Research by HBR1 shows that many managers (and by extension, business owners) are unable to judge objectively how well or poorly their business is run. In fact, the research found zero correlation between self-perceived management quality and actual performance.
The same report finds that only 6% of businesses are well run, and that the difference between them and the worst-run businesses equates to 25% in growth rate and 75% in productivity.
Now it could be that, like Captain Mainwaring, you are a pretty shrewd judge of these matters. This delusion does not apply to you and you really are one of those 6% of businesses.
But what if you aren’t?
Just think about those figures. Let’s take a modest business (say £1m turnover, 10% net margin, 5% annual growth) and assume the owner is in the middle of the pack (12.5% potential improvement in growth, 37.5% potential improvement in productivity). Over 5 years, the gap is over £200k of net profit.
£40k per year. Just for getting the basics right. No fancy strategy or miraculous new product required.
Curiously, the same skewed perception occurs in self-assessments of driving ability and sex. I can’t help you with those, but I can help you run your business better; take a look at https://www.thescaleupformula.com or contact me direct to find out how it works.
1Why Do We Undervalue Competent Management?, Raffaella Sadun, Nicholas Bloom, and John Van Reenen, October 2017
