
This methodology works because I have used it to produce results in a number of businesses. When businesses apply the tools and employ them consistently over a period of time, the benefits are record growth in sales and profitability.
These concepts are not silver bullet fixes. They represent a common sense application of tried and true methodologies that can make the difference between survival and failure.