For the last month, we have been feasting on our backyard citrus crop. Harvesting the abundant bounty got me to thinking about the ordeal I went through in early fall. I had the burdensome task of pruning five citrus trees, all in various states of disrepair. All of them had been pruned a year earlier, but in that short amount of time they had put on anywhere from three to five feet of new growth. The trees certainly appeared much larger than when they had last been pruned, but their shapes had lost that nice rounded “pure Florida orange juice” logo on the carton look. They more closely resembled a silhouette of Mort from the original Bazooka Joe comics.
What I was impressed with, though, other than the size and number of thorns on citrus trees, was the fact that, on all that new growth, there was no fruit to be found at all. Oh, there was plenty of fruit on the trees, but it was all on the old growth. Not only that, but the uncontrolled new growth made it much more difficult to get to the fruit. While the new growth was what everyone saw when looking at the trees, most of the fruit was concealed behind the façade of productive branches.
That got me thinking about businesses I have seen. Lots of growth, plenty of show, but no profit or cash to show for it.
Has unproductive growth gotten out of hand in your business?
Have you added new products, employees, and sales revenues only to see flat or declining profits?
Are you busier than ever, but without an increase in cash flow to show for it?
Is the productive core of your business being choked out by the new and greatest thing?
Perhaps it’s time to put on the gloves, the long-sleeved shirt, hat, and other protective gear, and get to pruning out the non-productive fluff. You’ll have a better-looking business, more production, and profits that are much easier to reach. Check out the “Seeing is Believing” blog to see how we can help.
As accountants, one of the hardest concepts we have to explain is the difference between cash and profit. (There’s also that whole Debit versus Credit thing but don’t get me started. ) I can’t tell you how many discussions have centered around the subject of cash. The discussion with a client can go in one of two directions: 1. “If I made this much money, why don’t I have any cash in the bank? ” or 2. ” I have cash in the bank, so why don’t those financial statements of yours show a profit?”
In the past, I have resorted to drawing on the financial statements, creating elaborate flow charts, building multi-tabbed excel spreadsheets, and one time I tried hand-puppets to make my point. But it’s just not a subject that makes sense to most people. The missing cash can usually be found hiding in the balance sheet as an investment in customer receivables, increased inventory, or additions to fixed assets. The ins and outs of the missing cash can be tracked on the statement of cash flows, but no one ever reads it. (Except fellow accountants and sometimes bankers who are looking for evidence that their loans will be repaid.)
Part of the problem in explaining this concept and many others is the language barrier between us as accountants and the language of normal people like our clients. We tend to think and speak in a linear, numerical fashion while most business owners think visually and speak conceptually. After many years spent wrestling with this issue. we have found a tool that lets us bridge the communication gap. It’s called $COPE It!. It’s a new iteration of similar products we have been using for a couple of years. The beauty of this tool is that you can bring in financial statements, convert them into pictures, and then make changes to your results. So now, rather than telling you that selling more products and services at the same margin (with other factors unchanged) will generate NOT more but LESS cash, I can change one number on the screen and show you the impact on your cash. I can also enter your targeted cash balance, and show you where to focus to achieve it.
After making one simple onscreen change to a set of numbers, I have had even marketing people proclaim that the blanket of confusion has been lifted from their eyes. Suddenly they understand why cash and profit are not the same thing. It really changes the dialogue when you’re doing business planning, negotiating loans, or evaluating new sales strategies.
But you really have to see it to believe it – just ask a member of our team to show you how it works.
“Confess?” you say, “You’re an accountant. We already knew you were a geek.”
Now, I like to think I hide it most of the time, but I have a passion for math problems, puzzles, and technology. So it’s good to know that there is now a TV show dedicated to people like me.
“Big Bang Theory” is about a group of friends who are physicists at Cal Tech, but they resonate with this accountant’s nerdy side. But, as a business consultant, I laughed my head off during a recent episode that featured process mapping as an instructional method for making friends.
Here’s the setup. Sheldon, the most anal-retentive of the bunch, decides that he needs to make friends with the guy who schedules access to a certain lab. He proceeds to research the art of making friends and ends up using a children’s book to create a flowchart (or process map) to follow during his phone call to the scheduler. While his friends are watching, he calls and follows the process step by step, smugly nodding as the discussion flows right along with his chart. As he reaches the final stage of setting up a common activity to share, the would-be friend declines several offers. Panic sets in for Sheldon until one of the friends in the room recognizes that he’s stuck in an infinite loop, changes the chart, and allows Sheldon to operate outside his predetermined plan.
Needless to say, in business things often don’t go as we planned. We set up a wonderful strategic plan, come up with the tactics to use, and, yes, when we’re firing on all cylinders, we even create a map detailing the process.
