Business planning - the importance of effective leadership

Good leadership is a prerequisite for any organisation to perform as well as it possibly can, Neville Stein explains.

Like many people I have a list of historical and modern-day figures who inspire me, mostly because they have achieved great things, often against considerable odds. The ones who inspire me most are the leaders, men such as Ernest Shackleton, leader of the 1914 Antarctic expedition, and Jim Lovell, the commander of the 1970 Apollo 13 flight. Both used all their resourcefulness and skills to galvanise and bring home alive the men under their command following catastrophic events.

So what makes a good leader and why are they so important in a business? If you own and run your own company, or are in a senior position, then you probably are one already. I am not suggesting you will face anything as dramatic as bringing the staff team home alive after an Antarctic freeze, but the life of the business, its direction and growth may well be in your hands. You need to ask yourself, if you have not done so already: "Where are we going? And Why?"

Leaders and managers

There is a clear difference between a leader and a manager, though it is possible for one person to be involved in both roles. Considering it through the example of a journey, the leader works out the destination, the reason for going there and the best possible route based on what is going on at that time. The manager ensures that there is fuel in the car, the vehicle is roadworthy — with insurance and breakdown cover — and a qualified driver is in place.

Managers tend to think incrementally, follow company policy, implement systems and procedures and have organisational skills. They know how things work, often using formal methods to get things done.

Leaders tend to think radically, following their own intuition and creativity. They have a preference for innovation, for the larger picture rather than the small details of the how things may get done. What they lack in organisational skills they make up for with passion, drive and vision, motivating and inspiring others to achieve the overall goals they have set. Leaders are followed, which means that the vision they create for their organisation is often embraced by their employees.

Embracing both roles

One of the challenges, particularly with small business, is that employers and business owners often need to embrace both roles. At times they need to be a manager, at others they need to be a leader. Only in much larger corporations can the role of a leader be a full-time one.

Typically people slip more easily into being a manager, attending to day-to-day detail, and do not get or make time to set the vision for the organisation. We can get so busy trying to achieve in the present time that we do not know what we want to achieve in the future. Creating a vision for your organisation takes time and involves a lot of thinking, and perhaps that is why it does not get prioritised. We value action more, yet spending time with your team thinking about where the business is going will ensure future activity is productive, efficient and profitable. Being a leader will enable your business to be sustainable.

Informed vision for the future

An organisation’s vision should be informed and developed by what is happening in the wider world. There would be no point setting a vision, for example, of being the UK’s first organic-only garden centre if there was no demand for organic produce.

A key role of the leader, especially in a small business, is to be aware of what is happening in the macro environment — the broad environmental factors that impact your organisation. Reviewing these key issues on a regular basis will help you to understand where your business needs to be and help to future-proof against threats.

The classic management tool for doing this is the "PESTLE" analysis — reviewing the political, economic, social, technical, legal and environmental factors that might impinge your business. It is worth noting that these macro factors are outside your control but you need to be aware of them and respond accordingly. Shackleton could not control the ice freeze immobilising his ship, but he knew it was a possibility beforehand and had considered the implications.

In reality a PESTLE might be quite involved, but to illustrate my point here are some examples:

Political How will a change of Government impact on your business? What is the likelihood of a change of Government? How will existing Government policy affect your business? What would be the impact if the UK left the EU?

Economic How does a recession affect your business? What happens if interest rates rise? How will the National Living Wage affect you?

Social How will changes in consumer trends affect your business? What is happening to the demographics of your customer base? What is the impact of an ageing population?

Technical How will the internet impact your business? Will the increasing use of robotics in agri-business provide an opportunity?

Legal Increasing legislation increases costs to a business. How will you manage this?
Environmental What environmental changes will impact your business? How will climate change affect the range of crops grown?

Opportunities and threats

As you go through this PESTLE analysis for your own business you might identify opportunities and threats, and depending on the seriousness of them you might need to change your business and create a new vision that answers the question: "What do we want to achieve in the light of what we have leant from the PESTLE analysis?"

The PESTLE is a powerful tool. Ignore your macro environment and changes in the market will creep up on you before you can respond and your business will be as immobilised as Shackleton’s Endurance was, whereas if you identify problems well in advance you can take evasive or alternative action.

The message is serious — if your business is going nowhere that is not a good thing and if it is going in the wrong direction then that is not a good thing either.

Obviously leadership involves skills and talents beyond just setting a vision and completing a PESTLE analysis, and much literature exists on the qualities of a great business leader and how they can be developed. If nothing else I would urge you to see the importance of the role and to ensure that someone is doing it within your business, even if it is not you.

Leadership sets a direction and a vision, and even just the knowledge that such a thing exists can motivate and bond a team to work better, smarter and more profitably for all.

Neville Stein is managing director of business consultancy Ovation


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