Are you rapidly ascending the corporate ladder at a Fortune 500 company? Or, a budding entrepreneur hoping to create an exciting, growing small business? Whether you’re a corporate executive with your sights on a corner office and C-level title or a new entrepreneur, you may think you have little in common with the other. Wrong!
You both have at least one major responsibility whichever part of the business universe you occupy. This vital responsibility: Managing Resources. The resources available to you in your corner of the business world may be extensive or modest and highly limited, but they share one critical trait in common. They are finite.
Whether your company thinks globally (larger corporation) or focuses on becoming a strong player locally or regionally (smaller business), your responsibility is identical for each enterprise. The resource pool available to you is limited, even when you can add multiple zeros after your budgetary funds.
Even Bill Gates at Microsoft and Jack Welch at GE had finite resources. Only some government agencies can create more resources via new taxation rates. Companies, whether private or public face troubling challenges expanding their resource level.
Sure, public corporations can issue additional shares to generate funds that can increase resources, but even they risk devaluing their stock by diluting current shareholders’ ownership positions—not to mention the potential of angering their stockholder group.
What Are Business Resources?
According to BusinessDictionary.com business resources are “human, financial, physical, and knowledge factors that provide a firm the means to perform its business processes.” As noted, these components are never infinite, even for the largest international organizations. Ask yourself these questions. “No” answers should inspire you to dig deeper into the reasons you could not answer “Yes.”
- Human — Do you have sufficient personnel to handle your operational needs?
- Financial — Are you blessed with enough money to reach your goals and objectives?
- Physical — Do you have the tangible (brick and mortar, office, manufacturing, or warehouse) facilities to manage business operations?
- Knowledge – Does your key personnel—or you–have the skills, experience, and education to excel in their roles and contribute to company success?
You should also evaluate the “factors of production” you enjoy or that trouble you. Defined as the resources you need for efficient “generation of goods or services,” these factors may not apply to all business firms. Consider these factors, typically placed in four primary groups.
- Land – which covers the natural resources you need to succeed.
- Labor – which defines the manpower you need to produce quality goods or services.
- Capital – which is not confined to money alone, but all man-made resources.
- Enterprise – which combines the prior three factors to produce your products or services.
It is vital that you maintain an objective evaluation for the components of your available resources. If you find this difficult, consider retaining an outside consultant you believe will maintain his/her objectivity.
How to Properly Manage Your Resources
Here are some steps you should follow to evaluate and utilize your available resources.
- Write down your known, factual resources. Although these are real, do not artificially enhance their impact (up or down) on your business.
- Evaluate resource sufficiency. While you seldom rate them as excessive, you must determine their sufficiency at a minimum.
- Do not overlook the factors of production. Along with the factors noted above, some owners and executives favor the so-called Four M’s (“management, machines, materials, and money”) as a simpler, more descriptive evaluation rule. Remember, be honest and objective.
- Measure your ROI (return on investment) to date when you employ your resources. It’s helpful to measure your ROI against a baseline or goal for your return. Are your resources offering the results you want?
- Utilize those resources that deliver the ROI you want similarly in the future. Tweak those returns that are less than you desire, particularly if your strategic plans include significant company growth in the foreseeable future.
- Develop plans to use those resources failing to live up to ROI expectations in a different fashion. For example, if your cash flow is falling short of optimum levels, get creative to address this issue.
- Questions of sufficiency, not highest and best use, demand new strategies to increase the number or volume of qualified resources. For example, if you determine you need more money (capital), consider alternatives to increase this resource, e.g., venture capitalists or so-called angels. Or, if your shortage is skilled, talented personnel, you may want to modify your recruitment strategy or benefits package to attract better-qualified employees.
As you can see from this information, whatever size company you own or manage, you must develop expertise in managing your resources. Since available resources are always limited in comparison to the size and reach of your business, you need to have command of your options. You also must be ready to change, modify, or switch strategies to increase your resource level.
Be aware there are circumstances, albeit rare, that dictate that you reduce your resource volume. For example, if you manufacture product, having capacity far beyond your demand for goods, can be a highly expensive resource that can drive up your costs without measurable returns.
In all cases, you need to match your resources to your desired ROI. You will need flexibility, creativity, and objectivity. You cannot “fall in love” with a resource or strategy if it’s not performing effectively. Always be ready to change direction on a dime. Like a great running back or ice hockey player, you must be prepared to change direction if a situation or problem develops that signals harm to your company.
This flexibility must be matched with your strong resolve and creative vision to manage your resources effectively. If you follow the steps previously noted, you’ll enjoy higher ROI percentages, which will make you, your boss or board of directors, investors, and your personnel happy. What could be better than that?
Properly managing resources is not rocket science. However, you must develop the commitment, dedication, and habit of considering this “Job 1.” Even profits fall into second place, because, if you manage your available resources properly, the profit will come. If you need to improve the number or quality of your resources, you must commit to doing so. If you’re “on a roll” and your resources are functioning like a world-class athlete, keep up the good work – don’t change a thing.