BRICE CONSULTING

My Blog is Moving

noreply@blogger.com (Mike Brice) — Wed, 04 Aug 2010 17:01:00 +0000

I recently made a decision to move my blog to a WordPress platform operating on my BriceConsulting.com web site. I have also renamed the Brice Consulting blog the Creating Above-market Value blog.

Why did I do this?
The WordPress platform offered a more dynamic environment in which to develop the Creating Above-Market Value brand. Blogger has provided valuable support for the past 2 plus years. You will find expanded features on the new blog site to support the Creating Above-market Value message.

I decided to separate Brice Consulting, my web site, from my brand concept, Creating Above-market Value. The web site provides services that apply the Creating Above-market Value concept to solving business problems and developing higher performing organizations. The blog is developed at expanding the discussion of Creating Above-market Value and resources that are available to readers that can apply the lessons and suggestions to their businesses.

To continue getting feed from the blog under the new name use the following:

Feed Title: Creating Above-market Value
Original feed: http://www.briceconsulting.com/blog/feed/

I hope those who have loyally followed me the Brice Consulting blog will now follow the Creating Above-market Value blog.

Let me know if you have any questions.

Limit Your Business Risk & Prepare for the Unexpected

noreply@blogger.com (Mike Brice) — Tue, 29 Jun 2010 23:39:00 +0000

No matter the size of your business – sole proprietor, partnership, LLC, or corporation – you daily face decisions and opportunities that affect your business risk. Many of the choices due to these circumstances are obvious and you will make good decisions guiding your future business operation toward safe territory. However, other choices may appear to be innocuous in their affect on your business but under dynamic market and business conditions can have a significant impact on your business, increasing your risk to grow and perpetuate the business.

At the beginning of the recent recession I was amazed at the number of companies that did not have sufficient cash reserves or line of credit to last more than a few weeks when sales dropped. They did not have enough freeboard in their business to withstand the economic storm and take corrective action to survive. Do you have enough freeboard to deal with the unexpected in your business?

Here are some positive steps that you can take to reduce the impact and risk in dealing with the unexpected?

Managing Cash Reserves: Accruing cash to offset unexpected cash (either due to controllable events such as unplanned/ unforecasted expenditures or uncontrollable crisis) demand is difficult to do when you think you are in control. Putting cash on the sidelines may appear to be betting against yourself, that you have a good handle on the future, or that you are convinced that spending the money now versus putting it into an “idle” position is a better business decision. Remember once spent it is not easy to recreate cash when business tightens, squeezing your cash flow from positive to negative. Get counsel from your accountant or trusted advisors on what level of cash to keep in reserve. Rely on outside or objective perspective as your emotional commitment to the business may blur your objectivity.
Employee Competence: The competence of key employees or contractors may not be a glaring problem during boom times but can become a critical factor when you least expect or can afford it – particularly during a down market. This may be expressed in what you hear from customers that your employees are promising or how they are servicing the account, which may be retarding additional sales. Employee loyalty is a diminishing characteristic in the work force today, which can result in unexpected turnover, loss of an account relationship or worse loss of a customer if they go with the employee. Choose employees wisely and review their performance regularly to make sure their performance and attitude is consistent with the needs of your business. Owners can become so focused on the tasks of managing the company that they take relationships with key employees for granted and overlook their shortcomings and miss signals indicting their dissatisfaction and potential for leaving.
Customers: Customers are obviously important but what risk do they present to your business. Do you have good business agreements in force in case payments are stretched out? Does one customer have more than 10% of your business or margin? Do you have regular contact with customers to measure what is happening to their business and how it will affect your forecast? Good customers can adversely affect your business when you least expect it. Do you have the reserves to see through what ever interruption in normal business occurs, possibly even replacing them, until you are able to recover the loss? If you have customers that represent a significant part of your revenue or margin then you are well served to develop other clients to reduce the potential impact on your business by any unexpected loss of business from major accounts.
Key Suppliers: A supplier of critical components or services can also have an adverse impact on your business. Remember you are not just buying a product or service to a specification but you are also dependant upon the quality of the management process to perform sufficiently to protect your interests with timely delivery, at the contracted price, and meeting or exceeding quality expectations. Do you have a strategy to use alternate sources of supply to preserve your ability to deliver to your customers reliably?

Will I avoid all risk if I invest in the areas cited above? No! But it will set a tone for how you and your organization manage the business. It is not a matter of making a mistake but how you respond to those mistakes and reduce them over time, Developing sound business practices and a balanced business strategy that is not only focused at developing the business but also addressing those issues that will impair your ability to deal with the unexpected – and the unexpected will occur!

When to Say No to Business!

noreply@blogger.com (Mike Brice) — Thu, 24 Jun 2010 19:27:00 +0000

In a recent article on the Five Principles to Managing Cash Flow Successfully I received a number of comments on the third principle – Importance of No. As business people we strive for the yes from the customer/account/client, which means an order or a commitment for an engagement. However, in our drive toward closing the order we can overlook critical signals about the customer or become too aggressive in negotiating away our value that often results in business we wish we had said No to and walked away.

Why is it so hard to say “No?” We have all been there –more than one, two or three times. The experience is the same. We make less money. We regret the customer relationship. We loose face or feel people will think less of us if we back away. We are less motivated and we struggle to deliver a good quality experience despite the circumstances. Our internal drive to win any and all business is a strong one and difficult to manage. It becomes personal when we should be objective and recognize that we should let the opportunity pass to someone else who may be a better fit or willing to take the risk with this particular piece of business.

We need to manage and control the fear of loosing business or an account and stand firm on the success principles of our businesses. It doesn’t make sense to compromise your business principles only to put the customer relationship at risk. If you roll over and walk away from your principles you will move from a position that you can defend to your customer to the slippery slope of compromise that once you start it is difficult to know where to stop. Some customers (under the guise of good negotiating) will take advantage of you once you start down this path.

Here are key indicators that you should look for that will put you in a “No” position.

Balanced agreement/contract – You should have a sound business contract/engagement agreement that protects you and looks out for the interests of the buyer. Use legal counsel and an insurance professional to look it over to make sure it is sound. The key terms of the agreement should be reinforced during the sales development process. If the customer is hesitant to sign the agreement wanting to do a handshake or refers it to his attorney and it comes back with language that clearly favors the buyer – say “No!”
Moving goal posts – Too often a customer will want, or appear to want, infinite idea flexibility and each time you meet with them the story changes. Your job is to contain scope creep and avoid pressure on what you have proposed and what will be agreed to in the beginning but seems to continue to evolve. Another factor is vagueness or difficulty in agreeing to details that are critical to your performance.
Working relationship – If you do not have a reasonable working relationship – keeping scheduled meetings, providing necessary details, reasonable access (returns e-mails, phone calls, etc.), demonstrates appropriate follow up on activities they are responsible for – then you are witnessing what your under-contract working relationship will be like.
Outside your core competency – You get jazzed about a great opportunity and then realize that the scope of the work requires experience and competency that is too far from what you are capable of doing. In this case the opportunity is not a good match for you and you should withdraw gracefully. Most customers will respect your decision and will consider you for future opportunities due to your honesty.
Contact with the key decision maker – Where your success is dependant upon organization cooperation but you do not have access to the decision maker that is responsible to deliver that cooperation then you are at risk. You need to have access to the senior manager that can make things happen if they are not occurring on their own or you will find that you are working uphill, against the flow, and at risk.
Absence of commitment – If the customer is unwilling or finds it difficult to commit time or reasonable resources in the development of the project then, like 3 above, the customer is not engaged or committed to not only to their success but yours as well.

Saying “No” should occur as soon as you cross one of the thresholds above where you know it is not going to be a good deal. Communicating your decision should be in person if possible and also in writing describing the important business factors that you feel need to be present for success. Do not highlight what you feel are the customer’s shortcomings, as you will want to be considered for future work. The “No” statement should be used to strengthen the customer’s impression of you and not a basis for breaking a relationship.

So what do I do if I am always saying No? You will find yourself doing a better job of qualifying customers and investing in those that do not have the characteristics above. They are out there and as you raise your standards you will find them. Why are there so many “No” opportunities – possibly because the better companies and professionals have already turned them down!

