LEADING WAYS NEWSLETTER # 48

LEADING WAYS # 48
STRESS TESTING - Proven Concept or Fad?

Speaker Tip of the Month

MEMORABLE PRESENTERS have "unreasonable friends" to help them improve their presentations.

We all know what we did well, typically from the reaction of the audience.
Many times we do not need to see the evaluation forms.
But your unreasonable friends will help you improve areas of your presentation, so that your next is even more Powerful.
[often your audience won’t]

On to Stress Testing:

"The stress test will apparently involve running hypothetical economic shocks through models to see how well the banks' balance sheets hold up."

Yes, you are right…. A new label for testing your assumptions or playing out "What if" scenarios. But perhaps it is a timely reminder on stress testing your business plan assumptions.

Stress tests are usually spread-sheet or computer generated, where you run a variety of future scenarios. They focus on Cashflow and Profit Plans, together with a Risk Management Plan (the subject of the next Leading Ways). For me, stress tests are at three levels ::

- Baseline - What I realistically think will occur.

- Worst Case - What the worst case result could possibly be. e.g., a 22% decline in revenues.

- Target – an optimistic forecast with a "stretch component."
The outcome of those stress tests should be to determine how much time, capital and expertise will be needed to achieve the desired result.

Forecasting for Growth - Your Target Stress Test

To be effective as a leader, we all should be developing skills in strategic thinking. It is about learning how to make your business vision a reality by developing in areas of team work, problem solving, and critical thinking.

This kind of thinking requires you to lead change, plan for and make transitions, and see new possibilities and opportunities.

Strategic thinking requires you to visualize what you want the outcome to be for your business, and then working backwards in order to develop your story. A believable story to excite your people; and a roadmap for reaching your business vision.

Focus on ::
Organization - The organizational structure of your business, and the resources needed to make it all work. What will your organization look like? What type of structure will support your vision? How will you combine people, resources, and culture to achieve your ideal outcome [your target or optimistic forecast]?

Observation - Some call it the helicopter view. You can see much more from above, rather than when you are on the ground. Strategic thinking is much the same in that it allows you to see things from "higher up, rather than being buried in the business."

From this view of things you will be more aware of what motivates people, how to solve problems more effectively, and how to distinguish between alternatives. Clarity of focus towards your target forecast, or increasing the probability that you will at least achieve the baseline.

Views - Here you can take into account four viewpoints. The environment and business climate; the marketplace; the project view; and the benchmarking perspective. These four perspectives can help you think about outcomes, and adjust your actions to achieve your ideal position.

Driving or Braking Forces - What are the driving forces that will make your ideal outcome a reality, or hinder your progress? Driving and braking forces are the foundation for what you want people to focus on in your business.
These forces may include: individual and organizational incentives; empowerment and goal alignment; qualitative factors such as a defined vision, values, and goals; productive factors like a mission or function; and quantitative factors such as results.

Ideal Position - Having worked through the information, you should be able to better define your ideal position.

The niche in the marketplace that your business will fill; opportunities that may exist either currently or in the future for your business; the core competencies or skills required by the people in your business; and the strategies and tactics you will use to pull it all together.

In working through these five areas, you will begin to get a clearer picture of exactly how your business vision can be accomplished. As your vision becomes more focused, your ideas will appear stronger and more credible.

By making a concerted effort to strategic thinking skills and applying them to your organization you will have a much better chance of making your target or optimistic forecast a reality.

Now you can tell stories about the future of your organization in order to excite and motivate your people.

Through the visioning and stress-testing process it is less likely that your "worst case" stress test will ever become a reality.

With open communication around your business plan and forecasts you will have a more engaged and motivated workforce.

You provide that Engaging Leadership.

Maintaining your momentum means looking forward even as you focus on the present. Forecasting and planning are critical to your continued success. 

I am not ignoring your "worst case" stress test, but your focus should remain on getting new growth by gaining market share, and being fleet-footed and agile in the market.

Your "worst case" stress test
Yes, I always have a "Plan B." I covered some of the scenarios in a recent Leading Ways.

What would I do if our GP declined by 5%?

What if we lost three accounts; or orders from key accounts declined 20%....etc…..

Plan B at the ready to perhaps::
- Sublease premises
- Factor our receivables
- Reduce Inventory
- Run monthly sales specials
- Staff restructuring ….etc…etc….
Most people can be guided to make these adjustments.
However, too few of us commit to regrowth. Most of us just hunker down to ride out the storm. Remember, no-one ever downsized to greatness.

Stress testing or playing the "What if’s" ---- are necessary leadership functions.
Start today!

Kind regards
Denis Orme
027-472-8610
www.leader-success.com

Preventing Project Derailments…
Email me for a copy of this new article, or to arrange a presentation ::: denis.orme@yahoo.com