In this episode, we will take a deep dive into how to build a capacity and capability plan for your business.
Business Improvement is at the core of this process and it covers business management and communication training programs for employees.
There is a simple 30-day plan to improve your capacity using the Pareto 80/20 model and matching that with a 30-day plan to start the capability through the use of emotional intelligence.
You’ll also have a framework to build out a long-term strategy that is designed to meet your overall goals and objectives.
Stephen Sandor CEO of Inspiring Business
Inspiring Business website - www.inspiringbusiness.net
Book an Exploration Call here - https://ib30explore.youcanbook.me
And finally, in a look at capacity before capability, there's no point in building people's capabilities up in an area that is not required by the organization. So I always talk about capability, supports capacity determine the capacity first to achieve your objectives, and then look at building a culture within the organization that supports that don't get caught in the headlights. Lack of strategy and planning creates fear. I've given you a 30 day capacity triage plan. I've given you a 30 day capability, basic strategy. Do the math in the longer term approach to your capacity planning, and build a culture that is supporting of that strategy. Welcome to the Inspiring Business Podcast, where we hope to inspire you, the business owner, and provide you with information, knowledge, and tools that will help you create a business that is scalable and ultimately independent of your daily involvement. My name's Steve Sandor and I'm your host today of the fifth episode of the Lazy Entrepreneur Series. And this is where I walk you through the Scale to Success Solution, and this week we are going to be covering one of the areas in people, which is capability and capacity building. And I'll be dropping in a few strategies that I'm sure you'll be able to apply at least over the next 30 days and also looking at how you might develop a longer term strategy for your business. One of the things that we spoke about last week was, attracting good people to your business and then holding onto them and we talked about the, big resignation, but there are other challenges in the market at, the moment as well. So obviously there's a noisy marketplace. If you're anywhere near social media, you'll know that there's a clamoring of people across all the platforms and and if, that's a part of your marketing strategy, then it's getting harder and harder to do that. On a global level we we've got the pressures of the war and global warming and the impact that's having on energy prices. Logistics are becoming a, major factor internationally and domestic. Obviously that's having some impact on expenses going up, and we've got interest rates and wage escalations here in Australia potentially looming. So not a great, environment to be running a business. And all of these factors put a lot of pressure on the owner and their employees to get more things done with less resources and then obviously that has an impact on how the business functions. So the typical response is to cut your, costs but the other option is to look at how do you go about increasing your revenue and there's a combination of that, and it obviously depends on the circumstances that you are in. But I think the pandemic taught us something when it first hit in early 2020, a lot of people were deer in the headlights. And it was those people who identified really quickly what the opportunities were they thought about it and they developed a strategy and then doubled down on that strategy they are the ones who came out of the back end of the pandemic relatively unscathed. So that's what I'm suggesting here there's there's never a bad time to do, to put a strategy or a plan together. And so one of the things that I'm looking at in terms of helping you with capacity and capability planning is to give you something that you might be able to operate within the next 30 days. So put some really simple things in place. Longer term, looking at a framework that will help you to be more strategic in your planning and it will depend on what stage or and size of your business and then looking at how you go about building a communication platform within your organization because one of the things that I've noticed in organizations that are not functioning as well as they could be is it's typically the culture or the communication internally. So it's a good business, but they just need a little bit of support around how they communicate and converse with each other. So let's take a deep dive into capability and capacity, and the extent to which you spend time on a capability and capacity plan is very much dependent on the size of the business and where you are at in the satisfaction level. In week one we looked at what was your satisfaction levels in each of the functional areas and if people is relatively low then you, this is something that is obviously an issue, But if your biggest concerns at the moment are sales or revenue, then okay, it's great to have a capacity and capability plan in place, but if you don't have anything to, put out the front door because the sales aren't coming in, then there's no point in having a beautifully designed capability and capacity strategy when sales are not coming in. So focus on what is important. And as you develop the business, it becomes obvious when you need to Implement a capacity or capability strategy. However, there are three broad areas of why you would build a capacity plan. So it depends on your overall strategic objective what approach you take. So you may be looking at growth opportunities. You may be looking at the status quo or potentially even stabilizing the situation that you're in now, or you may be rationalizing, which means that