Optimizing Your People

"Focus on revenue-producing activities.” Eric Lofholm

Leadership is the ability to utilize, organize, and optimize the talent and skills of your people to bring out the results that you desire. A good leader will understand what results need to be produced, the kind of activities that will produce the results, and the talents and skills of the people required to drive those activities.

When a company is suffering with revenue issues, it may be as a result of the leaders not understanding the activities that produce revenue or may have people employed who are not engaged and competent to perform those activities.

A company’s profit depends a great deal on its ability to optimize the potential of its people. If leaders don’t know how to optimize the talent and capability of their people, they may get distracted from producing the results they have always desired to produce.

Once most companies start making money, they focus on activities to collect and keep the money instead of how to focus on creating more revenue. They get more accountants and administrators to manage. These talents only extract resources from the value that has already been created

If the majority of their people are not engaged in work that brings in the revenue, they risk being disrupted from within it. If the rate of change and value creation outside a company is more than the rate of change within the company, the market the company serves will shift without it knowing.

As a leader, you need to constantly ask yourself these few questions:

1. Where is the most of our revenue coming from?

2. What are the specific activities involved in bringing in the revenue?

3. What percentage of our people is engaged in these activities?

4. How do we increase these activities without breaking the bank?

The ability to understand what activities drive revenue and what skills are needed to perform those activities makes leaders who continually make a difference in their market.

Reasons Why Companies Are Started

Change is hard. The idea behind the start of a company in many cases hardly changes. The reason why founders start a company is very important. Revenues may not be the reason for starting a company but they can be the death of a company if it doesn’t come in regularly. Money is the blood of a company. Profits may be the byproduct of value creation but it is still how to measure the success of your product.

Without economic value, income, a company will not survive the economy. Human value can only be built with using economic value. But also important is that human value focuses on activities that create economic value.

Most companies fall into these different categories when it comes to revenue:

1. Companies started out of love for technology: These companies focus on technology. They might be patient for a while before they start generating revenue so they can perfect their technology.

2. Companies started to solve a problem: The founders identified a problem they wanted to solve and then fixed a price to exchange the solution with those who had the problem. They validate their solution by the revenues they will be generating. In these companies, the people are treated with care, and round pegs are kept in round holes.

3. Companies started to make a profit: These companies are started with the sole aim of profit. Rather than optimize the capability of their people, they use their people to achieve profit. In most cases, the people are simply tools to achieve success.

When companies are started to help people, it makes it a lot easier to produce revenue. That is because profit is the byproduct of value creation. When companies provide people with solutions, getting revenue in exchange is easy.

Activities That Drive Revenue

Peter Drucker, the management expert, identified two functions of a business that produce revenue. All other functions are cost to the company. Companies that focus on any activities outside the two are not serious about revenue.

The two revenue-producing activities are:

1. Innovation: This is the activity that produces value for the customer. What creates value for the customer determines the value the company gets and captures in return. Activities here include product, service, and experience design.

2. Marketing: This is the activity that delivers value to the customer. It comes both as advertisement and sales. Advertisement is about educating the customer while sales is about developing a relationship with the customer. Activities here include delivery, sales, advertisement, customer relationship & service and

Companies like Apple focused more on getting the products right, the customer experience, and advertisement to grow their revenue. Computer companies like IBM employ more salespeople to drive their product sales. Company leaders should know what activities drive the revenue of their company and then employ the right people who can continually drive the revenue.

Culture Should Drive Business Model

No company should treat its culture in a silo. The best way to measure the culture of a company is through customer experience and satisfaction. Culture should drive the business model. When a company designs its culture just to make its employees happy without making a connection intentionally to their business model, it will have happy employees but a drowning company.

When we teach the concept of Human-Centered Organization we use the analogy of a car: business model is the engine of the car, culture is the fuel that powers the engineer, and leaders are the drivers of the car. Your business model needs the right fuel to power it and make it work. If the fuel isn't right for your business model, the engine will knock.

The culture of a company must be treated as a part of the overall system of the business. It takes input from the business model and also makes input into the business model. The culture of the company must be so designed to continually drive revenue-producing activities. If the people are happy but there is no money to run the business, they will all be fired despite being happy.

Leaders need to design their culture to feed their business model. No company should design its culture in isolation. It has to be part of the system that feeds the business model. When we design the culture of a company, we always tie it to the leadership and business model. Culture has to determine the performance of the business model. If the business model is not working, the fault could be either the leadership or the culture.

Leaders should never fall into the trap of designing the culture as a silo. That is why it has to be tested and validated before being implemented company-wide. The employee experience and satisfaction must of necessity result in customer experience satisfaction and loyalty.