No company can say what the future will bring, but it can definitely transform itself in a way that it will be equipped to deal with changing circumstances. There is always room for improvement, but organizations and their senior executives must be open to such improvement as to gain new skills and knowledge and become accustomed to the modern world. This is where dynamic management is steps in..
Dealing with uncertainty is a real challenge for organizations, and individuals alike, these days. In addition to thoughtful analysis, it also increases the significance of making the right decisions at the right time. This means taking decisions when the fog has lifted even slightly, so that competitors can’t get ahead. A minimal delay in decision-making can result in an unwanted situation.
Most organizations aim to achieve a dynamic management; however, this objective is attainable only when an organization can get its senior managers to work together in a radically unique way. Their experience and knowledge is what makes them the right people to take decisive actions at the right time; they are placed in high positions so as to build and improve the company’s capabilities which will help in identifying serious issues early on, and employ the extra time in gathering intelligence, analyzing, and finding a solution. Efficient organizations will probably find it easier to move toward a dynamic management by implementing some small, but significant, changes in their operations. Other companies that are not as well-managed, will find moving away from rigid old practices quite challenging. This article is going to present some basic principles that any company can adopt to make changing circumstances favorable.
A ship is headed by a single captain who is responsible for all major decisions. Although the task is daunting, it is more efficient and simpler because there is a single person in authority. Similarly, a vehicle is also driven by a single driver which makes the task comparatively simpler. When it comes to a modern company though, there are tens, and sometimes hundreds, of captains involved. Although when more people are involved, there are more opinions, ideas, and solutions, such a large number of captains can make the task of decision-making more complex. Those captains play a vital role in the success of the corporation, and their alignment with each other is of massive importance for smooth operations.
Identifying the people who are to fill those vital positions is a prerequisite. The skills, experience, and knowledge of those individuals must be in line with their respective roles if a corporation is to succeed. Companies with a smaller management are quick in communicating and decision-making because the people in authority are lesser in number. Larger companies face a challenge when it comes to speedy interaction because of the amount of people in charge, but they definitely have access to a larger spectrum of experience, skill, and knowledge. The size of management of an organization depends on the type of company it is and the industry it operates in. Moreover, it also depends on the personal preference of the company’s owner. Some owners prefer a longer chain of command so that authority lies at the top only, whereas others are more in favor of delegation of authority. As mentioned before, it depends greatly on the nature of the organization and the business it is engaged in.
Coping with uncertainty demands for a mindful discourse which is possible only if management is well informed of the economy, market, competitors, and other relevant factors. Secondly, managers must be completely aware of their obligations, and know that a debate is just the first step, followed by putting all their effort into making the uncertain tomorrow successful. A debate without implementation is completely useless. Most of the time, people just engage in energetic debates, but do not take necessary action. Decision without an action is not going to help any individual or organization.
It would obviously be very convenient if all companies could follow the same protocols, but unfortunately, what works for one might not work for the other. A company’s organizational structure and cultural norms have an impact on how it transitions, and every company is different. This article will suggest some approaches that corporations can use to get their senior managers to collaborate with one another in a versatile and positive way.
You do, you learn
Listening to recommendations is easy, and forgetting them is just as easy. However, when you act upon what you have heard, you learn. Again, acting upon a decision is of utmost significance. Stage gating, decision trees, and scenario planning are some techniques that will encourage managers to think out of the box, and learn the power of collaboration.
Learning never stops, if one really wants. The speed at which the world is changing requires individuals to become efficient and willing to learn more. The changing environment calls for new skills and knowledge so organizations can keep up with their competitors. Executives and managers should continuously work towards their personal development by taking workshops to learn new skills that will aid in steering the organization through complexity and obscurity.
People always tend to be more cautious and mindful when they know they will be held accountable. Evaluating and measuring the performance of executives, individually and collaboratively, results in a motivated management.
Decisions can be made anytime and all the time, but making decisions at the right time is what matters. Losses, investment costs, and opportunity costs are the results of delayed decisions. On the other hand, unnecessarily quick action in decision making can lead to high risks and bad choices. Below are some techniques a company can use for proper planning and management.
