Do Your Core Business Well

When a business is initially successful, it is generally in one type of business. That success often leads owners and managers to begin thinking they can make any business successful. They start thinking about diversifying into other types of businesses. The reverse of this is when a business is struggling and the owner or manager believes that the only way to achieve success is to diversify.

In both cases, the core business probably represents an opportunity for additional success if properly managed. But there seems to be something about human nature that draws people away from what they do best and toward something that appears to be more glamorous or more intriguing.

We believe it is important to pay special attention to the core business...what it is you do best...and grow that business to higher levels of success. Business newspapers and journals are full of stories about companies that get outside their core business and fail miserably. And in many cases the core business suffers because resources are drawn away from it.
We think that too many decisions to diversify outside of the core business or strategic outgrowth of the core business are ego-driven. Making diversification decisions to feed someone's ego is simply irresponsible.

Before thinking about moving beyond the core business, ask yourself why you are even considering such a move. Can you grow your core business in a profitable, significant manner? Are you doing a good job with your core business in terms of operating efficiency, customer service, margins, promotion and quality of personnel? If there is room for improvement, concentrate and focus on making those improvements. Your objective should be to maximize the value of the business. Making the core business strong in terms of operations and customer satisfaction and loyalty will enhance value significantly. If you divert resources away from the core business by buying another business or diversifying through product or service development, the core business will not get the attention needed to enhance its value.

In short, focus on doing what you do best. And then try to do it better. However, none of this is to say that diversification is necessarily bad. It can be a very positive step for a business. But the point of this brief is to point out that the core business, assuming it has adequate potential, must have a lot of attention paid to it. A new venture can be undertaken as long as adequate resources and expertise are available for both the core business and the new one.

Learn and Understand Front Line Jobs

Have you ever had a manager request or assign you a task and want it done in a time frame that was simply not realistic? This probably happened because they did not understand your job and day-to-day tasks. This generally leads to mistakes, stress and unrealistic expectations.

The more a manager knows about the day-to-day operations of your business, the easier it will be to make informed decisions. Spend some time working side-by-side with your front line employees to gain a better understanding of what they go through each day and to get a better feel for the processes they undertake. This knowledge will help when focusing on process refinement and when making operational decisions. Also, you will gain the perspective of your customers and have an opportunity to identify problems with customer service.

Establish Productivity Standards

Because productivity has such a profound impact on profits, there must be some way of measuring performance. Setting productivity standards for a particular job is important. Whether it be processing payables or picking orders in the warehouse or some other job, it is possible to establish minimum standards in terms of output. These standards become expectations for your employees. Also, incentives can be established for performance above the minimum performance level. In order to establish standards it is essential that you understand what it takes to do the job and what a reasonable work pace is. Setting unrealistically high or low standards can be detrimental to productivity and/or morale. It is also imperative that employees are held accountable on meeting these productivity standards which can be done through performance reviews.

The Cost of Turnover

Some turnover of employees is normal and expected. When it becomes excessive, it costs a business a significant amount of money. There are tangible and intangible costs associated with employee turnover. As a general rule of thumb, we believe that the cost of turning over one employee is roughly 25% of that employee's annual wages and benefits. For an employee earning $30,000 (includes benefits), this would amount to $7,500 of "cost" associated with that employee leaving the company. For example, suppose a company employing 100 people turns over 25% of its work force annually. In this case 25 employees leave the company every year. Assuming all 25 employees were earning $30,000/year, the total approximate cost of these employees departing is $187,500. If the turnover rate is reduced to 10%, the total approximate cost would fall to $75,000. Obviously it is important to take steps to control employee turnover. Are you taking those steps?

Do Your Core Business Well

When a business is initially successful, it is generally in one type of business. That success often leads owners and managers to begin thinking they can make any business successful. They start thinking about diversifying into other types of businesses. The reverse of this is when a business is struggling and the owner or manager believes that the only way to achieve success is to diversify.

In both cases, the core business probably represents an opportunity for additional success if properly managed. But there seems to be something about human nature that draws people away from what they do best and toward something that appears to be more glamorous or more intriguing.

We believe it is important to pay special attention to the core business...what it is you do best...and grow that business to higher levels of success. Business newspapers and journals are full of stories about companies that get outside their core business and fail miserably. And in many cases the core business suffers because resources are drawn away from it.

We think that too many decisions to diversify outside of the core business or strategic outgrowth of the core business are ego-driven. Making diversification decisions to feed someone's ego is simply irresponsible.

Before thinking about moving beyond the core business, ask yourself why you are even considering such a move. Can you grow your core business in a profitable, significant manner? Are you doing a good job with your core business in terms of operating efficiency, customer service, margins, promotion and quality of personnel? If there is room for improvement, concentrate and focus on making those improvements. Your objective should be to maximize the value of the business. Making the core business strong in terms of operations and customer satisfaction and loyalty will enhance value significantly. If you divert resources away from the core business by buying another business or diversifying through product or service development, the core business will not get the attention needed to enhance its value.

In short, focus on doing what you do best. And then try to do it better. However, none of this is to say that diversification is necessarily bad. It can be a very positive step for a business. But the point of this brief is to point out that the core business, assuming it has adequate potential, must have a lot of attention paid to it. A new venture can be undertaken as long as adequate resources and expertise are available for both the core business and the new one.

