When and Why a Funder Should Use an Operational Review

Can this business deliver on its plans?

For private equity firms, specialist lenders, and banks, an operational review can be a powerful tool—when used at the right time and in the right way. Unlike financial due diligence, which primarily assesses the past, an operational review looks forward, evaluating whether the business is set up to execute effectively. However, its timing and approach vary depending on the context.

Many investors and lenders focus on financial due diligence (FDD) or audits to validate past performance and risk, but an operational review provides something different: an assessment of execution capability. Strong financials don’t always mean a business is running well—companies can look profitable on paper while struggling operationally. The real question is:

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Financial Audit vs Financial Due Diligence vs Operational Review

Financial Audit	Financial Due Diligence	Operational Review
Focuses on past financial data	Assesses historical financials to determine risk, sustainability, and valuation	Focuses on current and future operational execution
Checks compliance with accounting standards	Evaluates financial stability, cash flow, and business viability	Looks at efficiency, effectiveness, and execution gaps
Provides historical insight	Determines financial health for investors or buyers	Provides actionable recommendations for improvement
Tells you what happened	Tells you whether the numbers are reliable and sustainable	Tells you what needs to change and how to execute effectively

While financial due diligence and audits focus on past data, an operational review is forward-looking—identifying bottlenecks, inefficiencies, and execution risks that could impact future performance.

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Pre-Investment: A Balancing Act for Private Equity and Banking

Private Equity Perspective

At the pre-investment stage, an operational review could provide an independent opinion on whether the investment thesis is truly deliverable. However, this is a sensitive period.

• Competitive Dynamics – In a competitive bidding process, PE firms must balance diligence with speed. If management sees an operational review as intrusive, it may put the firm at a disadvantage.
• Trust and Access Challenges – Management teams—particularly in founder-led businesses—may resist deep operational scrutiny, fearing it signals a lack of trust or confidence.
• Alternative Approaches – If a full operational review isn’t feasible pre-investment, a light-touch assessment—such as informal discussions with operational leaders, supplier references, or desktop analysis—can provide valuable insight.

Banking and Specialist Lender Perspective

Banks and lenders are in a different position. If they are already financing the business, they may have better access and more leverage to request an operational review before committing further capital.

• Understanding Where the Money Will Be Spent – Before approving new lending, an operational review helps assess whether the business has the execution capability to deliver its plans.
• Risk Mitigation – Unlike PE firms, lenders have no equity upside—only downside risk if a business underperforms. An operational review helps determine whether the company can operate efficiently enough to sustain repayments.
• Trigger Points for an Operational Review – Banks may require a review before increasing credit facilities, refinancing, or funding expansion plans.

Key Takeaways for Pre-Investment

• PE firms may find an independent operational review valuable but difficult to execute at this stage due to management resistance and competitive pressures.
• Banks and lenders are in a stronger position to mandate operational reviews before committing funds, particularly when evaluating new loans, refinancing, or expansion plans.

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Post-Deal: Understanding What You’ve Bought and Acting Quickly

Private Equity Perspective

Once a deal has closed, an operational review provides clarity on the real state of the business.

• The Window for Quick Wins – The first 100 days are critical for assessing operational gaps and identifying quick wins.
• Understanding the Business Beyond the Numbers – Many deals are based on financial projections, but execution determines whether those numbers are realistic.
• Preventing Surprises – Supply chain inefficiencies, weak middle management, or ineffective sales processes may only become fully visible post-acquisition. An operational review helps surface these risks early.

Speed Matters: Act Early Rather Than Reacting Later

Post-transaction, the natural instinct is to stabilise the business and reassure the team. While understandable, delaying operational changes can be more disruptive later.

• People Expect Change – Employees anticipate adjustments following an acquisition. It is far better to conduct an operational review early, identify improvement areas, and set out a structured plan in the first few months rather than waiting for issues to surface.
• Control the Narrative – If changes happen proactively, they are seen as part of a strategic vision. If changes come after a period of stability, they can feel like a reaction to failure.

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Common Operational Risks Identified in Reviews

An operational review often uncovers risks that don’t appear in financial due diligence. Some of the most common issues include:

• Supply Chain Bottlenecks – Poor inventory control or logistics inefficiencies causing delays and excess costs.
• Sales & Marketing Misalignment – A disconnect between lead generation and sales conversion efforts.
• Weak Management Processes – A lack of structured reporting, decision-making, or accountability.
• Technology & Systems Lag – Outdated or poorly integrated technology that limits scalability.
• Cultural Resistance to Change – Employee inertia or leadership reluctance to make necessary improvements.

Identifying and addressing these risks early prevents operational weaknesses from turning into financial distress later.

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Supporting the Management Team: A Critical Pivot Point

A Less Disruptive Alternative to a Management Change

When a business underperforms, investors often consider replacing leadership. While sometimes necessary, this can be destabilising. An operational review provides an alternative path:

• A Chance to Course-Correct: Instead of immediately replacing management, an operational review gives them a structured opportunity to improve.
• Reducing Resistance to Change: A well-run review helps management see the need for change, rather than resisting it.
• Avoiding Unnecessary Disruption: Leadership changes create uncertainty, culture shifts, and the risk of losing key employees.

An Opportunity for Management to Pivot and Improve

A seasoned operational advisor can turn a review into a positive pivot point for the management team:

• It Creates a Shared Agenda: Rather than being imposed externally, a review should empower leadership to own the improvement plan.
• It Provides Cover for Necessary Change: Many leaders know what needs to change but struggle to push through. An operational review can serve as an external mandate for action.
• It Offers a Fair Evaluation Before Making Harder Decisions: If management embraces the review and drives change, the business benefits. If they fail to act, investors can make leadership changes with confidence.

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When Things Go Off Track: A Critical Time for an Operational Review

Private Equity Perspective

• Covenant Breaches & Underperformance – An operational review helps determine whether the problem is financial, structural, or execution-related.
• Before Additional Capital Injection – If follow-on funding is needed, an operational review ensures that capital won’t simply be swallowed by inefficiencies.
• Turnaround & Restructuring – If the business is struggling, an operational review can guide the most immediate operational levers to pull.

Banking and Lender Perspective

• Covenant Breaches & Credit Deterioration – Lenders need to understand whether financial strain is caused by poor execution.
• Debt Restructuring or Workouts – Before renegotiating terms, lenders often request an operational review to assess turnaround viability.
• Exit Planning – If a lender is considering reducing exposure, an operational review can inform timing and strategy.

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Conclusion: Timing an Operational Review for Maximum Impact

Financial statements provide a snapshot, but an operational review tells you what’s really happening—and how to fix it.

The key is to conduct an operational review early, before issues become unmanageable. Acting proactively ensures a structured foundation, avoids reactive firefighting, and ensures that operational improvements are made on your terms—not as a last resort.

Just as importantly, an operational review can be a management support tool—giving leadership a clear mandate for change. If they take the opportunity, the business benefits. If they don’t, investors and lenders can proceed with confidence, knowing they provided the right opportunity for improvement.

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Thinking about an Operational Review?

If you’re considering an operational review for a portfolio company or lending relationship, I’d be happy to discuss how it could apply to your situation. Get in touch to explore how structured, execution-focused insights can drive better investment and lending decisions.