What happens, though, when either the situation changes or the “standard process” just isn’t all that great?
Do people stick to the process or do they work around it?
Do they tell anyone that they’ve gone around the process?
Are they allowed to go around the standard process?
Are they free to suggest changes or improvements?
Does anyone listen to the suggestions?
Ultimately, are improvements made to the process as needed?
Process mapping is a wonderful way to capture the current reality of how things are done and identify wastes, but it’s extremely important to have the honest input of those performing the tasks. Only when you know your current process can you create improvements that reduce waste, eliminate redundancies, and allow people the flexibility to provide maximum value to your customers.
Ask your people, let them be honest, and figure out how to improve what they do. Your customers (and closet geeks) will thank you for it.
Last night I ate at the Mesa Grill in Las Vegas, a wonderful restaurant owned by Food Network Star and Iron Chef, Bobby Flay. I was curious and was keen on keeping my consulting eye open to what makes him one of the country’s most famous restaurateurs. In addition to the fabulous food, two things stood out immediately.
Team members know their numbers. In a brief, informal exchange with the hostess, I found out that the restaurant has 217 seats, breaks even at two table turns per evening, has a goal of three turns per evening, and once served a record 732 dinners in one evening.
Employees know their products. The waitress was very quick to recommend only a few items on the menu, but described them in great detail. She told us which dishes were spicier and exactly how they were prepared. She also asked us exactly how we wanted our steak cooked, so she could properly communicate with the chef. The steak was excellent and perfectly prepared.
Your employees crave information about your business and your products. Give them numbers. Let them know how the business makes money. Give them samples of your products and allow them to describe their personal experiences with your customer. You like to do business with real people. So do your customers.
You keep up on all the latest trends. You update your technology way ahead of your peers and competitors. You look forward to the new industry magazines to see what you can do next to maintain your competitive edge. Of course, you put up with your employees’ complaints about constant change and “bleeding edge” technology, but you kind of enjoy the challenge.
So, let me show you cutting edge technology. I was exposed to this video featuring a young man from India, Pranav Mistry, who is an intellectual giant currently working at MIT. Recognizing that humans intuitively use objects and gestures, he set out to combine these natural instincts with computer technology. Imagine displaying a watch on your wrist by drawing a circle on your arm with your finger, taking a photograph by making a square by joining your thumbs and forefingers, displaying a phone keypad on the palm of your hand and making a call by tapping the display with your finger.
The possibilities are staggering. And… he is willing to make the source code open to anyone who wants to advance the technology.
The next time your employees tell you that you need to ease off on the changes, show them this video. Then watch their jaws drop.
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How easy do you make it for your customers to do business with you? Have your “upselling” efforts inadvertently resulted in lost opportunities or, worse yet, lost customers? Do your processes enhance your customers’ experience?
These questions came to mind as I was standing in line at a national rental car agency. (I won’t mention the company’s name, but I’ll bet you hate making one and the government hates sticking to one.) My day started off by leaving our San Jose hotel at 4:30 a.m. where we caught an airplane to Washington D.C. We arrived there at 4:30 p.m. after a long and tiring day of travel. Worn out and drained, we caught the shuttle bus to the rental car center, ready to pick up our car and finish our day’s journey.
I had made an online reservation, answering all the questions about the options available, and so I expected my confirmation to be processed very quickly. I first went to the express check-in area where I was told the car was reserved, but that I would have to go upstairs to check in. I left my wife at the express area and told her I would be back in just a few minutes. When I got to the counter there were two agents waiting on people. I was second in line and was thinking how fortunate I was that it wasn’t busy. That feeling of euphoria soon ended.
UGLY POINT #1 – One agent (who, I later found out, was the manager) was helping a customer, while the other agent was beginning the review of the liability waiver. You know the one, the one that says, “We tried to sell you additional insurance at a cost equivalent to $5,000 per year, but for some reason you didn’t see that as a good deal.” As smart consumers, these women had already determined that they were covered by their personal auto insurance carrier. However, doubt crept in to the woman who was the primary renter. “If my friend is driving and has an accident, will the company go after her or me?” Shrug. The manager, who had just finished with his customer, was brought over. “Yes, as the person on the contract, you will be liable.” “OK, let’s add the insurance. No, we’d better change the contract over to her (pointing at her friend). We need you to re-write the agreement and show her as the renter.” (My wife calls. “Where are you?” I tell her it will be just a few minutes now.) The manager disappeared. (I’m still waiting in line.) Finally, after an interminably lengthy discussion, the women had their car and were off.
