Do You Appear Too Powerful to Your Employees?

A number of years ago, I did some work for a large service corporation, one with over 10,000 employees. While I was there, I got to know a young person who worked there. This was his first job in a large corporation and he was frustrated. He felt that he could not get along with his manager and that his manager did not like him or treat him fairly. From everything I could see, this person was doing a good job and I did not understand why he felt that way.

I made a recommendation: before doing something that could have a significant and possibly negative effect on his career, I recommended that he sit down and talk to his manager, and tell him how he felt. I suppose that there are those who think that my suggestion was foolish, but I had not seen any sign from the manager that he felt this way about the young person.

The conversation took place, and the result surprised the young person. The manager apologized to him for the misperception. The manager’s remedy was also a great one. Starting the following week the manager and the young person would have breakfast together once a week and they would not discuss business. Rather, they would take time to get to know each other better.

The weekly meetings ensued, and in this case, they worked out very well. The manager and his employee actually became good friends, which they remain today. But even more importantly, the young person was able to use the mentoring he received from the manager to make significant growth that I know helped him enhance his career. The young person also learned an important lesson in management.

What is the lesson in this for us? Not that as a manager you need to be every employee’s best friend, but that you be open to understanding how you come across to other people in ways that you may not even realize. In particular, if you are the owner or head of a small business, you may be perceived by employees as being very powerful and hard to approach, in particular among your junior staff. Be aware of this when you are managing people, and be open to listening to your staff, and it will help you grow a business of loyal employees.

Sustaining Growth

Every business owner wants to be successful; or at least all of the business owners I know do. However, there are a significant number of businesses that do not succeed in the long term because of how well they succeed in the short run. Most often, this is because the business grows more quickly than their cash flow allows (see Its Cash That Counts and A Simple Tool to Calculate and Track Cash Flow). Adequate cash flow is vital to the success of any business, and it is possible to analyze your company’s financials in order to predict the rate of growth that your cash flow allows.

Allowable Growth Rate will tell you how fast your company may grow without changing any external financial inputs, such as increasing equity financing or loans. The lesson here is to know what your company’s allowable growth rate is without such financial adjustments and then be ready to apply the adjustments when needed. Negotiate the additional equity or loan before you need it!

This posting will look at the Allowable Growth Rate Formula, and next week will follow with a practical example. Here is the formula for Allowable Growth Rate:

AGR = Net Profit Margin  X  Rate of Retention  X  Asset Turnover  X  Leverage

Net Profit Margin: The first term of the formula is simply the percentage of your net profit, which is Net Income divided by Revenues. The formula presumes that the first source of operating cash is your company’s profits. Recall that I mentioned above that this formula addresses the allowable growth rate without external financial inputs. If your company does not yet have net profit, you will automatically need external financial inputs in order to operate at all, let alone grow.

Retention Rate: Retention rate refers to the amount of Net Profit that is retained within the company. For example, the company may be obligated to pay a dividend out of profits, or as the owner, you do not take any personal salary until after all other expenses are met. The retention rate is calculated by dividing the amount of profit retained in the company by the total of net profit.

Asset Turnover: Asset turnover refers to the number of times in a year that your company uses a dollar to move its operations forward. It is calculated by dividing the company’s Total Assets from the Balance Sheet by Revenues. Asset Turnover is a way of looking at how efficient your company is with its resources. This is important for determining your company’s growth rate: the more efficient that your company uses its resources, the greater the allowable growth rate.

Leverage: Although not everyone agrees with me when I state it like this, but Leverage basically tells us who owns what in a company (see DuPont Analysis: Capital, Debt and Equity). If the total capital in a company is $150,000, and the owner’s equity is $100,000, then that means that there is also $50,000 in debt (belonging to the bank or other individual or entity). In this case, capital divided by equity equals 1.5. Debt is used as a lever to increase the amount of capital available to operate the company. In many small companies, there is no leverage because the company has not taken on debt.

Next week, a practical application of the formula.

Effective, Efficient, Repeatable Processes

There are times, when dealing with different situations in business, when I remind myself that patience is a virtue. I ran into one of those times recently, though I will not release any names in order to protect the guilty! In this case, not only is patience a virtue, but the creation and maintenance of effective, efficient, repeatable and most of all, documented processes could have saved a large amount of virtue expended on my part!

Whether your business is large or small, when you reinvent the wheel with every new business opportunity, you are wasting precious resources. Even worse, when process is informal and undocumented, you could be wasting the precious time of a client or a vendor. This is essentially what happened to me. Had I known what was expected of me when interacting with this vendor, we could have been much more efficient. Imagine what might have happened if vendor employees had known what to do as well.

The first quality of a good business process is to be effective. In other words, the process is intended to accomplish something specific and is designed to do so. Forgive the old adage, but if you don’t know where you are going, you are very likely to wind up there! When designing process, always begin with the end in mind, and be certain through testing that the process actually accomplishes what is intended.

