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“There is no ‘there’: Employee Engagement is a journey, not a destination.”

Can you imagine your employees looking forward to coming to work?  Can you imagine them working for a higher purpose than just collecting a paycheck?  Can you imagine them committed not only to discharging their own duties and responsibilities, but also to helping the company achieve its long-term goals?  Can you imagine your employees so engrossed by what they’re doing that they lose track of time?  Well, that’s the promise of Employee Engagement.  And the prize for building an “engaged” workforce?  Discretionary effort . . . meaning employees will willingly devote their maximum effort to their work because they want to, not because they have to.  Contrast that with ordinary effort whereby employees put forth only enough effort to keep their jobs (and their paychecks).  By tapping into discretionary effort, you get higher productivity, superior customer service, and as a result, higher profitability.  That’s why the business world has finally realized that Employee Engagement is good for the bottom line. Do you think you’ve got the “right stuff” to build an engaged workforce?  To find out, please continue reading below.

Are we almost there yet?

“There is no ‘there’: Employee Engagement is a journey, not a destination.”

~ Bob Kelleher, author of “Employee Engagement for Dummies”

 SilkRoad, a human capital technology firm, did a 2013 study in which they determined that less than 40 percent of companies do anything at all with Employee Engagement, despite the fact that an engaged workforce provides the company a significant competitive advantage.  Why?  Because Employee Engagement is not for the faint of heart.  Building an engaged workforce ain’t easy.  It takes time, it takes effort, and above all, it takes commitment.  As Thomas Edison once said, “Opportunity is missed by most people because it is dressed in overalls and looks like work.”  So it is with Employee Engagement

Interestingly, of the (less than) 40 percent of companies that do give Employee Engagement a nod of some sort, many of them treat it as a “program.”  Employee Engagement is not a “program.”  It’s not something that needs to be funded on an annual basis, nor is it something that gets a scant few minutes at the bottom of a weekly staff meeting agenda.  It’s a way of doing business.  It’s something that gets absorbed into the fabric of the company and its culture.  It defines how things are done and how things are communicated throughout the organization.

Another mistake people make regarding Employee Engagement is the belief that it is the same thing as “employee satisfaction.”  It’s not . . . not even close.  Employee satisfaction is about the quality of your group health insurance coverage, how big a contribution the company makes to the 401(k) program, and whether or not you have a ping pong table in the break room.  Not that there’s anything wrong with those sorts of perks, but they don’t drive performance and productivity.  Employee Engagement does.

Employee Engagement is driven by the company’s culture.  Therefore, before employees can or will become fully engaged, certain characteristics of the company’s culture must be in place.  Those include:

  • Challenging work
  • Continuous learning and improvement
  • Job autonomy (working without close supervision)
  • Supportive managers and/or supervisors
  • A climate of respect and trust
  • Work/life balance
  • Economic security (trust that the company’s financial health is being well-managed)

So, as you can see, there is a lot of foundational work to be done to a company’s culture before Employee Engagement will take root, not the least of which is the company’s hiring practices.  For instance, are we screening for people who can work independently without a lot of close supervision?  When we are hiring managers and supervisors, are we attempting to screen out those who might have micro-management tendencies?

As we have said, building an “engaged” workforce is not something you can do overnight.   It takes time and it takes effort . . . which is what makes Employee Engagement a significant competitive advantage.  If it were fast and easy, everyone would do it and there would be no competitive advantage for anyone.  So are you going to ignore the trend toward Employee Engagement and allow one of your competitors to beat you to the punch?  Or will you seize this opportunity to capture the high ground while your competitors are napping?  The choice is yours.

If you like the sound of Employee Engagement but don’t know where to begin, contact us.  We can help.

 
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“We are what we repeatedly do. Excellence, then, is not an act, but a habit.”

In their book, “The CEO Next Door,” consultants Elena Botelho and Kim Powell talk about “The 4 behaviors that transform ordinary people into world-class leaders.”  They base their findings on studies of over 2600 leaders.  While any individual leader may display a wide range of behaviors, Botelho and Powell argue that there are just four that all leaders tend to have in common.  However, one of those four behaviors (in our judgement), towers over the other three.  To learn what these transformational behaviors are that the authors describe, and to learn what we believe to be the most important of the four, please continue reading below.

 “We are what we repeatedly do.  Excellence, then, is not an act, but a habit.”    ~ Aristotle

In no particular order, here are the four behaviors found in “The CEO Next Door” that the authors believe all great leaders exhibit.

