Buzz words: wake-up calls for our natural instincts

Plus ca change

Why do some buzz words embed themselves in our vocabulary while others slide past the window with just a short burst of fame? Some take a long time to leave. Let’s hope “paradigm shift” and “no-brainer” are nearing the end of their useful life. 

Words that get traction align with our natural instincts. Fashionable buzz words are not new ideas. They get traction because they embrace the things we instinctively do best. 

Instincts are there to preserve and propagate the species. One is to form communities because, collectively, we have a better chance at survival and prosperity. No surprises that “collaboration” has got traction.

Ditto our ability to organize. The desire for food has fashioned agriculture. We no longer just kill things; we also grow them. We embrace agriculture because it underwrites our future. We instinctively know that “sustainability” is good.

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Your top customer is not always your best customer

Who’s your most profitable account?

The most common ranking of customers is by percentage of sales. Most businesses have a few standouts. What makes them so? 

It is not always the size of their operations. Your product may just suit them perfectly. Or the sales team on that account delivers a superior service. There are other reasons. Maybe you do not monitor their receivables closely, and they know that you help their cash flow by allowing their account to age out to 90 days, when others are paying on time.

All these things have costs associated with them. Maybe it is free add-ons or complimentary backup services that make your product the perfect one. That costs money. The sales team may be your most expensive. Those cozy payment arrangements can be costing you in working capital and overdraft expenses.

Try ranking your customers on their net contribution to profitability. How do they stand on a fully-costed basis? 

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Cash flow 101: keeping it simple

Think like your accountant

When you look at a complicated cash flow statement in an annual report, it might look like accountants do anything but make it simple. Yet if you want to take some fast action when cash is tight, the basic structure of a cash flow statement makes a very handy checklist.

It’s made up of three very simple categories. Cash is either raised or spent in:

• operating activities
• investing activities
• financing activities

In plain English, those three things mean what you do, what you’ve got and how you fund the first two. That’s pretty much all there is to cash flow. It’s not exactly rocket science. 

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An environmental checkup for business

How’s your economic eco-system?

Business is often asked to consider two popular notions: sustainability and the environment. At times – and probably too often – they are simply buzzwords; at other times, they focus on the need for everyone – business included – to take responsibility for the sustainability of the planet.

That’s all well and good but it need not stop at the natural environment. We can learn a lot more from environmental science across the entire spectrum of management practice.

Your business does not operate in a vacuum. It depends on all sorts of stakeholders. Just think of the six basic ones: shareholders, managers, employees, suppliers, customers and the community. Together they make up the ecology of your business. Call them species if you like.

They all depend on each other and have needs which have to be served. Often we focus only on serving the customers. Yet you can’t expect your business eco-system to function optimally if you ignore the others.

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Why middle management isn't dead

It’s more like re-birthing

It’s fashionable to say it’s over for middle managers. The theory goes that everything they did before either is, or will be, sorted out by new technology.

I don’t know what businesses these people are talking about. But let’s take an obvious candidate – Information Technology.  Change in that industry is rapid, and technology is increasingly complex. But I have yet to find an IT company that isn’t dependent on sound middle management to make sure they can reliably deliver their services.

Middle management is not dying; it’s being redefined. The skill set is changing, but it still requires skill. Someone has to make sure that something is happening. Try running any business where you don’t have a strata of middle managers to ensure that strategy is turned into action.

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