Make sure you invest in opportunities where there is a high probability you will want to say, “Yes!”

Character: Cornerstone of Win/Win Success in Business

noreply@blogger.com (Mike Brice) — Wed, 16 Jun 2010 21:23:00 +0000

Steven Covey in his 1990 bestseller “The Seven Habits of Highly Effective People” devotes a number of pages of his book to discussing the 5 Dimensions of Win/Win. His premise is that thinking Win/Win is the habit of interpersonal leadership. This is a key point in that many of us are small business owners or sole proprietors and do not have the luxury of delegating the Win/Win of our business to someone else. We need to be sure we can master the Win/Win philosophy or we will not be able to enjoy the success we aspire to.

These dimensions include: Character, Relationships, Agreements, Supportive Systems and Process. Thinking Win/Win begins with character and this will be the focus of this article and I will leave you to get the book and read about the remaining four dimensions. Why is character of interest to me? It is what I can control or influence the most. It is the foundation and cornerstone of Win/Win.

Covey defines character as having three traits essential to a Win/Win paradigm. These are Integrity, Maturity and what he calls Abundance Mentality (there is plenty for everyone). We know these traits and often recognize them in others that we find are easy to work with, are trustworthy and provide a sense of satisfaction and accomplishment when a project is completed – Win/Win.

A penetrating question is do they have the same feeling toward us? How do we score ourselves in the fundamental character traits for Win/Win.

Character Traits

Integrity: Integrity is the value we place on ourselves. A primary measure of integrity is how good are we at honoring promises and commitments not only to ourselves but also to others? Is this trait important to you? Do you find it easy to work with someone who cannot fulfill what they have promised others? Do you find it easier to work with someone who you know will go the extra mile to make sure they deliver and support you?

Maturity: Maturity covers a lot of ground but deals with our ability to express our feelings and convictions with consideration for the feelings and convictions of others. We often find ourselves in urgent (confrontive) situations where it is necessary to communicate a difficult subject and we have choices in how we accomplish it. Are we overbearing and inconsiderate in our goal of completing the task or do we address the feelings of the other person and help them see our point of view. How do we react when we are taken to task on a matter and the other person tramples all over our feelings and convictions? Are we motivated to work toward a winning relationship? Are we more motivated by someone dealing with confrontation emotionally or in a mature manner that balances nice and tough? Do you deal with others in this type of circumstance as adults or as children?

Abundance Mentality: How do we share credit or recognition, power or profit? We all know what it is like to work with someone who “steals” the credit or “grabs” the power in order to make them look good. These people tend to be insecure and have low personal wealth. On the other hand people who have high self worth and security tend to be very interested in the welfare of those around them. It is much easier to work with someone that is not always looking for ways to make them look good and willing to share the credit and recognition with you and others.

Character is the cornerstone of the 5 dimensions of Win/Win. Some of us come by the three traits of character naturally. Others of us need to consistently work at it to overcome negative behavior.

So . . . how did you score yourself? What are you going to work on? If you are not sure of how you are really doing seek out a mentor (someone with integrity, maturity and an abundance mentality) who can offer you perspective on your character. You may this difficult and tough to do to be transparent and vulnerable but it is better getting feedback from someone you trust than through lost business or lost accounts. Seek out those in your workplace that seem to have the Win/Win profile and go to school on them on how they develop their positive character work traits. You might be surprised at how hard they work at it.

Remember Win/Win begins with your character!

5 Principles to Managing Cash Flow Successfully

noreply@blogger.com (Mike Brice) — Wed, 02 Jun 2010 18:08:00 +0000

Managing cash flow is a simple concept – but hard to do it successfully in practice. Why? Business is dynamic and balancing the timing of unpredictable revenue against the predictable consumption of cash by fixed expenses coupled with unpredictable variable expenses can create a cash flow crisis. An easy solution is to just borrow more money (sound familiar – US Gov?) but that only provides a short-term solution to what might be a chronic problem of reigning in expenses to the revenue that your business is producing.

I have outlined 5 basic principles that can help you establish good business practices that will allow you to keep abreast of your cash flow position and enable you to take necessary action and managed your cash successfully.

Revenue/Expense Budget: Develop a budget that time phases your cash (expense) needs. This may need to be down to the day (i.e. cash for payroll) and not just bucketed by month. This then helps you determine how much revenue you need to sell and then collect payment on in time to make payments. Review your budget with other business professionals to get their feedback as to its believability. Their initial comments may hurt but your still working on paper and not spending money. Stress your plan for corner conditions (low sales, unexpected expenses, delays in receivables) and understand how your budget may or may not respond under those conditions.

Collection of Receivables: The critical element in managing cash is to understand what collection obstacles may occur that would delay the arrival of cash to pay for necessary expenses. A common mistake is not recognizing that a (valuable) client may choose at their discretion to extend and delay payment. Having an effective collection process that is prepared to contact clients “prior” to the payment date to make sure that the client organization is scheduled to make payment and that nothing is amiss. Do not let this become a conflict avoidance issue. Remember you are in business and the collection process, done professionally, can be painless – most of the time!

Importance of No: Too often we are hungry for business or excited about a new client and make allowances, become too aggressive in pricing or scheduling a project, or committing to a poorly defined project. The end result is that you devalue the value that you offer the customer. What you rationalize as a good concession at the time to get the order makes it a costly product/project to deliver. Because of the over commitment you consume opportunity and delivery time on a low margin piece of business that may end up becoming a collection problem when other business was available that would have come in with full margin and paid on time.

Negotiate Expenses: A number one priority is to minimize your expenses by effective purchasing. When you need something in your business remember that there are all kinds of ways of purchasing it – at different prices. Online auction sites can be very effective in reducing the cost of a business item by over half the local street price. Used equipment is also a great way to conserve cash. That approach may be a problem for you or a few of your employees using something that is refurbished or shows signs of wear but still has a useful life left but it protects cash. Tough negotiating on recurring costs (rent, advertising, etc.) is basic to containing cost and relieving pressure on cash flow.

Cash Flow Dashboard: Doing all of the above does not get you to a point where you are through. Managing cash flow is a daily discipline. How severe your cash flow situation is determines the intensity in which you monitor key performance indicators (KPI’s) or metrics. If you are in good shape then it may be as simple as monitoring incoming orders, shipments and deposits. If you are on a roller coaster then you may need to include watching each receivable, bank balance, when you pay payroll (even yourself), what your payable situation is, etc. Keep a dashboard active so that you can always dial it up or down when you need it. Creating it during a crisis is not easy to do.

I have listed 5 principles to managing cash flow successfully. These steps are tactical measures that require solid execution. Bottom line is your basic cash attitude toward managing your business.

Good attitude: Keep your spending inline with your actual revenue and don’t spend assuming you will get the revenue.

Dangerous attitude: Convincing yourself that by spending more the revenue will come.

You may feel “crippled” by a tight spend/cash policy but that is an easier problem to handle than when you are over extended with no way to meet your financial obligations. Many successful individuals and companies started out using an austere money management approach and made it work for them. Make it work for you!

Style: Is it Important?

noreply@blogger.com (Mike Brice) — Fri, 07 May 2010 16:57:00 +0000

Is your professional style important? Style is defined as the way you make decisions or solve problems, resolve conflict and relate to others – peers, subordinates, superiors, customers, etc. Your style can be a make-or-break factor to your success. It is the primary factor that influences the experience someone has when they come in contact with you. In these days of customer experience awareness, style has never been more important.

During the late 80’s and into the ‘90’s through Y2K the technology industry was in high demand for technology professionals and in many cases a pulse was a primary condition of employment. This resulted in organizations with a diverse mix of individuals who expected everyone to accept them as they were – appearance, working habits, attitude, etc. Since the technology feeding frenzy was so great companies and customers overlooked the idiosyncrasies of many of these “professionals” as the price to achieve an objective in a crisis.

As the demand/supply curve came into balance it became necessary for technology professionals to consider how they influenced the customer experience by not just delivering a successful project on time and with in budget but to also successfully demonstrate interpersonal behavior that was harmonious with management and employees. We went so far as to publish a style guide for our on site consultants as to how to deal with key style factors. The following is a few of the more dramatic style factors:

Improving appearance (including of all things personal hygiene).
How they initiated proactive contact and communication with customer management and team members.
Improving their listening skills to detect customer concern or misunderstandings.
Resolve conflict in a timely manner without becoming personally involved.
Taking responsibility for customer satisfaction.

