The Systems Thinker Blog

Customer Care: A Business System I'm Rather Proud Of

Posted byRon Carroll

As most of you know, I once had an accounting practice that also specialized in business coaching. As my interest grew in business systems and processes, I began to apply the principles to my own organization—Carroll and Company. Even I, your humble Systems Thinker, was impressed as I recently read some of the things we did back then to deliver first-rate customer service.

Below is an overview document written in 2004 describing our business system for providing “killer-customer-care.” It may be a little outdated, but good customer service is based upon true and enduring principles, so adapt it to your modern-day methods and technologies. (Also, please forgive my frequent use of the term “she.” Our receptionist and customer care person was female, so I wasn’t as gender-neutral as I would be if writing today.)

Keep in mind, this system overview refers to a number of other component documents that were an important part of our customer-care system. (Component documents, like those italicized below, are now an integral part of creating systems and processes using Box Theory™ Software.

This article is a little longer than usual, and probably more information than you need. However, it contains many useful ideas; even one could lead to an important improvement for your business. More than anything, I hope it gives you a vision of what goes into creating a high-performance business system. If you give your customer-service system the attention it deserves, (not like the cartoon below), your company can become remarkable. Enjoy!

CustomerService-297

Carroll and Company Customer-Care System Overview

The Customer Advocate

The Customer Advocate is a Carroll and Company employee assigned to view all customer contacts and customer-care activities from the customer’s point of view. This person continually assists customers, monitors the customer experience, reports problems to management, and recommends ways of improving customer care. 

The Customer Advocate performs the duties defined in the document Customer Advocate Responsibilities. These duties include new client intake and orientation, the customer relationship management (CRM) database, customer surveys, monthly customer email contacts, the customer care calendar and budget, and special customer events or activities.

Customer Care Contacts

A customer care contact takes place any time a client or one of their employees enters the physical space of Carroll and Company. A customer enters the space by walking in the front door or by calling over the telephone. Whenever a customer enters this space and interacts with Carroll and Company employees, they are given utmost courtesy and prompt attention to their needs. The employee “puts on their best face” as described in the killer-customer-care philosophy.

While on duty, the Customer Advocate/receptionist for Carroll and Company has stewardship for all customer contacts that take place. The person is sensitive to customer comfort, waiting times, fulfillment of commitments, and meeting or exceeding customer expectations. 

All management and staff employees practice the killer-customer-care philosophy during any engagement with clients, including those at the client’s workplace. All outgoing email communications from Carroll and Company use the prescribed logo and signature. Email communications are always courteous and professional (see document Email Etiquette). 

The Carroll and Company Customer-Care System includes the following guidelines. 

Carroll And Company “Sensation”

When clients visit Carroll and Company, they will have an overall feeling or “sensation” about the experience. Our goal is to make the experience as pleasant as possible. This begins with a clean and organized office. The temperature is set at a comfortable level (70-74 degrees). The person is greeted with a smile, addressed by their first name, and quickly served in a polite and professional manner. The client leaves Carroll and Company feeling that they accomplished their purpose. Sometimes they leave thinking, “WOW!”

Client Visits

When a client or their employee enters the reception area of Carroll and Company, they get immediate attention. If the receptionist is on the phone, she motions the person to have a seat. Addressing the client by name—when possible—she seeks to know who they have an appointment with, or what they have come to drop off or pick up. (By asking, “Do you have an appointment?” customers are trained to prearrange their visits to the office.) The receptionist immediately notifies the appropriate manager or staff that the client has arrived. If not already sitting, she invites the guest to take a seat and offers them a bottle of water. Wrapped candies also fill a bowl on the waiting-room table.

The receptionist continues to monitor people in the waiting area and strives to be interested and helpful, chatting with them if they would like to talk. The receptionist may also conduct a brief Client Survey (see below) while the customer is waiting.

The receptionist is sensitive to the length of time the client has been waiting. Response from Carroll managers or staff should be prompt, no more than three to five minutes. The receptionist contacts the Carroll employee if their response time is longer, and informs the waiting person what they can expect. Most meetings with clients should take place in the conference rooms. Clients are discouraged from going into other parts of the building. Conference rooms are scheduled when possible.

Client Inbound Calls

When customers call the office, they are greeted by a smile (even though they can’t see it) and the statement “Good Morning, Carroll and Company, This is [Mary].” During the conversation, the greeter finds out the first name of the caller and the company they represent. The greeter also gets the phone number if the person wishes to be called back.

The receptionist/greeter works for the caller until his or her needs are met. She listens, takes action, and follows up as necessary to ensure the caller has a positive experience. The receptionist’s duty ends only when a call is successfully transferred, the customer leaves a voice mail, or the customer chooses to call back later.

If the client wants to be called later by a manager or staff, or if the call is urgent, the receptionist gives a detailed post-it to the manager or staff upon their return. If the client needs to be reached immediately, the receptionist should facilitate a mobile-phone contact.

The receptionist monitors a caller who is on hold, and speaks with them every thirty seconds until the call is taken. If the customer is anxious or frustrated, they are assisted in every way to resolve their problem. The Carroll and Company on-hold music/information/light advertising CD should be checked daily to make sure it is working properly. The receptionist also monitors and updates the after-hours voice message.

Customer-Service-Gandhi
View 50 more enlightening customer-service quotes


Remember: exceptional customer service is everyone’s job. Make a good impression. You may be the first and only contact a caller has with our company. Their feelings about the experience will stay with them long after the call is completed. Use phrases such as “please” and “thank you.” Apply the Golden Rule to treat them the way you would like to be treated. Keep your promises. If you say you are going to call them back within a certain time, do it! Every contact strengthens or weakens the customer relationship.

All telephone activities should follow the guidelines contained in the document Telephone Etiquette, and in the section “Put on Your Best Face” in the killer-customer-care philosophy.

Finally, receptionists/greeters are trained to excel at telephone etiquette. They should take phone calls most of the time. However, all employees should have should have basic customer-service and telephone-etiquette skills. Every person who has contact with clients represents Carroll and Company, their team, and themselves. Let’s be at our very best!

Internal Communication and Commitments

Clients must receive excellent customer care at all times during the day. Because some part-time employees come and go from Carroll and Company, it is extremely important that there is good communication at every level. This is particularly consequential when commitments made to the client must be filled by another employee.

Employees check-in with the receptionist when they arrive for work. They check-out when they depart the building. This lets the receptionist know who is available to work with customers. When employees leave, they also indicate the next time they will be back in the office. If it is anticipated that the client will have any needs while the employee is away from the office, a co-worker or the receptionist is informed so that the client can continue to receive service. The coming and going of staff should not adversely affect clients, causing them to feel frustrated with their outsourced accounting solution.

New Client Intake

When a new client hires Carroll and Company, a variety of internal tasks are performed to get the client setup and ready for service. As soon as possible, the Customer Advocate completes all tasks detailed in the New Client Intake Checklist.

New Client Orientation

The Customer Advocate holds a brief 20-30-minute orientation meeting with all new clients (except payroll only clients). This is usually held in a Carroll and Company conference room at a time convenient to the client and within a week of signing the Client Agreement. The Customer Advocate follows the New Client Orientation Checklist.

Client Database and Pictures

The Customer Relations Management (CRM) software contains the records of all sales prospects and customers. Current clients should be flagged in the software in order to exclude or include them in advertising pieces. At the new client orientation meeting, relevant company and contact information is obtained using the New Client Information form. This is later entered on the CRM database along with pictures taken of managers or key employees. A primary purpose of pictures is to allow Carroll staff to become familiar with clients, and so they can address them by their first name.