UGLY POINT #2 – At last, it was my turn. I brought up my confirmation, knowing that this would be quick. There was no apology for the long wait, no acknowledgment that I had even been there. The agent keyed in my information and asked me how much luggage I had. Then the barrage of questions (no, strike that… “recommendations”) started.
“We recommend that you get the full-size car instead of the standard-size.” No, thank you.
“OK, do you accept the full-service package?” What!? I don’t understand what that is.
“It includes liability coverage.” No, thank you.
“We recommend that you at least choose the insurance on the car.” No, thank you.
“We recommend that you choose the fueling option so you don’t have to worry about bringing the car back with a full tank of gas.” No, thank you.
“Finally,” I thought, “I’m done with these annoying questions.” While these questions are always frustrating, after nine hours of travelling and 30 minutes standing in line, these questions were EXTREMELY irritating. Another phone call from my wife. “This is not going well and is REALLY frustrating!”, I said, intentionally within earshot of the agent. No comment from the agent.
UGLY POINT #3 – No matter, I had gotten through the questions unscathed and the agent printed the contract. My momentary jubilation quickly ended when the first point was reviewed. “Here’s your total rate.” ARGHHH! The amount was $60 higher than the confirmation agreement I had given the agent. The agent reviewed the confirmation, looked at her contract, looked at the computer screen, and hit a few keys. No explanation could be found. The manager was now brought over and he assumed the investigation. Again, no apologies, no “Thank you for waiting”… nothing. He spent the next several minutes hitting computer keys. Finally, he just made an adjustment and gave me the revised amount. It was $30 LESS than my confirmation!
“Oh, well,” he said, as he printed the contract. But, there was one final problem. The revised contract had no total. When I asked about it, he just said that it was a modified agreement and showed me the adjustment. I asked him for the total and manually wrote it on the agreement so I would have a record of it before I signed it. Again, there were no apologies, no consideration at all for the extremely lengthy and annoying process.
Finally! I was done and am on my way to get my car. Total time from entering rental counter area… ONE HOUR!
Questions to ask yourself:
Does your performance management system reward the desired behavior? While additional revenue per customer is a nice goal, the add-ons may be perceived as an additional pound of flesh from your customer.
Are your employees well-trained in your product or service? Customers may ask very logical questions when presented with a sales request. You r employees should be trained to anticipate such questions and have ready responses that make sense to the customers.
Do you have “the right people on the bus”? Jim Collins, author of Good To Great, uses this term to describe employees who have the attitudes and attributes needed for your company. He suggests hiring for attitude and training for aptitude.
Is your company easy to do business with? When presented with a sales offer, the customers’ reasonable questions were met with a) no response, and b) a negative response. W hat seemed like a streamlined process via the online reservation system, turned into a nightmare when the system broke down.
With the best of intentions, businesses often begin to focus inward at their own processes and systems. Instead, they should be looking outward, to their customers, and focusing on their needs and wants. The ability to place the customer first and foremost, and then design the processes and systems to support that focus, is what sets good companies apart from mediocre ones.
Given the opportunity, your customers and employees are ready to tell you what to do.
“‘If… then’ rewards, the things around which we have built so many of our businesses, DON’T WORK!” In fact, in those types of activities, tests showed that “higher incentives led to worse performance.”
While on vacation in Washington, D.C., I enjoyed two wonderful tours at the Library of Congress and the Kennedy Center for the Performing Arts. What made these tours so great was not the magnificence of the buildings, nor the history associated with them; it was the passion displayed by the tour guides who led our groups
Remarkably, these tour guides were unpaid docents who did their jobs out of a desire to share their love of their subject with others. As I reflected on what made these tours so memorable, I realized that both of the docents were motivated by a passion to:
Educate and inform – they provided a lot of information to make our experience worthwhile.
Inspire us – they wanted to motivate us to have a perspective beyond ourselves.
Encourage our personal involvement – they wanted to kindle a desire inside of us to take action.
A few days later, I was introduced to a presentation by Daniel Pink, the author of the soon-to-be-published book, Drive: The Surprising Truth About What Motivates Us.
In the presentation, he makes the statement that was made at the beginning of this piece, i.e., that when it comes to complex or creative tasks, performance incentives don’t work. He supports his assertion with several tests showing that, in fact, performance actually declines in certain types of tasks. Yet, in business, we go on building performance initiative systems based on the belief (no… the KNOWLEDGE) that these rewards are effective at improving performance. As Mr. Pink says:
“There’s a mismatch between what science knows and what business does.”
