Monthly Archives: January 2013

SMB companies’ journey to next level: what should they focus on HR

SMB companies across the globe are major contributors to the national GDP, employment and often innovation. Most of them may be family led business where the culture, process and the directions the company takes depend upon the founders and the family. Unlike the large behemoths that employ employees to address strategy and efficiency or hire consultants to advice and implement the change, many of these companies adopt Do-it-Ourselves (DIO) approach.  Their organizational process may be mostly informal and largely centralized in few hands. The result, many SMB have lack an approach to build next level leaders, engage employees more gainfully, derive the insights of process and templates that allow them to discriminate the grain from others.

Our experience of consulting to the SMB, we believe the three levers the company must focus on HR front whenever they are adopt a major business model change or business transformation. Firstly, ensure formalization of process. Focus on formalizing the areas of hiring, performance measurement, training & development, rewards and celebrations. Process orientation on these areas helps the company to get a life-cycle window of insight on employees.   Formalization of these areas removes subjective assessments and their impact (sometimes irrevocably damaging and costly).  Supervisor bias, non-standard metrics for comparison and incomplete process effects can all be eliminated by focusing on these areas.

Another dimension SMB companies must focus is on decentralization and leadership management.  Decentralization not only helps in transferring of power to lower management levels where delegation of activities takes place, but more importantly unclogs the non-value added activities form key resources.  From an employee side this allows them to traverse the path of do-improve-innovate cycle so that their learning becomes meaningful and applied. Secondly, the leadership competencies develop from more structured areas to unstructured complex areas over time so that the employee can gainfully assimilate the learning and imbibe leadership capabilities. From an organization side, decentralization helps in senior management provided with time to invest on strategic affairs. While attempting decentralization, organizations must keep their eyes open for elimination of redundancy, multiple reporting structures that add more confusion and too long span of control with poor visibility on the last node. Finally as the adage goes, the attempt should be to keep HR grounded in reality and simplicity.

-Amrita Rao & Sheethal V.V

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Seven financial levers for Build to sell (BTS) or Build to Grow (BTG) Companies

In fast paced industries such as IT, Biotechnology etc. companies can be broadly classified into two primary groups: Build to sell (BTS) and Build to Grow (BTG). BTS companies are driven by the dictum “build fast” and “maximize valuation”. BTG companies are more focused on “Profitable, multi-year sustainability”.  With these fundamental guiding principles defining their behavior the finance function within the organization must pursue appropriate shades of levers to reach the end goals.  For both BTG and BTS companies the financial value drivers are: Profitability (P), Costs (C ), Capital Structure (CS), Investment (I), Capacity(CP) and Intangibles (includes goodwill and Patents and trademarks).

Profitability: Profitability is the primary goal of all business ventures. Companies built to sell must focus on profit maximization, expansion of customer base and specializing in the existing product and in a wide market. The profit to sales ratio when compared to historical results and industry averages need to favourable signifying efficient management of revenue and costs. For, BTG companies the focus should be more than make profits. The major consideration should be increase in the market share, investment in R & D and best quality resources thereby enhancing the quality of the product and constant innovation in products to become a reliable and long term player in the market. Companies can use the surplus cash for growth strategies, such as investing in research and development, expanding capacity and exploring new geographic markets.  The focus is therefore on creating long term growth and sustainability for the organisation.

 Cost:  Cost containment strategies are widely adopted to ensure organisations meet their financial targets.  BTS companies must incur expenditures that have an immediate impact on the revenues and financial performance of the company. The reduction in operating cost of a company is a good indicator to the buyer on the efficient utilization of resources and management of activities. BTG companies would incur expenditures on items creating an impact over a period of time like bringing in good quality resources, research and development and expenditures required for future growth. The financial and operational aspects of growth must be balanced during expansion of business. Cost control would be on items which do not have a lasting impact and does not match the intended outcome.