The results of this effort were impressive as we saw increased customer satisfaction, trust and confidence in our consulting team, extended project work, engaging with more sophisticated and higher value accounts from referrals and most significantly, increased work satisfaction on the part of the technology consultants.

I have applied this experience in a number of companies that I have consulted with. One of the more significant examples of how style affected an organization was with a private school, which was concerned about the ability of the school to have a consistent interaction with parents – the customer – particularly by the younger generation teachers. The problem was more complex than just a couple of teachers as the communication to the parent that impacted their expectations of what was to happen in the classroom was affected by the formal literature provided the parent, the teacher manual for the teachers and daily communication – teacher-to-student, teacher-to-parent, admin-to-teacher and admin-to-parent.

It was easy for the parent to become confused over the “style” of the school particularly when it came to problem resolution whether it started with the teacher or admin. This was compounded when the teacher (often a younger generation teacher) would receive the parent concern in a defensive way, which escalated the attitude of the parent to a crisis level. The bottom line result was a poor customer experience for the parent, which reflected on the school reputation and brand.

The correction to this style conflict:

School administration needed to reconcile the inconsistencies in the communication of expectations to parent, teacher and student.
Administration and teachers needed to visit this subject on a regular basis so that all knew what to do when an incident occurred so that they could execute in a predictable and consistent manner.
The teacher was often the first to receive the parent concern and they need to hear the parent out (listen) before coming (or jumping) to a conclusion as to what action to take to resolve the problem.
The teachers needed to accept that resolving parent concern was part of their job and to not take it negatively or personally that the parent was complaining to them and to handle it as part of what they did as a teacher.

The results were reduced parental conflict and improved relations with their customer and improved teacher morale. The style of the organization and individuals was adjusted so that communication was consistent and problem resolution was dealt with in a low to no conflict manner.

Take a look at your style, the style of your organization to see if you have areas that can be improved to enhance customer experience, improve morale and lead you to higher value business. Style is important!

Leadership: You Know It When You See It!

noreply@blogger.com (Mike Brice) — Wed, 05 May 2010 18:34:00 +0000

There is a continuous dialog on the internet and in management publications as to what defines leadership. Leaders are often contrasted with managers since a manager heads an organization and therefore must, by definition, be a leader. This is not necessarily the case.

Managers normally have a defined position in the organization and generally operate on the conservative side of the guidelines of their job description. They are comfortable directing activities and addressing problems within a narrow range and when that range is exceeded they seek direction from higher ups or pass it over to peers (HR, Accounting, etc.) in the organization. To vary from this "narrow path" raises the risk component of their job as they are then "on their own", have "stuck their neck out" or have become "independent."

Most managers are out of their comfort zone when they move too far into the risk zone. They are generally risk averse and withdraw to defined areas of responsibility where they are licensed to operate. Unfortunately unpredictable and uncertain business conditions occur at inconvenient times that require someone in the organization to step forward and deal with the exceptional condition that is outside the anticipated management guidelines. Leaders rise up and "lead" either his direct reports or others in the organization to successfully confront, over come obstacles and resolve the business challenge. This is leadership!

A leader is capable of performing as a manager but is also gifted with the innate ability to recognize when they should step out and wrestle a risky situation down into a controllable event. This often exposes the leader to criticism by others who are threatened by their confidence to exceed their management responsibilities and successfully perform outside of the box. This person is a valued asset to the company providing that senior management (primarily the owner in a small company) is not threatened by them and know how to mentor and develop them to greater levels of leadership and contribution to the success of the company.

A leader possesses certain critical skills that will enable them to be effective in operating outside manager guidelines. This skill set often includes the following:

Vision - They have a good sense of the long range view of how things are supposed to operate.
High Energy & Positive Attitude - Inspiring a group to move in a critical direction over a short period of time requires energy and a positive attitude to overcome objections and obstacles that will stop and defeat others.
Anticipation - Able to assimilate and translate various events into a condition that if addressed early eliminates a serious problem from developing.
Assertiveness - Has strong convictions on why their objectives are important and will pursue them even if they are unpopular.
Observer of People - They realize that the strength of the team is dependant upon each individual and the leader will mentor team members where they are weak and, where possible, recruit people with key strategic skills that complement the group.
Accountable - Take ownership and commit to what is the right thing to do and what needs to be done.
Influencer - Can successfully present the need for others to respond and perform in a manner they might not have done otherwise.

This combination of skills enables a leader to see what needs to be done, energize and inspire people, lead people to focus on “I can!” and not “I can’t!”, draw the right people together into an effective team that results in above expectation performance, and place the recognition for the successful outcome on those who worked the problem and not themselves. It is truly an exceptional experience to be lead by a leader.

As a company owner are you recognized as a leader? This can be a challenge for an owner where their “power” can be mistaken for leadership. You may be termed the leader but do you demonstrate the leadership characteristics that result in empowerment and positive motivation for the organization. This may be difficult to measure by yourself and you may need to rely on an outside resource – professional associate, board member, or consultant – to give you independent perspective. Take the initiative and evaluate your leadership strengths and weakness. Experienced management professionals often struggle with the definition of what makes a leader – but – they are pretty agreed that they can recognize it in someone when they observe how they operate on a daily basis and under special (and stressful) circumstances.

They know it when they see it!

Change Management ⇔ Good Management

noreply@blogger.com (Mike Brice) — Tue, 27 Apr 2010 19:18:00 +0000

Change management is a dreaded assignment in many companies. It is not leading edge and is normally associated with what a newbie would be asked to do when they joined the company. Those working on new products work hard to avoid any type of sustaining responsibility, which is viewed as a cleanup job to be handled by the less talented.

The company culture that lets this attitude prevail is one that will operate at a less than optimal or productive level, reduced profitability with substandard product quality and customers that question why they purchase their products. Employees at all levels recognize the problems producing products in this environment. What do they see?

Engineering documentation that is red lined or out of date requiring knowledgeable individuals to recall how it was last built.
Bills of material that are incomplete resulting in shortages of parts actually needed to build the product and the accumulations of obsolete material that is no longer needed. This material may ultimately be scrapped signaling to everyone that waste is acceptable.
Products that do not perform as they used to due to variations in incoming material quality or vendor production processes.
Delivery schedules that cannot be met on time due to material shortages and quality issues.
Product cost that is above standard because of excessive material cost expediting material in small quantities and excessive labor cost in overtime assembling and testing products to expedite delivery
Employee morale suffers because no one seems to care that the job is done right, or that things are done and ready when they are supposed to be, or that the product is not built in a quality environment.

A quality change management process is the foundation of an excellent company. Having products that have sizzle is certainly valuable but sizzle will not carry the day unless the product can be produced consistently at a high level of quality with predictable cost and delivery. What are the key steps to do this correctly?

All parts of the organization devote and invest in change management for existing and aging products just as they would for the next best thing coming out of product development.
Phase-out and phase-in of design changes are PLANNED and SCHEDULED reducing and possibly eliminating excess unwanted material, documentation is reviewed and walked through manufacturing and test as the new change takes over to make sure all stations in the process are communicated with and changes or exceptions are incorporated back into the engineering package.
Discoveries of weak design points are addressed and dealt with to eliminate the risk of future failures.
Purchasing and incoming inspection make sure that the quality and reliability of incoming material is high, changing vendors that cannot consistently deliver quality components on time that meet cost objectives.
Employee morale is high due to the company wide attitude toward doing things right for all products – and not just for new products.

Examine the balance of commitment in your company. Is the “back office” just as committed (and resourced) as the “front office”? Don’t let your organization side slip toward the highly visible functions (product development, sales, etc.) and starve the fundamentals of your business model. Listen and look for the signals – cost, quality, schedule, customer complaints - that indicates that this is happening.

Good change management is good management!

