From a business perspective partnerships can work very well, but they are also often the cause of grief and strife. What makes the difference? Well, firstly the partners understanding`each other well enough to know what they agree on, where their objectives are similar, and where they differ.    Then the setting out of clear rules – the partnership agreement. The political signs have been fairly good in that before the partnership was formalised a lot of the issues had been nailed down, and presumably what desires each would have to forgo. How many business partnerships can claim the same? How often before the partnership is formalised have the parties fully understood what they each want and what compromises they are prepared to make.

We can see some of the advantages of a good partnership in the coalition. The extremes of both parties are moderated by the need for agreement. But of course that carries the corresponding threat that sometimes unhappy compromises might come into being which are neither one thing or the other, and meet no ones needs adequately. It is too early days to see whether this is the case, I think.

It of course helps if you and your partner have a lot in common. Well, on the political front, despite the very different natures of the parties, the two leaders are very similar – age, sex, family, education. But probably the greatest factor helping any partnership is a clear mutual self-interest. This is clearly the case with the Coalition: if Cameron had won a clear majority with all the unpopular decisions needing to be taken and almost half the House and half the voters very anti, he would probably have seen out a term but made his party unelectable for another 10 years; for Clegg the electorate showed that, despite the good media performance and high opinion polls, when it came to the crunch it did not translate into votes. By agreeing to join a Coalition, Clegg will have the opportunity of showing the Lib-Dems in government and making their party more electable for the future. Both had a lot to lose on their own.

So when evaluating a business partnership look very coolly to see that all parties have a clear need and are mutually dependent. If not, the chances of an early parting are substantial.

For the government, they will be doing well if they manage to stay together for a full term, and nobody expects that there would be a second coalition thereafter. Whereas you want your business partnership to last much longer. And over time needs change, so that it becomes more difficult to stay with all parties reasonably equally committed to the business and agreeing on the key objectives and ways forward. So always a difficult to decision to make.

But if you are in a partnership, regular reviews, planning together, reassessment of objectives becomes extremely important for the survival and prosperity of the business.

Small businesses usually lead the way out of recession – partly because they are more flexible and can react more quickly than large businesses – and we will be relying on them this time too. But what is leadership for a small business – and can a one-man band have leadership?

I think the answer is definitely ‘yes’.  As a business advisor, many of the start-up businesses I see come into this category, and quite often one of the biggest issues could be construed as lack of leadership. This is not because there is no-one to lead, but because they are not leading themselves!

John Adair’s Action-Centred Leadership model of three-overlapping circles – so familiar it is trademarked – looks at 3 areas of leadership focus: the task, the individual and the team. Even a one-man band is affected by two of these circles. The task includes identifying the aim and the vision for the business, developing  a plan including resources to achieve it (and many one-man bands have not effectively done any of this) and understanding and using the individual effectively (in the case of the one-man band, themselves). Again many small businesses do not understand themselves and what they are capable of. Then add the dimension of a few extra staff and the complexity is greater. And, because there are so few of them, they are often not treated as though they were part of a team.

Leadership is a complex topic and will certainly occupy a few more of these posts, but if you cannot lead yourself, you have very little chance of leading others. And the first step on leading yourself or others is to have a vision of where you are going. This is not simply the same as some objectives – it implies not just a target but also an understanding of what you bring that is special, and element of the how you are going to get, there as well as where you are aiming to get.

The how in this vision might be ethical standards and integrity or the highest pressure selling, subtle or blatant but it will represent what differentiates your business and makes you more effective for or with your clients. Have the vision clear and you have some reasonable chance of motivating yourself and your team to achieve.

As someone who advises start-up and small businesses, it is sometimes very difficult to get across the importance of being able to place your business in the context of the broad environment in which it exists. But this was a perfect example of why it is essential. Every business will be relying on generation X and Y users, and their heirs for their business at some time. So we DO need to take into account the macro trends in our markets as well as the immediate and obvious.