Instead, science shows that workers in these complex or creative jobs are motivated by three things:
Autonomy – the urge to direct their own lives,
Mastery – the desire to get better and better at something that matters, and
Purpose – the yearning to do what they do in the service of something larger than themselves
This is not to say that money is unimportant; in fact, he begins with the premise that people receive a fair base pay. However, these intrinsic motivations (satisfaction in the work itself) are far more critical than extrinsic motivations (rewards) when it comes to improving performance.
In survey after survey, employees in these types of jobs show that they want:
Challenging work
Meaningful work
Involvement in the outcome
Direction over their own work
Feedback on their performance
In many ways, these are much more challenging to manage than assigning monetary rewards to outcomes. It is the challenge of management, though, to create the type of environment that motivates people to work beyond even their own expectations.
Watch the video yourself to gain a better understanding of the science behind motivation.
It’s a cold and rainy day in our nation’s capital. My wife and I have walked several blocks to the Newseum, an amazing 250,000 square foot museum devoted to the history of news. We walk up to the door labeled “Group Entrance” and step inside. I ask where the main entrance is, anticipating the response I know I’ll hear.
“It’s on the other side of the building,” the attendant says (I sigh), “but we can help you here.”
What refreshing words to hear! We don’t have to go back outside and walk the two blocks to get to the front door. Not only that, he calls for someone to come over and help us. A friendly woman comes to greet us with her full personal attention. She asks if we would like to check our coats (“Are you kidding!?”) and offers to escort us to the ticket counter. I tell her that I already bought my tickets online, so she escorts us to the beginning of the exhibit area.
Nearly every Newseum employee we encountered had a similar attitude. “How can I help you?” was a common question, accompanied by genuine interest in making sure we had a pleasant experience.
The team members at the Newseum all exhibited “customer-centric” attitudes. To a person, the attitude was one of serving the customers’ needs rather than focusing on their prescribed systems and procedures.
How often have you heard these comments?
“I’m sorry, that’s not my job.”
“That’s our policy.”
“You’ll have to talk to my manager.”
“No, we can’t do that.”
“If you’ll go over there, someone can help you.”
These phrases are all examples of an inward focus on systems and procedures (in the name of efficiency); instead, we should have an outward focus on meeting the needs and wants of our customers. This may require an adjustment of attitudes and culture, and it must start with the leader’s actions and tone. Standardized procedures are important, not because they help to keep costs down, but because they increase the likelihood that the customer receives an acceptable level of service. Meetings and communications should include reports of service provided, customer feedback, examples of great service, and opportunities to improve.
Ask yourself the following questions:
Does our strategic plan focus on our customers or on our products and services?
What action steps have we implemented in the past year to improve service to our customers?
What metrics do we use to measure customer service?
Do our systems and procedures allow employees flexibility in serving our customers?
Is there time set aside in our meetings to discuss customer service?
The next time you update your strategic plan, begin by focusing on how you can improve your customers’ experience with you. Your discussions and, as a result, your plan, will take on a much more positive tone. In the end, you will have better processes, happier customers, and a much more motivated team.
You’re in yet another planning retreat, wondering how anything fruitful is going to come out of it. “I’ve heard the same things for the past three years,” you think to yourself, “and nothing has changed at all.” You look around and notice that people are checking their watches, doodling on their notes, fiddling with their phones, reengineering their mechanical pencils… you get the point. Somewhere in the background, Charlie Brown’s teacher is rambling on, “Waah, wah, waah, wah, wah.”
The meeting ends, everyone nods in agreement (“What did we just decide?”), they walk out, check their inboxes, phones, and go back to what they were doing before the meeting. Did anything change? Better yet, WILL anything change as a result of the last eight hours?
With our structured “sticky wall” approach to brainstorming, we have facilitated many productive planning sessions that have led to successful decision-making and implementation.
Here are some tips for making your next planning retreat more meaningful:
Make sure all of the key players are involved up front. If key people can’t attend, cancel the meeting. Don’t invite anyone who doesn’t need to be there.
Hand out a sample agenda beforehand. Give people the expectations for the meeting so they have time to think about the discussion topics.
Start and end the meeting on time. Show respect for those people who show up on time by starting promptly. Be ready to wrap things up on schedule by allowing time for decisions and follow-up actions.
Review the group objectives, methods, and agenda at the beginning of the retreat. Let people know what to expect.
Establish “rules of behavior”. While some conflict can be healthy, finger pointing and personal attacks are not. Focus the attention on the ideas and not on individuals.
Use a structured approach to capture everyone’s input and to document decisions.
Stay on track. Use a flip chart page designated as the “parking lot” to record miscellaneous or “off-topic” comments.
Periodically check on the progress toward the desired goals of the meeting.
Develop consensus on the meeting’s outcomes and ensure that everyone is clear on the decisions made, initiatives, responsibilities, due dates, and monitoring mechanisms.
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