Three Steps to Protect Customer Confidence?

noreply@blogger.com (Mike Brice) — Mon, 19 Apr 2010 21:03:00 +0000

There have been a number of tragic events lately in various industries - oil refining, mining, automotive, pharmaceuticals, commercial airlines - to name a few. In each of these instances severe injuries and/or fatalities of employees, customers and the general public occurred creating public outrage over what happened to those involved and how it might have affected others - even themselves. The public focus is immediately on the CEO or prominent company leader who will use a public relations firm to provide media coaching for damage control to deal with immediate events and public perception. Coaching to deal with the public image deals with the short term exposure and many CEO's are very effective at coming forward, expressing concern and, when necessary, publicly directing company resources to take immediate action to remove product, stop distribution and take other measures necessary to win over public confidence.

However, what can really undercut and compromise all of this upfront effort to put a good face on the reaction to the incident is what emerges as either the company or, in the case of a regulated industry such as airlines, an outside investigator discovers internal company practices that were not being followed and were the principle factor in causing the tragic event.

Here are three positive steps that can be taken to make sure that your company is doing all it can to avoid the unthinkable from happening?

Process control: Unfortunately too many businesses do not have adequate control of their business processes. Adherence and compliance with procedures and regulations take a back seat to expediency and cost control. Executive management does not reinforce the importance of critical process control points by their inattention to detail, which sends the wrong signals into the organization.
Listening: Too often indications of pending problems are well known to people in the organization but it is not popular to voice concern or become a squeaky wheel. "Whistle blowers" as they are often called are overlooked and dismissed as being uninformed or troublemakers. Executive management is responsible for the company culture that will either encourage open feedback and quick resolution or suppression and inaction.
Training: Adequate and consistent training of new or transferred employees that reflect current practices, procedures and business conditions is paramount. Updating training programs and timely refresh training can become a lower priority particularly during times of business economic stress puts all employees on deck to meet business needs.

Total avoidance of the unthinkable happening is not possible. Things happen and people can still make mistakes, equipment can fail in unusual ways and it is always possible to experience the perfect storm of events. However, too many highly public industrial accidents are later determined to have been caused by fundamental operations that could have been controlled but basic practices broke down, people were not listening (or taking action) when told of bad conditions or people did not recognize what to do in circumstances where better training would have prepared them to handle the events successfully. Consequently the investment to look good in front of the media is short lived as the true story is later revealed and does real damage to company image, brand and more, importantly, customer confidence.

The Best Read: Reading Your Financials!

noreply@blogger.com (Mike Brice) — Wed, 07 Apr 2010 16:14:00 +0000

For many people the most boring aspect of running a business is reading their financials. For some it is so onerous they try to avoid the experience every month and only want to know the bottom number - profit or loss! However, your P/L, Balance Sheet and Cash Flow statements are the cardiogram of your business. To maintain our personal good health we get physicals on a regular basis and for many that means a cardiogram and even a stress test to make sure all pumps and valves are working properly. For good health and longevity we would not go without one.

Your financial statements, on a monthly basis (minimum), are the cardiogram of your company. Properly designed financial statements provide insight on how the key elements of your company are performing. While significant focus is put on how much profit (hopefully) you made. Profit will take care of itself if the key profit performance factors of your business are under control. Financial ratios help you quickly get the feel of where the pain might be if profit is less than expected. The value for each ratio may be measured against historical averages or market benchmarks. Obviously performance factors that have current values on the wrong side of the desired value deserve your first attention. There is always a story behind each number so it is necessary to uncover the facts that influenced the outcome in order to take effect give action. It is in this process that you can learn a lot about your company.

Are unusual numbers the result of data collected incorrectly (wrong coding)?
Is it a one-time anomaly which will correct itself in successive periods(3 versus 2 payroll periods)?
Were all of the closing cutoffs made on time so that all revenue and all expenses for the period are included?
Is your Cost of Goods sold - material, labor, contracted services - consistent for the revenue recorded?

Are you absorbing too much labor that is nonproductive?
Are you buying from the best price/quality/delivery source?
Is there a mix shift in the products delivered that resulted in less margin than what was expected?

Are your overhead expenses inline?

Salaries are often fixed for the period but variable expenses such as marketing, expense accounts, travel, entertainment, etc. may get out of line.
Are your commission payments consistent with revenue and discounts?

Does your balance sheet show any surprises?

Is your inventory level consistent with the production demand?
Are customer deposits collected and in reserve for the product or service ordered and not consumed by other operations?
Is debt service under control and do you have adequate operating reserves in the event of an unexpected change in business?

How healthy is your cash-flow?

Do you have sufficient cash to ride out the normal flow of high expenses and valleys of revenue?
Do you have the cash to afford the capital improvements that you are planning?
Using a conservative revenue forecast how strong is your cash position two to three months out?

These are just a few of the questions that need to be considered as you examine your financial feedback on your business. In too many cases I have observed owners/CEO's taking a complacent attitude toward their basic financial reports "since they were profitable." However, when an unprofitable period arrived they then had plenty of time to dive into the details only to find out that the "unprofitable" signals began several periods earlier. Timely action would have avoided the profit problem or reduced it significantly through proactive measures instead of reactively applying CPR to the business.

Experienced owners/CEO's take advantage of interim metrics that track key performance factors that influence their financials so that on a daily/weekly basis they get snapshots of what is going on without waiting until the next month to discover a problem. This serves as a pace maker to make sure that the pulse of the business is appropriate and if not - inject their attention and leadership to get things back on track.

Read your financials and develop a good feel for how your business operates so that you can enjoy good business health!

I Want to Be in Business!

noreply@blogger.com (Mike Brice) — Wed, 31 Mar 2010 17:36:00 +0000

Recently I met a business owner who, upon finding out that I was a business consultant, wanted to meet and discuss how their business could benefit from working with me. The objective of the business was to produce a specialty item for sale in grocery stores. This was a home manufactured product and family members were the production and delivery team.

The business had been operating for a year and when I asked if it was profitable I got a suspicious answer. After some wrangling it was revealed that another family member (brother-in-law) did the books for the business but no monthly reports were provided until the end of the year when they discovered they were not making a profit.

I asked what their profit goals were and again received a weak answer. So I backed into the answer by asking what the shelf price of the product was and the cost to distribute it. Subtracting distribution costs from the shelf price left a small number to accommodate per unit production costs and also produce an operating margin. When I multiplied the budgeted margin times the annual volume I asked if this was a good result for their effort prior to covering overhead expenses. A got a very disappointed look.

The end result of the conversation was that they needed to reassess their reasons for being in business because the model as currently operating was not going to lead them toward a profitable experience. The passion and desire to be in business was apparent but they had no idea of what it took operate the business toward a profit goal.

What are some of the basic lessons from this experience that should have been addressed before business operations began?

In addition to a business plan a financial model of the business should have been developed that would have allowed them to understand the sensitivity of the model to volume, distribution costs, etc. and the level of effort necessary to meet a minimum business goal.
There was no regular reporting of financial information to understand what costs were being incurred compared to the revenue that they were generating.
They engaged in a market where there were barriers to doing distribution themselves and or successfully negotiating more competitive distribution costs per unit that ultimately represented a significant part of the unit cost that they could not control.
Be careful relying on family members for performing significant roles in your business particularly if it is not an important focus for them. Once assigned it is difficult to reorganize without creating hurt feelings and conflict in the family.

While this was a micro-company the issues that affected their success also occur in larger business endeavors. If you want to be in business do your due diligence and get outside input which will be difficult to take but it is better to get objective perspective on the issues that will affect your success before you start rather than after investing time and money to get the same input.