The strategic approach to this is through a PEST analysis – standing for:

P – political and regulatory issues

E – economic issues

S – social and environmental issues

T – technological issues and developments

Well the emerging technologies of the internet and the social media systems it hosts are clear examples  of how technology has changed and is changing our world and our businesses – if you are a conventional media business you will certainly be very aware of this. But the example of generation X and Y also indicates the way social changes are impacting: the technology is the enabler for what is a social change – a different way of using time, of communicating, of researching and gathering information, of having relationships with others.

Some businesses are switched on to every aspect of their broad environment, but for most the pressures of day-to-day mean that it is easy to overlook what is happening on the macro level. This is especially true for a small business where there may not appear to be “time to stop and stare”.

Part of the value of a formal planning process is that it directs your focus onto areas that can get overlooked – and despite the huge surge in the use of the social media by business,  there are still a massive number who are not even reasonably aware of how the shape and process of business is changing as a result of the technological and social changes that are taking place. Make sure you are not one of these.

Most importantly, to be aware. Be aware of the need to lead as well as to manage your business; be aware of the dynamics of the group and the potential (for good and ill) of the individuals in the business; be aware of the different management types and styles and therefore make conscious decisions on how to handle companies and individuals within them, whether they are your customers, your suppliers or your staff.

Be aware especially of your own style and, by being conscious of it, be prepared to adapt it when the time is right. I can remember at one stage being Sales & Marketing Director to a pretty fiery Managing Director. So he would usually be Mr Nasty and I was the one who poured oil on the troubled waters. Until an IT project with which he had been very deeply involved started to go wrong – quite badly wrong. He was not in a position to take his usual approach, and, as we discussed it, it was clear that in this instance I would have to be Mr Nasty, whilst he played the role of conciliator. And that worked very well.

Although, of course, I am too nice a guy to stay in that role for long!

So don’t sink under the theory, but do be aware of what the theory tells you, and therefore have a better understanding of what is really happening in and around your business and the options open to you to make the most of it.

 Leadership is about direction; in a business choosing an appropriate path in given circumstances and guiding the business along it. Management is about making the practical stuff happen, handling situations. Even a one-man band can have a problem of leadership if, as so often happens, the owner becomes so engrossed in managing that he ceases to have a direction. And of course, if the business involves any more than one person, the problems of leadership take on a whole new dimension of differing aims, aspirations, views of the world etc. (and sometimes it can be easier to lead 200 people than one person!)

So leadership is relevant, however large or small your business is. So let’s have a quick scan of theories. 

Originally there were the Great Man theories that leaders are born not made, and theorists studied their characteristics. This led to Traits Theories - that leadership can be defined by certain traits and skills – this had so many answers that it did not lead anywhere. These theories were about identifying leaders. But it encouraged the Behavioural Theorists (on the back of McGregor’s Theory X and Y see earlier blog). An example is Blake & Mouton’s Managerial Grid, which looks at the concern for people  and for output as the two axes on a grid where managers can be defined by their style. This raised the question of whether one style was more suited to a particular situation than another and led to Situational Theories so that by identifying the situation one could adopt an appropriate style. Then Transactional Theories look at how the leader and the group interact. Increasingly we have gone from identifying to learning how to.

Perhaps one of the most  influential of the theories has been John Adair’s Action-Centred Leadership model which looks at the leader’s role in three overlapping dimensions: achieving the task, building the group to deliver it, and supporting and developing individuals within the group. It is focused on skills which can be learned; a person can learn to be an effective leader.

We can look at this in the context of a small business such as a shop. The first leadership dimension is the task: probably initially a marketing one of deciding where the shop fits in the competitive environment, what image it needs to portray and what values it has. (In a large organisation this might be a team activity but most usually not in a small business). Without some vision of how the business should be and where it should go, there can be no leadership, as this implies direction.

The second leadership dimension is the team, getting the staff to buy into this overall concept of the business and where you are trying to go. Without the commitment of staff, you end up with a business that sends out mixed messages (The newsletter from the WOW Awards for customer service today gave the example of 2 uniformed staff from a health foods shop standing smoking outside the front door!).

The third leadership dimension is working with individuals to contribute as much as they are able, and at least as much as is required, to achieve the results you want. This might, for instance, involve developing one person into a supervisory role for when you are not there, or developing specific skills for certain tasks.