  1. Decide: Speed Over Precision. Great leaders don’t fire from the hip, and they don’t make decisions recklessly or capriciously, but nor do they allow themselves to get tangled up in “analysis paralysis.”  They don’t delay things in hopes of a perfect decision when a good one is already at hand.  Steve Gorman, former CEO of Greyhound Lines, said it this way: “A potentially bad decision is better than a lack of direction.”  A CEO  who delays, delays, and delays making a decision while dithering over the details doesn’t exactly inspire the confidence of his or her organization.
  2. Engage for Impact: Orchestrate Stakeholders to Drive Results. There is little, if anything, a CEO can do to single-handedly drive the company forward.  A CEO can set a direction and formulate strategies, but ultimately, those need to be carried out by others.  Knowing the truth of that, great leaders are consensus-builders.  Not that they try to run a democracy . . . the final decisions are still theirs to make . . . but they do try to get as many stakeholders as possible (employees, customers, vendors, etc.) to understand and support what the CEO is trying to accomplish.  A CEO who isolates himself or herself from the rest of the organization and tries to rule by edict is almost certain to fail.
  3. Relentless Reliability: Deliver Consistently. Every CEO must earn the trust of his or her organization.  And the best, most direct way to earn that trust is for the CEO to be utterly reliable and to behave in ways that are consistent from one day to the next.  Let’s look at those two traits a little more closely.
  • It’s simple.  Don’t promise what you can’t deliver, but absolutely deliver what you do promise without fail.  Your word is your bond.  And this goes for everything both large (i.e., negotiating a new contract with a major customer) and small (i.e., arriving at a meeting on time).  When you agree to do something, your people need to forget about it, safe in the absolute knowledge that it’s going to be done, done right, and done on time.  And by the way, this is a behavior you’re modeling for the rest of your organization, and over time, you should demand it of everyone else.
  • Consistency and reliability are two sides of the same coin. Don’t rigorously enforce company rules one day and let them slide the next.  Don’t be a mellow fellow in the morning but turn into an ogre by lunchtime.  The way you solve problems and make decisions should be fairly predictable by those around you.  In short, you should operate by the “Doctrine of No Surprises.”  If your people could reasonably say about you, “We never know what the guy’s going to do from one minute to the next,” you will have a tough time building a firm foundation of trust.
  1. Adapt Boldly: Ride the Discomfort of the Unknown. According to H.G. Wells, we need to “adapt or die.”  If you don’t believe it, just look at Kodak, Blockbuster, or Borders to name only a few.  Change is an inescapable aspect of business today, and the rate of change has been accelerating and continues to accelerate. Technologies are constantly changing as are market conditions and government regulations.  Yet our leaders are expected to not just react to these changes, but to anticipate them and spot places where these changes may bring new opportunities.  Like it or not, today’s CEO must confront the unknown . . . must continuously face conditions he or she has not faced before and for which there is no real precedent.  Under these circumstances, a successful CEO, when confronted with a pile of manure, must have the strength of conviction that there’s a pony in there somewhere.

 Our choice for the behavior that’s head and shoulders above the others is #3, Reliability and Consistency.  They are the building blocks of trust without which the other three behaviors will never be able to take root.  Consider:

  • Without trust, people will not follow a leader’s decisions, whether they’re made fast or slow.
  • Without trust, a leader will be unable to gain the stakeholder support he or she needs to accomplish anything meaningful.
  • Without trust, a leader’s people will not follow him or her into the unknown, making the leader’s task of adapting to changing conditions almost impossible.

Here we have focused only on what behaviors “The CEO Next Door” says a strong leader must have.  We haven’t said anything here about how to develop those behaviors.  So if you think you may be deficient in some of these behaviors but need help developing them, the book will tell you how.  Pick up a copy.

Or, if you don’t want to get your leadership training from a book, call me.  I’ll be glad to help.

 
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“Ideas are cheap. Ideas are easy. Ideas are common. Everybody has ideas. Ideas are highly, highly overvalued. Execution is all that matters.”

We were recently at a meeting where several of the people there started talking about a book they had read, “The 4 Disciplines of Execution” written by three top executives of the FranklinCovey Company . . . Chris McChesney, Jim Huling, and Sean Covey (son of Stephen Covey, who was a founder of the FranklinCovey Company and author of “The 7 Habits of Highly Effective People”).  Execution is a compelling topic because no matter how good an idea you have, and no matter how thoroughly you plan to bring your idea to life, it will all go for naught if you don’t execute your plan well.  So the boys from FranklinCovey give us their take on the four disciplines you must have in place if you’re going to execute a plan well.  But we believe there is a fifth discipline . . . arguably the most important discipline . . . that needs to be in place if you’re going to execute well.  To learn more about “The 4 Disciplines of Execution,” and about the fifth discipline that we believe was overlooked, please continue reading below.

“Ideas are cheap. Ideas are easy. Ideas are common. Everybody has ideas. Ideas are highly, highly overvalued. Execution is all that matters.”                        ~ Casey Neistat

Every morning, a business owner starts the day with some idea of what he or she wants to accomplish during the day.  But then the biggest customer calls with a problem that demands immediate attention or a key piece of equipment breaks down, and suddenly, the owner’s Plan for the Day is pushed aside in order to solve these emergency situations.  It’s the idea that important but long-term things we want to do for the health of the business will always give way to the Crisis du Jour.  Throughout the book, the authors refer to this as the “whirlwind” . . . the daily operational demands of the business that make it difficult to focus on the long-term objectives for the business.  In one way or another, all of the authors’ “4 Disciplines” are aimed at taming the “whirlwind.”  Let’s look at them one at a time.

