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How Should You Lead by Managing Your Money?

Managing your finances can be tricky, time consuming and often really frustrating, but are there any right and wrong ways to go about managing your money?

Everyone should deal with their finances in a way that they feel comfortable, but managing your money effectively does require an element of organisation and know-how.

Always keep a budget

A budget can be one of the most effective financial tools, and they are very simple to do. The easiest way to create a budget is to use a spreadsheet application so that you can quickly carry out any calculations that you need and it eliminates the margin for human error.

What information do you need?

To start off your budget you need two sets of information, your income and your expenditure and both should be pretty easy to get.

The easiest way to gather this information is to compile at least three months worth of your bank statements, you should easily be able to see how much money you have made each month and how much money you have spent.

To work out your budget all you need to do is minus your expenditure from your income, this will leave you with the amount of flexible cash that you have available to you.

Keeping a budget as a money monitoring tool will allow you notice where you are spending too much money so that you can cut back accordingly, you will also be able to notice any trends that may need addressing.

Always have an objective

To manage your money effectively you must have an overall objective of what you want to achieve financially. You should have an end goal that is split up by smaller objectives.

Whether you want to save for a new home or a new car it doesn’t really matter as it’s the smaller steps that will probably prove to be the more important.

Smaller steps could include things like spending less on your weekly food shop, or cutting down your monthly phone bill, every little step you make will help.

Make your money work for you

It’s pretty pointless to manage your money effectively if you are just letting your money go to waste. Make your money work for you by putting it to good use.

If you are planning to save for something special then think about putting your money into a high interest bank account and reap the rewards. Find out more about savings accounts by clicking here.

Or if you’re planning to reduce your debt, then allocate a set amount of money each month to paying off any credit card debt that you have.

This article was written by Andy who regularly writes about all things to do with finance.

Would WikiLeaks Cripple Your Organisation?

The story of winter 2010 has certainly been the WikiLeaks scandal. The contraversial website that has already disseminated over 300,000 top secret military and diplomatic embassy documents, has captured headlines all over the world. What has been particularly gripping is that the documents are seemingly 100% true. This gives them tremendous power, as the citizens of various countries have been pouring over what the USA ‘really‘ thinks about their government/officials.

Particularly interesting stories include the exposure of the backroom dealings of the Bank of England Mervyn King and also of Italian Prime Minister Silvio Berlusconi. This made me think of the following intriguing hypothetical scenario:

“Would WikiLeaks Cripple Your Organisation?”

To define the question a little more clearly;

“If the public could pour over all the emails that senior management have sent to each other in the past year, would the organisational structure of the business collapse?”

It’s a very scary thought! Would there be calls for the resignation of the CEO? Do you think that even the great leaders of our history could stand up to such data releases? Leave your comments below!

5 Iron-Clad Ways to Identify & Develop Your Successor

Interestingly, one of the best times to receive leadership advice is when you near the end of your reign. This article deals with the complexities of choosing and grooming potential candidates for leadership succession.

1. Removing Emotion from the Process

For many, after a long-spanning career in a particular position, one can look back on the role as one we have become emotionally attached to. We may know the job, and indeed the office like the back of our hand. When the time comes when we move on from such a job, the process of choosing and grooming a successor is one filled with emotion.

2. Evaluating the Skills Needed (Properly)

The further you travel back through history, the more aristocratic and corrupt succession processes seemed to be, with power being handed down within networks of families and close friends. In the present day, a meritocracy has largely replaced this old fashioned way of doing things. Choosing a successor based on their merits, or skills, is a modern, reasoned and effective way of selecting the next leader. Using skills as the key criteria ensures that the leader who follows you is capable of meeting your expectations and continue the good work you have begun.

Depending on your involvement in personal development in your organisation, you may be very familiar or unfamiliar with the specific strengths you have that allow you to perform the job you do, well. You may also be aware of the weaknesses that perhaps hold you back in terms of productivity or success. Often managers make the mistake of assuming that these strengths are the necessary criteria for a competent successor, but they’d be very wrong in thinking so.

Any job role can be done in a variety of ways, and although your particular style has been successful during your tenure, that isn’t to say that a completely different approach wouldn’t be even better! Therefore you need to take extra care when evaluating which skills a good candidate actually requires. For example, the loud and assertive chief of a marketing team may conclude after an effective few years that their successor must also be extrovert with the desire to make themselves heard as strongly as they currently do. In reality, the actual skills required would not include ‘loud’ and ‘strong minded’ at all, but simply ‘effective at communicating ideas’. Being effective at communicating ideas is a broad skill that could be aquired and used by even the most soft-spoken of individuals. This example, I hope, will instill the attitude that you are not looking for someone who is like you, but instead someone who could also respond to the demands of your job successfully, albeit in a different way.