Client Feedback and Surveys

It is very important for Carroll and Company employees to understand the feelings and expectations of valued clients. This is done by listening to their spontaneous remarks, complaints, or suggestions during a contact or at a monthly client meeting. It is also accomplished by asking the client through a formal feedback system such as a customer survey. Client feedback must be routinely captured, forwarded to management, analyzed, and acted upon.

The Carroll and Company Client Survey is conducted on a continuous basis—twice a year with each client. It is administered to 5% of clients per week over a twenty-week period. It can be conducted by phone, during client visits, or at monthly client meetings. Survey results, along with customer suggestions and complaints, are analyzed and discussed during weekly management meetings or at a business improvement workshop. They are also compiled in a final report at the end of the six-month survey period.

Customer-Service-Rating

Client Comments Request Form

It is important for Carroll and Company and our accounting teams to recognize all significant accomplishments in working with clients. This increases motivation, strengthens relationships, and creates valuable good will. Many clients have become more profitable and successful using the Carroll and Company outsourcing model. We would like to capture some of those feelings as written testimonials.

To make this a simple task, we have created the Client Comments Request Form that lists common phrases used by our clients in the past. Clients can check any that represent their feelings and add comments if they desire. We will write a brief statement that reflects their thoughts and seek permission to use the statement in our sales process. 

The best time to get a testimonial is:

  • After a successful business evaluation
  • After early success in getting the company financially on track
  • After a major financial turn-around
  • After a significant year of profitability
  • After a single important financial accomplishment
  • Anytime an owner speaks verbal praises of the company, accounting team, or service

As a “Thank You,” Carroll and Company provides the client two $20 gift certificates for dinner at the Outback Steakhouse.

Website and Newsletter

Carroll and Company provides valuable information to customers through a monthly newsletter called Profitable Times. This newsletter is designed for busy entrepreneurs who need timely and specific information to manage their companies more effectively and improve profitability. The newsletter offers advice from industry experts in accounting, tax, personal financial planning, sales and marketing, customer service, and human resource. The Profitable Times Newsletter is distributed the middle Tuesday of each month to clients and prospects of Carroll and Company. All articles are archived for future reference in the website Library. The Customer Advocate manages the subscription list.

Client Email Contacts

Carroll and Company maintains a Customer Email Distribution List in Microsoft Outlook and sends a general email to all clients and their key employees once or twice a month. This email may include a thought-of-the-day, tax deposit dates, office close dates, client promotions, or other useful information. The email uses Carroll and Company authorized logos and artwork, and is approved by Ron prior to sending.

Client “WOW” Activities

Carroll and Company has a limited budget for doing special activities to “surprise and delight” clients. These activities may recognize an important accomplishment of the client, or they may be general activities targeted to all clients. Events or activities could include sponsoring a client’s office pizza party, giving away a free business book, having a summer picnic, or taking clients to a seminar. These “WOW” activities are targeted to an approved list of clients. Creative ideas are welcomed.

wow_factor-1

Customer Care Calendar and Budget

Carroll and Company produces a Three-Month Calendar of employee events, customer care, and marketing activities. The Customer Advocate is responsible for updating the company calendar with all scheduled customer care activities. They include client surveys, WOW activities, new client orientations, monthly customer emails, birthday wishes, and so forth. Calendar activities for each quarter are completed two weeks prior to the end of the current quarter. A budget is also submitted to fund the proposed activities.

Client Nurturing Activities

CFOs and controllers are encouraged to develop friendships with their clients by taking them to lunch, playing golf, or other relationship-building activities. Because of the cost and time involved, nurturing activities should be occasional and serve a specific purpose. These activities are at the discretion of the manager and require a personal, out-of-pocket expense.

Customer Care Training and System Improvement

At Carroll and Company, customer care is everyone’s job, regardless of other responsibilities. All employees should seek to create a company culture committed to the sincere caring, guidance, and protection of our clients. To achieve end-to-end killer-customer-care requires teamwork and shared goals, which means all business systems and incentives must reward customer care and never conflict with it.

The principles of remarkable customer service are taught at new employee orientations, weekly management meetings, team meetings, business improvement workshops, and through customer care stories (see below). Killer-customer-care must be talked about often. Client Survey results are shared. Success and horror stories are told. Information is analyzed, and improvements are made to the customer care system.

Email Stories to Staff

The Customer Advocate and receptionist monitor customer experiences at all times. Once a week, the Customer Advocate emails to all employees of Carroll and Company a customer experience story. The story can be a success story, or it can be an experience to learn from. The purpose of these stories is to teach the principles of killer-customer-care and to remind employees that customer care is everyone’s job.

Monthly Client Meetings

The monthly client meeting and delivery of the Profit Acceleration System™ is the most important face-to-face contact with the client. An outstanding and productive meeting is killer-customer-care at its best. The customer binder, with vision statement, business blueprint, monthly agendas, financial summaries, analysis and forecasting, and goal sheet, should WOW the customer every time. This is what separates us from the competition and is at the heart of the Carroll and Company Customer-Care System.

Well, That’s It

I’m exhausted just thinking about this business system, and the work it took to get it going. Retirement feels pretty good right about now.

However, you should know this: it took me several weeks of full-time work—free from distraction—to develop this system and all the component documents that were mentioned in italics. Once going—and a few kinks worked out—the system ran on auto-pilot, and a lot of great things happened with our clients and our employees. (Completing this system also moved me one more step toward retirement.)

You may have a different type of business, or this may be more than you want to tackle right now. But, remember this: 1) customer care is everyone’s job and essential to having a culture of excellence, 2) customer service must be systemized to consistently meet and exceed customer expectations, and 3) customer feedback is the key to achieving continuous improvement.

Your answer to three questions will determine if you are on track. Are your customers loyal? Do they refer others? Would you be a satisfied customer of your own company?

And one last thing, I didn’t have Box Theory™ Software back then. Now, I could create this business system in half the time. Your cost savings with this tool will be more than good. However, the amazing skill you learn will be even better, and the remarkable business you become will make you the best in your target market! So don’t wait any longer. Get going today.

Footnote:

Consider the following terms (italicized above) as you contemplate your new and improved customer-care system:

Killer-customer-care philosophy and business system
Customer advocate
The customer contact
The customer sensation
New customer orientation
Customer intake
WOW Activities
Customer-care calendar and budget
Customer feedback/survey
Customer testimonials
Monthly newsletter or email communications
Business Improvement workshop for customer care

Related Articles:

Create a Symphony of Business Systems to Delight Customers!
The Business System that can Make or Break a Company!
Voice of the Customer: Four Things That Will Earn You an “A”!
How To Become the "Best Deal" for Your Target Customer!
Customer Service: Best Practices for an Awesome Customer Care System (slideshow)!

The Next Step...

Tags: Business Systems, Culture, Customer Retention, System Example

Systems Thinking: The Plumber's Wall of Fame

Posted byRon Carroll

Warning: This article contains graphic images and bathroom humor, mingled with a bit of Systems Thinking. Proceed with caution... and a sense of humor.

Recently, I had a chance to visit the Plumber's Hall of Fame (or was it Hall of Shame), where I walked the gallery and viewed some of the great masterpieces of plumbing savoir-faire (know-how; style; flair). I invite you to walk the gallery below. As always, there are Systems-thinking lessons to be learned. Enjoy!

 
Plumber-Wall-of-Fame

Begin the tour below

 
Frame-Innovation

Lesson: Celebrate problem solving and innovation.
(I'm just glad the toilet doesn't drain into the sink.)

 

 Frame-Shower-Head

Patent pending...
Lesson: The best solutions are often simple and inexpensive.

 

Frame-Two-Heads

His and hers, nice...
Lesson: Two "heads" are better than one (Teamwork).

 

Frame-Cutting-Corners

Really?
Lesson: Cutting corners rarely woks out well.