you are looking for maybe more profits more time or potentially an exit strategy. And so that's why I created the Scale to Success Solution to provide you with a strategy or a strategic roadmap and an implementation strategy to make sure that you're doing the right things at the right time. Okay, so let's look at defining capacity and capability as a start starting point. So capacity is really simple. It's a balance of available resources and the anticipated demand no more difficult than that capability is what's needed to deliver that outcome. And so if there are any deficiencies in that area, reduces the ability of business or your business to be able to satisfy your client's needs. So at the end of the day, what you are trying to do is you're trying to create a business that is able to deal with the sales funnel and the operations and deliver the client, the right product with high quality at the right time and be able to bank the profits as a result of and although we're not looking at the marketing and sales strategies, these obviously have an impact into what feeds into your models. So when I look at capability and capacity planning, I put them into two broad buckets. And the, I call them forecasting and responsive, and they have their own application and dependent on the stage or cycle of your business will depend on which one is more appropriate for you. And over time one is more agile and one is more structured. The forecasting model is more suited towards larger organizations that have either probably product rather than service and so they're looking at holding stock potentially project based businesses. Large consulting firms, for example, would work on projects and they would need to look at their capacity based on what's in the pipeline. Construction is another an industry that would use some sort of forecasting, modeling for their capacity and capability planning. Both the responsive and forecasting models use transactional and predictive internal processes. So you're looking at what, pipelines do you have and how quickly are they flowing through? And how quickly do you need to be able to respond to those? Forecasting is, tends to be in a more stable market with incremental growth, not always and where you are looking at holding stock, for example so you might be a, you might take a forecasting type of model to capability and capacity and what you have are clients who are more responsive in their approach and so therefore they're relying on you to hold the stock. To give you a, really basic example. So in the responsive area, it's more about the way I look at it, it's more about the smaller businesses or those that are service based businesses like accounting, trades people, consulting businesses I mentioned tr transactional and predictive internal processes to help you to do your planning and where your marketing strategy is around turning a tap on or off so you may have a social media strategy or some sort of advertising strategy where you are looking at bringing in clients based on a that sort of marketing activity. And you, need to be able to turn your capability and capacity taps on and off or at least be able to have some predictability around that. And the hybrid model is particularly if you're in that growth phase you might be moving from, or a combination of both responsive and forecasting. So I'm gonna focus on the responsive model, through the rest of this podcast because obviously my client base is more in that smaller 10 to 50 employees around that stage. They're a little bit more agile and so obviously what I'm talking about here is more relevant to that, but, It doesn't mean that you can't have this within a larger organization maybe a smaller department or division within a large organization can be a little bit more responsive in their capacity and capability planning whereas the larger the global organization might have more forecasting, type modeling at at its core. So what do you need? You need a structured flexibility. So what do I mean by that? You need to have the framework in place so it can't be loose, but it needs to be designed in such a way that it enables you to be flexible. And you've heard me talk about this before. The job description gives people an opportunity to work within a framework and what, And because that framework is there, they know what sandpit they're working in and they can, work independently within, inside that sandpit. If they go outside that sandpit, then obviously there needs to be some structure around that. And so that's why I'm calling it structured flexibility. The other area is the systems and processes. Now again, these need to have some structure around it, and if they're regular transactions or regular processes that happen on a regular basis then obviously they need to have the systems and processes designed and the SOPs to help guide people, particularly with onboarding but it also needs to have some flexibility and I would suggest that you review the, SOP's on a regular basis, maybe every six or 12 months, just to make sure they're relevant to the situation that you're in at the moment. And, if they're not the use the, participative approach. So rather than having or believing that you have all of the answers, include your team into working those problems out not being as autocratic in the way that you Developing the capacity plan. There also needs to be transparent communications. Now, this is regardless of the type of organization that you have, but particularly with smaller groups the open and honest conversation works far greater than having silos within the organization and then building cross-functional capability because of the size of the business sometimes you don't have the luxury of having a whole bunch of people to call upon, so you need to be able to have a cross-functional capability within the organization. Now, the