The second quality of a good business process is to be efficient. This means that the process should only include only those inputs, outputs and steps that are absolutely necessary to accomplish the end in mind. Many of us have a natural tendency towards complexity and we must resist at all costs. When you are creating business process, ask at each step along the way, “Is this really necessary?”  Think of the other person, be they client or vendor, carrying out the process; will they be muttering under their breath as to why they must perform this action?

The third quality of a good business process is to be repeatable. As mentioned above, the height of inefficiency is to do the same thing a different way every time (or was that insanity?). A process that is repeatable will gradually build up a body of experience that will help to increase efficiency and reduce performance time.

The fourth quality of a good business process is to be documented. What others don’t know they cannot follow! If a process lives only in someone’s mind, then there will be a constant battle to get the process done well. Of course, there are those who would like to preserve their position by keeping control, but that rarely works in the long run.

A final lesson here: a truly agile business will also have a process that handles exceptions to the rule. When an effective, efficient, repeatable and documented process produces an unexpected result, business agility requires that another process be available to handle the exception.

These simple, common sense ideas can keep all of us from expending too much of the virtue of patience!

Genial Relationships and a High Performing Management Team

There comes a time in the life of many small companies when outstanding performance leads to growth. The small company no longer consists of the founder and a handful of employees. At some point, it becomes apparent that the founder cannot manage every aspect of operations, much as they would like. The company now needs a management team.

Forming any management team, let alone a high performing management team, is a challenging task. What follows is not a complete guide to the process of forming a management team, but a few ideas that I believe may be lost along the way. Among them are: a genial relationship among managers and commitment by the managers to each other, and to the company.

In the age of demanding executives, it would seem that the way that people relate to each other is less important than it might have been one time. I don’t have to mention names for anyone to think of one executive or another that is highly demanding with their team and less than cordial when their demands are not met. Despite the fame of these highly successful people, I believe it to be the exception rather than the rule.

In the instance of a small company management team, I believe that a “genial relationship” among the team is a crucial element to be high performing. Now, I don’t expect that a management team will restrict their social circle to the team, nor that every member of the team must be best friends, but I do believe that if any member of the team is not well disposed to every other, then there will be problems. By genial, I do mean that when members know each other, their strengths, weaknesses and style, it is much easier to develop the cohesiveness necessary to be high performing.

That is where commitment comes in. I do not describe commitment as a general feeling that one has towards others, but rather the specific things that each member of the team commits to one another and to the company. For example, the management team members must commit to clear communication with one another. Finding out about problems indirectly can be the cause of dissension on a team, so each member ought to commit to going directly to another team member when there is a problem. When team members know each other well and share a genial relationship, it is possible that communication can concentrate on a problem, rather than a person.

Management team members ought to commit to the company strategy. This does not mean that there should not be discussion or disagreement on the development of the strategy, but that such discussion, disagreement and eventual consensus around strategy should focus on the business, not the relationships among the management team.

Finally, management team members ought to commit to the success of each other and the recognition to each other’s success. Becoming successful by pulling another team member down is rarely the path to long-term success for oneself. Helping another team member that is struggling strengthens the whole team. Success is rarely a one person achievement, so that recognizing the participation of another management team member and their employees in one’s own success will lead to a more sound management team.

Great Customer Service is No Accident

Nothing brings out the bulldog in me more quickly than poor customer service. Recently, the bulldog has had too many occasions to come out! In one case, a company website where I was trying to pay a bill was not working. The site was quite rudimentary for a $6 billion dollar company, with no help function at all. When I called the only number listed on the site, I went through the “pass you on” routine, with lots of hold time during which I was told how important I was to their company.  Finally, I reached the office of the right person to talk to, but she was on vacation. I sincerely hoped that she would make it back from vacation else I might never be able to pay my bill online (or anyone else, for that matter).

In another instance, a well-known delivery company left me a form to sign to have a package delivered on the second attempt. I even called the company to let them know that they could leave the package in the foyer and that I would sign the form. The next day, I found a second form next to the first. When I called this time, the customer service person could not tell me what happened and passed me on to the local terminal.

After a couple of tries, and more messages about how important I was, I reached the terminal manager. The manager explained to me that company regulations did not allow them to leave the package in the foyer of my condo. To put a quick end to the story, about fifteen minutes later when I removed my teeth from his leg (figuratively, of course), he agreed to have the package left as I had requested.