 

Frame-Measure-Twice

Oopsie! Measure twice, cut once.
Lesson: Good systems get it right every time.

 

Frame-Up-to-Knees

I smell trouble...
Lesson: When you’re knee deep, delegate!

 

Frame-Very-Classy

Very classy! The Mrs. wll love it.
Lesson: Sell the sizzle!

 

Frame-KeepSimple

Lesson 1: Keep it Simple (even simpler, just use the jugs).
Lesson 2: When you've perfected the system, replicate it.

 

Frame-Improvise

Whatever works...
Lesson: Learn to improvise like
the Legendary Macgyver.

 

Frame-Problems-Resolve-Themselves

 Lesson: Be patient. In time things will work out.
(Just a thought: Use the first half of the roll as Kleenex.)

 

Frame-Tight-Fit

Hmmmm... Maybe it could be ridden side-saddle.
Lesson: Run a tight ship (but not too tight).

 

Frame-Why-Door

And the reason for the door is…
Lesson: Always ask yourself, Why?

 

Frame-Plan-Ahead

Probably nothing important behind the door, anyway...
Lesson: Don’t understimate the importance of the planning phase.



Frame-Stretch-Goals

Two lessons come to mind: 1) reduce excessive steps in a process,
and 2) encourage people to set stretch goals.

 

 Frame-Buddy-System

*Eeeny, meeny, miny, moe...
(My favorite system, the buddy system...)
Lesson: Strive for maximum space utilization.

 

Frame-High-End-Finish

Lesson: The user interface makes all the difference. 
(Oak is a nice touch, don’t you think?)

 

Frame-WorksGreat

So, this does what?
Lesson: Not everything that works great, looks great.
(However, neatness does have its virtue.)

 

Frame-Begin-with-End-in-Mind

Privacy is the goal, right?
Lesson: “Begin with the end in mind” (Stephen Covey).



Frame-Root-Cause

Now that's job committment!
Lesson: Don't give up 'til you find the root cause.

 

Frame-The-End

 The End

 

The Next Step...

Tags: Systems Thinker, Business Systems, Quality

Business Leadership: Six Ways to Increase Worker Desire and Capability

Posted byRon Carroll

Are you a leader? Do you have enough “juice” to accomplish important things through other people?

Leadership is not about who we say we are. It’s not about who we want to be. It’s not a popularity contest. It’s not about our position as owner or manager, or about the title on our business card. It’s none of these things.

“Leadership is . . . about impact, influence and inspiration. Impact involves getting results, influence is about spreading the passion you have for your work, and you have to inspire team-mates and customers. . . Leadership is to derive power . . . . not from your position but from your competence, effectiveness, relationships, excellence, innovation and ethics” (Robin S. Sharma, best-selling author on leadership).

Leadership is about creating a vision, influencing attitudes and behaviors, building capability, and moving people enthusiastically toward worthy goals.

In business, it’s all about our power to develop people, products and processes that give customers what they want, retain the best employees, produce a healthy profit, and grow a lasting enterprise.

More specifically, our role is to establish clear, compelling and frequently measured objectives, identify the vital few (see 80-20 Principle) behaviors or processes that impact those objectives, and finally, bring about the desire and capability of people to achieve those objectives.

So, how do we do that? How do we systematically create immediate, effective, and lasting change?

Consider the following six ways to elevate the desire and capability of your workforce to carry out the vital behaviors and processes of your business.

Desire and Capability

Three Ways to Increase Desire or Motivation

  1. Make it About Them – What gets you motivated? Apply the Golden Rule and provide the kind of business culture YOU would thrive in. Make work—the vital behaviors and essential processes of your operation—pleasurable, rewarding and even fun. Turn work into a game and keep score.

    Replace control with choice—even the choice to say no. Replace orders and dictates with dialog and questions. (To ask is to teach, to tell is to preach.) Replace the blaming of people with finding the root cause of negative behavior or poor performance in faulty business systems. Develop your team by giving them the freedom to fail, and the chance to learn from the things they experience.

    Compensate fairly, but remember that people work harder and even sacrifice for a cause or a vision, when they feel they are making a difference, when the mind and the heart are engaged. Focus on the personal success of your employees—learning, skill development, and career growth. (“Help thy brother’s boat across the water, and lo, thine own has reached the shore” - Scottish proverb.)

  2. Provide Social Support and Example – How do you respond to praise or criticism, acceptance or rejection, approval or disapproval? Your words count! So does the approval or disapproval of managers and team members. Social influence—the desire to be recognized, valued, and connected to others has an immense persuasive power.

    Here is the best part: it only takes the presence of one capable and exemplary person on a team to significantly affect how others will act. And if that individual is willing to sacrifice personally—proving how important the task or goal is—their credibility is even greater, and others will naturally raise their game. Find your opinion leaders or exemplary workers and get them onboard with the behavior or process you are trying to implement. Remember, the power of the message is determined by the power of the messenger.

    And one more thing: when people work together, they either encourage one another, try to impress one another, or even compete with one another, all of which improve performance. Once they hold each other accountable for following vital behaviors or business processes, you’ve got incredible social support and a motivated team.

  3. Boost Enthusiasm with Incentives – Would well-deserved incentives, rewards, or recognition get you motivated? I think so. However, incentives are effective only after you have succeeded with personal motivation and social support (the first two above). Incentives do not work if people don’t want to do the work or don’t see the value of doing it. In addition, rewards don’t improve performance very much if people already like what they are doing and are doing it well (they are self-motivated).

    Tie rewards to the desired behaviors and results you want repeated. Make sure they are given quickly, and that they are appreciated. (Christmas bonuses are not a good way to reward people; if they are smaller than previous years, negative feelings often result.)

    Keep in mind that symbolic incentives or rewards are often more important than the actual face value (e.g., Employee-of-the-Month plaque; a personal note of appreciation).

    (I once got my young children to perform chores and other work tasks during the summer months by presenting them with colorful beads at a morning recognition ceremony for accomplishments the prior day. The coveted “good-deed bead” was given for performing a kind act. This amazing and highly effective reward system came from my experience with the Boy Scouts.)

    Reward effort and small improvements, not just big successes. Recognize behaviors that support valued processes, knowing that if you reward the actual steps people follow, results take care of themselves. And be generous with praise at all stages of progress.

Three Ways to Increase Capability

  1. Build Personal Skill and Proficiency – Do your people have the ability to do what you ask? Motivational tactics—like those described above—are futile and even cause resentment if people are not capable of performing or getting the results you expect. They must have the will and the skill. Goals have to be realistic and achievable, or you are doomed from the outset.

    The repetition of behavior or processes—with frequent feedback—builds capability and confidence. Rather than focusing on results, concentrate on developing skills and creating effective business systems and processes.

    You can help people become more skillful and productive by making complex tasks simpler, breaking big processes into several smaller processes (the Box Theory™ Way), turning vague direction into clear and specific instructions, and making distasteful or boring tasks pleasant. These strategies will cause quality and efficiency to go up, and costs go down.

    Telling people to “suck it up, and try harder” doesn’t work. Change the process so that people will naturally do better and success is inevitable.

  2. Create Synergy with Teamwork – Do you believe teamwork is essential in any great business endeavor? Diverse intellects, talents, experience and capabilities often enable a group of people to work smarter and perform better than any one person within the group. Ideas and resources are shared, and workers collaborate to help one another accomplish common goals. As in sports, put each person on the team in a position where they can add the most value. For example, the higher-skilled and more expensive accountant is probably not the right person to process accounts payable.

    As mentioned earlier, when people work together and talk about how to reach goals, improve performance, and solve problems, and when they offer encouragement and hold each other accountable, just step back and smile. You’ve got an extraordinary team that will become incrementally stronger with each passing day.