3. Choosing the Needle

When it comes to identifying the perfect candidate, managers usually have one of two approaches: They’ve either picked out their replacement years in advance and breeze through this stage, or they have a fierce and difficult decision to make between several promising options. For seem reason this choice rarely falls neatly in the middle – where a suitable candidate stands out from the rest after a few of days of thought.

Beyond a formal interview, I wouldn’t recommend you involve the candidates further in response to the tough decision you’re facing. The more you let them invest themselves in the idea of taking hold of the reigns, the more conflict and frustration will result when you announce the 1 winner and several losers. If you’re having trouble selecting the successful candidate, then seek to listen to the views of other managers to help inform your knowledge and perhaps fill in the gaps that exist through infrequent prior contact with some candidates versus close contact with others.

The framework I have developed for making this tough decision is as follows:

1. Which candidates possess most of the required skills?

2. Which candidate has the most advanced critical required skill?

3. Which candidate attracts the most motivated followers?

4. Which candidate has a strong vision of the future of this company?

5. Which candidate has shown loyalty and personal sacrifice to the company?

If you found the same name appearing far more than others, it’s likely you’ve found your successor already.

4. Grooming your Mentee

In many cases where you have identified potential successors, you may still see improvement areas that you’d like to see worked on well before a hand over can occur. You will want to ensure that they develop these skills as part of their annual plan/continuing professional development if possible, but don’t be afraid of assuming a mentor role in one on one workshops that are built around developing those skills. With a counsellor/counsellee relationship, you can share some of your insights, which they will probably been keen to lap up when put in the context of a future promotion!

5. Avoid This Pitfall

The biggest mistake you can make in succession planning is to leave it too late. To take the Ohama Oracle Warren Buffet as a good example, in this case he has been planning his own succession for over a decade. In the case of Buffett’s Berkshire Hathaway Corp, a smooth succession will safeguard the $ billions of shareholder interest in the company. However, your succession doesn’t need to move markets for it to be important enough to plan early. Beginning to think about mentees as you give fixed notice to your employer is simply not sufficient, as you should always be evaluating employees from a potential leadership perspective on a continual basis. Steve Arnseson at examiner.com communicates this idea clearly as he repeats part of a briefing he receiving upon assuming a new post: “your role as the leader of this team is to train your replacement”.

Domestic Debt: Time to Show Some leadership

When it comes to money and debt, a lot of managers manage their income and outgoings perfectly well in the office but fall short of supplying the same leadership skills at home. It’s a real shame, since so many of the skills required are similar if not identical.

After all, budgets are budgets – and whether you’re dealing with million-pound accounts or a £100 shopping bill, a lot of the same logic applies. And in either case, spending beyond your means means debts – and debts all too often mean problems.

So:

1)      Don’t waste money you need on things you don’t

2)      Take the time to figure out what you do need

3)      Learn from your mistakes.

These are just three examples. There are all kinds of parallels between the business world and the home, but let’s take a look at these three. I’m sure you’re familiar with their application in the office, but what do they mean in terms of avoiding debt at home?

Debt rule 1: Don’t waste money you need on things you don’t

Rule 1 of fiscal prudence, really. If you’re not so good at spotting the difference between a ‘want’ and a ‘need’, there’s a high probability that your household will end up in debt sooner, rather than later.

If you’re looking to make the best use of your money and make sure you stay out of debt, you’ll need to draw up a budget detailing what your household needs to spend every month – essentials like mortgage payments, utility bills, essential food & travel, etc.

Once you’ve done that, you’ll be able to figure out what you can all spend on your wants without running into debt problems.

Debt rule 2: Take time to figure out what you need

No-one said it was easy, but if you’re determined to avoid debt, you need to take the time to figure out your domestic finances as thoroughly as they deserve.

Some things are easy – mortgage payments, for example, tend to be the same for months on end (or years on end, if you’re on a fixed rate). Some things, such as petrol and food, will vary from month to month. You might pay for others (e.g. council tax & insurance) on an annual basis, which means you should really set aside a twelfth of that amount every month to make sure the bill doesn’t come as a painful surprise that pushes you into debt.

You can get a lot of the information you need from your bank statements, but it’s a good idea to spend a month or two writing down literally everything you spend, to fill the list out. That should make it a lot easier to add up the figures and find out exactly what you’re all spending on your needs and on your wants.

Debt rule 3: Learn from your mistakes

As in the business world, success in the field of domestic budgeting depends on learning from your mistakes.

If you’ve used a form of debt in the past, whether it’s an overdraft or a credit card, take the time to figure out how much money you actually borrowed and how much you’ve had to pay in interest and charges associated with that debt.

Sometimes there’s no alternative to taking on some debt, but knowing which kind of debt costs less will help you make wiser decisions in the future.

Do Our Schools Prepare Children to be Future Leaders?