  1. Focusing on the Wildly Important. Pick a long-term goal that is high-profile, highly impactful, and gives the business the most bang for the buck.  But only one.  Don’t try to solve everything at once.  It’s better to make good progress on one goal than to make no progress on a dozen.
  2. Acting on Lead Measures. Identify the actions and activities that have the most impact on moving you toward your goal.  Track both lag and lead measures.  Lag measures are accurate because they’re tracking activities that have already happened.  Lead measures, on the other hand, are predictive in nature and are therefore less accurate.  So lead measures tell us what we think is going to happen while lag measures tell us what actually did happen.
  3. Keep a Compelling Scoreboard. A little friendly competition, whether between individuals or teams, can create some fun and excitement around achieving a goal.  But more importantly, they tell us whether or not we’re moving in the right direction toward our goal.  Design a scoreboard that’s easy to read and to understand, and then post it in a common area for everyone to see.
  4. Create a Cadence of Accountability. Accountability happens when everybody holds each other accountable to do what they’ve been asked to do, and this has to be done at regular, frequent intervals (that’s the “cadence” part).  If accountability is applied sporadically, it disintegrates very quickly.  So set regular accountability sessions (i.e., every Friday afternoon at 2:00) and make it a priority to keep that “cadence.”

And then there’s the missing, fifth, discipline.

  1. Generate a Sense of Absolute Commitment. Accountability (Discipline 4 above) speaks a little to commitment, but only to doing the activities we’ve promised to do.  Somewhere along the line we need a commitment to getting the outcome we want.  Think of “accountability” as an individual taking responsibility for carrying out certain, specified tasks.  Commitment, on the other hand, is a determination by an individual or an organization to achieve a specific outcome . . . no matter what.

Think of a professional sports team where each member of the team is held accountable to perform in a professional, workman-like manner . . . but the team still has a losing record.  Compare that to a team that is committed to win . . . a team that, despite injuries to key players, despite playing in adverse weather conditions, despite playing on the road, still finds a way to win.  Make no mistake, accountability is a crucial tool in any organization, but if you have to place a bet on which organization will be most likely to execute its plans well, bet on the organization that is fully and truly committed to the outcomes it wants to achieve.

In many organizations, commitment means “We’re committed to giving it a try” or “We’ll give it our best shot” or words to that effect.  They leave a door open in case this doesn’t work out.  No, that’s not true commitment.  True commitment means you’re all in, no turning back, failure is not an option, pull out all the stops.  That level of commitment is the only way to overcome the “whirlwind” of daily distractions and ultimately achieve your long-term goals.

 
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Don’t produce a budget. Map out a Profit Plan. (Part Two)

The blog below is a repeat, as were the previous two postings (October 17, 2018 and November 7, 2018). Combined, the three postings offer a template for developing a 2019 Plan. We are re-publishing these now because developing an Annual Plan is a critically important activity for any small business to undertake, and now is the right time to do it. If you don’t remember seeing these before, perhaps they will encourage you to get serious about creating an Annual Plan. If you do remember them, then maybe they serve as a good refresher. Either way, plan well.

We have been talking about an annual planning process.  It began two postings ago when we talked about laying out three to five strategic initiatives aimed at moving the company forward.  Then with our last posting, we began a 2-part discussion on what some call a “budget,” but what we prefer to call a “profit plan.”  Part 1 dealt with the revenue side of things.  How do we forecast what we expect to sell next year?  Now we’ll deal with the cost side of things.  We need a spending plan that anticipates what we expect our costs to be next near.  If you’re interested in our discussion about projecting costs, please continue reading Profit Plan (Part Two) below.

 Don’t produce a budget.  Map out a Profit Plan. (Part Two)

The basic problem we see with forecasting the cost side of the business is people trying to take shortcuts in the name of being expedient.  Most shortcuts create two problems:

  1. They can rob you of the level of detail you need to spot waste, inefficiency, or irregularities.
  2. If your Plan starts to falter, they can make it difficult to analyze what’s going wrong, and even more difficult to figure out how to fix it.

Here are a few examples of shortcuts you should not take.

Bad shortcut #1

Breaking down all our sales and expense projections by month is a real pain.  Can’t we make do with just the annual numbers?

Nope.  You’ll want to break down everything by month so that when your actual financial statements are available each month, you’ll be able to compare them to your Profit Plan.  If your Plan is made up of only annual numbers, you may not realize it’s off target until it’s too late in the year the do much about it.

Bad shortcut #2

We know what our overall Cost of Goods is as a percentage of sales.  Can’t we just use that instead of calculating a separate Cost of Goods for each of our products or service lines?

If you’ve got multiple products or service lines, each with its own unique Cost of Goods structure, you’ll need to know how much of each you expect to sell, and then do a separate Cost of Goods calculation on each.  Otherwise, if your Cost of Goods starts going out of whack, how will you know which of your products or service lines is the culprit?

Bad shortcut #3

Do we really have to analyze our fixed costs.  After all, they are “fixed,” right?  Can’t we just use last year’s costs as a percent of sales and go with that?

No, we can’t.  Our fixed costs (usually referred to as SG&A or Overhead) are “fixed” only in the sense that we have to pay them no matter what.  Even if we’re having a dismal sales month, we still have to pay salaries, utilities, bank debt, etc.  But these so-called “fixed” costs do change.  We may hire new office people or grant salary increases to existing employees, the lease agreement for our office space may have a rent escalation clause, some of our vendors might put through price increases, etc.  Besides, if we just base our spending on historical trends, we eliminate opportunities to improve . . . to eliminate waste and improve efficiency.