    Put capable teams into first-rate business systems and processes, and you will create a culture of excellence, where people perform to their best ability even when you’re not around.

  3. Supercharge Your Business Environment with Effective Systems and Processes – Do you provide a workplace that is conducive to high-quality and efficient work? Are you more likely to find fault with people before taking a close look at the environment or process they are working in?

    It is much easier to change business processes than it is to change people. Start looking at your work layout, distance people walk, tools, machinery and equipment, clutter, distractions, unnecessary movement, complexity, downtime and start-stop workflow. Find ways to change the physical world to support the behavior you want. For example, move the printer or buy another printer so people don’t have to walk as far. Clean up your operation and get organized so it doesn’t take as long to find things (see Lean 5S).

    Don’t merely make good behavior desirable; make it certain with well-designed business systems and processes. Ordinary people put into exceptional systems will produce extraordinary results, and at a much lower cost. With Box Theory™ Software, an $8-10/hour college student can do work worth $100 per hour, and that’s no baloney!

    Look and listen. Take notice of the physical surroundings, but also listen carefully. From a factory office I once worked in, I could accurately predict the day's production level by the pace of repeated sounds made by people and equipment. When the sound of staple guns going off or the whir of a wood molder slowed, I walked out to take a look. Because money was coming out of my pocket, I quickly noticed when there was a disruption to productivity.

    Provide visual cues, examples, checklists, quality materials and supplies, the best tools, safety guards, and so forth. Make it not only easy to do the right thing, but almost impossible to do the wrong thing (see Poka Yoke). Put people who work on the same team in close proximity. Replace employee discretion and vague procedures with clear policies and supporting business systems. Change the subtle features within your work environment that are causing misbehavior, sputtering processes, and diminished results.

You Now Have the Juice to Make It Happen

There are a lot of ideas described above to increase employee motivation and capability. Start with what makes sense for your business—what would have the greatest impact and be the easiest to implement.

Apply as many of the six major strategies above as possible, experimenting to discover what works best within each. Diagnose the root cause of your problems carefully before prescribing a remedy (see 5-Whys Analysis). Ask what process weakness or perverse incentive is causing negative behavior or barriers to success. Observe and measure the impact or your changes, learn from the results, and keep refining to make things better.

Remember: making good things happen requires personal desire and capability. Be bold. Start applying these principles today and you will soon have the “juice” to elevate your company by providing greater value to stakeholders, customers, and employees.

 

The Next Step...

Tags: People, Improvement, Culture

Business Systems: Your TOOLS for Greater Productivity and Profit

Posted byRon Carroll

When I was a little fellow, my father was a carpenter. To apply his craft, he wore a tool belt that contained an assortment of tools for hammering, cutting, fastening, and so forth. The right tools made his job easier and faster, and he kept them in good repair to get the maximum benefit. By making hard tasks easy, he could be more productive and earn more money for our family. As a little boy, he would occasionally let me wear his tool belt. Throughout my life—including in business—I have always appreciated having the right tools to get work done as efficiently and effectively as possible.

Wikipedia describes a tool as “any physical item that can be used to achieve a goal. . . .  Informally, the word is also used to describe a procedure or process with a specific purpose” (http://en.wikipedia.org/wiki/Tool).

Smart Creatures Use Tools

“For years there was a running debate concerning whether humans are the only animals that use tools. When scientists watched chimpanzees sit next to an anthill and place a stick in the entrance hole as a way to gathering ants—without having to dig—they decided that these creatures, with whom we share almost 95 percent of our DNA, were also using tools. So we now have our answer. Smart creatures, including Homo sapiens, use tools. Why? Because smart creatures do their best to find a way to make hard things easier” (Influencer, Joseph Grenny, 275; italics added).

Tool-Monkey-Ant-Hill


We all know that much of the work people do is boring, tedious, stressful, unpleasant, and for some even dangerous.  However, like the chimpanzee, we can make tasks easier, faster, and more enjoyable for workers by providing them the right tools.

Have you ever tried to do something difficult without a tool, like removing a staple without a staple remover? Or performing a task with the wrong tool, like trying to dig a hole with a square-point shovel? Or how about using a tool that hasn’t been maintained, such as cutting with a dull blade? Wouldn’t you agree that not having good tools can be very unproductive and frustrating?

We often hire professionals to work on our home or vehicle because they have the right tools, even specialized tools. In your target market, YOU are the professionals. Your job Mr. or Ms. Business Owner is to provide the most effective tools (systems and processes) for  employees to get work done better, faster, and cheaper than your competition.

Business Systems and Processes are Tools

Business systems—lead generation, hiring, order fulfillment, customer service, and many others unique to your company—are the customized tools you create to get things done in an easier and more excellent way. Consider some of the advantages of having the right system tools.

  • Business systems incorporate the skills, behaviors or tasks that you need done the right way every time (less oversight and supervision required).

  • Good Systems ensure that quality is achieved in products and services (happier customers).

  • Effective systems increase efficiency and productivity, and lower costs (more profit).

  • Exceptional business systems and processes make you a remarkable company (a standout, and the obvious choice of your target market).

  • Well-designed systems make work easier and more pleasant (higher employee morale, better performance, and less turnover).

  • Effective business systems and processes allow for measurement and frequent feedback to workers (the key to continuous improvement).

Sales-generating, customer-pleasing, waste-removing, profit-boosting business systems and processes are your tools to create an outstanding company. There is no other way!

And one final thought, the component parts used in your business systems are also tools: the checklist, the brochure, the contract, the order form, and so forth. Each of these tools has an important purpose, and the “sharper” the tools, the better your result.

Get the Right Tool

In my humble opinion, Box Theory™ Software is the best tool devised for owners and managers of small to mid-sized businesses. With this amazing desktop tool, you can create, organize, document, manage, store, and print everything pertaining to your company’s systems and processes—sort of like a QuickBooks accounting tool, but for business systems.

Last weekend, I purchased a tool chest at COSTCO to store the many hard-to-find tools scattered around my house. What a difference this handy organizer makes; I should have bought it years ago. I think you will have the same feelings about Box Theory™ Software. You’ll wonder how you ever got along without it.

Wishing You Prosperous Times,
Ron

Related Article:
Systems Thinking: What We Can Learn From the Legendary MacGyver!

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Tags: Business Systems, Laws/Principles

10 SIMPLE ACTS to Increase Customer Loyalty, Profitability and Growth

Posted byRon Carroll

The average business owner is always on the run, trying to do everything in his or her power to keep up, solve problems, please people, pay the bills and make a little profit—to survive, grow and prosper. 

In our fast-paced and complex world, many voices are calling out for our attention, advising us where to go and what to do to achieve success. We hope for a breakthrough idea that will propel us to the “next level,” but we’re not always sure what investment of our time, effort and money will provide the biggest payoff.

However, many of the best ways to improve a business are found in doing small, simple and inexpensive things that can have a significant positive impact on employees, customers and business results.

 Small but Simple Things


How to Improve a Business

Here are t SIMPLE ACTS that will elevate your business and put more money in your pocket.

  1. The SIMPLE ACT of smiling, showing kindness, or expressing gratitude will lift everyone you come in contact with, engender loyalty, and elevate employee performance.
     
  2. The SIMPLE ACT of creating checklists to ensure procedures are precisely followed will reduce the number of mistakes people make, and the unnecessary waste of time and materials.
     
  3. The SIMPLE ACT of measuring a business process and providing your workers frequent feedback will increase motivation and productivity.
     
  4. The SIMPLE ACT of applying a 5-Whys Analysis will help you quickly uncover the root cause of many business problems.
     
  5. The SIMPLE ACT of getting your operation cleaned up and organized will impress customers, increase efficiency, and boost profit. Make your business shine!

