When, you pit one group against another in a “Zero/ Sum” environment there will be “Winners and Losers”.  Anytime you create a situation where someone is a loser you create the strong possibility for negative morale.

I see in the process of “Sharing” a much better and more productive approach among the management team.

A definition I prefer regarding management is that managers are ‘Decision Makers’. In other words they are given by the president or CEO the responsibility and the power to ‘make decisions’ which in turn, will support the people who report to them. ‘Decision Makers’ provided the oil the wheels of the wagon need and they focus on removing the barriers which stop employees from doing as good as they can.

The process of sharing among the ‘Decision Makers’  include not only the information needed to make a decision, but the shared process of arriving at decisions on the management level. What this means is that ‘Decision Makers’ are more highly motivated to follow a plan that they were part of creating.

What are some of the things a management team needs to share?

Goals

Knowing what the company’s wide goals are is critical to the success of the company.  If everyone knows where the company is planning to go then anyone can raise the alarm if the company starts to cruise in the wrong direction.

The plan

Understanding the plan and strategies, which are used to achieve that goal, allows individual managers to format their approach. When company goals are broken down to individual department responsibilities, there will be a greater chance of successful reaching those goals.

Current status

It is critical that the management team meets on a regular basis (no less than once a month) to review the current status of the plan. The reports used to provide needed information to the ‘decision makers’ are in their hands no less than two days before the meeting.

What might we do differently?

When the current status report indicates that the company is not on plan, then strategies should be created to get the company back on course or the planned goals should be changed to reflect what is possible.

Sharing with the best

There should be an agreed upon method of communication with the rest of the team. The communication should be on a regular and anticipated basis. If information exists which should not be shared, all managers must be aware and agree.

A final thought: Sharing goals and strategies among the managers results in a very positive and powerful force. The feeling that individuals are all part of a greater whole, help interdepartmental sharing of solutions. When the management team of an organization believes that ‘we are in this together’, not only will goals be achieved, they will be exceeded.

Next: Sharing among employees

Good Management is about bringing all seven areas together. In a small business, the owner is often the only decision maker. This is the simplest organizational structure that uses what we call “Spider Management”. All of the legs of the spider report to the central body or head. This form of organizational structure can be very effective. However, the larger the company the less effective Spider management is.

In a larger business  delegation of responsibility and the requisite authority is necessary for success.  The inability of the owner to “let go” is one of the most common roadblocks to the creation of a capable middle management team and growth. When the owner realizes the value of empowering others, much more can happen.

As the business grows so must the management team. Many companies of size have people in place who are accountable for the performance of others but often, they are not a team. They are more a collection of independent and non-relating decision makers focusing on their own area of concern without regard to the company as a whole. Helping our middle managers to become team focused, and feeling like a valuable part of a team, is an essential task of senior management.

To this end, at Business Navigators we often present the Three Levels of Management:

Managing Tasks – where getting things done is the managers main concern. Though necessary, this level limits a manager’s overall effectiveness. For greater success, the Task Manager must move to the second level.

Managing People – where helping others get things done is the main concern. To reach this level, a manager must learn to evaluate others, communicate well and be a Coach. These skills are essential to reaching and moving beyond the second level of management

Managing Vision – Those who reach the highest level of management see the big picture. They envision how the company will look in the future and include others in the creation of that vision. They are Leaders.

Growing a business will succeed when management teams are successful in all Three Levels of Management. When owners can delegate to middle managers and middle managers act as coaches the team performs. Most importantly, every employee sees their place in the future of the company.

Measuring management performance can be highly subjective. We must do it all the same. Self-evaluation of the Three Levels of Management may be the most important measurement of all. It is, “The Final Accountability, because good management is good business.

Next: Three blogs on “Sharing”

LOCATION

The old real estate maxim has a lot of weight when considering your business. The three most important elements to consider are Location, Location and Location.

Is the location of your building(s) best suited for the customers you serve?

Do they know where you are and can they get to you?

Can your employees serve your present and future customers from the location you have selected?

If visibility is important for your company, can you be easily be seen and remembered as people pass by?

If the answer to any of the four questions is “no” you might consider relocation as a solution.

CONTENTS

The function of each element of the business helps to define the requirements for the form the structure takes. The interaction among departments in a business helps to determine the location within the four walls for each department.

Asking those who are involved with the situation their opinions as to how best to arrange the space is a most effective approach.

At Gabrilson Heating in Davenport, IA Tom Gabrilson decided to get the employees involved in planning the layout of the shop.

Plastic covered blueprints of the warehouse/ shop were posted on the wall. Employees could draw their suggestions on one of the blueprints and the other blueprint was used to present ideas to be implemented. After several months of drawing and decisions a final layout was adopted. Tom believes that this method got better results than if he had used an architect or an engineer.