Capital structure: A company’s proportion of short term and long term debts are considered when evaluating the capital structure of a company. The debt equity ratio is an indicator of the company’s internal and external liabilities. It reflects the financial position of the company as it is a measure of the financial leverage.  BTS companies should thrive to showcase good profit margins to attract buyers and maintain less long term obligations and improved liquidity positions. BTG need to make strategic decisions in maintaining favourable debt equity to ensure long term sustainability.

Asset Investments: BTS firms must focus to invest on creating a value for the company and a predictable future. Any investments on assets that are yielding substantial short term returns is favourable and to signal liquidity maintain favourable current asset ratios.

BTG invest in assets based on the expectation that this investment, which is intended to last a long time, will result in continuous positive income. These organizations concentrate more on the Asset Turnover Ratio. This reflects the management philosophy of owning the resources and being less vulnerable to increase in costs and volatility in the market in the long term.

Goodwill: A business acquires goodwill through best practises, customer service, innovation and good governance. BTS strive in creating a value for the company which is associated with loyal customers, brand, continuous innovation and trust in the market. More emphasis is on creating a Unique Selling Proposition (USP) which would provide a competitive advantage and define the business. When the company is sold, the buyer pays a notable amount on the goodwill earned by the company. BTG not only focus on offering best customer experience, but also on the quality of the products, long term relationships with customers and pricing fairness. The companies build goodwill over a period of time and penetrate gradually to establish a strong foothold in the market.

Patents and Trademarks: Corporate valuation relies greatly on a company’s intellectual assets such as patents. Business enterprises perceive patent portfolios as a demonstration of high level of expertise and specialization within the company. Patents also provide licensing opportunities. BTS focus on creating patents for their organizations as it increases the overall corporate value. BTG focus on constant innovation and believe in consistently improving the product/services. Patents are a part of the growth agenda, but the prime focus is on defending the products and markets from poaching, and creating a competitive advantage for the company. BTG companies create patents to exclude the competitors from exploiting the right to make/sell, more from a technology protection perspective than enhancing the value of the firm. They end up investing in related patents and standards to cover their technological grounds.

Capacity Utilization:   A firm’s productive capacity is the total output it can produce within a given time period. BTS the focus would be showcasing themselves as a company utilizing near 100% capacity. This would indicate the buyers that the organization has enough work on hand and the cost per unit is also minimised wherein there is optimum utilization of resources. The firm is assumed to be using all of its fixed assets effectively; therefore the profits should be high. Two approaches that could increase capacity utilization could be by reducing the factors of production employed or move into smaller premises/ cut down investment on facilities. For BTG, the focus is to efficiently utilise the resources and capacity expansion to facilitate future demands and cope up with new orders. Firms in expanding markets may expect to have low utilisation while they build their sales and establish themselves in the market.

Finally, as novelist Nora Roberts says…”Know what you want, and work to get it!!!”

-Pratibha Sharma

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9 Sutras to write a damn good content!

Good Content is like honey and its taste lingers even after it has been drank.  A blog, new posting in communities or a newsletter, all are media vehicles.  A great brand not just focuses on form (ads on TV and other media) but also on the substance of the content (what is said, how said, etc).  While there are heated arguments on when does a blog becomes a blog and not a note or white paper, there is an anonymous agreement on what good content is.

Based on my barb with fellow content worshippers and less than tolerant critiques, here are few criteria that define what a good content is.

