How Happy Is Your Business?

How Happy is Your Business?

And its stakeholders – yourself, your customers, employees, suppliers, partners, etc.?

© OlegCheremnykh, MBA, strategic management consultant

Every business owner must constantly ask himself (or herself) one fundamental question:
Is my business a happy one? And if the answer to this question is ‘No’ (which is by far the most likely outcome), then What needs to be done to make my business happy – and make it stay happy?

Contents

Contents

Why you need to own and run a ‘happy company’

Conduct a comprehensive ‘happiness audit’ of your company

Properly define ‘corporate happiness’ and ‘happy company’

Conduct a thorough ‘reality check’

Specify and validate your financial needs & objectives

Specify and validate your functional needs

Specify and validate your emotional & spiritual needs

Put together a ‘declaration of corporate identity’

Examine your corporate culture and corporate code

Analyze mission, vision and strategies for your company

Evaluate the system of unique aggregate value propositions to your stakeholders

Assess your key business objects and the corresponding synergies

Examine your relationships with key stakeholders of your company

Deploy Aggregate Value Scorecards – your key ‘happiness management’ tools

Then re-engineer your company to make it radically happier

Appendix 1. Key Business Management Diagram

Appendix 2. Key SRM Diagram

Appendix 3. Key Stakeholders of a Typical Business Entity

Appendix 4. Key Object Categories in a Typical Business System

Why you need to own and run a ‘happy company’

All management theories are based upon certain assumptions. Therefore, any management theory is only as good as the assumptions it is based on (i.e. how well these assumptions correspond to common sense and reality). The contents of this paper (its statements, questions and recommendations) is based on the assumption that your most fundamental objective in life is to be happy – at home, at work, in social life, etc.

Common sense tells me that in your case, this assumption is true. Of course, there are individuals whose fundamental objective in life is something other than happiness, but such characters are usually committed to some radical religious or social idea which is quite rare among entrepreneurs and business owners.

Whether we like it or not, a human being is a social being and, therefore, can only be happy in a ‘happy environment’. Again, there are exceptions (mostly, religious hermits) but I strongly doubt that there are any religious hermits among successful entrepreneurs and business owners.

As your life is inseparable from the life of your business (in other words, your emotional well-being depends heavily on the ‘quality’ of your emotional relationship with your business), you can only be happy owning and running a ‘happy company’. Any degree of ‘unhappiness’ in your company will inevitably ‘poison’ your emotional life and, therefore, prevent you from being happy.

Therefore, to achieve and maintain personal happiness, you simply have to own and run a ‘happy business’ (and therefore, to transform a ‘not-so-happy’ business into a happy one).

Conduct a comprehensive ‘happiness audit’ of your company

You know that there’s only one way to find out whether the company is financially sound – conduct a comprehensive financial audit. Same thing with operations. Likewise, to find out whether the company is, indeed,happy or ‘not quite’ you must conduct a comprehensive ‘happiness audit’ (CHA).

From a practical standpoint, conducting the CHA means finding straight, honest, unambiguous and candid answers to a number of key corporate happiness – related questions (based largely on common sense – the foundation of any effective business management methodology).

This paper is essentially a very practical guide to conducting the first step in a CHA – a so-called ‘comprehensive blitz-audit’ (CBA) which, on the one hand, you can conduct rather quickly, but, on the other hand, will give you a fairly realistic estimation of an aggregate level of ‘corporate happiness’ in your company and a list of the most immediate steps that you need to take in order to transform your company into a much happier business entity.

CBA procedure presented in this paper (as well as the deeper CHA) are based on a key strategic business management diagram presented in Appendix 1.

Properly define ‘corporate happiness’ and ‘happy company’

But before you can even begin the CBA project, you must come up with the most appropriate definition of a ‘corporate happiness’ and ‘happy company’. This definition must not only be based on common sense, but also allow for the development of (1) a comprehensive and efficient system of plans and activities aimed at achieving and preserving ‘corporate happiness’ in your company and (2) a comprehensive and efficient system of key performance indicators to be used for “measuring corporate happiness” in your company.

Fortunately, such a definition is not that difficult to come up with. An individual can be called truly ‘happy’ when his or her aggregate needs–financial, functional, emotional and spiritual – are completely (or at least adequately) satisfied. Therefore, a ‘happy company’ is the one that at least adequately (‘acceptably’) satisfies aggregate needs of all of its key stakeholders – yourself, other company co-owners, your clients (customers), your suppliers, your partners, appropriate government entities, etc.A comprehensive list of key categories of a typical business entity is presented in Appendix 1.