  6. The SIMPLE ACT of assigning ownership to business systems, processes, or activities—and making team leaders accountable for their results—will dramatically elevate your business performance.
     
  7. The SIMPLE ACT of identifying and monitoring key performance indicators (KPIs) will cause you to focus attention on the areas of your business that matter most.
     
  8. The SIMPLE ACT of asking your employees about persistent problems, bottlenecks, and ways to improve—tapping into their ideas and insights—can reveal many opportunities for innovation and cost reduction.
     
  9. The SIMPLE ACT of implementing the WOW Factor in your business operation will help you attract and keep good customers and valuable employees.
     
  10. The SIMPLE ACT of holding a weekly business improvement workshop will eventually give you a world-class organization.


One More Simple Act

Finally, the SIMPLE ACT of reading “Box Theory™: Double Your Profit with High-Performance Systems and Processes” and becoming a Systems Thinker will raise your business I.Q. by 80 points—overnight!

Forgive me for this little sales pitch; I don’t do it often. However, I truly believe that applying the Box Theory™ Way (eCourse, all-in-one software, and Business Systems Academy) is the most important thing you can do to have a smooth-running business that attracts customers, retains the best employees, and generates a healthy profit.

Remember: by small and SIMPLE ACTS are great things brought to pass!

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Tags: Improvement, Efficiency/Speed

Business Systems: I love It When a Plan Comes Together!

Posted byRon Carroll

Colonel John "Hannibal" Smith is a fictional television and movie character and one of four ex-Army Special Forces soldiers. Near the end of the Vietnam War, they were all convicted of a crime they did not commit and managed to escape from the Military Police. As fugitives, this group, known as the A-Team, worked as soldiers of fortune, using their military training to fight oppression or injustice.

Hannibal, the oldest and most experienced of the group, frequently came up with a strategic plan to accomplish the team’s objectives and win the day. At each moment of victory, Hannibal was heard to say, “I love it when a plan comes together.“

  

    

There’s a Plan in Everything

I, too, love it when a plan comes together. Every time I complete a business system that performs as expected, I feel exhilarated. I feel like jumping up and down and congratulating the team. I feel a great sense of accomplishment.  You can, too!

And we’re not necessarily talking about big plans (BHAGS). Small improvements carried out each day have a significant cumulative effect. Below is an example of a quick little plan or system created by a client during the busy Christmas season.

“I walked into one of my retail stores unexpectedly on a Saturday during the Christmas rush and was shocked by the deplorable appearance of the store, inside and out. Shopping carts were scattered throughout the parking lot. Restrooms were filthy. The front of the store was a disorganized mess. Having been exposed to Systems Thinking, I avoided confronting employees on the spot. (It took everything I could muster to smile and remain calm). However, on Monday morning, I brought the staff together and we created a checklist to solve the problem. Now, on busy days when normal custodial service isn't adequate, the store workers complete the five-minute cleaning checklist every two hours. The store always looks tip-top, and I don’t have to worry about it anymore.”

An Amazing Plan That Came Together Perfectly

After years of preparation and seven months of space travel, a NASA team successfully landed the robotic rover “Spirit” on the surface of Mars January 4, 2004. Over time, Spirit accomplished far more than its expected mission and became one of the most successful space projects ever.

The incredible video below is an illustration of what can happen “when a plan comes together”—when a system is designed and executed with such precision that it generates astonishing results.

    

    

What We Learn From This Video

  • Ordinary people can do extraordinary things with a good plan and attention to detail.
     
  • Business systems that consistently deliver on their promise are what create world-class organizations.
     
  • The unique business systems and processes you create reflect ingenuity, hard work, and desire for excellence... AND THEY TOO CAN BE REMARKABLE!


You may not have a budget like NASA, but you can create business systems that will cause people to stand up and cheer. (The last scenes of the video could be YOUR customers!)

Like Hannibal Smith, you may occasionally be heard declaring, "I LOVE IT WHEN A PLAN (SYSTEM) COMES TOGETHER!"
 

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Tags: Business Systems, Video, Business Leader

What Is a Business Process, and Why Should You Care (A Lot)!

Posted byRon Carroll

A business is made up of people, products, and processes organized to find and keep customers profitably. Many companies fail because owners and managers are unable to create effective business processes that accomplish this fundamental objective. 

So, what exactly is a business process? And how can you create processes that will help your company achieve greater customer loyalty, profitability, and growth?


Business Process

 

Simple Definitions

There are business process experts who get deep in the weeds when defining a business process or trying to distinguish it from a business procedure or a business system. However, for entrepreneurs and owners of small to mid-size businesses, a few simple definitions will be sufficient for our discussion.

  • Business Procedure – a sequence of actions taken to accomplish a task (emphasis on following steps in a specified order).
     
  • Business Process – a series of ordered activities that transform inputs into higher-value outputs (emphasis on transforming materials or information into a product or service).
     
  • Business System – a group of interacting, interrelated, or interdependent elements forming a unified whole (emphasis on related parts working together for a desired outcome).

A Process is Just a Recipe

As a business owner or manager, you may use these terms interchangeably. They are all business activities designed to produce a specific, pre-determined, and consistent result. They include your processes for marketing and sales, hiring and training employees, customer service, production, order fulfillment, accounting, and many more, some unique to your industry or company.

Business systems and processes—whether in the store, the office or the workshop—are your unique recipes for getting work done. They are governed by the Law of Cause and Effect. The result (effect) of a business process is determined by the ingredients used (e.g. , forms, checklists, materials, supplies, equipment, software, people, and so forth) and the procedure followed (cause). The only way to get a better process result is to improve the ingredients or the procedure of the recipe.

For example, when you carefully follow the detailed instructions of a chocolate cake recipe, you get the same result every time. However, we all agree there are chocolate cakes and then there are CHOCOLATE CAKES!  (e.g., Chocolate Thunder). They may go by the same name, but the unique recipe makes all the difference.

The same is true with your recipe for generating sales leads or hiring the best people. A little change in ingredients or procedure can give you far superior results!  

Correctly designed, your business systems and processes support the mission, strategy and goals of your organization. While people may come and go, the successful recipes you have created remain constant. Furthermore, the better your recipes are, the greater the customer loyalty, profitability and growth you will enjoy!

Simply put, 100% of your business is made up of systems and processes (recipes) that can be managed and improved by applying correct principles to fine-tune 1) the ingredients or 2) the procedures. There is no other way!

Three Types of Business Processes

Effective systems and processes are the essential building blocks of your company. There are three general types to consider:

  1. Management processes include planning, organizing, controlling, and leading—the activities for governing your business (e.g., developing strategy, management meetings, and board of directors).
     
  2. Operational Processes constitute your core business and create the primary value stream for customers (e.g., lead generation, sales, purchasing, production, order-fulfillment, shipping, and customer service).
     
  3. Supporting process uphold and sustain the core processes (e.g., accounting, hiring, information systems, safety, and custodial).

Most business systems and processes are unique to your company (like fingerprints) and differentiate you from all other companies, unless you are a franchise. They include sub-systems or sub-processes that focus on the details of your business activities. For example, a marketing process has a sub-process called lead generation, which has sub-processes such as print advertising, radio, social media, or a website. It is in the details—the sub-systems and processes—that profit dollars are made or lost!

Good business systems and processes have three primary purposes: 1) to attract customers, exceed their expectations, and transform them into loyal fans, 2) eliminate operational waste and inefficiencies that rob profit, and 3) to create differentiation and domination in your target market.

Michael Gerber, author of the E-Myth Revisited, teaches, "Organize around business functions, not people. Build systems [and processes] within each business function. Let systems run the business and people run the systems. People come and go but the systems [and processes] remain constant.”