Where does leadership stop and management begin? Does it matter? But whether you employ people or are on your own, setting the direction and making sure the motivation is there is clearly separate from making it happen, and it is particularly crucial that managing the day-to-day does not happen instead of determining the course and ensuring the resources are there to reach the destination, but as well as.

Now this is a thory for management in large organisations, and many have interpreted it as suggesting a new style of management to be preferred over an old-fashioned rigid method. At this level it is not very interesting to small business perhaps. But McGregor’s own view was about making people aware of these styles in order to adapt their own behaviour. At this point it becomes much more relevant to small business.

First, what is your approach to management? It will probably be a mix depending on the circumstances but you will tend toward one or the other end of the spectrum. This will condition how you respond to others – and we may not be just thinking of staff here, but also customers and suppliers. And within those customers and suppliers, there will be similar issues, both as individuals and within their corporate culture.

Now in certain circumstances, getting a result requires precision and focus and does not allow much latitude for individual expression; but in other situations a very different approach will be more productive. For instance, organising a delivery for a client against a deadline may require primarily a strict adherence to process, which, if followed rigidly, will deliver the result. But handling a complaint about a missed delivery may be a very different matter.

At the customer level, they may feel comfort at a Thoery X approach to the management of shipping their product, which suggests clear rules, everyone told exactly what to do and expected to do it, but they would probably be less happy with that approach to their complaint: wait in the queue and you will be dealt with; here is the form to fill in etc. They are much more likely to respond to an attempt to understand what problem has been created for them and an exploration of what can now be done to create the best outcome in the circumstances (and that best outcome may not be obvious without understanding the client circumstances). So both styles have their place.

At an organisational level, a Theory X organisation will have very rigid rules on purchasing your product and if you try to circumvent the process you will lose the sale. Whilst in a Theory Y organisation, making the sale may require you to get various parties on board before anyone is ready to make the decision to buy. Mix up the two and you could lose both sales.

From a staff effectiveness point of view, there are times when you want to be Theory X: for instance, in health & safety issues the rules will be rigid; there will be serious penalties for not follwing them. But if the issue is how best to handle a piece of new business, then results are likely to be far better if all involved have been consulted, their issues taken into account and an agreed best process determined. Collaborative working will favour Theory Y approaches.

If your natural instincts are Theory X, then you will benefit from consciously modifying your approach when the result will be better from collaboration; similarly, it is no use taking a “what do you think?” approach when absolute adherence to process is required – it will confuse the message. By adapting appropriately to both situations you will send a clearer signal of what you want.

So by understanding both your own approach and that of your customers and suppliers, you can better achieve effective results. It was this that McGregor was seeking to achieve in defining and understanding these two contrasting modes.

The lowest layer is PHYSIOLOGICAL needs: to breathe, food, water, shelter, sleep, sex. When these are satisfied, the next motivational level is SECURITY whether that is personal safety, security of employment or health. Above this are SOCIAL needs, which are about belonging to a social unit or group: family, team etc. Above this are ESTEEM needs, which are about how the individual sees themself against their society and hence the view they believe society, their peers etc have of them - the need to be valued. And at the top of the hierarchy is SELF-ACTUALISATION, which is about self-fulfillment rather than the perception of others. This may come from the satisfaction of growing as a human being, in knowledge or wisdom or spiritual growth. It probably applies to only a few per cent of the population.

Some people have argued with the rigid concept of the hierarchy (if it were so, then no one would buy a fast car before they had full pension provision and that clearly is not the case!) but at the same time, you would not try to sell a drowning man a new car, so the hierarchy has some validity of precedence. Herzberg’s motivators and hygiene factors (see previous blogs) are based on the hierarchy.

Organisational thinking often looks at the hierarchy concept both from the point of view of staff and of customers. But what of the small business?