Win-Win Banking Relationships

noreply@blogger.com (Mike Brice) — Wed, 17 Mar 2010 22:56:00 +0000

Having a positive working relationship with your banking institution is critical in a turbulent economy. Having a good understanding of your banks lending policy is a given but there are additional factors that come into play when a loan is necessary. Factors that can make this process a Win-Win situation are:

Honesty is at the top of the list. Fundamental to any lending relationship is trust. Whether lending hedge clippers to a neighbor or money to a customer, the lender needs to trust that the borrower will return the property / money in good order.
If honesty is # 1, “no surprises” is a close second. Money was lent based on a set of circumstances. If these facts change, the lender needs to be kept informed in advance if possible. Consider the neighbor who says; “your hedge clippers? I can’t get it to you this weekend; my brother-in-law in Ohio has it. I am sure he will bring it along when he comes back to visit.”
Good Surprises will not always be viewed as positive. “If management can miss what was happening by that much, could they also miss it in the other direction?”
Keep in mind that every lender reports to someone who is generally less informed about your company. Even the bank President reports to a Board and to the Regulators.Keeping them informed protects them within their organization.
Have a plan and do what you say. Being consistently overly optimistic will eventually compromise the trust relationship.
Pay attention to the covenants in the loan agreement. Making payments on time is only part of what was agreed to. These covenants are in place to help the bank maintain its fiduciary responsibility to their depositors. Think how you would feel if your mother was the widow mentioned above.
Be realistic on how you view rates. Think about how you respond to your low margin customers. Do you want your lender thinking about you in this way? Remember, a quarter point on a $250,000 loan costs an extra $625 per year. Compare that to the cost of being viewed as an unprofitable account.
View the relationship as long-term. Consider the banks other services (home mortgages, investments, cash management, etc) if they can add value. If you are satisfied with your bank, refer them to others. In other words, increase your value to your bank.
If the bank invites you to a social event. Go! Getting to know each other in a relaxed environment can often lead to better understanding. Reciprocate when possible.
If you get in a tough cash bind, make sure you pay your payroll taxes. Without getting into a legal discussion, unpaid withholding taxes can jeopardize the lenders secured position. This is never a good thing.

These are good points for us as banking customers to keep in mind as we managed our relationship with our respective banks. Bankers can also foster better bank / customer relationships that we should look for (and expect) in determining if a banking relationship should begin or continue.

Listen!
Be consistent. If things are changing on your end of the relationship, remember the “no surprise rule”.
Know your customer. Understand their business. Be aware of the challenges and opportunities. Serve as a resource. Introduce the company to successful new ideas or services. You see a broad cross section of the marketplace that your customer may not be aware of.
Most banks today have a catchy slogan. “They are all good”. Live your slogan.
Take the mystery out of your lending process.
Recommend your other services only when they can add real value. If the value isn’t clear, remember the “trust relationship”.
About rates, be fair. You deserve to make a profit, but again remember the trust relationship.
Introduce the customer to your back up person. It’s never positive if that introduction happens in a transition meeting.
Keep the client’s interest in mind on the depository side of the relationship not just the borrowing side.
“No, but have you considered…” is often a better answer.

A banking relationship is an important and invaluable asset which both sides need to invest time and energy to manage well. Don't just invest in it when you need it!

Click here for the complete article from Lauber & Company.

Is Your Line of Business Profitable?

noreply@blogger.com (Mike Brice) — Mon, 08 Mar 2010 22:54:00 +0000

Anyone who owns or runs a business knows if they are profitable or not. They look at the P/L at the end of the month and to see if the bean counters show that all revenue exceeds all expenses for the period producing "earnings". This may not be the true profitability of your "line of business" or LOB. The question is compounded if you happen to have more than one LOB.

I have often come across companies that report profits but upon closer examination the profits reported differ from what the LOB's produce. Measuring the profitability of a LOB aligns all of the products, services and overhead for related products that serve a particular industry or customer base. Provided the accounting esteem collects the appropriate data on material, labor and overhead cost it is then possible to measure the LOB profitability.

In a single LOB company it is not uncommon for administrative overhead or corporate overhead to include more cost than is really used by the LOB. This may be due to general inefficiency or intentional misuse by senior leadership or owner for services that are not really related to the LOB. Consequently the company may be profitable with the LOB bearing a heavy overhead allocation or worse the company may be unprofitable when the LOB is profitable. The risk here is that the LOB may be starved of critical resources so that overhead services can be continued.

An extreme example of this was a multi LOB business model where two of the lines were producing LOB profit in excess of 10% while the third and most capital intensive had a loss of 15%. The consolidated profit was 5% and termed "a good profit" by the ownership. Upon further examination the third, capital intensive, LOB had significant issues without he pricing model of work performed, an understanding of what the loading factor of the equipment should be to be profitable, and when it was "profitable" to add additional equipment to the business. These "weaknesses" would not have been revealed had the LOB profitability of a profitable company's not investigated.

Make sure your LOB's are profitable and that your consolidated profit is the accumulated totals of those profits!!

Personal Guarantees and Your Business

noreply@blogger.com (Mike Brice) — Wed, 03 Feb 2010 16:44:00 +0000

Operating and growing a business often requires injections of cash to provide the working capital for expansion in staff, equipment, and market promotion campaign or to just get through a tight business climate and preserve essential resources. Depending upon your source for credit you may be asked to make a personal guarantee. Despite your confidence and enthusiasm in the ability of the business to bear the repayment of the loan and associated debt service consider the following 5 tips (see 5 Steps: A Personal Guarantee and Your Business (and Future ) to protect your self and your business.

Know the risks. Understand what you will risk in the personal guarantee.

For business partners, a new meaning to "one for all." Make sure that all partners share the same liability if the debt cannot be repaid.

Beware the "clause" & effect. Know what the impact of changes or "flexible" alternatives to loan elements as such as determining interest rate over the term of the loan can have to you.

Don't gloss over the fine print. Understand what the fine print says. Use a lawyer to interpret the legalize. You do not want a surprise if things go bad.

You can't run. You can't hide. So don't! Bankers do not like surprises. Don't let them learn of a problem from someone else other than you. Don't let your bravado hide the true condition of your business. Be transparent on what you are doing if a problem situation and build their confidence in you.

Borrow wisely and take the time to exhaustively determine what range of liabilities you are obligated to in your loan agreement.

How Well is Your Vision Understood?

noreply@blogger.com (Mike Brice) — Mon, 01 Feb 2010 18:45:00 +0000

Successful companies are known for the clarity of their vision in guiding the organization toward a long term goal and how well it is understood and accepted throughout the company. Is this true of your organization? What stands in the way of a successful vision?

Where the strategic plan might be referred to as the outline or wire diagram, the vision is the solid model that ties strategies together into a complete picture. The leadership is responsible for framing the vision and the strategies that support it. A successful vision is the sum of not only detail strategic accomplishments but also passion and enthusiasm of employees for the vision.

Test the effectiveness of your company vision by measuring how well the people in your organization can verbalize the vision and how what they do supports it. The vision needs to be shared and adopted across the organization and not just appear on a plaque on the boardroom wall.

Leaders need to get the word out from the executive level down to line managers and then to first level employees. This can be accomplished using a variety of methods such as:

Giving life to the vision in a story that others can repeat.
Leaders who can effectively communicate a compelling vision in a clear, brief way ("elevator speech"), when they interact with people informally.
Use of multiple media channels - slogans, video, handouts - so that people get the vision,
Engaging others in one-on-one conversations using personal connections to transmit information and, more importantly, get feedback and clear up misunderstandings.
Involve customers, partners and vendors in the messaging path.
Back up your vision with actions and behavior that reinforce the vision. People seeing one thing and hearing another can destroy your credibility and compromise the vision.

Many struggle with the vision process and feel that it comes down to just mission. However, a small company that I worked with a few years ago made the transition from just having a mission to also having a defining vision for direction of the company. Consequently they were able to tell a much more compelling story to customers that were looking at why they should have a long-term strategic relationship with them. The new vision was instrumental in establishing business relationships with much larger companies than had been possible in the past.

Test your vision and validate that your organization is behind it. Make sure that your talk is consistent with your walk.

Choosing a Consultant

noreply@blogger.com (Mike Brice) — Thu, 28 Jan 2010 20:24:00 +0000

Hiring an outside consultant is a common practice in many businesses. The need to do this is often due to the need for a particular skill or function that is not present or available in the organization but not one that the organization is prepared to add as a permanent employee. Another reason for hiring an outside consultant is the need to have an impartial voice weigh in on an important matter.

The selection of the consultant is as important as hiring an employee and should not be taken lightly. Accepting "brand names" as a qualification is short cut method used by many that too often lead to undesirable outcomes. This path is often used by senior executives as a "safe choice" alternative in supposedly hiring the best.