As ZenHabits.net pointed out in blog post 3 weeks ago entitled ’21 skills that you child doesn’t learn at School’, the education system is not designed to teach a child absolutely everything they need to succeed in the real world. However, children often fail to learn leadership skills from (increasingly lenient and laissez faire) parents, so do we have a gap in responsibilities here?

Historically, private schools such as Westminster School and Eton in the UK have a vastly disproportionate amount of prime ministers in their alumni, with Westminster having educated 3, and Eton having educated 19! From these statistics, it is clear that schools do have an affect on a student’s leadership potential (ability to lead)and their career aspirations (opportunity to do so).

One school who firmly believes in teaching children a broader range of skills is Ross Global Academy. Ross Global Academy is a ‘Chartered Public School’ based in New York. Chartered Public School status means that the school is free to attend, however the school has looser governance from the state, which allows for variance in the curriculum, which Ross Global Academy have used to create a ‘different’ ethos at the school.

From their site:
“By immersing young minds in a curriculum rich in cultural history, current world events, intercultural dialogue, and fluency in new technologies, the school prepares our students for global challenges by producing synthetic thinkers who can combine separate elements of knowledge to form a coherent perspective of the whole.”

From this statement, it is clear that they are preparing children for a leaders mindset. They are arming students with the ability to look at a problem after taking a step back, and being able to analyse, which is useful in any business strategy.

Let’s here your opinion on the subject. Are schools with this agenda on the right track? Do the schools near you prepare children for the world of leaders and followers?

Leadership Through Policy – KKR Case Study

Ken Mehlman has shown leadership through example recently, with his announcement to extend their green program to a fifth of their global portfolio. In doing so, these companies will reduce their environmental impacts in the areas of waste, paper, chemical use, and energy and water consumption in am measurable way. Ken Mehlman is a member of Kohlberg, Kravis, Roberts & Co. LLP, a private equity firm which recently sold shares to the public and became a listed company on NYSE.

Ken Mehlman is the man responsible for the global external affairs activities of the firm, and by extension, carries the responsibility in ensuring that their owned subsidiaries comply to a decent standard of ethics and social responsibility. After a brief pilot programme at 3 of its investments yielded successful results, KKR has announced that they will now engage one fifth of their portfolio in using the same green strategies. This is a significant move that is relatively unmatched across the breadth of the private equity industry, and therefore Ken Mehlman is a fine example of a leader who doesn’t wait for others to make a decision before acting.

Says the KRR founder in a recent discussion: “The business case for environmental management has never been stronger,”. “The Green Portfolio Program highlights that environmental performance and business performance can go hand-in-hand. We are very excited about the momentum to date and the fact that we have taken this effort global in such a short period of time.”

Cynics may argue that this fund is only engaging in ethical activities in order to attract capital from the ever-growing band of ethical-investors who limit their savings for only the most reputable and up-standing companies to invest in. I would disagree, firmly on the basis that such investors prefer to invest in shares on a one-on-one basis, and would not risk pooling funds into a Private Equity firm that could still spend its money wherever it liked.

So I give a hats off to Ken for setting a good standard that I hope will continue to extend across the KKR group and across the Private Equity industry as a whole!

Lead By Example With Your Company Finances

How to best control your company finance is often a hot topic of discussion, however there are many simple, yet effective ways of managing your cash that often go unnoticed. I will detail what I feel are the most important tips, to help you show leadership, by effectively managing your company finances.

Credit Cards

You can lead by example by using a business credit card. Business credit cards help build trust in a company by allowing your employees to use your credit card when purchasing supplies. The one problem that may arise here is if you are worried that an employee may misuse your card. Many business credit card providers appreciate this fact and they offer insurance that covers you against any exploitation of company finances.

Business credit cards also open doors to many supplier and purchase discounts, meaning they could help you to save a lot of money.  Using your business credit card helps build your business credit profile (different from your personal credit score) which in turn helps to build your company reputation and credibility.

Successful Planning – Monitoring Finances

Effective management of your company finances comes first from successful planning, which in turn leads to successful execution. You should always monitor your company finances to ensure you have an idea of what your income and expenditure should be for a given time. This way you are always aware of any changes in your finances, and for whatever the reason for the change you can then act on it.

If when monitoring your finances you realise you have spent too much in a given time period, then ask yourself why and come up with a solution. If you are finding this process hard, try and identify what the exact problem is and brainstorm a list of possible ideas that you feel may put an end to the problem.

If when monitoring your cash-flow you realise you have made more money than you expected to make, then that’s great; you can now identify why and reap the rewards, you should always try to build on the positives!

Budgeting

Your company should always have a budget, if you haven’t got one, then set one up. Work out your budget yearly (taking into account any dates where you will need to spend more than others) and divide by 12 to give you a monthly figure.