  1. Focus: What is the central message of the article? Have you stuck to it?
  2. Relevance: Is each sentence at a right place. Does it connect and flow from previous and lead to the next logically. Only flow makes a reader stay.
  3. Character: what is the story all about? Is this an informed Yuppie or a sober professorial lecture or a high pitch shrill of joy? Character of the content can vary form Inform, compare, referential to endorsement.
  4. Personality: What is the personality of the content? Does it have some black shades somewhere? Is there a shade of grey? Nothing like a taciturn arguments that can bowl a googly at the reader to wake him up. Humor, Negotiate and argue with the reader. Indian classical dancers employ Navaras (9 emotions) to aptly engage their audience. So should you.
  5. Provoke and ignite responses: A good content not only engages the readers but must also elicit responses.
  6. Beauty in simplicity: Clarity comes easily with simplicity. Hence, use simple words which results in an effortless reading. Use terms/words which are widely understood, do not expect your reader to reach out to Encyclopedia to understand what on earth you wanted to say.
  7. 15 words rule: Short, simple and 15 words sentences read always better. Mend this long walk habit of 2-3 lines. Your readers interest gets lost in the highway. And finally,
  8. Write in your own way. Do not labor hard to write like some senile academician to sound intelligent and informative. Avoid aping the 40 year old Bollywood star pumping iron to look  like a college kid. Remember, authenticity and experience sharing in your inimitable style would always succeed in long run.
  9. Proof read, do a Spell and Grammar Check before any of the content goes online. Remember, good grammar may not grab attention but a bad grammar definitely does!

-Amrita Rao

Structuring Global Expansion

Structuring global expansion is a complex decision requiring one to weigh multitudes of treaties, cost advantages and cost of monitoring. Expansion enables the company to benefit from economies of scale providing additional profit enhancement. Companies often face the question of whether to structure the new venture as a separate legal entity or a subsidiary. Factors such as taxation, transfer pricing, legalities and profit sharing form the crux of these expansion strategies. Companies need to also ensure treaties between two countries and the nature of business that they could likely engage in. The profit could be pooled in the country where the tax laws are less stringent and the law for transfer of funds flexible. The increasing volume and variety of inter-company transactions have given rise to companies concentrating on transfer pricing as a leading risk management issue. The right strategies if adopted can save a company billions of dollars while a wrong decision could initiate the increase in costs and penalties. 

– Pratibha Sharma

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Creating Content That Sells

One of the easy steps towards smart business is to generate quality traffic on your webpage. Only when the content is focussed on user needs and targets prospects, this can be achieved. The aim of the website content is to welcome the readers to read what is written. Once they are on the website, they look for content which they can grasp and understand easily. Keeping in mind these and a reader’s attention span, quality and quantity of the content must be developed.

Quality content that has a clear focus and which connects with its intended audience is something many companies aspire to develop, but only a few practice and fewer practice well. So, where do most companies go wrong?

Through my experience I have found that even though companies have created a decent website and content, the intended traffic just seem like a MIRAGE. Problem might be the amount of content where it is either too much or too little and in the worst case, inapt to what is sought or likely to be appreciated by the readers. Hence, there is a need to separate wheat from the chaff. You just need to cut out the rough edges, simplify, and calibrate.

I have also learned that content planning is simple if one understand what NOT TO COMMUNICATE. This requires the content generator to understand the schema, its boundaries and connects and what to drop or highlight keeping in mind the seasons. Planning rests on the purpose and good planning reflects on the kind of format you choose to use. Planning is probably not something you are going to do all at once. You will want to begin by start questioning yourself- ‘Who is the right audience?’ ‘What would they seek for on my website?’ and the rest of it will flow.

Start creating a content which not just talks about the products/services and its features but a content which brings value to your customer. The content must speak for itself the worth and the values a reader is going to benefit from. A reader’s perception about you also depends on the style, format and the language in which you choose to write. Website is like a sales person. Sales people explain about their offerings, so should the website. They talk about how they can bring value to the customers, so should the website. A sales person clarifies doubts, so should your website. If you want to impress the world with your complex language abilities, perhaps, your website is not a good bet.

Along with the appropriate content, a well thought out design is a plus. A good content with a cluttered design is a major turn off for your readers. For a face-lift, the website needs to look at aspects of aesthetics, attractiveness, user friendly features, the kind of colours used, overall design etc. A combination of right content and right way of presenting brings value.

Remember, the content is for your readers. Hence, it needs to be developed keeping in mind the time a reader is likely to spend on it, its relevance to the reader and the depth of information he is likely to seek. A simple, clear and standard content is what most appreciate. If your content doesn’t clearly establish any of the aspects, ‘back’ button is just a click away from a prospect!

– Amrita Rao

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