What MDs Can Learn from Private Equity Turnaround Strategies

Introduction

I have had numerous conversations with both PE and non-PE management teams. On one side, I often hear, “We are PE-owned, so we need to act in the best interests of the PE firm.” On the other, there’s the sentiment, “We don’t act like a PE firm because we are privately owned, so we’re not ruthless.” While I recognise the feelings behind both perspectives, the reality is simple: the primary purpose of any business is to make profit and ensure long-term viability. When the chips are down, both ownership structures ultimately pursue the same goal. The main difference is that PE firms tend to be more decisive and upfront about the purpose of the business, leaving no room for indecision, a quality that can be crucial in turbulent times.

In challenging times, many managing directors of privately owned companies tend to misinterpret private equity tactics, assuming they’re aggressive and unsympathetic. However, a closer look shows that PE firms aren’t out to dismantle businesses; rather, they focus on the same essential priorities you value, maintaining operational stability, preserving cash flow, and ensuring long-term sustainability. This article examines how private equity firms respond during downturns and outlines practical lessons that MDs can adopt to bolster their own turnaround strategies.

The Primary Objective of Private Equity

At its core, private equity is about generating attractive, long-term returns by unlocking the latent potential within a business. This isn’t achieved through reckless or overly aggressive maneuvers. Instead, PE investors apply financial rigour, operational expertise, and strategic insight to improve processes, restructure operations, and ultimately enhance value. Their focus is on practical, measured interventions designed to stabilise the business before charting a path to growth.

Comparing Ownership Models: PE-Owned vs. Privately Owned Firms

Private equity–owned firms typically operate under a defined exit strategy and a short-to-medium-term focus, whereas privately owned companies often prioritise long-term stability and legacy concerns. Despite these differences, both ownership models share a steadfast commitment to business sustainability and success. Whether the aim is maximising investor returns or preserving a family legacy, neither party is willing to tolerate prolonged underperformance. Both prioritise operational stability, cash flow preservation, and the protection of their reputations, recognising that survival is essential before any strategic expansion can be contemplated.

Both models share several core attributes, including:

• Commitment to Business Continuity: Maintaining stable operations and ensuring the business remains viable during challenging periods.
• Cash Flow Preservation: Safeguarding cash flow as a critical resource for ongoing operations.
• Cost Optimisation: Streamlining expenses and enhancing operational efficiency.
• Reputation Management: Protecting the company’s credibility and market standing.
• Swift Crisis Response: Being prepared to act decisively when challenges arise.
• Financial Prudence: Upholding strong fiscal discipline and tight financial controls.
• Stable, Well-Motivated Workforce: Prioritising employee engagement and retention to preserve essential organisational knowledge.
• Continuous Improvement Culture: Encouraging ongoing learning and process refinement to stay agile.
• Strong Internal Communication: Ensuring clear communication channels that align the workforce with strategic objectives.

The Importance of Decisive Action

One of the key differentiators between private equity–owned firms and many privately owned companies is the speed of decision-making. Driven by portfolio managers who are under pressure to deliver returns within defined timeframes, PE firms tend to act rapidly when a downturn occurs. In contrast, MDs of privately owned companies might lack this external impetus, which can lead to hesitancy and slower responses. Over time, such indecision can allow problems to compound, potentially necessitating deeper, more disruptive interventions. In the worst case, delayed action might even jeopardise the firm’s long-term viability.

A critical enabler of this rapid decision-making is the deliberate organisational structure employed by PE firms. They set up robust board advisory structures and maintain ready access to a network of experts, from financial analysts to operational turnaround specialists. This framework minimises indecision by ensuring that each decision is well-informed and backed by specialised expertise. Importantly, these external resources operate within strict guidance, implementing only agreed-upon actions rather than having free rein. This ensures that every intervention is balanced and aligned with long-term strategic goals, taking into account the impact on employee morale and overall business stability.

During a crisis, while immediate action is critical, both ownership models recognise the importance of returning to these core principles. Any measures taken to stabilise the business must not only address the urgent need for survival but also lay the groundwork for a robust recovery that aligns with the longer-term shared goals. In other words, the crisis response should be designed with an eye on re-establishing the attributes listed above, ensuring that short-term fixes contribute to, rather than detract from, sustained long-term success.

A Myth-Busting Note

Before we proceed, let’s address a fashionable phrase you may have heard down the pub: “asset stripping.” Despite the liberal use of this term in some circles, in my experience, no PE firm is fixated on wrecking businesses. In fact, the notion of a ruthless, asset-stripping PE firm is probably a myth—coined and perpetuated by Hollywood and picked up by someone who wanted to sound like they knew what they were talking about.

I’m not saying there aren’t instances where large deals have been structured to sell off certain assets to enrich a deal or where businesses are acquired and restructured to achieve economic scale. Nor am I ignoring situations, such as accelerated sales processes triggered by potential insolvency, where asset divestitures occur. However, these cases are relatively uncommon and typically confined to distressed situations. For the most part, PE firms are structured to take decisive, measured actions that protect and enhance long-term value. It’s important to recognise that the primary goal, whether in a PE or privately owned setting, is to ensure the business remains profitable and sustainable.

How PE Firms Act During a Downturn

Contrary to popular belief, the actions of a private equity firm during a downturn are not about radical disruption for its own sake. Instead, their approach is focused on stabilising the business rapidly and then paving the way for recovery. Their interventions typically include:

• Operational Restructuring: Reviewing and streamlining operations to improve efficiency and reduce unnecessary costs.
• Management Adjustments: Implementing leadership changes or enhancing management capabilities when gaps are identified.
• Strategic Repositioning: Revisiting the business model to ensure alignment with current market conditions and opportunities.
• Financial Engineering: Adjusting the capital structure to secure the liquidity needed for turnaround initiatives.

These steps are not aggressive for aggression’s sake; they are practical measures designed to align the business with its long-term value creation goals while preserving critical aspects such as employee welfare and organisational culture.

Lessons for Privately Owned Companies

For MDs of privately owned companies, there are clear takeaways from the private equity playbook:

• Focus on Core Fundamentals: Prioritise cash flow, cost optimisation, and operational stability as the foundation of any turnaround strategy.
• Be Decisive, But Thoughtful: Rapid action is crucial in a downturn, but ensure that each decision reinforces long-term objectives and protects the welfare of your workforce.
• Empower Your Team: A stable, well-motivated workforce is invaluable, invest in employee engagement and maintain strong internal communication.
• Plan for Recovery: Address immediate challenges while keeping an eye on long-term recovery and growth.
• Learn from Best Practices: Adopt strategies like operational audits, financial discipline, and strategic repositioning that have proven effective in the private equity space.
• Align with Personal Goals: Even for so-called lifestyle businesses—where the primary aim might be to sustain a particular way of life—the underlying principles remain unchanged. Owners depend on a healthy, thriving business to support their personal lifestyle, underscoring the need for decisive, strategic action during downturns.
• Recognise Universal Financial Imperatives: Whether you’re running a privately owned business, a charity, or even a local village hall or church, generating a surplus is essential for long-term survival. Even not-for-profit organisations need to manage their finances effectively to maintain their services and support their missions.

Top Tip

If there’s one piece of advice I’d pass on, it’s to get back to first principles. Change the mindset of your entire business—not as a fleeting fad, but as a core, ongoing approach. Focus on understanding not just what things cost to buy, but how much revenue you need to generate to cover those costs. Reinforce that sales is the lifeblood of your business, ultimately, it’s your revenue that pays for everything. Make it a recurring theme in your meetings and communications.