Throughout this process, for both revenue and expenses, you should be recording assumptions for each line item, i.e. “We plan to put in an across-the-board 5% price increase in April,” or “We expect our energy costs to be flat.”  During the year, as you compare your actual results to the results you expected in your Profit Plan, you’ll be looking for variances or deviations.  When you find them, if they are significant, you’ll ask yourself, “What the heck were we thinking when we forecast that number?”  If you recorded your assumptions properly, they will remind you what you were thinking.  If the assumption is flawed in some way, then you may have to make a correction to your Profit Plan.  But if the assumption still seems valid, then we apparently failed to execute on that particular item and we’ll need to find out if there’s some corrective action we can take to get back on track.

Now for the tough part.  You’ve projected your sales and expenses for next year, so now you can see your projected profit.  If that number meets your expectations, then good, we’re done.  But if not, you have a choice to make: you can either accept the profit level the Plan projects (even though it’s lower than what you expected); or you can go back to the Plan, tweeking it here and there to produce the profit result you want.  The danger here is that your sound business judgement gets replaced by hope and unreasonable optimism, and the tweeks you make are nothing more than wishful thinking.  Obviously, you want to avoid that.

In summary of this posting and the previous two postings:

  • Begin building your annual plan by laying out the three to five strategic initiatives you expect to implement to move the company forward during the coming year.
  • Forecast sales and expenses for the coming year to produce a Profit Plan, noting all the assumptions you make during that process.
  • As you set your strategic goals and build your Profit Plan, be as inclusive as possible.  The more people you are able to involve in the process, the more support you’ll have when the new year starts and it’s time to execute your plans.
  • Throughout the process, immerse yourself in the details of your business, and avoid shortcuts that may undermine your annual plan’s usefulness as a valuable management tool.
 
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Don’t produce a budget.  Map out a Profit Plan. (Part 1)

The blog below is a repeat, as was the previous posting (October 17, 2018), and as will be the next posting (November 21, 2018).  Combined, the three postings offer a template for developing a 2019  Plan.  We are re-publishing these now because developing an Annual Plan is a critically important activity for any small business to undertake, and now is the right time to do it.  If you don’t remember seeing these before, perhaps they will encourage you to get serious about creating an Annual Plan.  If you do remember them, then maybe they serve as a good refresher.  Either way, plan well.

In our last posting, we talked about building an annual plan around three to five strategic initiatives.  We also suggested that you open up your planning process to as many of your employees as possible . . . don’t restrict it to only you and your top managers.  Make your planning process as inclusive as you can.  However, these strategic initiatives are activity-based  . . . these are the things we’re going to be doing to move the company forward.  But the plan also needs a financial component.  It needs what many people call a budget, but what we prefer to call a “profit plan.”  A “budget” sounds restrictive, confining.  It sets the boundaries for what we can and cannot do.  A “profit plan” on the other hand, says “This is our target for profitability next year, and here’s how we intend to achieve it.”  The Profit Plan probably looks identical to a traditional budget, but instead of a document that sets up boundaries, it’s a road map to the financial outcomes we expect to achieve next year.  For a few thoughts on how to build your Profit Plan, please continue reading below.

Don’t produce a budget.  Map out a Profit Plan. (Part 1)

The starting point for a Profit Plan is also the most difficult part . . . that is, a sales projection for the year.  It’s difficult because in most cases, we don’t know with certainty who is going to buy from us, what they’re going to buy, or in what quantity they’re going to buy.  So it’s a lot of guesswork.  Educated guesswork perhaps, but guesswork nonetheless.  Still, we can’t have a Profit Plan without some sort of sales target.

The best, most reliable way to project sales is customer-by-customer.  If you’ve got thousands upon thousands of customers, this approach may not be practical, but for most small businesses, that’s not the case.  So take a look at each customer (probably with the help of your sales people) and ask yourself:

  • What did they buy from us last year?
  • Was there some event last year (one that won’t be repeated) that caused them to buy more or less from us than they normally would?
  • Do we have any intelligence that would suggest they’ll do more or less business with us the coming year than they did this year?  That is, are they trying to acquire other businesses, open new locations, roll out new products or services, etc.?
  • Thinking of our existing customer base, do we have opportunities to sell them more of what they’re already buying from us?  Do we have opportunities to sell them additional products or services that they are not currently buying from us?
  • How many new customers are in our sales funnel and how many of those can we reasonably expect to start doing business with us this year?  For each of those that we think will be new customers for us, when will they start and at what volume?
  • What about attrition?  Nobody keeps every customer forever . . . they retire, move away, close their doors, all sorts of stuff that may or may not have anything to do with us.  So how much business can we reasonably expect to fall off during the year?
  • Are we anticipating any change in our pricing strategy that may cause our volume to go up or down?
  • Do we expect the strategic goals (discussed in our previous post) to have an impact on sales.  If so, we need to build that into our projection.

