How To Use Small Business Value As The Ultimate Performance IndicatorWritten by David Coffman
Business performance measurement and management promote use of carefully selected key performance indicators to evaluate performance of a company, its management and employees. Management theory has long recognized that primary purpose of a company’s management is to maximize shareholder value. For large companies with stock that freely trades in public securities markets, this is a simple process of monitoring stock price. For small, private companies situation is quite different.Large, public companies have many stockholders that elect a board of directors, who in turn hire key executives. This separation of ownership from management does not exist in small, private businesses. Often these three groups (owners, directors and management) are comprised of exact same individuals. Small businesses become extensions of their owners in many ways including their objectives. Owners are typically more concerned about objectives like: minimizing taxes, maximizing personal income, maintaining personal lifestyles, minimizing assets held within business, and protecting personal assets. Pursuit of these objectives tends to minimize value of small businesses. Owners often are not very interested in value of their businesses until something happens that makes it important like a divorce or wanting to retire. Do small business owners really not care about business value? Or is it because they are not accustomed to having it available? Business valuations cost thousands of dollars, so small businesses can’t afford to get one on a regular basis. If it is not practical to measure something, it becomes unimportant. If value of small businesses were readily available, like public companies, then owners would become interested in it. Quite possibly they might shift their business objectives to maximize value. Those who have tried to monitor business value without paying for regular business valuations often used industry “rule of thumb” formulas. While formulas are easy to use they have some serious drawbacks. They are based on data of unknown quality and quantity. The formulas are expressed in ranges that produce widely varying values. They do not take into consideration unique facts and circumstances of each specific business.
| | Choices in Appointing International ManagersWritten by Brenda Townsend Hall
Globalization is requiring companies to make important choices about how to deploy international managers. The costs of making wrong choice are heavy both economically and in emotional and physical toll it can take on employees and impact it can have on overseas branch. Traditionally companies have required managers to accept foreign postings of, perhaps, several years’ duration. Such postings mean upheaval for manager’s entire family—schools, dual career issues, isolation—and these problems of adapting to different cultures are a common cause of failure of such postings. The burden on manager is heavy with double challenge of dealing with unfamiliar work patterns and anxiety about family’s ability to settle away from home. A compromise is for assignments to be shorter, no more than one year. Such postings permit greater choice for employee. The family may wish to come along but no long-term adaptation is required. Or family may stay behind and be content to visit, knowing that absence is not too long. This is clearly less disruptive for employee but means company has an additional burden of making new postings every year. More recently, we have seen emergence of international commuter, who ostensibly lives at home, but commutes every week or so to job abroad. This is less disruptive for families but is likely to lead to travel fatigue, even burnout for employee. A further option is for a key employee to make frequent trips to a foreign branch without actually relocating and doing so only when physical presence is a necessity—this choice is made easier by technologies that allow video meetings, telephone conferences, use of intranets and other means of real-time remote contact. A recent study by Cranfield Centre for Research into Management of Expatriation (CREME) found that organizations are increasing their use of all four types of handling international assignments. However, many questions remain about how companies can find best solutions for staffing overseas branches. Although more flexible working patterns have been sought because employees clearly have difficulty in dealing with long-term overseas postings, newer patterns are not themselves necessarily any easier to handle or more successful. The short-term assignment affects continuity of staffing and, in many cultures, frequent changes of manager are themselves a source of difficulty. The international commuter may cause local resentment by being seen as somebody imposed from outside who does not really wish to integrate with local operation. Similarly, frequent flyer will have less influence locally and is likely to find performance impaired both at home and abroad simply from strain of travel.
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