Refine Processes the Easy Way

What TQM, CQI, reengineering and other process improvement programs advocate is an increase in efficiency through the systematic study and improvement of critical business processes. But what we have found is that many companies approach these programs incorrectly by:

1) selecting unimportant or lower priority processes to study

2) getting bogged down in the analysis rather than focusing on results.

What is a process? Webster's Dictionary defines a process as a "method of doing something will all the steps involved". Businesses are made up of a number of processes, each with varying degrees of complexity in terms of the number of steps involved. These processes are used to carry out functions and activities. For example, something as simple as paying bills or more complex manufacturing or distribution processes are all necessary to keep a business running. How efficient these processes are can have a major impact on customer satisfaction, employee morale and productivity and profitability.

Before proceeding, an organization should inventory all of its important business processes. Once the inventory is completed, the list of processes should be prioritized in terms of their relative importance to the overall success of the company. We believe that the most important processes are generally those that impact customers most directly and most heavily. After the list of processes has been prioritized, begin with the most important process. Select a refinement team of roughly 3 to 7 people. The team should consist of people with and without intimate knowledge of the process. Selecting people without intimate knowledge is important because they can provide a more objective, distant perspective. It is often difficult for those closely involved in a process to "see the forest from the trees". They are often too close to it to be objective or they have such a vested interest in it that they will fight change.

Once the team is in place, have an initial meeting to provide a brief overview of the process and to collectively list the steps (flow chart) the process in question. Have someone record the steps involved in the proper order. That individual will be responsible for preparing a draft of the flow chart and distributing it to each member of the team within a day or two of the initial meeting. Schedule a second meeting that should take place within about a week or so. In the meantime, the team should be individually looking at each and every step of the process and evaluating whether that step is:

1) appropriate

2) necessary at all.

In the second meeting, the group will begin discussing each step of the process. Each member of the team should provide input as to whether that step is correct and necessary or whether it should be modifed (and how) or eliminated completely. The group should reach consensus on each step. Once each of the steps has been evaluated in this manner, a new flow chart should be prepared for the group to review. A final evaluation should take place to ensure that the process will, indeed, do what it is intended and that it has in fact been made more efficient.

With this approach, processes can be quickly and easily enhanced to become more efficient and less cumbersome. While most processes can be refined in this manner, there could be a few processes that are very complex that will require more extensive analysis and measurement. But we believe that over-analyzing simple processes simply ties up people resources and provides little incremental advantage over the method described above.

Sales and Wasting Time

The way that sales people utilize their time is critical to their success. Many sales people are simply ineffective time managers. Every minute of every day is essential to a sales person. Sales managers need to stress the importance of time and help their sales people understand how wasted time translates into lost sales.

Let's look at an example to clarify our point. Suppose the average face-to-face call lasts 15 minutes. And the average travel time between accounts is 30 minutes. We'll use an 8 hour day even though we believe an 8 hour day falls far short of acceptable in the sales game. Let's assume that on this day the full 8 hours is devoted to either travel or actual sales calls. We'll further assume that the rep is at the first prospect's doorstep at the beginning of the 8 hour period. In this 8 hour day, the rep would be able to make roughly 16 sales calls.

We know that sales is an imperfect art form and making 16 calls in this example is undoubtedly a stretch. We know that the rep will need to return phone calls and follow up on and resolve problems that might occur. These will consume some of the day which will further reduce the actual number of calls that get made. So let's say that on a good day the rep can make 10 calls.
Now let's complicate this scenario by introducing events or activities that tend to waste a sales person's time. Here's a list of our top ten time killers:

1. Poor routing through a territory increasing the average travel time between accounts.
2. Making a face-to-face contact to answer a question or resolve a minor customer issue when a phone call would have sufficed.
3. Doing administrative (non-selling) tasks such as paperwork during prime selling time.
4. Calling on non-decison makers.
5. Calling on prospects who will never buy anything or simply can't afford to buy from you.
6. Making too many calls to the same account or prospect.
7. Finding every reason possible not to make sales calls by doing make-work activities that yield no real return.
8. Leaving at the start of normal business hours from home or the office to drive to the first call and/or driving home or back to the office before putting in a full day in the field.
9. Preparing proposals during prime selling time.
10. Spending too much time with any given customer or prospect.

If a sales person engages in any or all of these activities, the number of calls that can be made is further reduced. In extreme cases, the sales person is doing more of these activities than actual selling activities. In many cases, a sales person is often not even aware they are doing one or more of these things and are chewing up significant chunks of time in non-selling activities.

The sales manager must act as a role model and mentor to help the sales person more effectively manage his/her time. Sales people need to understand clearly that time really is money and that selling is, in most cases, a matter of relationship development and maximizing the number of quality contacts made. Without enough time devoted to actual sales activities, it is difficult to achieve either.

Learn Front Line Jobs

The more you know about the operations of your business, the easier it will be to make informed decisions. Spend some time working side-by-side with your front line employees to gain a better understanding of what they go through each day and to get a better feel for the processes they undertake. This knowledge will help when focusing on process refinement and when making operational decisions. Also, you will gain the perspective of your customers and have an opportunity to identify problems with customer service.