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The Business Hierarchy of Needs

The Business Hierarchy of Needs

We, as humans, have needs that change as we grow. Abraham Maslow named and organized these needs in his 1943 paper “A Theory of Human Motivation.” He arranged them in pyramid form with the most fundamental needs at the bottom. He understood the human brain to be a complicated organ which could shift in between needs as they became available and unavailable. For instance, one would not worry about esteem if they are starving since physiological needs were more fundamental to well-being than esteem. However, once one need became well fed, they were ready to ascend the pyramid.

Just like human needs change, as a business grows, matures, and becomes more sophisticated their needs also change. Therefore, I would like to propose a few thoughts on the hierarchy of business needs. As listed in the illustration in this blog post, I have arranged each need for business management with the most fundamental at the bottom of the pyramid.

Automation isn't always the answer.

Automation isn't always the answer.

A business' activities need to be in line with their goal in all three areas: sales, operations, and administration. When the activities don't match the company goal, and move the company forward we call this ineffectiveness. If your business is transacting activities in line with your company goals but could do so in a more practical fashion, then we call this inefficiency. Don't confuse the two, treating ineffectiveness as inefficiency will destroy your business.

Can an accounting standard help you qualify for a loan or worse, can an accounting standard cause you to default on a loan covenant? We are about to find out with the new leasing standard.

Can an accounting standard help you qualify for a loan or worse, can an accounting standard cause you to default on a loan covenant?  We are about to find out with the new leasing standard.

Disruption is a buzz word these days in the business world as business owners and those around them try to predict what is going to impact their businesses and where those disruptions are going to come from in the near future.  Generally, you wouldn’t expect that disruption to come from an accounting standard, but I believe the new leasing standard, formally known as ASC 842, may create a serious impact on businesses who borrow money and those lending the money. 

Why some businesses lead and some fall behind.

Why some businesses lead and some fall behind.
"If I had asked people what they wanted they would have said faster horses." 
- Henry Ford.

I have observed four methods to planning a business.

By planning a business, I'm not referring to a business plan you'd put together for a banker nor an operating plan you might publish for managers and controllers to judge the efficiency of the business. I'm referring to how a company decides what services/products to offer and how the operations team performs/produces them.