Obviously, this is an exhaustive process, but one that forces us to closely examine our customers and understand their evolving needs.  It also takes our guesswork out of the realm of total speculation.  It’s still guesswork, but as noted earlier, it’s at least educated guesswork.

 

Some companies may try to avoid this customer-by-customer approach using some sort of trend analysis.  For instance, they may say, “Over the past three years, our sales have averaged an annual 10% increase, so we’ll just assume that trend will continue.”  While this approach is better than nothing, it doesn’t offer any insights into the dynamics of the company’s customer base or market segment.  But for some, it may be the only way to do it.  For instance, a divorce attorney may have a good referral network, but doesn’t really have a customer base that will produce reliable repeat business.  He or she can’t really count on the people who divorced last year, divorcing again this year.

 

At the risk of making this sales projection process even more burdensome, we need to footnote everything.  At some point in the year, it will become obvious that some of our assumptions are way off base.  We will say, “Wow!  ABC Company isn’t doing one tenth of the volume we expected it to do.  What we’re we thinking?”  It’s unlikely we’ll be able to remember what we were thinking when we came up with our projection for ABC Company, but if we footnoted why we projected what we did, we can determine whether or not there’s a way to get it back on track.  If not, we may have to revise our projection for that company.

 

OK, so we’ve got the sales projection component of our Profit Plan complete, or at least our first swing at it.  In our next post, we’ll talk about the fixed and variable cost components of our Plan.

 
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“The nicest thing about not planning is that failure always comes as a complete surprise and is not preceded by a period of worry and desperation.”

The blog below is a repeat.  It was first published a year ago, along with two companion pieces that will also be re-published in the two postings following this one.  Combined, the three postings offer a template for developing a 2019  Plan.  We are re-publishing these now because developing an Annual Plan is a critically important activity for any small business to undertake, and now is the right time to do it.  If you don’t remember seeing these before, perhaps they will encourage you to get serious about creating an Annual Plan.  If you do remember them, then maybe they serve as a good refresher.  Either way, plan well.

About this time every year . . . somewhere around the beginning of the 4th quarter . . . is a good time to begin planning for next year.  Unfortunately, planning is not an activity that most small businesses engage in . . . at least, not in any meaningful way.  The owner may have in mind some sales and profit targets, but no real plan for how to achieve them.  The prevailing attitude seems to be, “We’ll just work real hard and hope we get there.”  But as they say, hope is a poor strategy.  Or, as author and explorer Jeff Rich tells us, “A goal without a plan is just a wish.”  Yet planning does have its detractors.  Mike Tyson has famously said, “Everybody’s got a plan   . . . until they get punched in the mouth.”  And Woody Allen weighs in with, “If you want to make God laugh, tell him about your plans.”  So if you’re in the same camp as Mike and Woody, and believe that planning is a waste of time, you should stop reading here.  But if you’re willing to be convinced that putting together an annual plan just might have some merit, please continue reading below.

 “The nicest thing about not planning is that failure always comes as a complete surprise and is not preceded by a period of worry and desperation.”     ~ Richard Palmer

If you truly have no expectations or goals for next year and are content to take whatever results fate chooses to give you, then fine, don’t plan.  Under those circumstances, what would be the point?  But if you do have aspirations and goals for next year (and of course, you do), then to claim that you can achieve those without at least a rudimentary plan is indefensible.

To be honest, it’s amazing that there’s any resistance at all to planning in a small business.  After all, we do plan for all sorts of other stuff.  We plan for vacations.  We plan for weddings (ugh, down to the last napkin).  We use financial planners to help us plan our future.  Yet, even though a business is usually the owner’s largest asset, many still resist the idea of an annual plan.  Yeah, it takes time and it takes effort, but done correctly, the result is a roadmap for where you’re going and how you’re going to get there.

The first step is to identify the major strategic goals you want to achieve next year.  Set SMART goals . . . goals that are Specific, Measurable, Achievable, Results-oriented, and Time-based. Vague goals that don’t include measurements or deadlines are doomed from the start.  Consider limiting yourself to three.  If you undertake more than three, you risk stretching yourself too thin.  It’s better to achieve the results you want with three goals than to achieve only so-so results with five.  And don’t set these goals all by yourself, locked away in your office.  Involve the managers on whom you will depend to implement these goals.  They probably have their own ideas about what the company should be undertaking next year, and you should hear those ideas.  Besides, they will be more supportive of goals they helped to set than they would be of goals in which they had no input.

Make sure your goals are focused on the outcomes or results that you expect.  For instance, “Buy and install a new computer system” is not a goal.  “Developing more detailed, timely business intelligence,” is a goal . . . it may be necessary to buy a new computer system to achieve this goal, but buying a new computer system is only the means to an end, not a goal.

Commit the goals to writing, taking care to word them clearly and concisely.  Confirm everyone has the same understanding of what we’re trying to achieve with each goal.

Next we have to do a little number crunching to make sure there’s an acceptable ROI for each goal.  That is, we need to identify a benefit to the company in terms of improved productivity, reduced cost, or higher profit.  If we can’t prove such a benefit (or if the benefit is significantly less than we hoped it would be), we either re-work the goal in a way that will achieve a better result, or we toss it out and substitute a different goal.

Now comes the hard part.