risks of not having a strategy in place is that you probably experiencing some of this now under-resourced and struggling to deliver. There's a constant pressure on the organization. Potentially over promising and underdelivering to meet the revenue targets, for example, the quality is suffering due to either the pressure that's being placed on the individuals or the lack of skill within the organization, and it typically overextends management so that they tend to be having to spend more time in the doing part rather than in the strategy part. So the value of having a res in this particular case, a responsive strategy, is that it enables you change the processes to suit the situation. So being more agile. So when you're thinking strategically, you're looking into the future and, planning for that but planning flexibility into your strategy is really important, particularly if you are in that growing phase. It helps with the ongoing process improvement. It builds high employee engagement. And, that's critical for a small business. And if you design it correctly from the start, what you can actually do is you can build in scalability and with the potential of thinking about having a different forecasting model type as, you get larger. So how are we going to tackle the pressure that you're currently under and take some steps towards building the appropriate level of capability and capacity within your organization. I'm gonna give you what might seem to be a relatively simple or simplistic approach. Trust me, I've used this on many occasions and it's used by many professionals around the world. It's called the Pareto model. It's the 80 20 rule, and I'm going to look at using it in terms of capacity in this situation and we're going to be using the revenue based on the number of customers that you have. So you'll need to have at least some mechanism to be able to pull these numbers out. Maybe it's your financial model, maybe you've got a CRM that collects this information. Maybe they're all on spreadsheets, but the example is really simple. So basically over the next 30 days, what I would like you to consider, let's assume that you've got a million dollars worth of revenue and you've got a hundred customers just to make the maths easy. So if we break that down 80, 20, so of the million, you would have 20 customers generating $800,000 worth of revenue. Now there have been very few businesses that I've actually gone into and done this work and been able to disprove this model so have a look at the revenue that you have, the number of customers and the revenue that each customer brings in the top 20 will bring in, or the top 20% will bring in approximately 80% of your total revenue. Might not be exactly 80%, might be 70%, might be 90% but it'll be in that, it'll be in that vicinity. And the remaining, obviously in this case, the 200,000 is represented by 80 businesses. So what we're gonna do now is we're gonna take that 800,000, so the 20% and or 80% of the revenue and we're gonna break that down as well. We're gonna break that down into 80 20. So what you end up with is of the 20 businesses 20% of those, or four of those are going to represent approximately $640,000 worth of revenue, and the remaining 16 businesses will represent the balance, the 20, the 20%. So you've got four A customer doing 640,000, you've got 16 B customers doing 160,000 and you've got 80 C customers doing 200,000. So that basically breaks up the numbers for you. That's the objective part of the exercise. We're now going to look at the subjective exercise. So you will have some now unless you've got some workforce planning modeling, so that you can measure the amount of time that each individual is working on that and that would be a more in depth deep dive over a longer period of time but what we're trying to do is we're trying to give you over the next 30 days, what can you do to fix a capacity problem that you might have. So if you are not achieving the results that you think you should be achieving so what I'm talking about here is of the A, B and C customers, which one of those do you feel you're not delivering the appropriate outcomes? So you might have, you might go all of them we're not delivering on all of them. Okay which is the worst of all of them. And I would say that you would have a inkling of what that would look like because you'd be getting phone calls from customers complaining about the level of service or the quality of service you might be having cash flow issues because you're not able to get the product out the door yet you are paying for the delivery of the product so there's a time lag there. And that might be capability of the people delivering. It might be the processes, but you're not trying to solve all the problems. What you're trying to do is you're trying to identify one major area within your client base that is not being serviced correctly. And over the next 30 days, your job is to dig really deep into that and identify what that problem is. It may be that you ring half a dozen of your customers and get their feedback on what they see has changed in your organization. Go and talk with your staff who are meant to be delivering this. Have a look at the systems and processes that are in place to support this and then what you'll be able to do is you'll be able to really clearly see where the problem is and you'll be able to make, take some steps to rectify those problems. So it's a triage, right? You're not solving all of the problems. It might be one person needs a little bit of skills training. It might be you need to shift to people a couple of people around within the organization. Might be you need to turn a tap off to give everybody some breathing space. You've been running your business for a long enough you, will know what the problem is. This is just a mechanism for you to really focus in on that particular