You might be surprised that many team members don’t even know your margins; if someone has to grab a calculator to figure it out, that’s a win, it means you’re driving home a powerful point about financial discipline. For example, consider a humble block of post-it notes that costs around £5. With an operating margin of 10%, that £5 expense effectively requires you to generate £50 in revenue to be justified. Similarly, an additional administrator with a base salary of £25,000 would need roughly an extra £250,000 in revenue (assuming a 10% Operating margin & ignoring Tax and NI) to cover the cost.

Conclusion

While private equity firms may sometimes be perceived as overly aggressive, a closer examination reveals that their strategies during a downturn are fundamentally about preserving and enhancing long-term value, a goal that resonates with every managing director of a privately owned company. By focusing on core fundamentals, acting decisively through a well-structured decision-making framework, and ensuring that short-term crisis responses align with enduring business attributes, MDs can navigate challenging times more effectively. Ultimately, the practical, measured approaches of private equity offer valuable lessons for any business leader committed to long-term success.

The Business World Has Changed—Have You?

In today’s rapidly evolving world, business leaders are constantly adapting to new technologies, marketing channels, and global competition—challenges unimaginable to previous generations. This accelerated transformation underscores a critical reality: no CEO can master every domain. While this has always been true, it’s more evident than ever today.

You may have heard the military term VUCA—volatility, uncertainty, complexity, and ambiguity—used to describe modern battlefields. Business leaders contend with a similar environment, where the pace of change and unpredictable market forces demand resilience, agility, and clarity. In this landscape, risks and opportunities co-exist.

We live in an era of breathtaking change. The business landscape that once felt familiar and predictable has been replaced by a world of volatility, uncertainty, complexity, and ambiguity—VUCA. For many leaders, this shift can be disorienting. The strategies and instincts that once ensured success may no longer apply. The pace of change has accelerated, leaving some feeling untethered from the business world they once knew so well.

If you’re experiencing an underlying sense of uncertainty—one that lingers in the background and disrupts your confidence—you are not alone. This new environment challenges even the most seasoned leaders. But within these challenges lie potential opportunities, provided you are equipped with the right mindset and strategies to navigate them.

The Whirlpools of Business: Understanding VUCA

Warren Buffett famously stated, “You only find out who is swimming naked when the tide goes out.” But what happens when the tides are no longer predictable, when opposing currents create whirlpools of disruption? Business today is not just about the tide going out—it’s about managing multiple crosscurrents, each pulling in a different direction.

The military coined the acronym VUCA in the 1980s to describe the challenging and unpredictable nature of modern warfare. The business world has since adopted the term, as it perfectly encapsulates the conditions we now face:

• Volatility: Sudden, unpredictable changes that make long-term planning difficult.
• Uncertainty: A lack of clarity about what’s coming next.
• Complexity: Intricate, interwoven challenges that defy simple solutions.
• Ambiguity: A fog of confusion where cause and effect are difficult to define.

When confronted with VUCA, the instinctive response for many is fear—fear that leads to inaction. When we don’t know what’s coming next, it’s easy to fixate on worst-case scenarios. But dwelling on hazards without taking action is a recipe for stagnation. Left unchecked, VUCA can spiral into negativity, paralysing decision-making and stalling business growth.

The Fog of War: Business Lessons from the Battlefield

The military’s experience with VUCA provides valuable insights for business leaders. On the battlefield, uncertainty is the only certainty, and inaction is not an option. Leaders must make decisions amidst incomplete information, shifting conditions, and high stakes.

Successful military strategies involve recognising VUCA as an operational reality rather than an insurmountable obstacle. They train leaders to anticipate change, develop adaptive strategies, and make confident decisions even when the path forward is unclear.

Business leaders can do the same. By acknowledging VUCA as an inevitable part of the modern business environment, they can prepare for uncertainty rather than be overwhelmed by it. The goal is not to eliminate volatility, uncertainty, complexity, or ambiguity, but to develop the resilience and strategic agility to operate effectively within them.

The Psychological Impact of VUCA: Fear vs. Anxiety

VUCA affects not just businesses, but the people within them. Our biological responses to uncertainty—deeply ingrained over millennia—can sometimes work against us. Understanding these responses is key to managing them.

• Fear occurs when we are directly confronted with a challenge.
• Anxiety is the anticipation of a challenge before it happens.

Consider the example of standing in a que for a rollercoaster. As you watch the ride dipping and looping, you might feel anxious about the experience ahead. But once you’re strapped in and the ride begins, fear takes over as you hurtle toward the ground.

These same dynamics play out in business. Leaders may experience anxiety when anticipating change, fearing the unknown. But once they are actively engaged in tackling a challenge, they shift into a more focused and action-oriented state. Recognising this shift—and learning to harness the energy of fear rather than being paralysed by anxiety—can make all the difference.

I am often asked about my experiences in combat situations and how people respond to high-pressure environments. I may have been fortunate that my service time was spent in elite units who had been highly trained and knew how to respond. But after the initial eruption of action—contact with the enemy—things slowed down. Instinct and training combined to react in an appropriate way to the situation. If the situation required an immediate instinctive response, that’s what we did. If we had time, even 30 seconds to think, we took it.

To this day, some 30+ years after leaving the military, I still use the process of Think, Plan, Do. In high-pressure situations, whether in combat or business, this structured approach helps ensure that actions are deliberate and effective, rather than reactive and chaotic.

Transforming VUCA into a Competitive Advantage

VUCA isn’t going away. The question is: how will you respond?

In my life as an Operational Advisor and Interim Leader for financial institutions, my work predominantly revolves around improving portfolio companies under pressure—both stressed and distressed. Although people within those businesses rarely know about my previous military service, I realised that marching up and down the office was a dead giveaway some time back. My unique experience from the military helps me understand and tune into the people on the ground within those businesses. The anxiety and fear they feel are the same as in combat.

Our primitive brain, buried deep within our modern brain, cannot distinguish between a saber-tooth tiger, an enemy ambush, or the stress of falling short of a banking covenant. As humans, our stress hormones create the same effect. Understanding this most basic of human instincts is a superpower. It allows me to guide business leaders through uncertainty, helping them regain control and clarity.

Rather than resisting or fearing change, your competitors are facing the same environment and likely in the same situation. They may be bigger, have more cash, or have shinier products, but if you can turn VUCA to your advantage, reacting faster than your competitors, this could become a competitive advantage. In the military, we call this a manoeuvrist approach—speed of manoeuvre from one activity to another, for example, from defensive operations to offensive operations.

The Future Belongs to Those Who Adapt

VUCA presents formidable challenges, but it also offers incredible opportunities for those willing to embrace change. Leaders who learn to navigate volatility, uncertainty, complexity, and ambiguity will not only survive but thrive.

The business world is not returning to its previous state of predictability. Instead, we must prepare for ongoing transformation. By developing resilience, adaptability, and a proactive mindset, you can turn VUCA from a source of fear into a catalyst for success.

Soichiro Honda – Lessons from a Master Innovator

We’ve all seen the famous logo, and we’ve all encountered Honda’s products at some point—be it their reliable cars like the Civic and Accord, their iconic motorcycles like the Super Cub and Fireblade, or even their powerful generators and lawnmowers. Honda is everywhere, a brand synonymous with quality and innovation.

But how much do we know about the man behind the name? Soichiro Honda’s story is one of grit, resilience, and visionary leadership. From humble beginnings in Japan to building a global empire, Honda’s journey is packed with lessons that inspire not just admiration but actionable insights for leaders today.

What makes his story even more remarkable is how he turned failures into opportunities and setbacks into springboards for success. His ability to connect visionary thinking with pragmatic execution sets an example for business leaders in any industry.