Keys to making a good consultant selection and successfully completing an engagement begin with project definition and should include:

Have a good definition of the task or problem for the consultant to work on.
Define what type of consultant activity - analysis, training, coaching, design, development - is needed to perform the assigned task.
Identify who the consultant will work with and who will be responsible for their work product.
Have a good definition of what the completed work product should look like.

Once the project definition is complete then it is time to consider the consultant to do the job:

Do they have the requisite experience to do the job?
Perform your due diligence and talk to previous customers and understand what experience they had with the consultant and if your project is smiler to what the consultant worked on.

Were the contract terms honored?
Was the project finished on time?
Was the project completed within budget?
Were the recommendations useful?
Were they open and flexible to ideas and input from the project team?
Did they work well with others?
Did they discuss or reveal information from work performed at competing organizations?

Involve a number of people from the project team that the consultant will be working with to make sure sufficient chemistry exists for a successful working relationship.
Determine how much of a "learning curve" the consultant will incur during the project and whop pays for it.
Have the consultant present how they work with customers, provide a record of work performed and work remaining, problem resolution, ability to contain cost within budget or advise if work parameters change and affect cost.
Evaluate key performance factors: communication style, ability to work with others, work habits, ability to meet deadlines.
If appropriate, have the consultant candidate submit a proposal on how they would structure and perform the engagement.
Have the consultant candidate critique the project definition to reveal their ability to understand the work requested and to make recommendations on any changes in order to make the project more successful.
Discuss the terms of payment and make sure that they are included in the contract.
Will the consultant sign a confidentiality agreement to protect your proprietary information.
Resolve who owns the work product.

A successful consultant engagement is important for all parties. Consultants provide expertise and experience to undertakes projects that you might be unable to do otherwise. They provide the capability you need when you need it. Plan your use of this resource carefully, do your due diligence, understand how they will impact your organization and how to put what they do to work in a timely and effective manner to maximize your return on investment.

Make a New Years Resolution: Plan & Execute

noreply@blogger.com (Mike Brice) — Tue, 05 Jan 2010 22:06:00 +0000

Too often I find companies that do not connect their planning function with how they execute. Don't get me wrong many of these companies know how to execute but much of it is tactical reactive execution which does not really advance the strategic direction of the business.

Many businesses go through a planning process but when asked the penetrating question "Is management compensation connected with performance to plan?" The answer ranges from"Not really!" to "We don't plan well!" Many owners have commented during the recent recession that planning has had to take a back seat to just surviving. I relate to that. It is not productive to apply precious time and energy to activities if they keep you from staying in business. However, is just surviving enough for your customers? Do they care how tough it is for you when it comes time to make strategic decisions on who they want to do business with next year. Don't be nosed out by another business offering an additional advantage to help your customer be competitive?

Planning can take on many forms. Some planning processes are very formal, elaborate and comprehensive. Others can be very spartan and crude. Both can be successful but they must possess a key ingredient - execution. You can create a plan to fulfill a vision to move your business in a strategic direction but without execution it is not worth the paper (or electrons) that it is printed on.

Where do companies fall short on the execution path? Measurement and accountability. It is imperative for any organization to have regular review cycles where measurement to plan occurs and when necessary adjustments made to modify the plan or address the short fall of key performers. This of course raises the issue of conflict management which many organizations struggle with when key performers (usually great and valued for their performance on daily tactical issues) resist the challenge of integrating the objectives of the plan into their daily activities.

Successful companies "master" the planning process to the extent that many of their planning objectives are accomplished each review cycle resulting in major shifts in what they deliver to existing or attracting new customers, This is not because they have better plans but that they have a leadership team that effectively executes to plan while meeting daily performance operating objectives as well. It is a maker commitment (led from the top of the organization), not just a halfhearted notion.

Make a New Years resolution to not only plan but to commit to the elements of execution necessary to move your business to a strategic position attractive to your customers that will retain them and be attractive to new customers.

New Product Introduction (NPI): What is your target?

noreply@blogger.com (Mike Brice) — Tue, 29 Dec 2009 20:35:00 +0000

Businesses commit high-valued resources (people, cash and windows of opportunity) to develop and introduce new products to market. Unfortunately, in many cases, product development is well along before attention is applied to whether the NPI process is appropriate for the product and the targeted market. This is particularly true of products where the product definition was developed without broad based customer involvement known as the "Voice of the Customer (VOC)".

By not engaging sufficient customer or "market" input the NPI process is starved of critical information that is needed to determine what "acceptance" criteria the product will have to satisfy to be a success. This can be a critical problem for a company that has traditionally designed and developed products to an acceptance criteria defined by a narrow (often just one) set of customers and then decide to convert an existing product or technology for use in a larger market. The normal NPI process used for this new endeavor will fall short of what is needed. It needs to reflect the condition that many customers will determine the success of the product and not just a few or one.

In every case the NPI needs to recognize the unique constraints of the market (customer community) that the product is intended to serve - one customer or many. An NPI process designed to successfully guide development of a product to meet or exceed customer acceptance criteria is radically different than one that will need to measured by market acceptance. The precision of the effort to determine market acceptance into a design criteria by an anonymous customer is a critical and challenging task. The customers voice has to be represented (and defended) in the same way that a detail specification in a customer acceptance criteria is adhered to in order to deliver the product. Internal resistance to accepting external acceptance factors needs to be dealt with effectively or the success of the product will be compromised.

An extreme example of this problem involved a team of extremely talented engineers developing a software tool for a market unfamiliar to anyone on the development team. Developing the product was looked upon as solving a difficult problem. When the product was released the response was far short of what was expected.

I was asked to look into why the product was struggling and discovered that the product specifications were developed without any involvement from any users. I scheduled several meetings with "typical" customers and the feedback was valuable - but too late to save the product. The product did do what it was designed to do, it solved a critical problem, it was recognized by customers as a technical achievement but it did not integrate with the work flow of the user so that they could view it as an inline productive tool. The end result was that the product was withdrawn and the team dissolved.

Could this have been averted? Yes! Surveying customers ahead of time to determine how they would use such a tool would have revealed the critical work flow integration requirement that may have resulted in a successful product or possibly a decision to go in a different direction.

The moral to the story. Know your target audience. Make sure they are represented throughout the NPI process. Invest in a sold NPI process or spend more time (and money) later trying to get the product right, in front of the customer, once it is in the market.

Product Customization - Boom or Bust

noreply@blogger.com (Mike Brice) — Wed, 23 Dec 2009 17:02:00 +0000

A challenge that many companies (small & large) wrestle with is the issue of product customization outside of the standard features that allow some form of user customization at order configuration. This often requires an investment in engineering, new documentation, quoting an engineering change charge and/or new product price and tailoring the manufacturing/build/test cycle to deliver a quality product - on time.

Why is this a difficult question? Sales rushes in with an order from a valued or targeted customer to buy the standard product except for . . . In the desire to either keep the customer, add a new customer or (more probable) meet sales objectives the order is accepted. The question is whether your order process is designed to operate effectively in this mode.

Is the sales process sufficiently capable of capturing the necessary specifications without committing an engineer to an onsite meeting with the customer?
Do you have engineering change staff (often called sustaining engineering) or will you need to siphon off valuable engineering time from engineers who are committed and personally invested in the design of new products?
Do you have a production build group that has the flexibility to efficiently do "one of" builds?
Is your accounting process setup to accurately collect the cost of this type of business so that you know where your profit (or loss) is occurring separate from your normal production business?

The answers to these questions are not good if customized products are not the focus of your business model. Too often the end result is business that you wished you had not taken or "bought" which is more likely the case. The goodwill with a valued customer is put at risk, the future with a new customer is questionable, and your profit margin is unknown if the customized product does not have the same product quality and performance your standard products have.

More significantly is the lost opportunity of the organization to keep valuable (and hard to find) strategic resources applied to the future of the business. One hour (you wish it would be just one hour) of engineering time redirected to a "one of" customized project is not just one hour out of the day as it is difficult to get back into the flow with where the project was let alone the impact on engineering morale when they are used for a project like this.

Consequently the promised upfront gains of an organization redirecting their business model to take on a customization project are not met. A common result of this decision is:

profits performance is compromised,
customer relationships are strained, and
strategic direction for the future of the business is put into limbo.