Describing a Process: Procedure vs. Checklist

When the steps of a task are performed in a specific order, the term “sequential steps” or “procedure” is used. For example, in a furniture shop, you first cut the wood, then sand the wood, and finally paint the wood. Doing these three things in the right order is essential. You would have an unacceptable finished product if you painted the wood before you sanded and prepared it.

A flowchart diagram with boxes and arrows—indicating steps, decision points, branches, and loops—sometimes makes it easier to describe a multi-path process than does a written procedure. Using the furniture example, if the wood has a rough edge when it arrives at painting, your decision is to reject the wood and send it back to the preparation stage. There it is re-sanded and returned to painting. After painting, a branch in the process might send different colors of wood to separate pallets for storage.

 Business Flowchart Example

 

When the steps in a process can be performed in any order, a simple "checklist" is all that is needed. For example, your office custodian might empty the trash, dust the furniture, and vacuum the floor. However, it doesn't really matter in what order they are completed. Checklists are easy systems that do not require flowcharts and can be created quickly.

Remember: While much thought, planning, and experimentation may go into developing a high-performance business system or process (see Your First Business Improvement Workshop), everything learned is eventually reduced to a single procedure or checklist that is used by the people who operate the system. Their responsibility is to follow that procedure with exactness until the system is improved. If you encourage and reward innovation, system operators will also drive the improvement process.

Processes Are For Customers

A primary purpose of your business processes is to provide value for customers—to transform information or material into something that customers want, and which meets their specifications and expectations. Customers can be those who ultimately buy your products or services; however, business processes also serve the similar needs of your internal customers (see Your Five Different Customers).

For example, in your business operations, the next step (a person, team, or department) in a business process is the customer of the previous step in that process. In an assembly line, station two is the internal customer of station one. The order-fulfillment department is the customer of the order-processing department. The sales team is a customer of the advertising or lead generation team. Each “customer” in a chain of business activities looks for added value, and also wants their specifications and expectations to be met.

In addition, employees are important customers of the business. They too have specifications (e.g. work hours, wages, and benefits) and expectations (e.g., rewarding assignment, opportunity for advancement). Whether spoken or not, if you fail to meet their requirements, they will eventually go elsewhere. Good business processes support the learning and growth of your people and encourage their loyalty.

All of your business processes must deliver four basic things to its varied customers: 1) quality—low defects, does what is supposed to do, 2) speed—on schedule, meets deadlines, no delay, 3) low cost—high perceived value, competitively priced, and 4) pleasurable—no hassle buying experience, “killer customer care.”

In summary, good processes exist to please and satisfy all types of internal and external customers (see Five Customer Types).

Business Process Development

Learning how to develop good business processes is the Master Skill of the entrepreneur. All business functions—marketing, finance, and operations—fall within the scope of this single skill mastery. What’s more, the true value of your business is found in the maturity of its business processes—their ability to produce desired results consistently.  (How would you and others grade YOUR business systems and processes?) 

Below are ten characteristics of an effective, efficient and even exceptional business system or process:

  1. The process is built with the customer in mind. (Does this process help turn your customers into fans by meeting or exceeding their expectations? Does it help your workers perform at their best and get top results?)
     
  2. The process represents “best practices” or your best-known way of doing something. (Are you getting less than 1% errors? Is the process as fast as it could be? Be honest. Is this the best you can do, or could you make the process better?)
     
  3. The business process is designed with one primary purpose (more than one purpose usually means that processes are wrongly combined).  In addition, the process has no unnecessary steps and little or no idle time between steps.  (Is the process stable, steady, and paced with sales orders and fulfillment? Are the process goals aligned with your company goals?)
     
  4. The system or process has an owner or team leader. (Who is accountable for, and reports the results of the process? Is the person rewarded for exceeding performance standards or making improvements?)
     
  5. There is ongoing and updated documentation on how to execute the process properly, including the handling of details and exceptions. (Do workers fully understand the process and can easily repeat it with consistent results? Have you created a good recipe?)
     
  6. The process is as simple as possible to get the job done, but not simpler? (Can you lesson complexity, customization and exceptions in products and services? Can you reduce the physical path, clutter, barriers and distractions? Can you drop unprofitable product lines or services?)
     
  7. There is a sufficient focus on system details to eliminate most bottlenecks, inefficiencies, delay, mistakes, defects, and rework. (Every process has waste. Have you reduced it to a minimum? Do you accumulate defects for later handling or do you properly fix problems in the process as they occur?)
     
  8. The system is not hampered by poor planning (lack of materials or labor) or stop-start work-flow as people switch between processes. (Are your workers losing productivity or making excessive errors caused by shifting assignments, multitasking, being "spread too thin," or "wearing too many hats”?)
     
  9. The system has performance standards, and results are measured. (Are you "managing by the numbers" for maximum profit? Do you celebrate success?)
     
  10. Workers get ongoing feedback about system performance and are recognized or rewarded for exceptional results. (Do people always know how they are performing in relation to the goal? Is feedback self-administered, and in real time like a sporting event? Simple tip: To improve performance, increase the frequency of the feedback.)

Quality + Speed = Low Cost

By creating business processes that have minimal mistakes, defects, and rework (quality), you will reduce waste and increases process speed. By eliminating delay, downtime, and other speed bumps, you will boost sales throughput. This powerful one-two punch of quality and speed will give you the lowest possible operational costs and your customers the greatest value.

Outstanding business systems and processes are the "magic formula" for success! Superior quality and speed are the “secret sauce” that will wow customers, boost profit, and blow your competition away. These two ingredients will turn your recipes and your company into a “CHOCOLATE THUNDER.”

Wrapping Up

Well-designed business systems and processes increase efficiency, accomplish objectives, and give customers what they want every single time. They are your answer to customer dissatisfaction, poor performance/productivity, waste of resources, employee turnover, excessive costs, slow cash flow, weak sales growth, low profit margins, daily frustration, and all other business problems.

Whether in the office or the workshop, developing effective business systems and processes begins with good system design. After creating a flowchart or checklist, and acquiring components necessary to operate the system, you now focus on improving its quality and speed. Measuring system performance provides the feedback for making adjustments and improvements.

More specifically, each box or step in the process flowchart contributes value to the customer. The process generates output that meets quality standards, with no accumulation of rejects or rework. The workload is level, with standardized tasks, and paced with the input of sales orders. Bottlenecks that delay order completion are eliminated. "Speed bumps" such as clutter, poor layout, and downtime are minimized. Employees are well trained and incentivized when possible. People and systems learn and improve from the ongoing feedback of process results.

So, what exactly is a business process, and why should you care (a lot)?

In the game of work, good systems and processes embody your distinctive business strategy. They are your means to create higher customer value and product demand. They enable you to differentiate yourself in a crowded marketplace. They help you maximize efficiency for greater profit, more personal income, and the ability to share financial rewards with others. In addition to people and products, processes give your company a unique identity and place in the world. Is it worth it to learn the Master Skill? A thousand times, “YES”!

There is an art and a science to creating exceptional business systems and processes and growing a remarkable business enterprise. I invite you to check out the Box Theory™ Way today and discover our eCourse and breakthrough business process software, especially designed for small to mid-size businesses.

If This Article Got You Thinking...

I have some other great information that will give you new insights, powerful tips, and proven strategies to dramatically improve your business operation.

You will learn how to create customer-pleasing, waste-removing, profit-boosting business systems and processes. The application of Box Theory™ strategies has proven to be worth THOUSANDS OF DOLLARS for many owners of small and midsize businesses. Put me to the test!

If you haven't had a chance, sign up below to get 5 Free hand-picked items that will guide you to an immediate financial payoff. You will learn the following, and much more:

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  • What six essential ingredients are found in every great business process?
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  • How good systems and processes will help you start, grow, fix or franchise (replicate) your business.

