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December 2017
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The Missing Link
By Dr. Rick Johnson
Dr. Rick Johnson, founder of CEO Strategist.
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Dr. Rick Johnson, founder of CEO Strategist.

Before you can solve problems, you must first accurately diagnose them. It’s often easy to recognize that a problem exists, but it’s much more difficult to put your finger exactly on its cause. 

As executives, we have tools that help us monitor performance. The most basic of these tools is the profit and loss statement. It tells us how much gross profit we are making, what our expenses are and what our net profit is. We can use this tool to calculate various financial analyses, from quick ratios to GMROI (gross margin return on inventory). Other tools include the PAR report, or something similar which compares our company performance to other companies in our industry. Using this tool, we can set benchmarks for our company and compare ourselves to the highest performers. These tools, in addition to many other preferential key indicators that we may individually follow, are all available. We just need to use them. Yet, we still have a difficult time pinpointing problems and performance issues that may hinder our success. Why is problem definition and resolution so frustrating?

The Answer is Simple

The answer is diagnostics! If you have made it to the executive management level of your company, you have obviously demonstrated success. So, it’s not incompetence that clouds the issues. Instead, it’s usually that we get so caught up in the day to day activity of running our business, so caught up in the emotional investment in our employees, so caught up in our vision for growth or defending our competitive position, and so caught up in our self-proclaimed answers to the perceived constraints that we can’t see the “forest for the trees.”

As successful executives, you deal with the urgency of running a company on a day-to-day basis. The very practices and characteristics that help you accomplish this may hinder your ability to see the whole picture with a fresh, open mind. Therefore, this diminishes your diagnostic skills.

An assessment by an outside pair of eyes with in-depth industry experience can provide tremendous return by helping identify the most serious challenges you face. It’s all about knowing what your true critical constraints are and then focusing your efforts to solve these real problems.

Examples of issues that are easy to misdiagnose include:

• We may believe we have a sales compensation problem. In fact, the real problem may be due to sales management, a training issue, or recruitment and retention.

• We may believe stagnant growth is due to either diminished support on the part of our vendors, poor sales management, a lack of enthusiasm, or even poor marketing. However, in reality, it may simply be a lack of accountability.

• We may believe we have an organizational development problem, when in fact it should be labeled as a “family in the business” problem.

• We may believe our problems are due to weak channel management, when in fact they may solely rest on our lack of competitive advantage. 

Let’s Talk Assessment

It's almost like going to the doctor for an annual physical. Generally a company is showing symptoms but may not see the entire problem or understand its cause. A doctor provides a diagnosis for his patient; likewise, a trained, objective business expert does the same for the company. An assessment from an outsider’s perspective allows for total objectivity. Using a proven industry expert is also obviously critical. The result is an often surprising clarity to a company’s issues and problem causes. One of our past clients, from a million electrical distributor said, “It’s like taking a punch in the gut, but it will open your eyes to reality.” It’s important that the expert assessment is performed by someone who is honest, but not necessarily nice. This means they won’t sugar coat the issues.

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