issue. This assumes that in your assessment of your business, when you've looked at capacity and capability in the I'm satisfied that this is relatively low, so obviously you are wanting to be able to address this in a relatively short period of time. What we're looking at in terms of longer term is looking at how you go about putting together a strategy and a plan around a broader delivery of capability and capacity. There's four basic areas in terms of pulling the strategy together. And it's a combination of, any or all of these as we dig into the operations of the business. So we're looking at budget versus actual workforce assessment. So for example, if you, in your pricing, you've decided that it's gonna take four hours for an individual to do that's what you've budgeted on. What are they actually doing? Are they doing it in two or are they doing it in 10? And so what you can then start to look at, you dig deeper into each one of those areas and what you're looking for is the inconsistency, where's the delta be in that? So what you budgeted and what you're actually spending in delivering that, you really want to get your heads around that. And I'm talking about frontline workers here, not so much the support people who are doing the the finance and the HR and all of those things. We'll, get to those, but this is the revenue part this is we really wanna make sure that our profit our revenue is high. And our pro expenses, although so our profits can be high. It may be that you've got product issues, the, a legacy you might have a range of legacy products, things that you've done in the past and they're just sitting on the shelf. I know when I went to Papua New Guinea, the training business, we had something like 40 or 50 products that we were marketing on a monthly basis and these were things like Excel training programs and word training and project management training and we were a HR company. We just happened to have a training business and people would approach us and ask us could we run a program for 'em? And because they trusted and liked us, we, we went, Yep, sure, not a problem. They paid the fee and then all of a sudden it became a product that we had and, we were looking at continuing that. And so what we did was we rationalized all of that. We said, Okay, what are we really good at? We're really good at and training people, training HR people. We are really good at occupational health and safety, and we have good trainers in that particular area and we wanted to get involved into the leadership and management area so we then we, looked at developing those products for that particular client base. Everything else we let go. We, just basically, we stopped advertising, we stopped telling people that we could do it and enabled us to be very focused on what we were trying to do. And we were able to rationalize our, processes as a result, we were able to provide a better quality service and we were actually, we increased our pricing model as well. The third part is looking at the type of clients that you have or the position that you have in the marketplace and I know that a lot of organizations over time, what they've done is they've taken on clients because they have had to and really what through this process, what you're looking for are the difficult clients that you're just not making money on because they're either too demanding, they're not pre prepared to pay you what you deserve for the value that you're giving. So there may be over a period of time looking at restructuring the offer that you have and having them self select and cleaning out the cupboard bit like the product side of things, just cleaning out the cupboard of the clients not that you don't want, but they don't value you and it's not, it's just not sustainable. And then the final piece is looking at the systems and processes that you have and if you're a growing small organization, what you've done is you've accumulated systems over the, over a period of time. You might have started with my OB and then you've moved to zero, You might have started with spreadsheets, and now you're working in some sort of crm. There's a lot of there's a lot of legacy systems that ha was suited you at a particular time the biggest issue I see with systems with my client base is that they've accumulated lots and lots of systems and processes at the time, but they don't necessarily suit the organization as it stands now. So there might be some legacy systems there that we need to look at. There may be some, just some upgrades of what they currently have or potentially a reassessment of everything that they have to enable them to scale to the next level. It's okay if you're not growing and, that's whatever you have in place at the moment is serving you and that's okay but if you are looking at scaling, then potentially what you may need to do is rationalize these or integrate them so that there is no duplication, or in fact, have a look at a whole brand new system. Now that's a huge investment and you wanna make sure that you don't go down that track without giving it some thought. So it's not something that you would do tomorrow, but it's, you need to consider it as a part of a strategy. So capacity for me is all about numbers. Making sure that you are dealing with the, revenue the, time it takes, basically the numbers. And that's what capacity planning has at its core. Capability planning is a little bit more subjective because you're actually, I think to have a, an a really valuable capability plan in place it means that you're trying to build people up make their job enjoyable. Which brings me to my my chest, my old chestnut that I keep bringing out, which is the job description. So if you are looking at building workforce capability or putting a basic plan in place, then job descriptions are at the core of that. Now we've, talked about job descriptions