We encourage management teams to set aside an hour or more each month to brainstorm ways to improve each of these cash cycle components. This is a powerful exercise to do with the broader middle-management team at a half- to full-day monthly management meeting. It will give everyone a better understanding of how cash flows through the business and how each function can contribute positively.
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Yet there are three barriers to scaling up, which we’ll discuss in the next chapter:
• Leadership: the inability to staff/grow enough leaders throughout the organization who have the capabilities to delegate and predict
• Scalable infrastructure: the lack of systems and structures (physical and organizational) to handle the complexities in communication and decisions that come with growth
• Marketing: the failure to scaleup an effective marketing function capable of attracting new customers, talent, advisors, and other key relationships to the business.
Thus, to overcome these barriers your team must master, using our tools, four fundamentals:
• In leading People, take a page from parenting: Establish a handful of rules, repeat yourself a lot, and act consistently with those rules. This is the role and power of Core Values. If discovered and used effectively, these values guide all the relationship decisions and systems in the company.
• In setting Strategy, follow the definition from the great business strategist Gary Hamel. You don’t have a real strategy if it doesn’t pass two tests: First, what you’re planning to do really matters to enough customers; and second, it differentiates you from your competition.
• In driving Execution, implement three key habits: Set a handful of Priorities (the fewer the better); gather quantitative and qualitative Data daily and review weekly to guide decisions; and establish an effective daily, weekly, monthly, quarterly, and annual meeting Rhythm to keep everyone in the loop. Those who pulse faster, grow faster.
• In managing Cash, don’t run out of it! This means paying as much attention to how every decision affects cash flow as you would to revenue and profitability.
With frontline employees and customers, ask the Start/Stop/Keep questions. With middle management, require a standard SWOT and inquire about their top three priorities for the quarter or year.
And demand that the senior team go deeper and broader using the SWT.
Communication rhythm is established and information moves through organization accurately and quickly.
• All employees are in a daily huddle that lasts less than 15 minutes.
• All teams have a weekly meeting.
• The executive and middle managers meet for a day of learning, resolving big issues, and DNA transfer each month.
• Quarterly and annually, the executive and middle managers meet offsite to work on the 4 Decisions.
Doing this requires one simple routine: a well-structured, one-day monthly management meeting that includes everyone who supervises or manages anyone in the business. It should be a day focused on learning, sharing, and problem-solving vs. a day of mind-numbing reports.
To tackle the cash conversion cycle, start by reading “How Fast Can Your Company Afford to Grow?” a Harvard Business Review article by Neil C. Churchill and John W. Mullins.