Well first look at your own motivation. Assuming you have a roof over your head, are you in business for security reasons (perhaps several times redundant and see this as a greater guarantee of future income) or for social reasons, to be part of the business community or your workplace team? Or for reasons of esteem, to be seen as the Managing Director, the leader of your own business, a pillar of the business community, or perhaps to earn lots of money and be visibly successful? Or are you one of the small group who find running a business a learning process, a source of personal development, and a great source of personal satisfaction in itself? Whichever is true for you, it is possible to see how, depending on your motivation, you would behave differently in certain circumstances.

And of course the same is true of your customers and your staff and all other stakeholders. For example, you may have a person marked out for a great promotion which will involve more responsibility, time and perhaps travel. But if that person is motivated more by the desire to spend time with family or perhaps sports commitments (social needs) than by money of status (self-esteem) then they are unlikley to respond in the way you would hope. And they may even then be tempted to move in if they believe that they are now poorly regarded by you.

So Maslow’s hierarchy can be used to focus on what motivates your clients (or at  least the majority or best ones) for your marketing, and what your key staff. It serves as a good discipline in both your marketing activities and personnel activities to do the appropriate research, because if you cannot answer that question, then you are going to be less effective than you could be – but it is often relatively easy to get feed back from customers and, in the case of small businesses, from individual staff to avoid getting it wrong. So what have you got to lose?

In this context it was interesting listening to the Chief Executive of Network Rail  on Radio 4 recently agreeing to forgo his bonus this year, but justifying the need to pay high bonuses to his staff, and presumably himself, on the grounds of the need to motivate. So has he not heard of Herzberg, or does he disagree with what is recognised as a generally validated motivational theory?

Of course, he may be working on an alternative theory that, although itself not a motivator, money in very large quantities (with a little natural greed thrown in) and associated with specific targets will focus an individual’s activities on those very specific targets at the expense of everything else. They will tend to get them achieved. However, the corrollary of this is that the overall responsibility of the job, the interests of all stakeholders, the long-term interests that should be the focus of all senior management, will be neglected in the interests of a few short-term goals. (Do I hear the words ’cause of the banking crisis’ whispered here?)

The fact is that these bonuses are nothing to do with motivation, but have become VERY expensive hygiene factors – no senior manager in a large corporation will consider himself valued if he does not have access to this ‘gravy-train’. And this culture has spread to the public sector, and is in danger of percolating further down- to the extent that a news bulletin recently reported a school Head as suspended for arranging to pay himself a bonus to which, of course, he had no entitlement. This could possibly be regarded as fraud.

This brings us to our MPs! Allegedly the activities of some amount to blatant fraud. Others are exploiting the letter but not the (written and instructed) spirit of the rules. But some have come out of this as incredibly moral people who have resisted the temptation spread before them. We should value these people dearly and not forget them in the focus on the worst.

I am disgusted as many are at what has happened, but also have some sympathy with them, working in a system which has been corrupted. Faced with the choice of keeping to the principles which they may have had, but at the expense of ‘losing out’ and being ‘taken for an idiot’ – they have compromised those principles and become lesser people – richer financially but poorer personally for it.

MPs have difficult job, but not one that carries individually a great deal of responsibility. But they tend to mix with the wealthy, the powerful and the highly paid. They can feel that they are undervalued by comparison, and is that a factor in the readiness of many to try to exploit the expenses system? Sometimes it is difficult to resist this insidious temptation. (By the way, why so much heartache over who should now ensure that the new rules are policed – what is wrong with HMRC which does the job for the rest of us?).

So what’s today’s lessons for small businesses?

1. Beware of setting up schemes which encourage corruption – if staff do not think they are treated fairly they can feel justified in helping themselves. 
2. Beware of the law of unintended consequences of any incentive scheme
3. Be aware of what hygiene factors you need to address to attract and keep good people but also be aware of what really motivates when you want to get your people working with you to achieve the best long-term result for your business
4. Be aware of your own motivation and how others and yourself can easily become poorer people in the pursuit of greater wealth! If you run a good business, hopefully the wealth will follow.

The premise states that factors which drive dissatisfaction are not that the same as - or opposite to – those that drive positive motivation. The ‘hygeine factors’ are about salary and work conditions, relationships of all sorts, status etc. But the motivators are about the satisfaction of work itself, recognition, achievement, responsibility and personal growth.