previously, the two parts within a job description in terms of capability. I'm going to talk about technical and social. So technical lot of people use hard and soft and I . that's been misinterpreted over time, and I think the narrative is changing. Soft indicates that it's weak. It's not. But I'm, thinking to change the narrative so that we can give it more pointed descriptions. So the technical skills, they're more objective and the social skills are more subjective. So when you're looking at a, the technical requirements of a job, so you've spelled those out in the job descriptions, it's really clear what skills they need to be able to do that job effectively. So one of the first things you could do without going and doing too much, and so again, this is the sort of the 30 day model is get people to do a self assessment on the skills that they have relating to their job, have their peers give an assessment that this is a qualitative assessment of their skills. And then the management can do also a qualitative assessment. It's not a 360 degree, it's just a this is where I think you're at. Then what you can do is you can do a guided learning assessment so put 'em through a a test that determines how well they are matched to their own self assessment. And then what you can also introduce is on the job training. So then what you can do is you can build out that type of model over a relatively short period of time and I'll talk a little bit, I'll give you a couple of tips about how you might be able to do that. The capability plan in terms of the social skills? In the job description, I've put needs to be able to communicate effectively. what does that mean? Communicate effectively. So it be, it becomes a very subjective situation. It's very hard to measure those in terms of KPIs because they are subjective. So I look at it as more about, it's a cultural thing within the organization that we are trying to create and emotional intelligence or self-awareness within the organization and that takes a little bit of time. It takes a little bit of leadership as well in that. So we're looking at self-management, social awareness, relationship management, and these are all of the characteristics of a emotionally intelligence individual or organization. And we spoke about this last week in the collective awareness of, the organization or heading all to, all heading together in the same direction. And so there needs a, I think the, a simple way to get that moving really quickly is to find a common communication framework or a common language that you can all use. And there's a number of models that I use So when they're having a conversation, they can give it a label that this is a coaching conversation or this is a training conversation, or this is a A disciplinary conversation so that you can give it context and, there's a language that you use within each of those. Either you are asking questions or you are telling, but it builds a culture within the organization that enables you to have difficult conversations when you need to have 'em. And that's really at the core of what we're talking about here. Then you can build on that platform. You can then build things like negotiating skills and conflict management and leadership and delegation. And these become more technical versions of the social skill levels that you need. So I promised you that I'd give you a 30 day strategy for capability as well as capacity. This is couple of really simple things that you could do over the next 30 days to at least start the conversation around the collaboration within the organization to, be able to support each other and we're gonna use capability as a part of that conversation. So you might have somebody who's really, good at something and they're known as the per the go-to person for this. And a lot of, times we talk about work on your weaknesses but I, think one of the things in terms of capability you could have some people who are classified as subject matter experts within, your organization. And so what you can do is you can give them 30 minutes a day to become the expert in that particular area. So given 30 minutes that they can go off and study. So these are not, you're not working on your weaknesses you're working actually on improving your strengths. Second part is if you've done a self assessment and you realize that the level of skills that you need to be able to do the work that you're doing, you're not quite there yet, then what you can do is you can pair up the subject matter expert with that person and buddy them up and so one becomes a mentor to the other. You start to build a bond within the organization. If you don't have that subject matter expert and you have two people who are working towards their becoming capable in that particular area, then what you could do is you could buddy them up. So give the 30 minutes to study that subject on a daily basis and then give them the ability to support each other as they learn that particular subject. The final one is that to use the toolbox and huddle meetings for education. And so what I'm a great fan of the toolbox meeting a meeting on a daily basis for five or 10 minutes just to talk about what we are doing, where we're up to as a leader or a supervisor of a particular group you actually get a sense of how people are performing. If they're still working on the same project that should have been done three or four days ago, you can then identify that as potential that they've got either a capacity issue or they've got a capability issue. And then what you are trying to do is you're trying to help and support them. You want, you don't want them coming to you the day that they're meant to produce the report or produce the output and say that they dunno what they're doing. You want to be picking that much earlier in the conversation. But in terms of the toolbox