In one company a plan for reorganizing the shop was submitted not on paper but on a piece of sheet metal cut in the shape of the space and drawings of machines was indicated with a blue magic marker.

Dominic Volpone of the H.J. Ziegler Company, in Ashtabula, OH. spent over a year researching the best arrangement for the space in his new building. He asked for and received the input of employees, staff and vendors involved in all areas of his business. The final outcome resulted in one of the most functional buildings we have witnessed.

If your business includes vehicles that are used for service, installation, delivery of your product or service they should be included in the scope of Physical Plant.

The arrangement of contents of vehicles should receive the same focus of organization and planning that traditional building space receives. They are seen as a representation of your company from the inside the outside and are one of the most powerful marketing tools provided you can own.

Next: Management – Final Accountability

The product that a governmental agency “Children’s Services” provides would seem to be quite intangible while the product of a manufacturing plant certainly could be more easily weighted and measured.

Product that is installed or delivered might be counted by statistical means, but how can “Children’s Services” enumerate their production?

in every business I have encountered for the ultimate success of the business, counting production must take place.

Some of the assets, which incorporate all production, are: People, Time, Materials (raw or finished), dollars and quality.

PEOPLE

Measurement of people can include:

• How often do they miss or attend work?
• How many times does their work need to be redone?
• Is their attitude toward what they do positive?
• Have they added ideas or actions, which improved production

TIME

Evaluation of time can focus on:

• Is the time allocated to a part of all of production sufficient to allow the work to be completed? Should more time be allotted?
• Can the time be reduced without losing quality?

MATERIALS

Counting of materials can be directed toward:

• Do we have a sufficient supply of materials to complete the work anticipated?
• Can we reduce the amount of inventory without losing production?

DOLLARS

The observation of money needed for production could concentrate on:

• Will our current cash flow provide us with the revenue needed to support both Cost of Sale and Overhead requirements?
• Do we have resources outside of current and anticipated revenue?

QUALITY

The assessment of quality conditions might include:

• Are our quality standards clearly defined and are they measurable?
• Is the impact of decisions made in the other six areas supporting our quality standards?

The simple questions I have recounted will have an impact on the types and methods used in counting production.

Production is what you sell and your focus on measuring company success has to include this element. Counting Production will guide you toward success. Ignoring it will help failure.

Next: Physical Plant Also Counts

There is a lot of truth in that statement. But, often I see that many sales are unconscious and not on purpose.

We all know those, on both sides of the sales equation, who are confused about value and cost. Many salespeople I meet believe that price is the one thing that determines the success of their selling.  “If he, the owner, would just sell at a lower price then I could make more sales.”

It’s my belief that the price driven market is not filled with salespeople at all but order takers. Sales is the art of persuasion and it is an art.

Just as athletes measure their performance and the results so that they can improve so should salespeople.

Among those elements a salesperson should measure are the following:

1. 1. Pre-qualifying leads. When marketing provides a lead it is to the benefit of the salesperson to analyze the probability of success they might enjoy.

There are indicators which, when discovered, will help the salesperson to estimate the percentage of possible success.

Among these are:

1. Age
2. Gender
3. Marital status
4. Income
5. Employment
6. Owner or Renter
7. Immediacy of need

How often is the salesperson successful with each of the preceding indicators?

1. 2. Some elements of the sales call
   1. Observation skills: Can the salesperson, like Sherlock Homes, deduce from the surrounding of the prospect (type of houses on the street, upkeep and care of the home, boats in the yard and pictures on the wall) what kind of people these are and what approach would be best suited for success?
   2. Questioning skills: Does the salesperson ask questions which provide indicators of need or other readiness to buy signals. Do question clarify objections the prospect may have to a purchase? How often does this work?
   3. Answering skills: Does the salesperson have the ability to clearly respond with solutions to needs or emotional and rational responses to objections the prospect may offer?  What is the number or percent of success?
   4. Closing Skills: Can the salesperson ask for the order and help the prospect to make a buying decision? How often does this happen per every ten calls?

1. 3. Close rate: Out of all the appointments with prospects, what number or percentage purchased?

1. 4. Mining for referrals: Sometime after the completed sale, what is the percent or number of qualified prospects a sales person gets from a completed sale?

If a salesperson was to track his success with these elements of the sales experience and use the results of the tracking analysis to modify his behavior, then like the athlete he would have a conscious approach to sales and would be doing things on purpose.

Next – Counting Production

Included in marketing are both free public relations and paid advertising.

There are many things a company can do to get exposure outside of paid advertisements. These things include supporting events, sports teams, bands, or charitable causes. In fact, any public relation focus will work. Causing print, radio or television to focus on the company as part of a human interest story or an announcement concerning a newsworthy event regarding the company will work.

Paid advertising not only includes commercials on television and radio or paid print advertisements but also signage on trucks, uniforms, letterhead and information on hold.