The answer? Stay the course and do what you do well and avoid the temptation to be a marketplace super hero!

Another Government Mandate To Take Care of You

noreply@blogger.com (Mike Brice) — Mon, 21 Dec 2009 21:51:00 +0000

A reaction to the east coast snow storm this weekend where there were several incidents of plane travelers strandede in planes for extended periods of time was for the Department of Transportation to order airlines to let passengers off stranded airplanes or face fines. The fine would be $27,500 for each violation over a three hour limit. This would total $1,375M for a commuter plane carrying 50 passengers or $5.5M for a larger plane carrying 200 passengers. Is this reasonable? What is our government doing to us in making this mandate?

It is true that there are a number of unusual stories where, in specific instances, mistakes were made and passengers were inconvenienced and kept for an unusually long time. However, for the number of trips per day that are taken by air travelers in this country these examples are few and far between. THis doesn't make it right but this new mandate will have significant ramifications to the relative low cost of air travel that the flying public has become used to.

Why will cost go up? Unfortunately the airlines are not omniscient and will have significant difficulty predicting when disastrous snow or weather conditions will create a situation where it will have a "stranded" passenger condition. This occurs when the planes themselves either cannot move on the ground (ice and snow) or cannot land at their destination such as when airplanes are grounded due to fog resulting in too many¨aircraft for the existing facilities to handle. The latter occurred to me flying from Denver to Seattle. Seattle closed while we were en-route and the decision was made to land in Portland and wait until landing conditions improved. We waited 6 hours on the ground partly due to waiting for conditions to improve and then for the few jetways to be available to land passengers. We were in a DC-10 at the time and Portland only had equipment and staff to handle three of jetways at a time and many aircraft were ahead of us.

Consequently we will have airlines faced with enormous fines if they cannot get passengers off the planes within three hours. How many extra staff will need to be on hand in the event of a weather or other incident that could "strand" passengers. What about baggage? Security is not too keen on passengers and baggage being separated particularly if when they re-board the plane the same passengers are not on the plane. What happens if the pane is at an airport where they do not have an office and use other facilities. Will the other airline or operation have liability if it does not have the crew and equipment to meet the need even if the primary carrier has the plane ready to let the passengers off? What an enormous problem and a great opportunity to finger point.

In this instance we have a government bureaucrat without any financial responsibility for the outcome making a decision so that we can all feel better. The traveling public used to be capable of letting an airline know when its service level was bad by avoiding it. The airline either corrected its ways or went out of business.

Who will absorb the cost of this mandate? You will! Will we still have isolated instances where conditions beyond the control of the airline result in inconvenience? Yes! But we will do it at a higher price because of mandates and fines imposed by an ever increasing governmental role in the lives of its citizens and free enterprise.

Do you feel better?

Is Your Organization Ready to Sell?

noreply@blogger.com (Mike Brice) — Wed, 09 Dec 2009 23:36:00 +0000

I recently considered (a pre-January 1st vow) expanding my workout schedule to include weight training in addition to lap swimming to address the rapidly escaping muscle mass that age brings in later life.

I regularly pass a well known gym in the area and thought that it would be convenient using that location for my new workout. I stopped in one morning to get membership information. The lobby desk was unattended so I waited a few minutes until someone returned. During my wait I scanned the counter looking for a brochure that might answer my questions.

I had visited the gym web site the night before but it did not show any schedule of membership rates or packages. A young woman soon returned and I asked to see a club brochure to understand what package/price would best fit my interest.

The woman looked at me sheepishly and said that they did not have any brochures and that sales people came in later in the day - it was 8:30am. I then asked her what the typical prevailing prices were for a membership. She quickly said that she did not think she could do that as everyone was different.

I was getting more confused and was hesitant to ask another price related question. She stood looking at me and seemed to want to leave it at that. So I saaid thanks and said goodbye. It was obvious that no one in ownership/management cared enough to create a customer experience encouraged membership.

It was obvious the woman at the desk had not been prepared for a sales scenario. She did not offer a tour (while she gathered her thoughts on how to address the price question), she did not get my contact information, she did not provide me with a contact name to reach later that day, she was not coached on how to keep a prospective member in the door until they made a buy decision or secured a commitment to meet or connect with someone who could.

Is this the case at your company? Of course you are prepared to sell - aren't you - but what about your front office? How do you score on the following check list?
Do you have an up-to-date price list of your products and services to answer customer inquiries?
Do all people that have contact with customers know how to triage interest from a customer so that they do not get away without taking them to the next level?
What is your policy on returning inquiries from a customer?

Phone calls - within the hour or within thee promised period on voice mail.
Fax - same day or no less than 24 hours.
E-mail - same as fax or less.

Are you on time with appointments?
If customers come to your office for appointments, are you on time. If they have to wait are they notified before the appointment time passes, and are they kept abreast of delays as the time progresses past the scheduled time (i.e. waiting for your schedule doctors appointment)?
Do you sit in on customer contact calls or visits to gauge the effectiveness of your sales training?
How regularly due you audit your sales process and materials?
If you use a web page (server side database) to collect customer requests information is it monitored regularly and are they responded to within the promise response time?
Is your web page accurate, are the phone numbers correct, are the contact e-mail addresses current?
If the customer request escalates into a quote is it processed in a timely manner with timely follow up to move the quote into an order.

Be ready to sell! A casual attitude toward a sales opportunity does not differentiate you in the market place and lead to a revenue opportunity. In the case of the gym above, I had heard that they were have trouble with membership. I thought it was due to the economy but now after experiencing the short comings of their sales process, their revenue problems could be greatly eased if they had a better "sales" attitude in their organization. How about your organization?

Bringing Order to Chaos

noreply@blogger.com (Mike Brice) — Tue, 01 Dec 2009 23:53:00 +0000

We have all been there! Taking over a company or group that has lost its way or suffering under market conditions that has overwhelmed it. Or, a major customer relationship erupts requiring immediate triage to stabilize and return to a normal business relationship. Or, you are blind sided by a third party trying to disrupt your organization by hiring away key employees affecting product development, sales and operations, or undercutting you position at key accounts. What do you do?

Your plan of action is a result of a quick but careful assessment of the conditions that exist. Many contradictory factors may be in play: Lack of organization and individual confidence, trust issues (mistrust, blame, defensiveness), break down in business discipline, poor communication, poor vision execution, etc. The effectiveness of your action plan is based on how you organize and prioritize what you do first, second and so on!

The following is a five-step process that I have used successfully to deal with severe organization dysfunction and poor performance:

Focus Employees On What They Can Control - The biggest distraction that I find that needs to be contained is the disruption that things people cannot control causes. Uncontrollable events can be very distracting to many employees and they are far more productive and satisfied when they can offload the unexpected and uncontrollable issues and Focus on What They Can Control.
Establish a Crisis Path - As a sizable part of the organization returns to processing controllable events there needs to be a timely response to the uncontrollable. Every organization has people who are more adept and comfortable dealing with uncontrollable problems where boundaries are poorly defined. They thrive on solving crisis. These people are capable of rising to the occasion in creating and developing solutions that solve tough problems in a timely and effective manner.
Establish a Horizon - A dysfunctional organization has lost track of what it is working toward. It may be difficult to target a long term goal right away. Daily (or in more severe cases hourly) goals or targets might be necessary at the beginning to measure progress and accomplishment for the organization. A sustainable track record of attaining daily goals will lead to increased confidence in setting longer term weekly and then monthly goals.
Eliminate the Root Causes of the Uncontrollable - As the organization begins to redirect itself toward a successful direction and uncontrollable crisis are contained; resources need to be applied to eliminating the causes of repetitive crisis. Possible reasons for this condition are:

Poor quality that is either occurring in the organization or by a supplier in the supply chain.
Critical business processes that are not being complied with.
Customer communication on commitments and expectations has broken down leading to an unrealistic demand on company resources.

Honesty, Transparency and Communication - Through all of this it is imperative to be as honest with employees and customers as possible. Ongoing urgent or crisis situations breeds skepticism. Telling the ruth is golden over telling people what they want to hear. I have had amazing response from employees and customers alike when I present the truth about a situation rather than using double talk or worse - delay and deny - to deal with a problem.