If the hygeine factors are not adequate, effort will be directed to trying to change this, but if these needs are met, this will not of itself generate any positive motivation; this comes from the higher factors. For some it is surprising that salary is not a positive motivator: how do we explain those enormous senior bonuses. Alfred Sloane at GM improved output figures by simply chalking numbers on the floor beside the production lines. The chalk meant recognition. Unfortunately for shareholders, taxpayers etc at the head of large organisations we have allowed it to be accepted that achievement is recognised by money. This was not the case as little as 30 years ago when senior managers did not generally get rewarded with astronomical salaries and the gap between top executive remuneration and the average employee was much smaller.

The implications of this for employers are clear: to keep your workforce happy and focussed you cannot ignore the hygeine factors. But once you have a good base, higher performance will not be delivered by more of the same. You need to move on to addressing the higher ambitions for advancement, responsibility, recognition, achievement and the satisfaction of a job well done. This can be an even more necessary process in a recession when it is more difficult to give recognition by financial means – and in truth this has often been a lazy response. To the extent that not paying an inflated salary is a dissatisfying hygeine factor not because of a restriction of the receiver’s lifestyle but because it implies lower status (See premiership football teams if you want to find obvious examples).

And for the one-man band? Well the same factors apply to your own motivation. You might be driven to slave at a boring function to make sure you can pay the mortgage, but once you are past the hygeine problems, what will raise the higher levels of performance? It will be achievement of goals, the recognition that comes with a successful business, and the pleasure of satisfied customers. So if you are running a business with a product or service that you believe in, you are likley to be more motivated and get more satisfaction than if your business has just become a chore to deliver the hygeine factors.

Money has tended to become the modern Western culture’s surrogate for the badge of achievement and to that extent it does motivate, but it is the achievement not the badge which is important. There are many more powerful motivators to performance so use them for your team and for yourself.

The matrix looks at the product and market growth options open to any business: these are to sell more of its existing products into existing markets (market penetration), to sell existing products into new markets (market development), to sell new products to existing markets (product development) and finally to sell new products into new markets (diversification).

As a business moves from market penetration into product and market development, the level of risk increases and is at its greatest when going furthest into the unknown – into diversification.

But surely all this is only relevant to corporates? Not so. Many small businesses seek to develop into new markets and new product areas before they have fully exploited their core market – sometimes before they have proved they can make a profit in the core business. And tough economic times sometimes encourage businesses to look into other products and markets. Of course, this can be a productive strategy, but it has a higher risk of failure than developing the core market – and it is likely to cost more, as penetrating new markets usually involves marketing expenditure, especially as the existing competitors in that market are likley to react to a new threat.

There is a tendency – at both small business and corporate level – to believe that ‘the grass is greener’ over the hill in that new market. But once there it often looks remarkably like the other side of the hill! And with the added disadvantage of being an outsider. Also whilst doing this, are you leaving gaps in your core market for a new competitor to enter? Ansoff understood the risk and also that such decisions were strategic and not short-term reponses to situations. Certainly for most businesses it is sensible to make sure that they are operating most effectively in the core market with existing products before pursuing any of the other options.

And as for diversification, the difficulty and risk is even greater to grow organically – and probably equally so by merger or acquisition. Small companies can grow in this way too, but the track record in corporate life is that most mergers or acquisitions do not achieve their objectives. For Ansoff synergy is the key where 1+1 = >2; thus merged sales forces may be able to maintain the same level of calling with smaller sales areas, less travelling and less sales numbers than separately: but will all the products get as much focus? This is where sometimes synergies exist in theory but prove elusive in practice.

Sometimes, if the core market is changing rapidly and there is no way forward for the business, diversification is the only way of surviving. And there are rewards to be achieved by diversification - but they are rarely as great as supposed and often the downside risk is very significant. So any such decisions require very careful analysis of both the potential reward and the potential risk.

But synergy can be sought in other ways without such large risks; for instance co-operative working with related companies. Tough times sometimes require drastic solutions, but often these are closer to home rather than in diversification. Look very carefully before you leap!