Each manager who has helped craft your goals must now present them to his or her direct reports and solicit their reactions/feedback.  Just as you needed your managers participation in the goal-setting process to secure their support, now you need the support of everyone else.  You can’t fake this.  You can’t go through the motions of being “inclusive” in this goal-setting process if you have no intention of listening to what anyone may have to say.  So you need to make an honest effort to get people to voice their questions, concerns, opinions, and suggestions.  We’re not running a democracy here, so you’re not obligated to act on what they say, but you are obligated to listen, to hear, and appreciate what they are telling you.  Besides, these are the folks who are immersed in the nitty-gritty details of your business every day, so it’s just possible they will spot something in your proposed goals that you and your managers overlooked.

Finally, we need to put metrics on each goal so they can be tracked and measured (remember the M in SMART goals?).  No question, some goals are easier to measure than others, but if a particular goal defies measurement of any kind, then it doesn’t really qualify as a goal.  After all, if we can’t measure it, we won’t know if or when we’ve achieved it.

If you think all this planning stuff is a waste of time and would prefer to “just work real hard and hope for the best,” that’s your choice.  However, if building an annual plan makes sense to you but you haven’t done one before and don’t quite know where to start, email or call me.  I’ll be happy to help.

 
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“Give up trying to grow the bottom line. Grow your people and your people will grow the bottom line.”

Simon Sinek is an author and lecturer . . . he’s a favorite of ours and we refer to him often.  He is a self-described idealist who “imagines a world in which the vast majority of people wake up every single morning inspired to go to work and return home at the end of the day fulfilled by the work that they do.”  He goes on to say, “I believe this thing called ‘fulfillment’. . . the ability to say that I love my work, that I love what I do . . .  is a basic human right, not a privilege.”  Pretty radical stuff, huh?  We’re supposed to make sure our people enjoy and are fulfilled by their work?  The cynics among us would say, “Seriously?  Ya know, Sy, there’s a reason they call it ‘work’.”  Besides, why should we care if people are “inspired” by their work?  Simple.   People who are engaged in their work and in their company’s goals outperform their counterparts who are just putting in their time and collecting a paycheck.  For more on this, please continue reading below.

“Give up trying to grow the bottom line.  Grow your people and your people will grow the bottom line.”     ~ Jim Sandstrom

Most CEOs and company owners, when asked about the importance of their people, will say that their people are of paramount importance.  Yet, when asked to put their priorities in rank order, these same company leaders will often talk about growth, delivering shareholder value, taking care of customers, and then somewhere further down the list, they’ll talk about employees.  Apparently, they have a different definition of “paramount” than we do.  And it’s strange, don’t you think?  How do we expect to achieve growth, create shareholder value, and take care of customers if not through the efforts of our employees?

The great irony is that, CEOs who actually do put their employees first and engage them in a meaningful way, out perform companies who consider themselves “performance-based.”  Think about Southwest Airlines who unabashedly puts its employees ahead of customers, ahead of shareholders, and ahead of everything else.  The theory, which Southwest has proved, is that if you take care of your employees, they will take care of your customers, and happy customers will protect shareholder value.

Here’s another example of people-based companies vs. performance-based companies.  General Electric, an icon of American industry, famously instituted a system that would eventually become known as “rank and yank.”  Under this system, employees would be ranked according to their contribution to shareholder value.  Each year, the top 10% would be promoted, the bottom 10% fired.  In effect, it was a system that encouraged employees to compete, not with other companies in their marketplace, but with one another.

In 2008, GE needed (and was awarded) a $139 billion taxpayer bailout.  Yep, that’s billion with a “B.”  So much for pitting employees against one another as a way to drive performance.

Tony Hsieh, founder and CEO of online retailer Zappos, based his growth strategy on extraordinary customer service.  However, he recognized that he couldn’t provide world-class customer service with a listless, apathetic workforce.  So he invested heavily in hiring, training, and retaining the very best people he could find.  As a result, he was able to achieve $1 billion in sales within his first 10 years in business.  Nurturing a people-centric business paid off handsomely for him.

None of this is to say that performance is unimportant.  Obviously, performance is critically important to any business, but the priority must be on people first.  To get the level of performance you want, you need to first put capable people in place, and then create an engaging culture that will allow them to flourish.

The Gallup organization has conducted a vast amount of research on Employee Engagement spanning several decades.  It has defined an “engaged” workforce as one that has an emotional attachment to the company, actively supports the company’s values and goals, and gives freely of its discretionary time and effort.  Do you want a few clues as to whether or not your workforce is “engaged?”  Here are two:

  • How is your turnover? Is your workforce relatively stable or do you have a revolving door?  If people are dissatisfied working for you, they’ll show their dissatisfaction with their feet.
  • When you do have openings, can you count on referrals from your employees? If your employees are unhappy, they’re not going to invite a friend or a neighbor or another family member to join in their misery.

According to Gallup’s research, the hallmarks of an “engaged” workforce are:

  • Low turnover
  • Low absenteeism
  • High productivity
  • High profitability
  • High quality
  • Reduced safety issues
  • High customer service
  • Low shrinkage/theft

It seems to us that any one of those measures would be good reason to invest the time and energy to create an “engaged” workforce.  But all of them combined?  It’s a real no-brainer.