Identify emerging issues
It is easy to identify issues within the organization’s internal environment and structure. However, it is equally vital to identify the threats and opportunities a company faces from the external environment, such as changes in customer demand, industry structure, rules and regulations, and competitors’ behavior. One simple approach to identifying emerging issues is to gather senior managers and take their opinion, a poll. Collaborating and reviewing these matters can help put them in order of gravity, and decide which ones to deal with first, and which ones to ignore. Although this method is efficient, some individuals might hesitate to voice their opinion for fear of being perceived as weak or incapable. However, a well-organized system of performance management can help executives realize the importance of identifying critical issues on time, and the danger of delayed measures.
Tools for decision-making
When an issue arises and executives identify it, there is enough time to employ proven approaches to solve problems. Decision trees are used for putting decisions in a proper structure and sequence. Probabilistic modeling helps in understanding consequences of the final result. Stage-gate process which is also known as phase-gate, is the process of dividing a process into smaller and well-sequenced phases/stages that greatly reduces the amount of risk involved. Creating different scenarios gives management a perspective of their issues; scenarios help managers weigh the pros and cons of each decision.
In order for an organization to run efficiently and profitably, it is imperative that each member of senior management is on the same page. This means that managers must be in contact with one another, and be fully aware of what is going on in their organization. This way, they can identify issues, engage in productive debate, and tackle problems. In office terminology, this contact refers to meetings. A redesign of a company’s calendar can help in implementing regular meetings.
Reforming budgeting processes
Many management practices are so invaluable that they have proven profitable for companies over the past century. Budget processes, fixed annual planning, decision making, and strategy setting are all connected to one another. They allow managers to delegate tasks and work efficiently. If managers had to make every single decision, the operations of an organization would slow down to a great extent, that’s why delegation of authority plays an important role in the success of a company.
In order to be more flexible, many organizations transform their budgeting processes. A common approach is to use three different cases: base, optimistic, and pessimistic. This way, management can see a range of outcomes and make decisions accordingly. A major number of companies also employ rolling budgets which requires continually updating a budget. This helps ensure that everything is going as planned, and identify any variances; a problem can be solved only when it is identified. As mentioned earlier, what works for one company might not work for another. Similarly, an approach that works at one point in time is not necessarily going to work a second time as well. So, the techniques discussed above are not completely foolproof; however, they offer significant help in a stable environment.
Rolling budgeting may work very well for a company at one point in time but when it comes to the macroeconomic environment, it can pose a challenge. In such an environment, there is great uncertainty whether a company will experience rapid returns, double-dip recession or anemic growth.
There is an alternative that can be useful: semi-annual budgeting. With a short budget period, companies have the authority to hold the relevant personnel accountable for the period in question, and they can also move towards contingency budgets if the circumstances change direction. Companies that adopt semi-annual budgeting will find that it works much better as compared to an annual budget. A year is a long time, and there is no way of knowing what might happen over the course of 12 months. A short budgeting period presents a more realistic picture of a company’s finances, and the accompanied short-term objectives are definitely more in line with the current situation.
There are many variables in the economy. Some macroeconomic uncontrollables, or variable factors, include commodity prices, currency movements, and interest rates. A valuable and compatible step is to have semi-annual budgets adjusted automatically for these uncontrollable factors. Restating budgets and their outcomes can greatly improve accountability when the variances are removed. Adopting these measures help senior executives minimize or even totally eliminate losses. This way, management becomes mainly accountable for its performance, and the external environment cannot be held responsible for loss or gain faced by the organization.
Just like having a plan A and a plan B, companies need to have a back-up plan, budget, and staff. This makes it easier to deal with uncertain circumstances, and supports significantly in nick of time decision making. These discretionary budgets must be sufficient for supporting the required staff work. Additionally, they should also provide for the resources that are needed for the implementation of important decisions.
In the modern world, it has become extremely important and lucrative to be versatile and efficient. There is strong competition that requires companies to be active, alert, and fully aware of the economy. Knowledge and information is power, and when companies have those, they can take critical decisions at the right time which leads the way to massive opportunities. These opportunities allow companies to tap into hidden markets, capture existing markets, and increase profits.