Everyone knows that one of the first steps in building a house (after the plans and permits are taken care of) is to have the roofers on site to construct the roof and then the other trades build the rest of the house underneath it while it is suspended from cranes, right? Well of course, not, that would be crazy. The proper sequence is to dig a hole and the pour the foundation. The various trades work their way up from there and putting on the roof comes later. Only after the house is sealed to the elements do the crews with weather sensitive materials begin their work. You don’t start hanging drywall while the house is open or without a roof as rain would come in and damage the work. Further, I’ve never seen the drywall crew come in and finish before the electricians and plumbers have done their rough-in. Can you imagine a process where the drywall crew taped and finished their work, the painters primed and put on the final coat, and THEN the plumbers, electricians and HVAC (Heating, Ventilation & Air Conditioning) crews came in and started tearing some of it back out to run, wires, pipes and duct work? It would be a mess, take twice as long and cost three times as much (at least).
Constructing a house is a process. You build from the ground up and deal with foundational and structural issues first. Once the foundation and the outer structure are in place you can start to deal with infrastructure issues (plumbing, electrical, HVAC, and so on). Only after these are completed can one start actually dealing with finishes. They can be planned in advance; however, one cannot actually start working on them until necessary precedent steps are completed first.
This probably seems obvious to many of you. So why then do so many companies ignore foundational and infrastructure elements and focus on the finishes? Allow me to fill out my analogy just a bit more.
In a company, foundational elements would be the ERP (Enterprise Resource Management), GL (General Ledger), time reporting and other software packages on which the company operates. And, of course, the hardware would be part of the foundation as well. Above that would be the actual business rules and processes that make up the infrastructure. Finally, there are the reporting and statistics that leadership needs in order to drive the business forward and make strategic decisions. These would be analogous to finishes (the paint color, carpeting, light fixtures, etc.) in our house analogy.
Too often I see “management” (which is different from “leadership” – more about that in a future article) focusing on the end result (i.e., the finishes) with no attention to the foundational and infrastructure elements needed to get the job done. I once served a company running on such under powered hardware that the buying team had to wait until late afternoon on Monday to view reports in order to find out what happened over the weekend. It only took me $5,000 of hardware upgrades to fix the underlying problem. No one else had been willing to drill into the foundational issues that were the root cause.
I frequently see management frustrated by the lack of reporting but unwilling to understand and invest in the processes, procedures and software in order to accomplish their desired goals.
As I type this, I have a client working on replacing its entire operational infrastructure as they realize they have simply outgrown it. What worked for them at $10 million in sales and was becoming an issue at $20 million, just doesn’t work and is a hindrance (to put it mildly) at $30 million. They are dealing with the core issue.
Whenever you have “finish” issues, I suggest you focus first on the underlying foundation and infrastructure that are supposed to be enabling the end result. In my experience, that is where the issue typically lies.
If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to [email protected] The archive of these monthly newsletters is posted at the Resources section of homza.com
your cash is flowing. know where.®
Ken Homza
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