The assets any company directs toward marketing are, of necessity, limited. While it is normal for a retail focused company to spend 8% or more of their gross revenue on marketing efforts, the service industry traditionally spends much less than half of that amount or, less that 4% of gross revenue.

In many service companies with whom I have worked it is not unusual to see 2% or even 1.5% as a marketing budget.

To make certain your marketing efforts are a good use of your money you need to track your current budget (to be sure you don’t overspend) and analyze the effectiveness of each marketing strategy.

A good way to track marketing effectiveness is to create a system which counts the number of:

1. Leads – This should include any and all types of quality from –hot to not.
2. Prospects – Includes where there is a presentation and a decision to buy is offered.
3. Sold prospects – Work is performed and the company has been paid.
4. Unsold leads –
   1. Those who purchased elsewhere and why.
   2. Those who have not yet purchased and why.
   3. Unsold prospects.

Those categories of leads should have the lead source or sources also listed.

You may find that a particular marketing effort may create a large number of leads but very few prospects and almost no sold prospects. Some believe that big display ads in the yellow pages are in the front of this category.

The final element that is needed to make measuring marketing effective is a consistent program of analysis.

At a minimum, quarterly marketing review meetings should be held where members of the team can confirm the wise decision of budged allocation or the need to change the way the company goes to market.

Next – Tracking sales

This time let’s focus on the Counting of Money.

A most valuable tool is the Profit and Loss statement. Based on a useful myth the P & L pretends that two things are true.

1. All money owed to the company has been collected.
2. All money owed by the company has been paid.

In that regard, P & L’s are never completely correct. However, they are very useful tools because they can determine.

1. Revenue status, often, divided by profit centers.
2. Cost of sales expense, often, divided by profit centers.
3. General overhead, costs that cannot be allocated to specific jobs or sales activities.

Revenue minus Cost Of Sale equals the Gross Margin and tells us if the fee we charge for the work we do is enough. It is also a strong indicator of company productivity and when accompanied by percentage indicators (all off of total revenue) can quickly tell us the areas to focus on for positive change.

Gross Margin minus General Overhead costs indicates Net Profit and Net Profit is the money we use to pay expenses on the Balance Sheet.

A word about attitudes toward profit: It used to be that owners viewed profit as “the money the government taxed”. It was the advice of many accountants to manipulate the figures to show a loss and therefore avoid taxes. The problem with that old view and practice is that those who do so find it difficult to get lines of credit from banks or suppliers. Perhaps most importantly there is no clear focus on the real measure of the company’s success or failure to perform.

I am constantly amazed how many small to medium businesses do not have timely monthly P & L’s. To a lesser degree, how many companies with monthly P & L’s do not review them with the management team on a consistent basis.

How can you see where the rocks or open seas are if you don’t check your position?

Other financial measurement tools of important value are:

• Accounts Receivable Ageing Report – Who owes you money and for the longest time.
• Accounts Payable Ageing Report – Who do you owe and for how long?
• Cash flow projections- When is money coming in and when will it be going out?
• Balance sheet – What is the Changing Status of long-term debt, receivables, payables and inventory?
• Job Costing – What is the gross margin dollar and percentage amount of the most recent work we have done?

Timeliness, Accuracy and Active Review of the financial status of your company are among the most important counting you can do.

Next – Measuring Marketing

• Current position?
• Does the ship leak?
• Quantity of fuel?
• How far could we travel?
• What are possible destinations?

It is my belief that gathering information and then counting is a primary source of success when that information aids in the decision-making process.

Every Business we work with consists of seven areas:  1. Office, 2. Accounting, 3. Marketing, 4. Sales, 5. Production, 6 Physical Plant and 7. Management

Often, people assume that area #2 is relegated to the accounting of money, but in fact our concern goes far beyond money alone.

Please, don’t be confused. Money is the fuel that drives the engine of the ship and knowing how much fuel you need and how much you have and how much you can expect to get is critical. But there are many more things to count in a business.

It is helpful to decision-making if a company counts and evaluates.

1. Productivity of support staff.
2. Timeliness and accuracy of reports.
3. Effectiveness of Marketing efforts.
4. Success of Sales staff.
5. Productivity of field personnel.
6. Use of space within the buildings and trucks.
7. Effectiveness of the Management team.

In each of these areas objective quantifiable measurements have to be used and standards of compliance must be created.

No report or analysis is worth the time unless within a 12 month period it has been actively used to make decisions “to do things differently”.

When you look at Office personnel some areas you might count would be:

1. How many phone calls can be handled effectively by the call takers?
2. How quickly are customer service questions and problems answered or resolved?
3. What is the ration of correctly filed material to that which is misfiled?
4. Are communications with internal and external Customers clearly executed and correct?

In the next few posts I will continue to share some of my specific observations and perspective regarding counting in the six remaining areas of business.