huddle, what you or toolbox meeting or the huddle, what you could do is you could ask somebody on a weekly basis to talk about what it is that something that they've learned over the last week and educate the rest of the group. Now, if you are spending time with your people you'll, have know that they you there'll be something that they'll have picked up or they'll talk about that is relevant to everyone in the organization. And you might ask them to it's called voluntold. Ask them if they wouldn't mind sharing that with the group. Obviously you can't force anybody to do. But I think most people if they if they've been able to achieve something throughout the day they, honestly they, really wanna share it. And so give 'em the opportunity to do that. And as you go about working through this whole process of building cap capability and capacity, the long term strategy is really, you are at the forefront of that. Most times the business owner has got the highest level of capability because of the the history that you have and the expertise that you have and become the champion of your organization in this endeavor. You can build an internal on the job training program and that sort of leads in from the previous conversation or the previous point that I was making in terms of having people with subject matter experts within your organization. I would suggest that you conduct regular skill gaps analysis might be once every 12 months just to make sure that people are using the, or at least they're keeping up with the skills that they need. I know that I'm pretty proficient at Excel, but there are times when I just haven't used something for, I haven't had to use a, particular formula or a particular look up strategy or pivot table strategy and and I, actually have to go and refresh myself. Again, the, there may be assuming people have got the, skill levels, but this is an opportunity for you to, just check in with them to make sure that they actually have got the appropriate skills to do the job that they've been asked to do. And finally, in a look at capacity before capability, there's no point in building people's capabilities up in an area that is not required by the organization. So I always talk about capability, supports capacity determine the capacity first to achieve your objectives, and then look at building a culture within the organization that supports that don't get caught in the headlights. Lack of strategy and planning creates fear. I've given you a 30 day capacity triage plan. I've given you a 30 day capability, basic strategy. Do the math in the longer term approach to your capacity planning, and build a culture that is supporting of that strategy. So we've included week five of the scale to success solution, Lazy Entrepreneurs so I hope you got some value from today's session. It again, I just wanna reinforce that if you are not struggling with the output delivery of, the product that you are or service that you're delivering and you're doing it reasonably efficiently and you've got good profits, then This is obviously important, but it's of a low urgency, so you don't really need to focus on it. But if, your phones are ringing continually about customers complaining or you are looking at your financials and there's the profit's just not there, then potentially it might not be a financial issue it actually might be a capability and capacity issue. And so that's why I created the Scale to Success solution, to be able to help business owners work their way through that and that's why I created this series of podcasts to help you become that lazy entrepreneur so that you, are comfortable and confident in what you're doing in your business, and that you are you, have fun coming to work. And as I've said in previous episodes, my mission is to create an environments where business owners are being provided with better advice, the right advice at the right time. And my vision is to enable business owners to have fun at work. So if you think the scale to success solution might add some value to your business and you're not sure what I'm offering is an exploration call. Just give me a call. We'll take you through it. I'm even happy to send you an electronic version of the questionnaire and you can fill that in, or a pdf version of it's for you to fill it in yourself and identify that I'm giving this away, right? I wanna make sure that you absolutely get as much possible value from this interaction that I have with you. But any interaction that you have with any advisor so that you are actually building up your own knowledge base because that's the one area that I feel that is potentially lacking. It's not that you're not running a good business, but like me sometimes there were just questions that I don't know the answer to because I've never been in that situation before. And so it's knowing the right questions to. Next week we'll be talking about financial modeling. It'll, it won't be an accounting conversation. It'll be about what, where to look, the numbers and particularly around the revenue part. As more so than the expenses part cause that's my area of expertise. I've had years and years of, experience and the front end, the sales, not so much the marketing, but the sales and looking at those, how you predict the numbers, and then what impact that has on the financial the viability of the business. As I said, I've created the scale to success solution as a simple application of systems and processes and the development of your people to be able to do the things that they've been employed to do so you can continue to do the things that you love and be with the ones that you love. As always, I appreciate you for listening, and I hope the information that I've shared with you today is useful and adds value to your business, and that you are inspired and energized to make a difference in your and others' lives.