Simon Sinek says he’s an idealist for believing fulfillment/engagement in our work is a basic human right.  Still, what’s wrong with a little idealism?  We may never achieve “the vast majority of people” being fulfilled by their work, but if we strive for that ideal, what we do achieve would be game-changing.

 
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“Strive for continuous improvement, instead of perfection.”

Our previous post talked about Continuous Improvement, but it’s an important topic that deserves to be thoroughly explored, so please consider this a continuation of the discussion we began with our last post.

No matter how good we are, we can always be better.  No matter how proficient we are, we can always be more so.  No matter how knowledgeable we are, we can always learn more.  There’s always room for improvement.  That’s what Continuous Improvement is all about.  The thing is, we’re OK with the “Improvement” part.  It’s the “Continuous” part that sometimes eludes us . . . the idea that even though we just improved something, we’ve got to turn around and improve it again, and again, and again.  We want some sort of closure, some sense of completion.  But Continuous Improvement is a tough master that, no matter how well we’re doing, tasks us to do even better.  Still, great companies embrace both parts of it . . . the need to improve and the need to improve continuously.  For more on this, please continue reading below.

 “Strive for continuous improvement, instead of perfection.”       ~ Kim Collins

For most of us, striving for perfection would be a fool’s errand (although we can remember a few Michael Jordan buzzer-beaters that came pretty darn close).  If you believe, as we do, that there’s always room for improvement, then aiming for perfection would just be setting yourself up for failure.  It makes more sense to set your sights on improvements that are reasonable and achievable, even when your target for improvement is something that’s already performing pretty well.

When we think about improvements we might make, our thoughts tend to gravitate toward the processes we use to produce our products or deliver our services.  And that makes sense since producing our products or delivering our services are what consume most of our time and money.  But focusing on the processes we use can distract us from other areas in need of improvement.  For instance:

Start with yourself.  Do your leadership skills need a tune-up?  Are you as good a communicator as you need to be?  Are you well-organized?  Do you manage your time well?  Are there emerging trends in your market that you need to understand more clearly?  The list of self-improvement opportunities can be almost endless.  Consider yourself a never-ending work-in-progress.

Demand the same of others.  Everyone ought to have a self-improvement plan.  Not just you and not just your managers.  Everyone.  Not necessarily a formal document, but at least a clear idea of what they want to work on.

Training, re-training, and cross-training.  Are your people well-trained for the work they are expected to do?  If you have introduced new equipment or technologies, have your people been re-trained so the company gets maximum benefit from those investments?  Are your people sufficiently cross-trained so that in the event of an absence or illness, your operations can continue as usual?

Snafus, screw-ups, and breakdowns.  Sometimes, despite our best efforts to the contrary, things head south.  Something significant should have gone just as planned, but it didn’t.  It went horribly wrong.  In those situations, be like the FAA after an airplane accident.  Was it pilot error?  Was there a mechanical failure?  Did the weather have something to do with it?  The FAA always wants to know what happened so that safeguards can be put in place to make sure it doesn’t happen again.  Similarly, when something goes out of control at your business, the resulting confusion points the way toward a needed improvement.  In these situations, there’s a temptation to just fix the problem and move on.  Don’t do that.  When a train derails, it’s important to get it back on the tracks, but if we don’t figure out what caused it to derail, it will happen again.  Take the time to figure out the underlying causes of the problem and fix those so that the problem doesn’t return.

Continuous Improvement goes hand-in-hand with Employee Engagement.  The more your people (at all levels) understand that Continuous Improvement is everybody’s responsibility, and the more they feel that their ideas for improvement are heard and valued, the more they will be “engaged” in supporting the company’s goals.  In the best of all worlds, Continuous Improvement becomes a mainstay of your culture and your company becomes a place where everybody is vigilant for that one little thing that doesn’t work quite right, that one problem that keeps re-occurring, or that one skill that hasn’t been mastered yet.  Imagine yourself saying to a new employee, “We’re always on the lookout for ways to improve.  We’re good at what we do, but we’re always looking for ways to do better . . . that’s just the way it is around here.”

Sounds pretty good, doesn’t it?

 
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“When was the last time you did something for the first time?”

George Romney once said, “There is nothing more vulnerable than entrenched success.”  In other words, we get a little success under our belt and there’s a risk that we become fat, dumb, and happy . . . in short, complacent.  Hubris sets in and some rigor leaves.  We take our foot off the gas a bit because we think, “No one can catch us.”  Until someone does.  So, in the face of success, how do we avoid that kind of arrogance?  How do we maintain the rigor and vitality that brought us success in the first place?  For more on this, please continue reading below.

“When was the last time you did something for the first time?”            ~ Unknown

That’s a line from a new Darius Rucker song, so we thought he wrote it . . . but he didn’t.  Although we’d never heard it before, it’s apparently been around for awhile.  Even so, we couldn’t find any attribution for it, so it’s either anonymous or in the public domain.  Anyway, it does illustrate one way to keep things vital and dynamic.  It challenges us to try something new once in awhile to prevent us from becoming stale.