It is important when detailing your budget to be thorough and honest while noting down any expenditure you have. With regards to income, you can set up a forecast of what you feel your company will make in the next 12 months. Then divide this figure by 12 to give you a monthly average. Your forecast enables you to predict what you aim for your company to achieve based on previous years figures. You can then deduct your expenditure from your income and work out how much you have left for flexible cash.

You can then decide what you would like to do with the flexible amount of cash you have left. You could decide to keep all of the cash for use if and when you need it. Or you can decide to reinvest a portion of the money back into the company for any changes you need to make.

If when working out your budget you realise that you may struggle for the year ahead, then take action now. Identify where you can save money, whether it be through your utilities or supplies and save as much as you can to get your forecast looking healthy again.

Showing leadership with regards to your company finances helps build trust in the workplace, which makes for a better working relationship with your employees.

Article written by Andreas Nicolaides – a company finance expert for UK based MoneySupermarket.com.

Customer Relationship Management

What is customer relationship management, and why is it important to UK Leaders?

Customer Relationship Management, or “CRM“, is the way a business goes about creating, maintaining or even sometimes repairing the relationship it has with its customers.

The customers are the vital life-blood of any modern organisation. Customer-centric product development is a decades-old concept, but lately several new aspects of companies have become potentially large growth area when the customer-focused principles and tools of CRM are applied to them.

One of the key pillars of CRM is collecting useful data about your customers in a way that does not damage the customer relationship itself. This is what I will discuss today.

How can I collect information about my customers?

Collecting information can be done in many different ways, with some being far more thorough, and others can happen without the customer even realising!

1. Creating customer accounts.

Online services and business2business organisations will already force new customers to ‘create an account’ to make their initial purchase. Doing so will allow you to easily collect some basic profile data on your customer and track all their purchases. This information can be used to create a demographic view of your current customers. If you currently allow customers to anonymously purchase from you, without giving up any information about themselves whatsoever, you are at a competitive disadvantage, and I would recommend you to try and implement an account-orientated point of sale model in the near future.

2. Generating email lists.

Many small and large businesses such as restaurants have recently realised that using email marketing is affordable, easy and impressively successful in attracting repeat customers to their businesses. Simple ‘Free drink if you join our mailing list’ offers are quickly taken up by customers, and this can lead to a positive and lengthy relationship with the customer through making good use of email marketing tools. Enticing offers such as money off coupons makes can be sent to these subscribers for an extremely low cost, and will be read with far more enthusiasm than expensive leaflets through the door. A combination of interesting and genuinely tempting deals in  the emails will lead to a surprising good retention rate. The success of money-saving emails such as that produced by MoneySavingExpert.com shows that customers won’t generally perceive it as spam if it offers them good value. Once a sizable email list has been built up – it can of course be part of a coordinated customer relationship management strategy.

3. Keeping it simple – Writing it down!

Several businesses, including fast food chains, actually have their employees key in to their till; the nationality and estimated age of each customer they serve. Just these two simple bits of anonymous data are perfect for analysing WHO is actually buying your product. Are your prices putting off young students? Does your brand draw in customers from a diverse range of ethnic backgrounds? You will be able to find out the answer to these types of questions with only a few snippets of information.

Once the data has been collected – proper analysis can begin, which I may cover in a future blog post. Stay tuned!

Mintzberg – Distinguish Leadership From Management At Your Peril

Henry Mintzberg is stirring the pot again. For those of you who don’t know who Mintzberg is, he’s a professor at the Desautels Faculty of Management at McGill University in Montreal, Canada. Mintzberg co-founded the International Masters Program in Practicing Management as an alternative to an MBA program. He likes to challenge conventional wisdom about management, and he does a great job at getting people to react to his views, though not the way you might want people to react.

Mintzberg earned quite a few critics with his 2004 book, Managers Not MBAs, in which he slammed MBA programs. Mintzberg said “MBA programs train the wrong people in the wrong ways with the wrong consequences. No one can create a manager in a classroom.” Mintzberg even implied that the MBA program at McGill (his employer) was ineffective.

Mintzberg’s latest book, called Managing, is sure to garner lots of attention from his critics. In this book he argues that good middle management is the key to good leadership. Accordingly, rather than distinguishing between leadership and management, Mintzberg says “we should be seeing managers as leaders, and leadership as management practiced well.” Mintzberg studied the work of twenty-nine different managers and suggests that managers are hindered from being effective planners due to the realities of today’s workplace such as heavy workloads and constant interruptions. To overcome these obstacles, he offers a new management paradigm in which managers can become effective leaders by working through information, people, and direct action.

If you want a fresh perspective on how management can accomplish their goals, I highly recommend this book. His writing style makes it easy to read and whether you agree with him or not, there’s no denying that his views are impactful.

Article written by Andrea Davis

What is your view on this matter? Leave your comments below!

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