Do you understand your business?

In the midst of the stock market cliff jump, one commentator pondered whether the top management of the financial firms really understood the “products” that they were selling and were the source of so much of their wealth. The question was an interesting one from an intellectual perspective (and a sickening one from a real life perspective).

 

Interesting – and an excellent question. Do you really understand and have a command of your business? Do you understand the products and services your company provides, who your customers are, and the people who work with you? As a company grows, it becomes harder to maintain the level of involvement and understanding of the day to day details of the organization.

                     

Understanding a company and its business has to be from bottom to top and top to bottom. I’m a proponent of ongoing training of all employees so that they have at least a basic command of what the company does. Top management is not able to effectively make strategic decisions on products if it isn’t able to evaluate the opportunities and risks involved. Relying on a subordinate puts the company at risk for a rogue employee – or employees – to do serious damage to the company. It reminds me of the $7 billion trading loss at Societe General this past January. The bank claims that a rogue trader hid his activity, and trader claims the bank knew and was happy with his multi-billion euro profit in 2007. Either way, it was bad for management.

 

The larger your organization, the more that you have to rely on others. This, alone, is why the selection of key staff is such a critical task for top management, surpassing just about any other task. But being visible – by physically walking over to someone’s office rather than calling them in, going over to thank someone personally for something well done (a difficult sale), and personally running key employee meetings and events – will do more do engender loyalty in the company, confidence in the leadership, and for people to open up and be more open about what they do and the challenges they deal with in their jobs.

 

Time to take stock. We are likely to be in difficult times for awhile – could be months, could be years in some industries. You need to have a good command of your company in order to create your plan, keep employees committed and confident, and to work through whatever the world throws out you.

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