Managing a business and its operations requires clarity as to the difference between business activity (the reason for the business being in existence) and business administration (the functions required to maintain the existence of the business).
Below provides a useful analogy into the distinct elements that make a thriving business and how you have to achieve the right balance in time and resources in serving both of these elements.
We explore the difference between business activity and business administration and how you delegate your time and resources between the two.
The “business train” analogy
Imagine a freight train trundling down a track. The cargo on the train represents the activity of the business; the products or services: the reason for its existence. It is that thing you give to customers in return for money.
The train itself is the entity of the business that enables its cargo to move. Without the business train, the cargo would simply sit on the side of the track – going nowhere: doing nothing.
The train therefore represents the business structure and the functions and tasks required to maintain that structure: marketing (what cargo, what customers, what price, what destination, what message), getting sales, finding the right suppliers; accounting reports, paying people on time, getting paid on time, ensuring the business has enough cash to continue operating, legal requirements and regulations, finding and paying for premises, utilities, government requirements, tax, obligations to employees, obligations to the outside world, logistics, facilities such as machinery, equipment, tools and computers etc.
The track under the business train – reaching out onto the horizon, represents your business tactical plan. The track therefore dictates where the business train is going.
The stations down the track represent destinations on your business journey – key points of achievement recognised as crucial to the survival of your business: business objectives such as turnover, market share and profit: particularly profit.
The winding of the track through hills, over rivers and through towns represents your business strategy. Seeking the scenic views of realised opportunities, negotiating forecasted obstacles and reacting with intelligence to the unexpected is how strategy enables success. It is your negotiation with the outside world. It is what dictates your tactical plan.
For convenience and still using our business train analogy, let’s summarise these as:
- Activity – the cargo: the supply of a value to customers in return for money. The reason for the business.
- Functions – the train: the actions required in order to supply value and maintain the entity of the business.
- Strategy – the chosen route for the track: taking into account circumstances, requirements and expectations.
- Tactical Plan – the track: the reasoned and immediate direction of the business dictated by your chosen strategy.
- Review – the stations: measuring success to justify or amend the other four business elements of Activity, Functions, Tactical Plan and Strategy.
This runthecompany website deals with the Business Admin aspect of business and strives to provide information, insight and clarification so that you can spend a little more time on the cargo bit of your business.
In contrast, an entrepreneur would buy, sell and build numerous trains and networks: which means that Business Admin is much more the Business Activity of the true entrepreneur. An entrepreneur therefore ceases to be an entrepreneur if he or she spends most of their time making the cargo within individual trains.
Delegating yourself and the art of being productive where you don’t want to be.
Whether you are at the start-up stage of a business or a seasoned business owner, the balance of time and effort in servicing the above five components will play a crucial role in your success or failure.
Achieving a balance between time spent on business activity and business admin.
It is perfectly natural to focus on cargo. It you set up as a baker: then you must (or should) enjoy the process of baking – and not, while kneading the dough, gaze longingly at the PC, hankering for doing the bookkeeping. After all, if accounting turns you on then you would have trained and set up as a bookkeeper or accountant.
Nevertheless, every great recipe plays with the apparent conflicting tastes of sweet and sour and running an efficient and good business will depend on you also carrying out tasks that contrast and require different mindsets, skills and applications. And this is the challenge for anyone setting up or running a business.
As a general rule, if you are a very small business or sole trader then expect to spend 20% of your time on Business Admin and the other 80% on Business Activity. The 80/20 rule is a weird phenomenon of the universe and shows itself in many aspects of business. Being a self-correcting ratio, the 80/20 rule will therefore apply whether you work strictly from nine to five or every waking moment. In other words, the 80/20 rule will adjust no matter how many hours you put into the business.
Knowing this means you can schedule your week to allow for Business Admin. If you spend 10 hours each day baking bread and making cakes then know you must also spend another two hours a day on Business Admin.
The 80/20 is therefore a nice and simple little rule to help keep you roughly on track.
If you run a larger business where Business Activities are carried out by employees then achieving focus and balance within the processes of Business Admin presents different issues.
Achieving a balance between the various activities within business admin
What we know and what we are comfortable with can bias our decisions. This might unwittingly compromise the business; particularly when we have the privilege and advantage of authority and unchallenged choice.
There are many examples of businesses where the managing director spends a disproportionate amount of time on a particular aspect of the business: hours in production on the factory floor or in logistics inside the warehouse; micro managing every aspect of that part of the operation – all close up and personal. They will get their hands dirty, be physical and drive the forklift truck and lead from the front. This can be more commonly found in small and even medium size businesses.
This hands-on approach might appear admirable but where there is micro-focus on one area then there is blurred vision for everything else – and the rest of the business can be neglected.
This can be a particular problem in family owned businesses. The board of directors is often made up of family members and those of lesser influence and is not answerable to a distinct and separate body of shareholders. This intrinsic culture then evolves into its own particular form of reality. Priorities are then perceived from the perspective of that reality.
Business owners or CEOs that are trained accountants will tend to focus on the books; while owners that are engineers are known to drift into workshops.
When it comes to budget and resource allocations, some will favour those functions within businesses they know well or have been trained in. The MD that has a background in the cost-driven logic of operations is less likely to appreciate the creative and perceptibly subjective lateral thinking required for marketing and might assume or not even consider the fairy dust that makes the phones ring in the sales office.
Being a 360 CEO or MD that wisely moves all the chess pieces around the board to maximum effect therefore requires at least an appreciation of those other functions that have not been directly part of that individual’s training or life experience.
It is therefore important to understand that being a CEO, MD or owner of a business that is large enough to employ business function employees requires a distinct skill set and attitude that is likely to have been compromised by that part of your career before you became the person in charge.
Trust is therefore a crucial ingredient in achieving balance. You should surround yourself with people of ability whom you can allow to focus and make decisions within each function. As the business owner or the person in charge, you then set the objectives of each function, orchestrate their interaction and review performances. If your team is not good, then improve or change it.
Good management means resisting those pressures that strive for chaos
Whether your business is a start up or a large international business, being in charge requires the discipline of knowing that a happy family means feeding all of the kids. Your time will always be in demand and there will be internal and external people that will demand your time, attention and effort disproportionately given the overall reality of your business requirements.
Individuals seeking your attention can only perceive their particular circumstance and are therefore unlikely to not comprehend the overview picture. Returning to our business train analogy, there will be people that are employed to be only concerned with changing the railway points or keeping the railway station in good order. These are all important jobs but you are responsible for all of the parts that enable the train to carry its cargo and reach its destination.