There’s one school of thought that says, “If it ain’t broke, don’t fix it.”  That leads to doing the same old thing, day in and day out, until someone arrives in your market with some fresh ideas and better ways of doing things.  But there’s also the opposite school of thought that says, “If it ain’t broke, break it.”  That’s change for the sake of change which probably doesn’t make much sense either.  If your processes and procedures are working well, why would you arbitrarily throw them out and start all over again?

So between those two schools of thought, there must be a middle ground.  This is where Continuous Improvement comes in . . . the idea that no matter how well things are working, there are always things we can do to make them better.  In other words, we’re not fixing something that “ain’t broke,” we’re taking something that’s already working well and making it even better.  Nor are we breaking something just for the sake of starting over.  We’re preserving the fundamentals of the things that have made us successful, but finding ways to improve and strengthen them.

Will Rogers warned against complacency when he said, “Even if you’re on the right track, you’ll get run over if you just sit there.”  So don’t just sit there.  If you ask yourself the question, “When was the last time we did something for the first time?”, and you either can’t remember, or you do remember but it was a long time ago, you’ve probably allowed yourself to “just sit there.”

Improving things that are already working well is tough, but with creativity, innovation, and determination, it can be done.  Improving things is also risky.  What happens if, in our efforts to make things better, we make them worse?  Yes, change always brings some risk, but isn’t the greater risk “just sitting there” and giving your competition an open field to be the ones with the new, creative ideas?

Try something new.  Look for improvements in old things.  No sacred cows.  Anything and everything should be subject to Continuous Improvement.  Challenge your people to be innovative, to think creatively.  Ask them, “When was the last time you did something for the first time?”

 
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“Success seems largely to be a matter of hanging on after the others let go.”

Let’s talk about Bill Gross, the serial entrepreneur.  As it turns out, there’s also Bill Gross the billionaire investor, but that’s not who we want to talk about.  We want to talk about the other guy.  The entrepreneur.  This Bill Gross has personally started over 100 companies, and more than 40 of those have either gone public or have been acquired.  He is the founder and CEO of Idealab, a company whose sole purpose is to churn out startups.  In that role, he wanted to discover why some of Idealab’s startups succeeded while others failed.  He came up with five factors that successful startups hold in common, but he missed the sixth and most important factor.  To learn about the five factors he identified in successful startups, and the sixth factor that he missed, please continue reading below.

“Success seems largely to be a matter of hanging on after the others let go.”

                                                            ~ William Feathers, Journalist

In order of importance, Bill Gross’ five success factors are:

Factor 5.  Idea.  Strange.  You’d think having a good idea for a business would be the most important factor for a startup.  Obviously, it is essential to start with a good business idea, but according to Gross’ research, it ranks below the other four.

Factor 4. Team/Execution.  We can see why this ranks above “Idea.”  What good is it to have a great idea for a business if you don’t have the right people with the right skills to bring it to life.

Factor 3. Business Model.  The business model needs to be consistent with the business’ mission and with its growth potential.  The business model for a small, boutique, niche player will be very different from a broad-based, fast growth company that’s expected to go public.

Factor 2. Funding.  The startup graveyard is full of companies who simply ran out of money.  In many cases, the founder succumbed to rosy sales projections and overly optimistic estimates for how quickly the company would achieve profitability.

Factor 1. Timing.  This surprised us a bit.  Not that timing isn’t important.  It is.  Obviously, most retailers will want to open their doors before the Christmas season, not after.  A distributor of farm implements will want to hold forth before the growing season, not after harvest time.  But the timing issues for many businesses are not quite so obvious

So, according to Bill Gross’ research, if we’ve got these five elements in place, we’ve got a good shot at launching a successful startup.  We’ve got a good business idea and a team that can bring it to fruition.  We’ve got a business model that will be a good road map to get us where we need to go, we’ve got enough cash in our war chest to get us through the tough spots, and our impeccable timing will make us all look like geniuses.  So what did Gross miss?

Commitment/Determination.  Starting a business is not a casual thing.  A new business will be unrelenting in its demands for time, effort, and money.  Murphy’s Law (“What can go wrong, will go wrong”) will be in full force.  So if you’re going to start a business, your battle cry better not be “Let’s give it a try!”  You might remember a scene in Star Wars when Luke was struggling to master The Force and said to Yoda, “I’ll try” to which Yoda replied, “No.  Don’t try.  Do or don’t do.”  Or if you weren’t a Star Wars fan, maybe you remember a line from Apollo 13 when the ground crew at NASA was trying to figure out how to get the damaged spacecraft home safely and the Ed Harris character said, “Failure is not an option.”  It’s like that.  If you want to be an entrepreneur and start a business, it’s like that.  If you can’t muster the commitment and determination to do whatever it takes, no matter what, to get the thing launched successfully, don’t do it.

If the company is at the starting gate and has all five of Bill Gross’ elements for success in place, it will still fail without absolute, unwavering commitment and determination from the founder.  Even with that level of commitment and determination, success is not guaranteed, but without it, failure is.  As hotelier Conrad Hilton observed, “Success seems to be connected with action.  Successful (people) keep moving.  They make mistakes, but they don’t quit.”

 
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