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Tags: Business Systems

Business Turnaround: 10 Threats that Can Kill Your Business!

Posted byRon Carroll

Many business owners wait too long before facing the brutal facts that their business is in trouble. Then they discover—like a bug in a flushed toilet—it’s nearly impossible to escape the downward spiral.

 

Downward Spiral 


We begin our business filled with hope and optimism. Before long, forces start into motion to test our grit. Getting sufficient sales and good employees is harder than expected. Bookkeeping and paperwork are burdensome. We face government regulations, slumping economies, cost increases from vendors, customers who pay slow or not at all, cash flow headaches, growing tax bites, unproductive workers, stiff competition, obsolete inventory, and constant customer demand for new and better products. (It wears me about just thinking about it.)

However, this is the profession we chose; the above challenges come with the territory. So, we suck it up, we adapt, we improve, and we work diligently to overcome the unrelenting forces trying to put us out of business.

Furthermore, not all problems we encounter are equal. Some have the power to kill our business if we fail to remedy those threats without delay. Our survival depends upon it!

Below are ten business killers that, if not addressed, can bring about the big flush and send your business spinning out of control and down the proverbial drain.

Sales Killers

  • Killer #1 Low Market Demand  – Your business and revenue model break down quickly when people aren’t much interested in buying your products or services. Perhaps your offering doesn’t solve problems or reduce pain as well as expected. Maybe it is getting old or outdated, running out of steam. Your message could be unappealing and doesn’t attract interest. Customers may be staying away because you don’t have a great reputation for delivering on your promise. Whatever it is, without sufficient product demand, you really don’t have a business.

    Blockbuster Video recently closed their last store—demand for rented movies moved to Netflix and digital delivery.  Question: What is causing the lack of demand for your product or service, and can you fix it?
     
  • Killer #2 Hard to Reach Target Market – Are you having difficulty finding an easy and cost-effective way to get your message in front of your ideal customers. Maybe they don’t have obvious hangouts for you to find them, or there isn’t an easy way for them to find you. Do you have a bad physical location? Are you not being easily found on the Internet? Could too much competitive noise be drowning out your message?  Is your reach to prospective customers about as effective as a billboard in the desert? 

    Business philosopher Jim Rohn teaches how to be a master communicator: "First, have something good to say. Second, say it well. And third, say it often." I repeat: Do you have a clear and cost-effective channel to deliver your message often to large numbers of people in your target market? If not, can you fix it?
     
  • Killer #3 Superior Competition – Your potential customers are always looking for the best deal, not necessarily the lowest price. If your competitors are bigger, better located, have superior products or services, provide better customer care, shorter lead times, more knowledgeable sales people, and so forth, you will lose business. It’s hard to get customers to beat down the door if you are second best, unless you do it like Avis Car Rental. 

    “The phrase
    We Try Harder’ has gone down in advertising history as one of the longest-lasting and respected taglines.  The origination of the slogan was not to create a cute, gimmick, but instead it was— and is—a business philosophy that every Avis employee holds true. ‘We Try Harder’ has helped Avis earn a reputation as one of the most admired businesses in the world.’”

    You don’t have to be the biggest, but you must strive to make your business so good that people would be crazy to buy from anyone else. What can you do to inspire this kind of loyalty?
     
  • Killer #4 Undifferentiated Strategy – In this day and age you have to stand out like “purple cow in a field of brown cows” (Seth Godin). You constantly have to promote your unique selling proposition (USP)—your main selling advantage. Perhaps you can be better, faster or cheaper than your competition, or you can provide “killer customer care.” 

    What makes some of the big boys stand out: UPS (logistics), COSTCO (value), Amazon (convenience/ease), Coldstone Ice Cream (quality) or Wal-Mart (low price). What compels you buy from specific stores in your area? Follow the successful strategies of others.

    You must have some way of doing business that makes the customer remember their experience, feel that
    WOW thing, and tell their friends. If you are like everybody else, then it is only luck that that determines your sales. What makes your business strategy —your game plan— a winner? Can you adjust your strategy to dominate a niche market?

Cash Flow and Profit Killers

  • Killer #5 Not Managing by the Numbers – If you aren’t sure how well your company is performing or why you are losing money, you have a serious problem.  It is critical that you understand your leading and lagging indicators, the numbers that tell you where to focus your business improvement efforts.  Maybe you are in denial about what the numbers reveal; if so, the longer you wait, the worse things get and the harder it is to recover. If necessary, find a financial person to help you understand what your numbers are trying to tell you.

    In 1891, a British scientist named William Thompson, also known as Lord Kelvin, said, “When you can measure what you are speaking about, and express it in numbers, you know something about it. But when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind.” 

    Are you aware of
    numerical clues that expose the problem areas of your business operation? When you find the under-performing systems or processes that are causing those numbers, can you fix them?
     
  • Killer #6 Inadequate Margins – There are very few problems in an established business that can’t be solved with good margins—gross margin, operating margin, and net profit margin.  Avoid the temptation to be the lowest price in town unless you have a legitimate cost advantage or operate on a very high-volume business model. Instead, focus on giving your customers the best overall value and buying experience.

    To improve margins, you have to raise your prices, reduce the cost of your products and services, and/or lower your overhead expenses. Which solution is best for you to increase your margins? Without adequate margins, you’re just working hard
    for the fun of it.
     
  • Killer #7 Insufficient Working Capital – If not remedied, cash flow cancer is a deadly disease that will eventually kill any business. You have to have enough money to buy goods, cover payroll, and meet your monthly financial obligations. Borrowing money to do this is a bad idea if you have not resolved the underlying business killers discussed above. However, borrowing can be OK to support growth when you have good profit margins.  As you dig out of a cash hole, consider the tips in this article, “A Business System When the Wolf is At the Door.

    Caution:
    Beware of excessive inventory and accounts receivable that suck cash and make you feel poor even when you are earning a nice profit. Do you know where all your profit has gone? What can you do to move more of it into working capital? If you have little or no profit, you better focus on lack of sales and/or insufficient margins—PRONTO!

Business Operations Killers

  • Killer #8 Lack of Innovation – If you are not coming up with new ideas for improved products or services, and for better systems and processes to run your business, you will be left behind. Your company will become stale, undifferentiated in your target market, and ho-hum boring.  Competitors that are innovating will surge ahead. Innovation is essential to stay on top.

    Business expert, Peter Drucker teaches, “A business has two purposes: marketing and innovation.”

    What new things could you do to draw more attention, serve customers better, and create higher quality and more efficient business operations? You have endless opportunities. Make innovation a part of your daily routine.
     
  • Killer #9 Weak Business Systems – Without good business systems and processes, you have a disorganized, seat-of-the pants operation that is frequently in crisis mode (every crisis is a system breakdown). Putting out fires is your daily routine. There is never-ending frustration for customers and employees. It’s time to end the madness. What grade would you give your business systems?

    Good systems will increase sales, customer loyalty, advantage over competitors, and profit margins. They are essential to a smooth-running and prosperous enterprise. Every business turnaround I have been involved with required drilling down into the operations to find ineffective systems and processes with excessive
    mistakes, inefficiency and waste.

    In a mature company with adequate product demand, reducing waste is the key to rescuing the business. What core systems in your organization drive its economic engine? What improvements could you quickly make? 
    Where might you turn for help?

  • Killer #10 Uninformed or Ineffective Management – Poor management can drag your business down in a hurry. You have to “get the right people on the bus and the wrong people off the bus” (Jim Collins, “Good to Great”).

    You need people who are Systems Thinkers (a learned skill) and results-oriented who can help you create a culture of excellence.

    Furthermore, managers must be in-the-know about the challenges your company is facing. Tap into their unique talents and insights. And remember: good managers get the best possible results with the least amount of resources.