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The Humble Beginnings of a Visionary

Born in 1906 in a small Japanese village, Soichiro Honda showed an early fascination with mechanics. He would spend hours watching vehicles and tinkering with mechanical parts. As a teenager, he began working as an apprentice at an automotive garage, where he honed his skills and developed a passion for engineering.

Despite his humble background, Honda’s ambition and curiosity were boundless. This determination to succeed would become a defining feature of his life.

In the 1930s, Honda founded his first company, Tokai Seiki, to manufacture piston rings. His initial designs were rejected by Toyota, but instead of giving up, he returned to school to refine his engineering knowledge. This early setback laid the foundation for his eventual success.

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Turning Failures into Stepping Stones

Honda’s life is a testament to the idea that failure is not the end but a step on the path to success. After refining his piston ring designs, he eventually became a supplier for Toyota. Yet, his challenges didn’t stop there.

During World War II, Honda’s factory was bombed twice, and an earthquake further destroyed his facilities. Faced with devastation, Honda pivoted. He salvaged materials and began producing motorised bicycles to meet Japan’s post-war need for affordable transportation.

This resilience in the face of adversity allowed Honda to build a business that addressed immediate market needs and set the stage for future innovation.

Leadership Lesson: Failures don’t define you—your response to them does. Leaders who embrace challenges and use them as opportunities to learn and adapt often emerge stronger and better prepared for future obstacles.

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Relentless Innovation as a Core Value

Honda’s relentless pursuit of innovation became the cornerstone of his company’s success. He constantly sought to push technological boundaries, challenging his team to think beyond the status quo.

In 1958, Honda launched the Super Cub motorcycle, an affordable and reliable vehicle that became an instant success. With over 100 million units sold worldwide, the Super Cub remains the best-selling vehicle of all time. This success was followed by groundbreaking advancements, such as the CVCC engine in the 1970s, which met stringent emissions standards without requiring a catalytic converter.

Honda’s philosophy, encapsulated in his statement, “Success is 99% failure,” drove the company to continuously improve and innovate.

Leadership Lesson: Innovation isn’t a one-time effort—it’s a mindset. Leaders who embed continuous improvement into their organisations ensure long-term relevance and competitiveness.

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Align Strategy with Market Needs

One of Honda’s greatest strengths was his ability to anticipate and respond to market trends. In post-war Japan, he identified the urgent need for affordable transport and developed motorised bicycles that met this demand.

As Honda Motor Company expanded globally, he continued to adapt. In the United States, the introduction of fuel-efficient cars like the Honda Civic and Accord aligned with the growing demand for economical and environmentally conscious vehicles. This ability to pivot and tailor products to specific markets ensured Honda’s sustained growth.

Leadership Lesson: Stay close to your customers. By understanding their needs and adapting to market conditions, leaders can ensure their organisations remain relevant and competitive.

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Building a Team of Innovators

Honda believed that great ideas come from collaboration. He fostered a company culture that valued creativity, experimentation, and open communication. His engineers were encouraged to take risks, knowing that failure was a natural part of the innovation process.

This empowerment not only drove innovation but also created loyalty and dedication within his workforce. Honda’s leadership style exemplifies the importance of trust and collaboration in achieving extraordinary results.

Leadership Lesson: Empowered teams drive performance and innovation. Leaders who create environments where employees feel trusted and valued unlock the full potential of their organisations.

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Balancing Vision with Pragmatism

While Honda was a visionary, he never lost sight of practical realities. He paired bold ideas with disciplined execution, ensuring that the company’s growth was both sustainable and scalable.

For example, Honda invested heavily in cutting-edge manufacturing techniques to maintain quality as demand grew. This balance of ambition and operational excellence became a hallmark of the company’s success.

Leadership Lesson: Visionary leaders must pair bold ideas with practical execution. Long-term success comes from balancing innovation with efficient operations.

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Lessons for Leaders

Soichiro Honda’s journey is a powerful reminder that leadership is about more than achieving success—it’s about how you respond to challenges, inspire innovation, and create a lasting legacy.

Here are three actionable lessons for leaders:

1. Turn Failures into Opportunities: Failures are stepping stones for growth. Embrace challenges as opportunities to learn and build resilience.
2. Foster a Culture of Innovation: Bold thinking and continuous improvement ensure relevance and success. Empower your team to experiment and challenge the status quo.
3. Align Strategy with Market Needs: Stay close to your customers and adapt to their evolving expectations. Tailored solutions create loyalty and maintain competitiveness.

By applying these principles, leaders can overcome challenges and position their organisations for lasting success.

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Further Reading

To dive deeper into the concepts explored in this article, check out the following guides:

• Building Resilience: Thriving Under Pressure
  Learn strategies to embrace failure, adapt to challenges, and lead your team with confidence through adversity.
• Driving Innovation: Staying Ahead of the Curve
  Explore how to foster a culture of innovation that propels your organisation forward in a competitive market.
• Adapting to Customer Needs: Creating Value During a Downturn
  Discover how to anticipate customer needs, deliver relevant solutions, and maintain loyalty in changing markets.

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What challenges or opportunities could you address differently by applying Honda’s principles?

Prepare to move,
Trevor

#LeadershipLessons #Resilience #Innovation #TeamEmpowerment #Adaptability #SoichiroHonda #BusinessLeadership #TurningFailureIntoSuccess #MarketInsight #TeamCollaboration

Managing Post-Funding Decisions – Avoiding the OPEX Trap

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Securing an injection of funding is a pivotal moment for any business. It validates your vision and provides the resources to pursue growth opportunities. However, this influx of cash can tempt management teams to expand operational expenditure (OPEX)—particularly through increased headcount—without fully considering the financial impact.

While optimism and ambition are crucial, it’s essential to remember that increasing OPEX too quickly can erode profitability, leaving businesses scrambling to maintain performance rather than improve results. This guide explores how to make smarter, more sustainable decisions when managing post-funding spending, linking costs to revenue, and maintaining profitability.

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The Challenge: The Temptation to Over-Invest in OPEX

One common post-funding misstep is rapidly expanding management headcount or other fixed costs to demonstrate progress. With the average UK management salary at £40,000, adding headcount can quickly escalate OPEX.

It’s vital to calculate the financial impact of these decisions. For example:

• At a 5.7% gross profit margin (the UK average in 2023 and 2024), every £40k in costs requires £702k in additional revenue just to maintain profitability.
• The margin for error is slim, and poor planning can lead to negative outcomes, even in high-growth scenarios.

This makes it imperative for businesses to align spending with achievable revenue targets while ensuring that profitability is preserved.

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The Context: Trends in UK Gross Profit Margins

Over the past three years, the average gross profit margin for UK companies has shown modest improvement:

• 2022: 3.98%
• 2023: 5.70%
• 2024: 5.70%

While these figures represent a positive trend, they also highlight how narrow profit margins remain for many businesses. It’s important to note that these averages vary significantly by industry, meaning your specific gross margin may be higher or lower.

This variability underscores the importance of understanding your business’s unique financial metrics before making significant OPEX decisions.

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Recognise Internal Pressures to Expand Teams

It’s not uncommon for existing management to push for the recruitment of additional subordinates after a funding round. In my experience, your management team will often be convinced they need more heads to handle the additional workload and expectations.