Customer service should be in the DNA of every company, and it does not happen by accident. Based on my experience, both as a customer and as a service provider, here are some guidelines to great customer service:

  1. Every employee of a company is potentially a customer service agent. Even amid the myriad choices in a company’s voice response system many people get through to one employee or another. Therefore, all employees must be trained and ready to handle customer service at a triage level, that is, be able to understand the problem and get the customer to the right place the first time.
  2. There should never be a circumstance where the only person who can solve the problem is not there. When there is a technical problem, multiple experts must be on hand. For a small company, this may mean having experts on call. With today’s technology, reaching a person who can solve a problem should not be a problem.
  3. Customer service representatives must be given reasonable authority to solve a problem. Repeating company policy is not a solution. Nor is saying, “My supervisor is not here right now, he will call you back.”
  4. At the very least, customer service representatives, supervisors and managers must learn how to ask questions and listen, not only to understand the problem, but ascertain what the solution is that the customer wants.

Finally, a suggestion to all companies: please stop using the “your call is important to us” routine!

I’ll Just Do It Myself

We have all experienced it in our small business, time is tight and a crucial task must get done. You have explained it (you thought) to an employee but the task is not getting done. Or worse, it is not done the way that you want it done. In order to cope with the frustration, you decide that it is just easier to do it yourself. Then, you wonder why you are working 16 hour days, staying longer than any employee.

I am sure that most of you have been in this situation on many occasions. The problem is that if you can’t find a way out of it, not only will you continue to work those long hours, but it will be very hard to grow your business. You just can’t do everything yourself! What to do? Here are three ideas that may help: concentrate on your strengths and delegate your weaknesses, document well any process that you will delegate, outsource any business process that is not in your businesses’ core competencies.

Concentrate on your strengths and delegate your weaknesses. We are all better at some things than others. Some of us are detailed oriented and well organized, while others work well with the overall themes and direction of a company. The former will probably be better at operations and the latter at setting strategy and guiding marketing campaigns. One of the keys here is to completely honest with about what you do and don’t do well. It is hard to assess yourself by yourself, so don’t be afraid to call on a trusted advisor to help.

A useful exercise when you are trying to determine your role in your company is to create a diagram of the “buckets” or areas of work that you do. You might be surprised by what you find! Once all of your buckets are defined and the activities they include are outlined, you can review more objectively what you are good at and what might be delegate. Doing this exercise with a trusted advisor will add to the depth of understanding that you may gain.

Document any process that you will delegate. Since you have created most of the processes in your company, you know it really well. However, our tendency is to assume that when we explain a process to another, they will catch the nuances without a great deal of detail. I once helped a business owner that thought that a 15 minute explanation of a process that had been honed over several years was all that was necessary. Proper documentation, including the steps of the process, perhaps a diagram of the process flow and a list of the meaning of the terms used form the basics.

There are many useful tools to use when documenting process. Personally, I like to use the different tools that originated in lean concepts are helpful.
Outsource any process that is not among your company’s core competencies. In a small company that is starting to grow, there are many processes that are not among the core competencies. As the company grows, it becomes harder to perform some of these processes with internal staff that are not specialized. Payroll, human resources and benefits come to mind for many companies.

Using these three ideas can help you delegate work more effectively and find more time for yourself.

Not Another Meeting!

I shudder to think of how many meetings I have attended during the last decade. Late in the afternoon, when I review my schedule for the next day I am tempted to ask the question, “Am I working tomorrow or going to meetings?” Many of the meetings I have attended in recent years included people on multiple continents and varying time zones. I have come to believe that the meeting may very well be the bane of modern business.

On the other hand, I must profess guilt at having been the instigator of many of those meetings. Running a business in a collaborative manner demands meetings. If this is to be so, it is imperative that meetings be well run and productive. Here are 4 tips that will help improve your meetings.

Have an objective: An old saying says it all, “If you don’t know where you are going, that’s likely where you will end up!” In order to avoid meetings that wander all over the place and never really come to a conclusion, have a clear objective for your meeting. Be sure that every person coming to the meeting knows the objective, and is prepared in advance to achieve the objective.

Have an agenda: A meeting without an objective will go nowhere. A meeting without an agenda will meander along the way, whether or not there is an objective. An agenda of precise topics that meeting attendees are prepared to take up will help maintain the group’s focus and promote productive conversations. Meeting attendees should be expected to be well prepared in advance. Nothing kills a meeting quicker than a group that is not prepared.

Have a timetable: The meeting should have a set beginning time and ending time, and these should be adhered to. Start the meeting at the appointed time, no matter how many attendees are missing. End the meeting on time as well. Attendees will lose any enthusiasm they may have for the meeting if they know in advance that the meeting will drag on forever. Attendees should have an idea of how long they may speak to any topic so that a “run-on” participant does not hijack the meeting. In addition, don’t be afraid to end a meeting early if all the work has been accomplished.

Have a moderator: It is often difficult to chair a meeting and be an active participant at the same time. Consider having a neutral moderator whose purpose is to keep to the agenda, direct traffic among participants and generally keep order. In small companies, it may be hard to find the extra person who is not actively involved the subject at hand, but for the more important meetings it can be a great help. For mission critical meetings, you may even want to consider hiring a moderator from outside the company. Of course, it then becomes essential to brief the moderator in advance of the session.