Five Steps to a David
Tuesday, April 14, 2009 at 7:00AM by Charles Day I’m a big believer in expansive thinking.
If you know me at all, either in person or through this blog, it’s as someone who likes to imagine the broadest possibilities. If you don’t start out there, I find you almost always end up very close to where you began.
But once you’ve defined the vision, then you’ve got to deliver it.
In an interesting post yesterday, Fred Wilson - the venture capitalist - wrote about managing expectations to those you report to as a business owner. Investors, a board, your partners. He stressed the need for consistency and delivering what you promise, even if that means significantly reducing your forecasts to make sure you can hit them.
Fred’s a brilliant guy and a hugely successful investor. But I think there's a better answer than. Because if you set low projections someone’s going to expect you to reduce your overhead to match. In a lot of businesses that usually means people, and the good ones take a long time to replace.
I think there are five things you should do instead of going straight to forecasting the worst case scenario:
- Have systems in place that are reliable and consistent. Make sure you know what you’re getting in the way of reporting and when you’re going to get it. As the CEO of a company I drove the managers of each of our offices crazy with my constant scrutiny of our monthly billings. I made a lot of decisions based on those billing projections which impacted people’s lives, and if you said you were going to bill that invoice this month, there needed to be a really good reason if you later decided you couldn’t.
- Hire smart people. Then let them help you be smarter about what the numbers say. It took longer than I wanted to instill the monthly invoicing discipline in some of those local managers. That was my fault. Until I stopped to explain the broader context of how we used those billing projections, they didn’t see that it really made that much difference. Individually, a single invoice rarely did. Cumulatively it was enormous. But I was the only who could see that. Once they understood, they gave me powerful insight each month into trends they were seeing locally. Those early warning signs let me adjust in other places.
- Have someone you trust search out the bad news in the monthly numbers and highlight them. Good news is easy to deliver. Bad news takes research. But once you can give bad news a proper context, you can provide better alternatives. Have someone who’s not afraid to give you the bad information.
- Always, always keep one eye fixed firmly on where you’re trying to take the business. You need to know whether you’re moving closer or further away with every set of financial reports. If things are going south you need to know before not after the fact and act accordingly. Once you do decide to act, it will be based on the broadest and deepest view.
- Partner with your partners, investors or board members each step of the way. If you’re working with the right people, they’ll help you preserve the core of the business as long as possible.
The trick to carving a statue, Michelangelo once said, “is to remove everything that isn’t the statue.”
The skill is making sure what you're left with is not just a piece of rock.
Reader Comments (4)
i love this post and reblogged one of my favorite parts at fredwilson.vc
Fred
Thanks so much. And for getting the debate started. It's an important one - now more than ever.
Charles -- Really enjoyed your post and referenced it in my blog this evening....
http://www.matteventoff.com/communicating-bad-news-seven-steps-for-ceos.html
Matt
I read your blog as well and thought your comments on Fred's post were also right on the money.
http://www.avc.com/a_vc/2009/04/communicating-changing-business-dynamics-to-your-board-and-investors.html