While these requests can have merit, it’s essential not to take them at face value. Don’t assume the need for additional headcount is entirely factual. Instead, work through the specifics:

• What additional effort is required, and is it truly beyond the current team’s capacity?
• Can the workload be redistributed, streamlined, or supported through tools or processes before committing to new hires?
• Will this new role genuinely alleviate constraints or simply create new layers of management?

Taking the time to evaluate these pressures critically helps avoid the “easy option” of expanding headcount unnecessarily and ensures every hire contributes directly to value creation and sustainable growth.

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Challenge the Justification of Additional Costs

I often hear management teams justify a £40k investment by breaking it down into monthly salary terms—seeing it as a manageable £3,333 per month. While this might make the cost feel more palatable, it’s only part of the picture.

Instead, consider the £702k in additional revenue required to cover that £40k annual cost (based on an average 5.7% gross margin). Spread that revenue target over 12 months—suddenly, it’s a staggering £58,500 in extra revenue per month just to stand still.

When viewed from this perspective, does the investment still feel like a “no-brainer”? Reframing the conversation this way encourages leaders to assess whether the additional cost is truly necessary and whether the associated revenue targets are realistic.

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Reframing the Post-Funding Conversation

Instead of asking, “What can we do with this funding?”, ask:

• “How much additional revenue is required to offset new costs?”
• “Are these expenditures sustainable given our profit margins?”
• “How can we optimise existing processes before increasing fixed costs?”

By shifting the focus from spending to sustainability, businesses can avoid common pitfalls and ensure that growth efforts lead to tangible, profitable results.

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Practical Framework for Post-Funding Decisions

1. Understand the Financial Impact of Additional Costs

With average UK gross profit margins at 5.7%, it’s essential to calculate the revenue required to break even on new expenditures. For example:

• Every additional £40k management salary demands £702k in new revenue to maintain profitability.
• To improve profitability, the required revenue is even higher.

This highlights how even modest increases in OPEX can have outsized implications for revenue targets.

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2. Optimise Existing Processes Before Expanding

Use funding to address inefficiencies and strengthen existing systems before committing to increased OPEX. Scaling flawed processes amplifies inefficiencies, leading to wasted resources and reduced profitability. Focus on:

• Automating repetitive tasks.
• Streamlining workflows.
• Enhancing operational systems to handle growth without proportional cost increases.

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3. Invest Strategically, Not Reactively

Expanding headcount is often necessary for growth, but it should always align with clear ROI. Before making new hires, assess whether the role:

• Addresses a critical constraint to growth.
• Will lead to measurable revenue or efficiency gains.
• Could achieve the same outcomes through outsourcing or technology.

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4. Link Expenditure to Revenue-Generating Activities

Ensure that every expenditure contributes directly or indirectly to revenue. For example:

• Instead of hiring additional management, could a combination of junior roles and improved systems achieve similar outcomes at a lower cost?
• Are you investing in sales or marketing capabilities that will drive the necessary revenue growth?

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5. Foster Financial Awareness Across the Team

Educate your leadership team on the relationship between OPEX, profit margins, and revenue. Encourage them to think critically about how each decision impacts the bottom line. This not only leads to better decisions but also creates a culture of accountability and strategic focus.

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Key Questions for Post-Funding Spending Decisions

• Does this expenditure align with our growth strategy, or is it reactive?
• How much additional revenue is needed to cover these costs?
• Are our current systems optimised to handle growth, or are we scaling inefficiencies?
• Could alternative solutions achieve the same outcomes more cost-effectively?

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The Leadership Advantage: Sustainable Growth Over Quick Wins

Post-funding decisions set the tone for your business’s next phase. While it’s tempting to ramp up OPEX to deliver immediate results, it’s crucial to prioritise profitability and long-term sustainability.

By understanding the financial implications of decisions—such as the revenue required to support an average £40k management salary—you can ensure that your growth efforts are strategic, measurable, and sustainable.

At NorthCo, we specialise in helping leadership teams navigate these critical moments. Our tailored leadership and operational support services ensure that businesses maximise the value of their funding while avoiding common pitfalls.

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Conclusion: Grow Smarter, Not Harder

Post-funding growth should be exciting, not stressful. By linking spending to achievable revenue targets and maintaining focus on profitability, you can avoid the OPEX trap and position your business for sustained success.

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About the Author

Trevor is the Managing Partner of NorthCo, a fellow of the Institute of the Motor Industry and a member of the Institute of Interim Management. Trevor is a respected C-Suite leader, Chairman and professional Interim Leader. For over a decade, he has provided interim leadership solutions to private equity, venture capital, and asset-backed firms. Whether it’s to stabilise a business during a turbulent trading period, fill a temporary skills gap or support a management team to navigate challenging situations, Trevor’s wealth of experience and proven track record in delivering value creation and retention plans demonstrate his ability to lead and support operational management teams effectively. To find out more about his approach, explore his LinkedIn profile and read what others say about Trevor.

Come On, Mav, Do Some of That Pilot Stuff

In the iconic scene from Top Gun: Maverick, Maverick’s co-pilot shouts, “Come on, Mav, do some of that pilot sh**!” It’s a moment that epitomises trust, confidence, and clarity of roles. Maverick, the leader in the cockpit, doesn’t hesitate—he does what he’s there to do, performing at his absolute best.

This principle applies beautifully to leadership, particularly at the top of an organisation. A CEO, like Maverick, needs to focus on doing their “pilot shit”—steering the business, making the critical calls, and driving the company toward its mission. But this is only possible if they’ve built a senior team they can look to, left and right, and trust implicitly to do their job exceptionally well. Unfortunately, for many leaders, that’s not the reality they’re living.

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The CEO and the Mediocre Team

I’m currently working with a talented young CEO who finds himself in this very predicament. He’s running a business with incredible potential, yet his senior team isn’t up to par. They’re good, but not great—and in some cases, they’re mediocre. The CEO knows this, but he’s been tolerating it for too long. The consequence? He’s constantly drawn into the weeds, firefighting problems that his team should be solving. Instead of focusing on what he does best, he’s caught up in operational distractions, unable to perform at the level the business demands.

This isn’t uncommon. Many leaders—particularly first-time CEOs—struggle to recognise when their team isn’t cutting it. They rationalise the situation, telling themselves it’s better to stick with familiar faces than disrupt the status quo. But here’s the hard truth: a CEO’s performance is only as strong as the team supporting them. If that team isn’t A-grade, the CEO can’t fly the plane properly.

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Why Trust and Excellence Are Non-Negotiable

For a CEO to focus on their role, they need to know that their senior team is rock-solid. This isn’t about micro-managing or second-guessing—it’s about absolute trust. When a CEO has a capable, high-performing team, they can focus on the big picture:

• Driving strategy: setting direction and ensuring everyone is aligned with the mission.
• Building relationships: managing key stakeholders, whether investors, clients, or partners.
• Making critical decisions: taking the calculated risks that move the business forward.
• Inspiring the organisation: rallying the team around the vision.

When a CEO is forced to micromanage or compensate for weak team members, they lose the bandwidth to excel. Worse, the business stagnates because the leader is operating below their potential.

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The Danger of Accepting Mediocrity

Accepting mediocre performance in a senior team isn’t just a small problem; it’s a silent killer. Mediocrity breeds complacency, and complacency is contagious. When a team member consistently underdelivers, it sends a message to the rest of the organisation: “This level of performance is acceptable here.” It erodes standards, diminishes morale, and ultimately hurts the business’s ability to compete.