Are these the only steps you can use to bring order to chaos. No! These five-steps have worked successfully for me in laying a foundation of stability in addressing severe organizational dysfunction in a number of management assignments in my career. Some of you may have circumstances that required a different tact and I would certainly appreciate hearing from you on what worked best for you.

Do You Have An Effective Market Strategy?

noreply@blogger.com (Mike Brice) — Thu, 19 Nov 2009 21:23:00 +0000

"Strategy should be developed from the bottom up, not the top down . . .In military warfare, the serious student of strategy begins with the study of the bayonet"

- Marketing Warfare, Ries & Trout

What is the underlying message in this quote? A smarter strategy will overcome just working harder in the trenches. Do not confront your opposition head-on when they have the high ground. If you are number 2 you seek higher ground. If you are number 3 you seek a flanking action to go around the high ground, And, if you are just entering the market your tactics would involve going under the high ground.

As a market leader your strategy would be defensive to protect your market position. For years Microsoft protected its strong position with its bundling strategy which positioned its browser, for example, ahead of others, possibly better performing, products. Apple comes to the market late and offers leading design, technology rich products that exceed the capabilities of the market leaders and taking advantage of their disadvantages.

Do openings exist when the market is dominated by one leader? As a company becomes a market leader it begins to struggle with being all things to all customers. Its success may have originally been serving a market segment very well and, over time, adding improvements to the product or service to make it attractive to a larger customer base. What often happens then is that the sharp features set and message that originally attracted customers becomes fuzzy and less distinct allowing smaller companies to step in and grab market share with targeted product solutions that respond to rapidly changing needs in the market place.

Customers react well to products that are refreshed regularly to meet their changing needs. Larger companies find this difficult to do as they become more bureaucratic and key decision makers become removed from the front lines where they were in constant contact with the market.

The strategic planning development process is a critical aspect of the ability of a company to hold or gain market share. Many companies fall into the top-down approach where decisions are made without the benefit of direct contact with tactics currently at play in the market. A bottom-up approach is able to use this tactical information to more effectively define what it will take to overpower a competitor or market leader for a segment of the market. This process is more likely to include the anticipation of what a stronger competitor will do and the best way to attack the weakness in the competitors strength so that they cannot respond without giving up its strength.

A market leader is more likely to believe they can do anything if they allocate enough resources. However, a poorly conceived strategy using a top-down approach will shift resources away from the point of battle where they are needed.

What is your market strategy process? Is it top-down where you are not incorporating current tactical information from the marketplace? Are your key resources improperly allocated to be effective in the development and execution of a market growth strategy?

Examine your market strategic planning process to make sure it is appropriate to your market objectives and position in the market place.

Resource: QuickMBA

The Benefits of Revenue Linearity

noreply@blogger.com (Mike Brice) — Thu, 12 Nov 2009 23:32:00 +0000

"Through improved revenue linearity and strong working capital management, we improved DSO, decreased inventories and, as a result, generated $46.8 million in positive operating cash flow, our 46th consecutive quarter of positive operating cash flow."

Chairman and CEO Robert Hagerty, Polycom Inc.

Many companies measure revenue on a monthly basis and overlook the "flow" of revenue during the month. In some cases companies are captives of their customers as it relates to the demand curve that they place on them. We often receive promotion offers to order by . . . which are designed to improve the linear flow of revenue for the company. In other instances, companies do not apply sufficient planning(forecasting)/control to the manufacturing process which can result in a hockey stick flow of revenue at the end of the month. This can be particularly true for build to order products versus those that are more commodity oriented. Insufficient order backlog can also produced a non-linear revenue flow as manufacturing will produce products for potential orders that do not arrive until late in the month placing extreme demands on operations as they do final assembly, configuration and test to ship by the end of the month.

Why is linear flow necessary and valuable to the financial performance of the company?

Revenue Linearity Example: Ideally if you have a monthly revenue budget set at $1.2M and there are 20 working days in the month then a linear flow would be to deliver to finish goods and ship $60K per working day.

This example assumes that there are sufficient orders and customer approved ship dates to ship available inventory each day at a $60K rate. This linear flow allows the collection process to begin earlier than if the bulk of the $1.2M is shipped the last week of the month. Also, inventories and work-in-process can be optimized to support a $60K/day flow instead of a large "burp" the last week of the month (in some cases this could occur over a few days).

By the end of the first month or by the 15th of the next or second month a good portion of the cash from the first part of the month would be received or on its way. A non-liner flow would push many receivables out into the third month putting pressure on working capital and credit lines.

The graphic below highlights the difference in collection is a linear and non-linear revenue pattern. In the Linear example the first collections are on their way by the middle of next month and would continue to increase as the each receivable aged. In the non-Linear example we see a substantial portion of the receivables delayed and additional 15 days or more depending upon the severity of the non-linearity. The cash is delayed but demands for cash regular wages, utilities, inventory for the current month revenue still exist and would have to be paid by reserves or a draw on the credit line.

When build-to-order products are involved the scheduling and production performance are critical to produce the linear flow. Lean manufacturing methods have improved the ability of manufacturing operations to meet scheduled delivery dates that also support linear revenue flow.

In the case of Polycom above, it improved revenue linearity along with strong working capital management and produced an attractive positive operating cash flow.

What is your linear revenue strategy? Are you taking advantage of revenue linearity to improve cash flow in your company?

Cash Flow Planning and Profits

noreply@blogger.com (Mike Brice) — Wed, 11 Nov 2009 18:02:00 +0000

Cash Flow Planning is something that many companies do not integrate with the normal budgeting and profit forecast process. For some companies this is not a serious problem in a "normal" economy as they have sufficient cash reserves or credit line that can absorb the normal ebbs and flows of cash demands of the company. In todays economy where cash reserves have been depleted or credit lines tightened or "lost" raises a new demand for "accurate" cash flow planning.

If I make a profit then whats the big deal about cash flow? Profits on most company financials do not represent cash but a sale that is a liability on the customer to pay at some time in the future. Until the customer pays the company uses working capital to pay for inventory, employee wages, heat, lights and other expenses. It is the management of customer payments and company obligations that results in either positive or negative cash flow.

Isn't it just a matter of making sure receivables are greater than payables - right? This would be a simplistic view of managing cash flow as this attitude would most likely not recognize factors that influence the changes in Days Sales Outstanding (DSO) or balancing non-uniform demands for cash such as new products, tax payments. capital expenditures or debt reduction.

DSO is a measure of the number of days that a company takes to collect revenue after a sale has been made. Why would DSO vary?

Products that have quality issues and do not operate properly will cause payments to be delayed until the products perform.
The customer mix changes where the majority of customers paying in 45 days days may transition to customers who push payments out to 60 days - or more.
Customer cash flow problems can filter down to you where they may delay payments to improve their own cash flow situation.

So if I do a good job on collections cash flow can be managed? Managing the inflow of cash is important but it is also critical that you look what expense and asset strategies you are using in the company. Such as:

Carrying inventory that is not being used consumes cash making it unavailable for other purposes such as paying wages, lease payments, etc. Excess inventory can even result in lost cash if the inventory becomes absolute and is written off - thrown away.
Capital expenditures such as equipment or buildings consume cash prior to getting a return on the investment. Timing of investing in capital expenditures can put positive cash flow at risk.
Factory cost or the cost of goods sold - labor and material - will put pressure on cash if productivity and quality objectives are not kept to insure that a dollar of sales will yield a predictable gross margin. Loss of control in labor cost, productivity, quality or material cost can create products that cost more than expected and/ or delivered later that expected resulting in a cash flow crisis.
Vendor financial stability can become a problem where they may need to tighten their collection policies which may require you to pay early if there are not otters sources for the same product or service that will let you pay on the same schedule you have planned into your cash flow plan.

Summary

Good cash flow management is not an accident. Intentional action is required on a regular basis to make sure that all of the factors that support your cash flow plan are in order. Cash is king - but you have to take a proactive role with your organization to make sure you achieve your cash flow objectives. Integrated cash flow planning is essential. Developing cash models of your business will help you and your team understand the sensitivity of your specific business model to factors that can cripple or impede good cash flow management.