Naturally, the company that adequately satisfies aggregate needs of its stakeholders is valuable (ideally, highly valuable to them). In other words, it creates a large amount of aggregate value - financial, functional, emotional and spiritual – for its stakeholders. Therefore, a ‘happy company’ is the one that creates the highest possible amount of aggregate value for its stakeholders (both in ‘absolute terms’ and compared to its competitors) or, what is essentially the same thing, maximizes its aggregate value to its stakeholders.

Common sense tells us (if necessary, you can verify the truth of this statement by conducting a thorough study of decision-making patterns) that your stakeholders – explicitly or implicitly – choose the company they are going to deal with based on the abovementioned ‘aggregate value maximization’ criterion.

You can measure and manage the aggregate value of your company by establishing a system of ‘key happiness indicators’ (KHI) – financial, functional, emotional and spiritual. Most of these KHI are simply more or less ‘traditional’ ‘key performance indicators’ (KPI) which are already being used in business management systems (most likely, in your company as well). To build a comprehensive system of KHI you only need to properly categorize and structure these ‘traditional KPI’ and complement them with several directly happiness-related indicators – and you will be all set.

Therefore, you must start the comprehensive blitz-audit of your company with answering the following questions:

How well does you company (at all levels) know the key needs – financial, functional and emotional of all of its key stakeholders (not just clients)? Their decision-making processes? Can your company make a proper distinction between the needs and desires[1] of its stakeholders? How well does it satisfy needs and desires of its stakeholders?

Have you ever estimated the aggregate value that the company created for its stakeholders (‘in absolute terms’ and compared to its competitors)? What kind of methodologies and tools did you use for this purpose?How close to its ‘maximum’ is the aggregate value of your company?

Which indicators do you use to measure the corporate efficiency of your company? Have you categorized them into financial, functional, emotional and spiritual? How complete, comprehensive well-structured and easy-to-use is your system of KPI?

Conduct a thorough ‘reality check’

One of the key differences between a ‘happy company’ and a ‘not-so-happy’ one is that the former one lives and operates in a real world, while the latter – at least to some extent (sometimes to a significant extent) lives in a “world of illusions”. In other words, in a happy company, reality and its perceptions at all levels in a corporate hierarchy are one and the same thing. A ‘not-so-happy’ company suffers from a (sometimes large) gap between perceptions and reality.

Hence, the owners, management and employees of a ‘not-so-happy’ risk to experience ‘in one of these days’ a ‘rude awakening’ (usually at the least convenient moment). Hardly a highly desirable experience.

Another key feature of a ‘happy company’ is its heavy reliance on common sense – by far the most powerfulbusiness management tool. In other words, practically all decisions and actions in a ‘happy company’ are firmly rooted in common sense. In a ‘not-so-happy’ one, a significant number of these decisions and actions are driven by something else – in most cases, by one or several of the ‘seven deadly sins’ – greed, pride, envy, lust, wrath, sloth and fear.

It should be noted that, if not driven out of the decision-making process in time, these sins can indeed become deadly for prosperity, efficiency, competitiveness and even the very existence of the company in question.

Therefore, your next step in a CBA should be a thorough ‘reality check’ by finding candid and honest answers to the following key questions:

Are most (ideally, all) decisions and actions (especially the most important ones) based on common sense? How strong and efficient are your defenses against the ‘seven deadly sins’?

How comprehensive & efficient is your information & knowledge management system? Is it focused on data, information or knowledge[2]? Is your data and information accurate, timely, reliable, comprehensive, sufficient, well-structured and easy to work with?

How well you, your managers and employees know the internal and external reality of your company (first and foremost, the key external factors[3])? How accurate are their perceptions of this reality?

Specify and validate your financial needs & objectives

In a happy company, its owners (i.e., you) are the most important stakeholders (the ‘first among the equals’). So are your financial needs and objectives and financial value of the company to you – among other components of its aggregate value.

Therefore, the cornerstone of a business management system in a happy company is a declaration of financial needs and objectives of its owners: dividends in absolute terms, dividends’ growth rate and the financial value of the company (estimated using more or less sophisticated financial valuation model). This declaration then becomes the firm foundation for a strategic financial plan, on which, in turn, your strategic business plan will be based.

Therefore, the next set of questions that you’ll need to answer during a CBA will be:

Have you developed a declaration of your key financial needs and objectives? How well are your financial objectives supported by common sense and sound reality?

Have your financial analysts developed a financial valuation model (FVM) for your company? How well does this model correspond to your key financial needs and objectives? How sound and adequate is the methodology used in developing the FVM for your company? How accurate is the ‘historical part’ of your FVM? How realistic are the forecasts in your FVM? Is your FVM firmly based on common sense?