In the case of the CEO I’m working with, he’s come to realise that tolerating mediocrity is no longer an option. The business is at a pivotal stage, and to achieve its ambitions, he needs a team that matches his drive and ability. It’s time for a restructure.

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Building the Right Team: A Playbook for CEOs

If you’re a CEO looking to build—or rebuild—your senior team, here are the key steps to take:

Be Honest About Performance Take a hard look at your team. Are they truly delivering what the business needs? If the answer is no, it’s time to address it. Be clear about your expectations and give people the chance to step up—but don’t be afraid to make changes if they don’t.

Define Roles and Expectations Every member of your senior team should have a crystal-clear understanding of their role and what success looks like. Ambiguity is the enemy of high performance.

Recruit for Excellence When bringing in new team members, aim high. Look for people who not only have the skills and experience but also align with your values and culture. A strong senior hire can elevate the entire team.

Foster Collaboration and Trust A great senior team isn’t just a collection of talented individuals—it’s a cohesive unit that works seamlessly together. Invest time in building trust and ensuring alignment.

Hold People Accountable Once you’ve set expectations, hold your team to them. Accountability drives performance and reinforces a culture of excellence.

Be Willing to Restructure Sometimes, the team you started with isn’t the team you need for the next stage. That’s okay. Leadership is about making tough decisions in the best interest of the business.

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The CEO’s Moment of Truth

For the young CEO I’m working with, the challenge is clear: he needs to look left and right at his senior team and see a group of people he can trust unequivocally. Only then will he be able to step back and focus on doing his “pilot shit.” It’s a tough journey, but one that will pay dividends—not just for him, but for the entire organisation.

So, if you’re a CEO struggling to perform at your best, ask yourself this: is your team enabling you to lead, or are they holding you back? If it’s the latter, it’s time to take action. Because at the end of the day, your job is to fly the plane—and you can’t do that if you’re constantly worried about the people in the cockpit with you.

About the Author

Trevor is the Managing Partner of NorthCo, a fellow of the Institute of the Motor Industry and a member of the Institute of Interim Management. Trevor is a respected C-Suite leader, Chairman and professional Interim Leader. For over a decade, he has provided interim leadership solutions to private equity, venture capital, and asset-backed firms. Whether it’s to stabilise a business during a turbulent trading period, fill a temporary skills gap or support a management team to navigate challenging situations, Trevor’s wealth of experience and proven track record in delivering value creation and retention plans demonstrate his ability to lead and support operational management teams effectively. To find out more about his approach, explore his LinkedIn profile and read what others say about Trevor.

Navigating the Winds of Change: Shifting the CEO and Senior Management Mindset in Distressed Situations

In a previous post, Navigating turbulent waters, , I explored how a CEO coach or interim leader can support management teams through turbulent times by offering structured guidance and fostering a mindset shift. My own experience as a CEO in challenging situations uniquely positions me to empathise with the CEO and management team when I am brought in during times of crisis. I understand the weight of responsibility they carry, having been there myself. While I am no pushover, I pride myself on creating a collaborative, supportive relationship, fostering a team environment that allows the leadership group to work together effectively. My role is to help them move from ‘business as usual’ (BAU) to a mindset equipped to navigate distress, maintaining authority with respect and guiding them through a transition toward a shared, strategic vision for recovery and growth.

This collaborative approach is especially critical when the business has breached its covenants, and management teams, understandably, may feel defensive or uncertain about next steps. By prioritising empathy and open communication, we can begin to make the shifts necessary to transform entrenched ways of thinking into proactive, resilient strategies.

Why Changing Mindsets is Crucial in Distressed Situations

When covenant breaches occur, the immediate reaction from senior management is often defensive. This is understandable – the leadership team has likely invested years into developing and executing strategies they believed were sound. But when those strategies falter, it’s imperative to see this as an opportunity to reset, re-evaluate, and create a new path forward.

Shifting mindset patterns in a management team can sometimes feel like navigating sastrugi—(That’s Sastrugi in the image for thei post BTW) those sharp, wind-carved ridges of snow and ice that reshape themselves with every storm. Just as sastrugi require a careful approach to avoid tripping or losing momentum, entrenched ways of thinking within a team need gradual reshaping. By understanding these ridges as natural but mutable formations, we can begin to work collaboratively to smooth out obstacles, helping leadership teams transition from a defensive posture to one of opportunity.

My goal as an Interim CEO is to help the team understand that, while this may be an uncomfortable transition, it is also an opportunity to think beyond the old model and explore solutions that can fundamentally reshape the business. This is where the mindset shift becomes critical: to see this not as a breakdown, but as a chance to rebuild with a sharper, more resilient approach.

Bridging the Gap Between BAU and a Distressed Mindset

When a business is in distress, there is a need for a clear break from BAU. However, rather than dictating change, my approach is to bring the senior team on a journey of honest self-assessment and collaboration. This journey is crucial to achieving a mindset of adaptability and proactivity in challenging times.

Setting the Foundation of Trust and Mutual Respect

• A defensive response, as I saw in the example below, often stems from fear or frustration – both understandable in a high-stakes situation. My role is to balance authority with empathy, allowing the team to feel valued and supported while clearly communicating the need for a change in mindset. Once they understand that their experience is respected, they become more willing to engage in a new direction.

Creating Space for Constructive Feedback

• In high-pressure settings, feedback can be tough to hear. But by creating an environment where honest feedback is received as part of a collaborative effort, not an attack, CEOs and management teams become more open to ideas that drive change. Recently, after a mildly tetchy board meeting where one of the funders shared honest but fair feedback, I noticed the CEO reacting defensively. Given the pressures he was under, the comments understandably struck a nerve. Recognising this as a crucial moment, I pulled him aside afterward and had a candid chat about seeing feedback not as an attack but as an opportunity for re-evaluation. An hour later, he called me with an insight I was thrilled to hear: “I want to thank you for the chat, and I want you to know that I’ve taken your advice onboard. I now realise that it’s an opportunity for us to re-imagine the business.”

Honesty Without Aggression

• In these situations, transparency is vital, but it doesn’t require confrontation. My approach is to provide unembellished feedback with clarity and respect. By presenting the reality of the business’s financial and operational situation without placing blame, the team can objectively assess the challenges and begin to see ways forward. Leaders begin to re-frame the situation from crisis management to opportunity creation.

Fostering a Culture of Innovation and Flexibility

• The greatest transformation occurs when CEOs and senior management teams move from a defensive stance to a proactive one. Rather than clinging to previous successes, they begin to ask, “What’s possible now?” – a question that brings previously unconsidered ideas to light. By shifting the emphasis from “preserving what we have” to “creating what we need,” they start building resilience and agility into the business.

Driving Alignment Through a Shared Vision

• Ultimately, the goal is mutual consent to a new strategy, where everyone understands the vision and is committed to it. With the CEO mentioned earlier, the shift from defensiveness to collaboration opened the door to a re-imagined business model, one that embraced rather than resisted change. This creates a foundation of alignment, allowing the team to drive forward with a renewed sense of purpose.

The Role of the Interim CEO in Shaping a New Mindset

When I’m brought into these situations, it’s not simply to impose authority but to foster a culture that values adaptability, resilience, and mutual respect. Leaders often resist change not out of stubbornness but from a deep commitment to what they’ve built. By helping them re-frame difficult situations as opportunities rather than crises, I help them harness their expertise and passion to redefine the future of the business.

