What may look like a people problem is often an environment, situation, or system problem. Organisations are brimming with misdiagnosed problems. Just as a caged bird is so close to the bars that it does not know it is in a cage, we too do not recognise the structures that surround us. Rather we just find ourselves conditioned to behave in certain ways.
In his brilliant book The Laws of Human Nature, Robert Greene writes in praise of what he calls ‘reality groups’ – groups that are infused with a functional and healthy dynamic arising from their ability to maintain a tight relationship with reality.
Running the business is grounded in the here and now. It depends on data from the past. And it can be a relatively comfortable space because it deals with known facts. In contrast, changing the business is about the world outside the organisation and about the future. And the world outside is much bigger and more complex than the organisation – to the extent that it is essentially unknowable.
In attending to leadership – without attending to development – then your leadership pathway will always be directed to the plan or agenda that you have. It will not be about the plan or the agenda that ‘has you’. In not seeing the plan or agenda that has you – your capacity for change is inherently restricted.
Marginal cashflow tells you how much working capital you require to achieve an additional € in sales. If the working capital requirement is greater than your gross margin you will run out of cash. Your business might be profitable but volume is detrimental to your survival. This is what ‘growing broke’ feels like.
Perhaps the most famous example of a company that revolutionised itself by shortening cycle times is Dell. When Tom Meredith became CFO at Dell in 1991, it had a cash conversion cycle of + 63 days. When he retired in 2001 it was -21 (yes that is a minus!). He did this by streamlining manufacturing, working closely with suppliers and having customers pay in advance.