Your Management Audit Will Show You How Well You Have Organized Your Business.
Your management audit will help you to identify the strengths and weaknesses of your organization of your business, and its management methods and structure. As you prepare your business for sale, be aware that many buyers will be attracted to a business so well run that its owner can take long vacations without any negative impact on the business. You will want to determine whether you can make that claim as you prepare to sell a business. This will help.
You might as well start by asking yourself a couple of basic questions. Are you confident that you can take a six week vacation without harming your business? Have you ever taken a six week vacation without harming your business? Remember your objective. You need to objectively examine your business as if your were looking at it as a prospective buyer. So remember your objectivity as you start.
This is only the beginning. But your response will set the tone. Remember the old chestnut that failing to plan is planning to fail. It can be applied to this aspect of your business. Failing to plan and implement an effective management structure for your business will put a huge obstacle in the way of its success. Showing prospective buyers that the results of your management audit are satisfactory will increase the demand for your business.
Doing this will highlight areas of organizational and management weakness. These areas are the likely cause of your failure or reluctance to take a long vacation, and do so stress free. The results of your management audit will illuminate areas of strength, and areas needing improvement. Don't become discouraged. Most business owners are in the same boat.
Your management audit will perform a similar function to a canary in a coal mine. If you are unfamiliar with that expression, look it up. If your organizational structure and management are appropriate and performing well, that is a good sign. If they are not, there are likely other areas of your business that will need work. And these are the various applicable functional areas of your business such as production, quality, financial systems, etc. At the risk of appearing redundant, failing to plan is planning to fail.
The next step, is to examine your business, and identify the necessary separate functional areas or activity clusters. In doing this, think about the various things that need to happen from the point of looking for and acquiring customers, to delivering your product and collecting payment. Prospective buyers will examine your business this way, either formally or informally. And to be prepared, you need to do it too.
When your audit has identified these various activity clusters, you need to identify where responsibility rests. You need to be clear on who is responsible for successful performance in each of these areas. Remember that if everybody has the ball, no one has the ball. One person may be responsible for the results of several areas of activity. However several people sharing responsibility for one area of activity rarely works.
After your management audit has identified the people having responsibility, you are part way there. Having responsibility without the necessary authority can cause great stress. As you work through your management audit, you need to identify the authority needed to carry out the responsibilities that you have highlighted. Now authority with the corresponding responsibilities. Where there is a mismatch, take appropriate remedial action. Failing to plan and execute this properly will lead to reduced demand when you try to sell a business.
You are now part way there. This will lead you in the direction of systems and people. However it will assume that the appropriate systems and processes are in place, or will be put in place. So the main focus will be on those responsible for overseeing the systematic and appropriate application of the systems. Those making sure that the system sounds an alarm when an invoice is needed, and that the appropriate person completes and send out the invoice. Are these people, who have supervisory responsibility, ensuring adherence to the system? And continually reviewing the relevant systems for possible improvements?
Let's examine these supervisors from another angle. As part of your management audit you need to consider continuity if any one of them should become seriously ill, or injured and incapable of working. Have you planned for how you would replace them? Or have you failed to plan for this contingency? Successful planning for this contingency probably involves having written job descriptions for them. Job descriptions that they agree with.
Now let's look at supervising rather than doing. This is a management audit, focusing on management. Frequently we have promoted the person best at doing to supervisory or managerial function. Business owners have often followed the same path. So we need to be quite clearly focusing on people discharging their supervisory or managerial responsibilities. Does your organizational structure make that distinction?
No management audit would be complete without paying attention to you, the owner. Are you a micro manager who won't let people get on with their jobs? Are you constantly interfering, rather than evaluating people on results? Do you want people to do things exactly the way you would do them? Even if their way produces the same or better results? If you are, that may be one of the reasons you can't take long vacations.
Management compensation and reward are logical adjuncts to a management audit. However although they are closely related, they will be dealt with elsewhere.
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