• Check out some case studies of other assignments

Final Thoughts

The CEO’s mindset is the cornerstone of organisational resilience, especially in distressed situations. Through candid discussions, like the one I had with the CEO after that challenging board meeting, leaders can transition from a mindset of defence to one of opportunity. By fostering an environment where feedback is valued, honesty is prioritised, and collaboration is central, the senior team can align on a re-imagined vision, build strength from challenge, and steer the business toward a dynamic, resilient, and ultimately successful future.

About the Author

Trevor is the Managing Partner of NorthCo, a fellow of the Institute of the Motor Industry and a member of the Institute of Interim Management. Trevor is a respected C-Suite leader, Chairman and professional Interim Leader. For over a decade, he has provided interim leadership solutions to private equity, venture capital, and asset-backed firms. Whether it’s to stabilise a business during a turbulent trading period, fill a temporary skills gap or support a management team to navigate challenging situations, Trevor’s wealth of experience and proven track record in delivering value creation and retention plans demonstrate his ability to lead and support operational management teams effectively. To find out more about his approach, explore his LinkedIn profile and read what others say about Trevor.

When businesses encounter turbulent times, it’s tempting to bring in an experienced Interim Finance Director (FD) to steady the ship. With cash flow under pressure and bottom-line metrics needing scrutiny, who better than a finance expert? But here’s the twist: if the issue is operational, a finance-focused leader may only scratch the surface without getting to the core problem.

The Pitfall of the “Obvious” Solution

Imagine a business struggling with classic financial symptoms — rising costs, declining profits, sluggish cash flow. The inclination might be to address these directly, tightening budgets, restructuring debt, optimising cash flow. While these steps may be essential, they often only treat the symptoms, the “obvious” pain points, rather than the root causes.

An Interim FD, for all their expertise, may view operational issues mainly through a financial lens, potentially missing deeper causes beyond the balance sheet. When a business faces operational challenges, it needs an interim leader with an operational background who instinctively asks: “Yes, but what’s the real issue here?” Without this operational insight, a purely financial approach might even compromise the long-term health of the business. Quick fixes aimed solely at financial metrics can create underlying stress points in the operation, resulting in team burnout, reduced efficiency, and ultimately a weakened competitive position.

Finding the Real Issue Beneath the Surface

A true operational problem solver knows that the first explanation often obscures the root cause. They won’t stop at initial answers but look beyond the obvious, drilling into details, understanding processes, and connecting the dots. An interim leader with a solid operational background can be invaluable in this way — they’ve seen how inefficiencies, cultural friction, or outdated workflows create hidden bottlenecks that manifest as financial symptoms.

Avoiding the Advice Trap

In The Advice Trap, Michael Bungay Stanier explores how rushing to provide answers can lead to surface-level solutions, overlooking complex underlying problems. For interim leaders, The Advice Trap offers a powerful reminder: effective problem-solving starts with curiosity, not quick answers.

An experienced operational interim doesn’t fall into this “advice trap.” Instead, they stay open, listen deeply, and ask probing questions, letting the full story emerge and building a multi-faceted view. When they finally act, it’s with a clear understanding of both symptoms and underlying causes.

Practical Questions to Ask

To truly uncover operational issues, a skilled interim will ask questions that go beyond the surface. Here are a few examples of questions that help cut through to the root of the problem:

• “What specific challenges are hindering this process?”
• “Why has this process been done this way until now?”
• “If this challenge were resolved, what new challenges might emerge?”
• “Who else should we consult on this?”
• “What makes this issue complex or challenging to resolve?”

These questions prompt the team to think critically and deeply, helping ensure solutions are comprehensive and sustainable.

Key Characteristics of an Effective Operational Interim

Here’s what distinguishes a truly effective operational interim:

• Curiosity and Open-Mindedness: They dig deep, seeking to understand before acting.
• Empathy and Emotional Intelligence: They can read the room, engaging team members at all levels, creating openness to change.
• Adaptability and Resilience: They stay agile, adjusting their approach when conditions shift.
• Unbiased Perspective: As an outsider, they bring a fresh view, challenging assumptions and spotting hidden issues.
• Results-Focused, Collaborative Leadership: They empower the team to achieve sustainable results, focusing on leaving the team stronger than before.

Getting the Team Onboard

Successful change requires more than expertise; it demands a blend of authority and approachability. The best interims gain the trust and commitment of the whole team — a critical factor in ensuring operational improvements stick.

An effective interim leader knows that true success lies in harnessing the team’s knowledge to uncover solutions and overcome obstacles together. Rather than imposing fixes, they create a culture of collaboration, leading the team to dig into pain points and develop solutions they feel ownership of.

Long-Term Impact and Cultural Shifts

An impactful operational interim doesn’t just solve immediate issues — they build a culture of continuous improvement:

• Creating Momentum for Lasting Improvement: They encourage the team to question practices, creating a foundation for long-term progress and resilience.
• Developing Champions of Change: A successful interim leader empowers team members to be champions of change, leaving behind a team ready to tackle future operational challenges confidently and independently.

Reflection and Call-to-Action

Reflect on your current challenges: Are you tackling surface-level symptoms or focusing on the root cause? When you bring in interim support, are you choosing someone who empowers your team to drive sustainable improvements? Remember, prioritising operational insight over financial metrics alone may be the difference between a short-term fix and long-term success.

If you’re ready for true operational transformation, consider bringing in an operational interim who won’t stop at the first answer but will dig deep and bring your team along on the journey. With the right interim at the helm, operational success becomes a team effort — and the entire organisation moves forward together.

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By recognising the risks of a finance-first approach to operational issues, leaders can safeguard their business’s long-term prospects. True success often requires seeing beyond the balance sheet, aligning operational improvements with a culture that values transparency, collaboration, and continuous growth.

About the Author

Trevor is the Managing Partner of NorthCo, a fellow of the Institute of the Motor Industry and a member of the Institute of Interim Management. Trevor is a respected C-Suite leader, Chairman and professional Interim Leader. For over a decade, he has provided interim leadership solutions to private equity, venture capital, and asset-backed firms. Whether it’s to stabilise a business during a turbulent trading period, fill a temporary skills gap or support a management team to navigate challenging situations, Trevor’s wealth of experience and proven track record in delivering value creation and retention plans demonstrate his ability to lead and support operational management teams effectively. To find out more about his approach, explore his LinkedIn profileand read what others say about Trevor.

We’ve all heard (or even said) it before: “I always give 110%!” That’s The 110% Myth. This familiar phrase might sound motivational, but it’s fundamentally flawed. You can’t give more than 100%, and most of us don’t even have that to spare once life’s other demands are factored in. So, let’s dive into a more sustainable truth: if you’ve only got 20% energy left for work, give it your best shot—100% of your 20%.

In today’s hustle culture, there’s immense pressure to burn the candle at both ends. Yet research shows that pushing beyond reasonable limits only leads to burnout, poor productivity, and frustration. As a leader, recognising this can be a game-changer. Instead of squeezing every last ounce of energy from your team, focus on creating an environment that values well-being and real results. Empower your team to work smartly within their limits, fostering both productivity and job satisfaction.

With trials of a four-day week showing promising results, there’s a real chance to rethink productivity metrics. Instead of hours clocked in, let’s focus on outcomes, quality, and impact. This approach not only aligns with evolving work-life expectations but could make adjusting to shorter workweeks far smoother. Embracing this shift may even future-proof your organisation, paving the way for happier, more engaged employees—and better results.