Are both strategicfinancial plan and a strategic business plan explicitly based on your key financial needs and objectives? Is your FVM an integral part (ideally, the foundation) for both of these plans? Are both of these plans firmly rooted in sound reality and common sense?

How well does your company satisfy your financial needs? How well does it meet your financial objectives?

Specify and validate yourfunctionalneeds

In order to make you truly happy, your company must not only satisfy your financial needs but allow you to do what you want to do – and always wanted to do (formally speaking, ‘perform the function that you want to perform in this society’). And this usually means not only the general function of an entrepreneur (owning and running a business, regardless of the specific nature of the latter), but owning and running the business that you always wanted to own and run. In other words, satisfy your functional needs.

Hence, at this stage in the CBA, you will need to ask yourself the following questions:

Do I know exactly which kind of business I would like to own and run if anything was possible(it usually is)? In other words, do I know my functional needs? Do I confuse my needs with my desires? Is the business that I own and run the right one for me? In other words, does it satisfy my functional needs? Do my financial needs agree with my functional needs or is there a contradiction between them?

Specify and validate youremotional & spiritualneeds

Naturally, your company can make you happy only when your personal (emotional and spiritual) values, principles, beliefs and priorities are implemented in its corporate culture and corporate code (which “codifies” the corporate culture). But first, the former have to be properly identified and specified.

Therefore, to complete this step in the CBA, you will need to answer the following questions:

Have you identified and declared your fundamental moral, emotional and spiritual values, principles, beliefs and priorities? How comprehensive and balanced is this description? Are there any contradictions between its components? Are your actual values, principles, beliefs and priorities identical to declared? Do your declared and actual values, principles, beliefs and priorities agree with the ‘universally accepted human values’? Requirements of your religion (if you have any)?

Is there any disagreement between your values and your strategic financial objectives? Between your values and your functional needs? How well does your company satisfy your emotional and spiritual needs and meets your moral and ethical standards?

Put together a ‘declaration of corporate identity’

In order to turn your key financial, functional, emotional and spiritual needs into the most solid foundation for a strategic management system in your company, it is advisable to combine all three abovementioned declaration into a single document – a declaration of corporate identity and strategic objectives (DCI & SO). The reasons for putting such a ‘label’ on this document are straightforward – the corporate identity of your company are obviously defined by your functional needs and moral, ethical, emotional and spiritual values, principles and beliefs; and your key financial objectives form the foundation for the corporate strategic objectives.

After you put together this fundamental declaration, it will prudent to thoroughly analyze it to guarantee the highest possible quality of this document by answering the following questions:

How complete, detailed and realistic is this declaration? Isitbasedonourneedsoronourwants/desires? How balanced is this declaration? What is the level of synergy within each of its sections (financial, functional, emotional, spiritual) and between its sections?

Examine your corporate culture and corporate code

In order for your company to be truly happy, its factual corporate culture must be identical to the officially declared culture (‘de facto’ must match ‘de jure’) and the factual behavioral patterns of company employees must match the ‘official’ corporate code.

True, in order to make you happy, the corporate culture and corporate code of your company must incorporate your moral, ethical, emotional and spiritual values, beliefs, principles and standards. But in order to make other stakeholders happy (otherwise your company will not be happy at all), your corporate culture and code must also incorporate a number of universalfeatures: a thorough understanding – by every manager and employee – of a ‘corporate raison d'être[4]’; confidence in the future – both corporate and personal; ‘corporate justice’; mutual reliability and trust – vertical and horizontal, internal and external; ‘corporate openness and transparency’ (i.e., a common sense-based approach to ‘confidentiality’ of corporate information and knowledge); feeling of ‘being needed’ (being important for) and cared about – by company owners, colleagues, superiors, subordinates, external stakeholders, etc.; permanent professional and personal growth of every manager and employee (which should accompany corporate growth).

Therefore, in order to make sure that your corporate culture and code meet these ‘corporate happiness requirements’, you will need to ask the following questions:

Do you have a formal declaration of a corporate culture and a formal description of corporate code in your company? How complete, detailed and balanced are these documents? Are these declarations based on common sense and firmly rooted in reality? Do actual corporate culture and corporate code match their ‘declared versions’ and if not, how large is the discrepancy? How completely and deeply declared and actual corporate culture and corporate code incorporate your moral, ethical, emotional and spiritual values, beliefs, principles and standards? Key features of a ‘happy company’? How well do they correspond to your declaration of corporate identity and strategic objectives? How efficient is the mechanism for enforcing the declared corporate culture and corporate code?