After we all agreed on the vision, I asked about the two dynamics of the Partnership Continuum. First, I said, let’s talk about the Stages of Relationship Development. Both agreed they hadn’t really gotten along in the past. In reality, they didn’t even know each other very well. I asked them if they met frequently to discuss issues of mutual concern. I wasn’t surprised to hear that they rarely even talked to each other. So I asked them what they could do to improve their relationship. Marty surprised me: “I think it would be helpful if we got to know each other’s operations.

Maybe there’s some way we can work together to solve our issues.” Jean immediately responded by suggesting they meet one afternoon the following week to talk about how they each accomplish their tasks. The following week we met again and both Jean and Marty reviewed how they scheduled and accomplished their tasks. One of the first things Jean noticed was that there was no coordination between cleaning the rooms and maintenance work. She asked Marty what time he received his list of guest room maintenance jobs. “First thing in the morning, about 7:30,” he said. The job orders were collected by the chief operator and given to him. He then passed them out to the maintenance engineers. We were well on our way to identifying the needs.

The acceptance of risk is an integral part of business, as is the principle that the higher the risk, the higher the rate of return needs to be. The willingness to take risks of both a personal and a financial nature is one of the defining characteristics of the entrepreneurial decision-maker.

Interestingly, a 1999 study commissioned by PricewaterhouseCoopers concluded that whereas in continental Europe strategies are generally oriented towards avoiding and hedging risk, Anglo-American companies view risk as an opportunity, consciously accepting the responsibility of risk management as necessary to achieving their goals.

Successful decision-makers understand this. They take steps to ensure that the risks resulting from their decisions are measured, the likely consequences are clearly understood and the danger signals are identified. Avoidable risks are pinpointed and eliminated, and others are reduced. Such decision-makers also take a holistic view of risk, going beyond the direct financial perspective and actively managing risk as it affects the whole organisation.

Accepting that risks exist provides a starting point for other necessary actions. Foremost among these is the need to create the right climate for risk management. People should understand why control systems are needed. This requires communication and leadership so that standards and expectations are set and clearly understood.

Do not ignore or underestimate the wider impact of a financial decision on other parts of the business. Avoid weak budgetary control Budgets are often used merely to assess performance, whereas their real value is as an active tool to inform financial decisions. Budgets should not be cut without giving sufficient thought to how this will affect other
decisions.

Understand the impact of cash flow

Issues of cash flow and the time value of money are often ignored by non-financial managers, to the detriment of the organisation. In the worst case, this may result in the business becoming insolvent.