The Beauty of Realistic Expectations

We live in a world where hustle culture is glorified. There’s this idea that if you’re not burning the candle at both ends, you’re not doing enough. But let’s get real. Pushing yourself to give 110% doesn’t just defy logic; it’s unsustainable. It sets you up for burnout, exhaustion, and ultimately, disappointment when you inevitably can’t meet such impossible standards.

In fact, research shows that working excessively long hours can actually decrease productivity. A study by Stanford University found that productivity per hour declines sharply when a person works more than 50 hours a week. Beyond 55 hours, productivity drops so much that putting in any more hours is practically pointless. Meanwhile, those working 70 hours a week achieved little more than those working 55.

Instead, what if you focused on making the most out of the energy you do have? Imagine being fully present and engaged with the 20% you allocate to your work. That’s not just effective; it’s sustainable. It allows you to be your best self, not just at work but in all areas of your life.

Leading with Empathy and Realism

Now, let’s flip the script. As a leader, this is where you come in. Recognising that your team members have lives outside of work is key to fostering a healthy, productive environment. Perhaps since lockdown and the phenomena of T.W.A.T.s (Tuesdays, Wednesdays, and Thursdays in the office), we need to adjust our leadership style and approach to better reflect what was always true: life doesn’t neatly compartmentalise itself into work and personal time.

In fact, with the UK government seriously considering the implementation of a four-day working week—something that will surely spill over into the private sector—we’re witnessing a broader shift in how we view productivity and work-life balance. Trials of the four-day week across the UK have been promising.

One of the largest trials involving 61 companies found that 92% of participating organisations opted to continue with the four-day week after the trial period ended. Not only did employee well-being improve, but company revenues remained steady or even increased for many businesses.

This shift acknowledges what we’ve always known deep down: more hours at work don’t necessarily mean more output. If anything, they might mean less.

Balancing the Debate: The Other Side of the Coin

While the idea of a four-day workweek has garnered much support, it’s important to consider some counterarguments to this trend. Critics often point out that reducing work hours might not be suitable for all industries, particularly those that rely on continuous operations like healthcare or manufacturing. There’s concern that a shorter workweek could lead to increased costs if businesses need to hire more staff or pay overtime to cover reduced hours.

Furthermore, some argue that mandating a four-day week could limit the flexibility businesses need to operate effectively. In a globalised economy, where companies often compete with others in countries with longer work hours, reducing the workweek might put them at a disadvantage. Additionally, not all employees may benefit equally—those eager for career advancement might find fewer opportunities for growth with reduced work hours, impacting their long-term development.

It’s crucial to weigh these perspectives when considering changes to work policies. A one-size-fits-all approach may not work for every business or individual, and flexibility could be key to finding the right balance.

Practical Application: Making the Most of Your Energy

Applying the concept of giving “100% of your 20%” is both realistic and empowering. Here’s how you can start integrating it into your work and personal life:

• Identify Your High-Impact Tasks: Spend a few minutes each morning to pinpoint the 20% of tasks that will yield the most significant results for your day. Aim to give these your focused attention, tackling them during your peak energy times.
• Set Boundaries and Breaks: Recognise that to be effective, you need moments to recharge. Schedule breaks and set clear boundaries around your work hours, even if it’s as simple as blocking out 10-minute “pause” slots in your calendar.
• Use Outcome-Based Goals: Instead of focusing on how much time you’ll spend on a task, set goals based on outcomes. For example, “finish project proposal draft” instead of “work on project for two hours.” This will help you prioritise quality over quantity.
• Align Work with Personal Life: Since energy is finite, balance your work by integrating it with personal commitments. Plan your week to include time for family, health, and hobbies to ensure that work doesn’t dominate your energy reserves.
• Regularly Assess and Adjust: At the end of each week, reflect on what worked well and what didn’t. Did you meet your outcome-based goals? Did you find yourself low on energy at certain times? Adjust your approach as needed to improve week by week.

Trends and Future Outlook: A New Era of Productivity

We’re witnessing a shift in how productivity is defined and measured, with trends suggesting that traditional “more hours equals more output” thinking is giving way to quality-focused, balanced approaches. Here are some developments likely to shape the future:

• Outcome-Based Performance Metrics: Companies are moving from time-based measures to outcome-based metrics, focusing on the value of what’s accomplished rather than the hours spent. This shift aligns with the evolving workplace, where flexibility and results matter more than rigid hours.
• Rise of the Four-Day Workweek: Trials across various industries suggest the four-day workweek could become a new standard. As more companies report stable or increased productivity with this structure, it’s increasingly likely that reduced hours, balanced with high-impact work, will become commonplace.
• Well-Being as a Core Metric: Companies are increasingly recognising employee well-being as integral to productivity. Businesses that prioritise mental health, offer flexible work options, and encourage manageable workloads are attracting and retaining talent, setting a new standard for sustainable work.
• Increased Automation and AI: As automation takes over more repetitive tasks, employees can focus their energy on high-level work requiring critical thinking, creativity, and interpersonal skills. AI tools may even support work-life balance by automating workflows and providing insights into energy-efficient scheduling.
• Flexibility and Hybrid Work Models: With remote work here to stay, organisations are exploring hybrid models and personalising work schedules to match individual productivity patterns. This flexibility enables employees to align work with their energy rhythms, fostering a more balanced approach to output and engagement.

Supporting Insights

1. Stanford University Study on Productivity: John Pencavel’s research shows productivity per hour sharply declines beyond 50 hours of work weekly, emphasising diminishing returns from excessive hours.
2. The Pareto Principle: Richard Koch’s “The 80/20 Principle” explores how 80% of outcomes come from 20% of efforts, a valuable framework for prioritising high-impact tasks.
3. UK Four-Day Workweek Trials: Research from Autonomy and 4 Day Week UK Campaign showed 92% of companies maintained the four-day work model after trial, seeing improved well-being and steady or increased revenue.
4. Work-Life Balance and Job Satisfaction: Research published in Journal of Happiness Studies links balanced workloads to productivity and organisational commitment.
5. Outcome-Based Performance Metrics: As detailed by Harvard Business Review, measuring results rather than hours allows flexibility, aligning with modern productivity needs.

These insights build a case for prioritising well-being, smart energy management, and a focus on outcomes over excessive hours. Embracing these shifts could foster happier, more productive workplaces and sustainable career growth.

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Enjoy your weekend, and remember: it’s all about working smart, not hard. And maybe, just maybe, start using that 110% energy to plan your next holiday instead.

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References:

• “Working hours and productivity.” The Economist. Available at: The Economist
• “Four-day working week: majority of UK firms in trial extend changes.” The Guardian. Available at: The Guardian

Counterarguments:

• “The Four-Day Week: A Potential Pitfall for Business?” Forbes. Available at: Forbes
• “Productivity and Working Hours: The Case for Caution.” Harvard Business Review. Available at: Harvard Business Review
• “The Economic Impact of a Four-Day Work Week.” Financial Times. Available at: Financial Times

About the Author

Trevor is the Managing Partner of NorthCo, a fellow of the Institute of the Motor Industry and a member of the Institute of Interim Management. Trevor is a respected C-Suite leader, Chairman and professional Interim Leader. For over a decade, he has provided interim leadership solutions to private equity, venture capital, and asset-backed firms. Whether it’s to stabilise a business during a turbulent trading period, fill a temporary skills gap or support a management team to navigate challenging situations, Trevor’s wealth of experience and proven track record in delivering value creation and retention plans demonstrate his ability to lead and support operational management teams effectively. To find out more about his approach, explore his LinkedIn profileand read what others say about Trevor.