    Finally, a frequent cause for business failure is that owners and managers do not create
    business systems and processes that effectively carry out the mission, strategy and goals of their organization. Do you currently have top-notch people? Are YOU an effective leader?

Turning Your Business Around

When an established business enters hard times, it has a lot more staying power than might be expected. I have seen companies struggle for years before going out of business or turning themselves around. They are able to live off of the good-will they have earned with vendors, customers and employees. They find needed cash from shrinking inventories and accounts receivable. They get support and softened terms from banks and vendors.

Struggling business owners who exhibit high integrity, courage to face the truth about their challenges, and who forge ahead with pig-headed determination, are often able to swim upstream to safety. And everyone will be cheering them on.

However, you can’t just hope for a better day. You must have a game-plan to solve the killer problems we’ve talked about. You have to get real, and get going—AND THE FASTER THE BETTER!

In my experience, most attention should be focused on either of two things, getting more high-margin sales or eliminating inefficiency and waste. Simply put, you have to focus on the right things, drill down into the details of your business systems and processes, identify the weak links, bottlenecks, obstacles and problems, and fix them. (See some examples of this.)

Hiring the right turnaround consultant might be helpful, but it is usually expensive and not always the best solution. Paying out more money that you cannot afford also adds to your burden and risk.

You know your business better than anyone else. Maybe you can do it! Becoming a Systems Thinker and following correct principles is the key. If you do it yourself—with your team— you will be forever stronger from the experience. You will become the master of your own fate.

The Next Step...

Tags: General Business, Improvement, Business Leader, System Failure

Problem Solving: Zero In on the Root Cause and the Vital Few

Posted byRon Carroll

Success in any business depends a great deal on how well you manage the details. I like to say the "dollars are in the details."  However, many business owners and managers are overwhelmed by the minutiae of daily business life. They haven't discovered where to focus attention to accomplish the most good for the least amount of time, effort and cost.

 

Dollars in the Details

 

So, what details in your business operation are most critical to success? The simple answer: those that propel you to achieve your business goals and those that obstruct you from reaching your business goals. Let's focus on the latter.

Most operational details causing frustration and hindering results are not obvious; if they were, you could quickly fix them. So how do you uncover the obstacles, weak links, bottlenecks, waste and delay buried in your daily business processes? More importantly, how can you spend your valuable time solving the most important problems—the ones with the greatest impact on customer satisfaction and your bottom-line profit?

The Root Cause

With business problems, we often tend to focus on symptoms such as excessive product returns or unproductive of employees, and fail to discover the true source of the problem—the "root cause."

By definition, A root cause "is the most basic cause that can reasonably be identified, and that management has control to fix. The fix will prevent (or significantly reduce the likelihood of) the problem’s recurrence" (Mark Paradies, TapRoot).

In a business setting, the job of the Systems Thinker is to drill-down and pinpoint the exact step within a business process that is under-performing and preventing expected results. Drilling-down is like looking through a microscope to examine the details and discover the underlying cause.

Keep in mind, however, that a symptom may have more than one cause. For example, lack of sales conversions from a website (symptom) may be from an overpriced product, a confusing sales message, or too many "hoops" for the customer to jump through in the buying process (causes). In addition, a single cause can create more than one symptom. An untrained worker could cause customer complaints and frustrated co-workers.

Finding the root cause of business problems is a skill that must be mastered by all business owners and managers. Understanding the Theory of Constraints will help you do just that. Once the true cause—the root cause—of a business problem is identified and fixed, all other dependent systems and processes are simultaneously improved.

Vital Few vs Trivial Many

When picking business improvement projects, it is important to prioritize and focus efforts where they will do the best good and help you achieve fast results. A few targeted improvements can be leveraged to create significant benefits to your organization.

In their book, "Six Sigma for Dummies," the authors write:

"The law of the 'vital few versus the trivial many' comes from the work of early 20th century Italian sociologist and economist Vilfredo Pareto. You may also know his law as the 80-20 Rule, where twenty percent of the inputs in any system account for eighty percent of the influence on that system.

"Pareto determined mathematically that, while a great number of factors are connected to a given outcome, only a few carry the weight to change that outcome in a significant way. In a business, system, or process, a few key variables are the cause of most performance problems. When you look for leverage in business, you search for the minority of variables that provide the majority of power in solving problems in manufacturing, assembly, distribution, accounting, finance, customer service and so on.

"There are more factors, contingencies, and dynamics to manage than possible when trying to break through to new levels of performance and success. The natural tendency is to try and manage and control every detail, but this is a slippery slope. The trivial many will bury you in a pile of unnecessary cost, trouble, worries, wasted energy and valueless action. No one, and no company, has the luxury or reason to manage all the details. Instead, the right path is to manage only those that are critical to producing the outcomes you desire. Focus on the inputs that really matter. All the rest, leave alone unless they become significant" (Craig Gygi, Neil DeCarlo, Bruce Williams, 39).

Getting to Work

Focus on the vital few details that will give you the biggest bang for your buck. What systems and processes can you improve that will help you reach company goals? What can you fix to eliminate road blocks, waste and inefficiency? What improvements will provide the largest financial payoff? How can you reduce frustration for customers or employees? What tweaks can you make quickly and inexpensively? 

Once you pinpoint the vital few areas to focus on—your priorities—the best way to drill down to the root cause is by asking the right questions to the right people—a 5-Whys Analysis. 

And please don't forget, The Box Theory™ Way—software and methodology—is also the best tool around to help you identify the root cause of problems and elevate your business systems and processes for high-performance results.
 

The Next Step...

Tags: Systems Thinker, Improvement, Laws/Principles

Theory of Constraints: 6 Limiting Factors to Your Business Success!

Posted byRon Carroll

Every businessperson with a vision of where they are going, and specific goals to get there, will face obstacles or barriers that hinder them from achieving success. Frequently, when confronted with solving problems or making improvements, business owners or managers feel overwhelmed. They lack the time, money, or resources to correct the problems they are experiencing. They often feel like their hands are tied and don't know where to begin.

 Hands tied when solving problems

 

You can start by confronting the brutal facts about your business operations—the problems that are staring you in the face. For example: from customer or employee complaints, discouraging financial or performance reports, or just plain gut-level frustration, you have a general idea of your weaknesses and challenges. As discussed earlier, these symptoms are the result of unhealthy and under-performing systems.

In 1984, Dr. Eliyahu M. Goldratt, in his book The Goal, introduced the Theory of Constraints (TOC) as a management philosophy based upon the application of logic and scientific principles to help organizations achieve their goals. The principles of TOC will provide you the shortest distance between two points—where you currently are, and where you want to go.

Theory of Constraints (TOC)

The Theory of Constraints is based upon the assertion that: “Every real system, such as a business, must have within it at least one constraint (limiting factor). If this were not the case then the system could produce unlimited amounts of whatever it was striving for, profit in the case of a business . . ." (Dr. Eli Goldratt).

In other words, every business operation has something inhibiting it from reaching its full potential.  Some condition exists that limits sales or production output. This limit or constraint determines the maximum capacity of the system. By removing or improving the single constraint, the system is elevated to a higher level of performance.

Below are six types of constraints that can hold back an organization. The solution to your problems can be found in any or all of them; some may overlap.

  1. A Logical Constraint - Faulty thinking or assumptions can block success (e.g., believing people are the problem when ineffective systems—hiring, training, and so forth—are the real problem).

  2. A Process Constraint – The output of work processes is reduced by a weak-link or bottleneck in the process (e.g., work piled up in an in-basket; inventory waiting to be processed).

  3. A Physical Constraint – Physical components of a process often have limitations (e.g., capacity of a machine; available space or time; capability of a person; physical obstacles such as clutter or travel distance, and so forth).

  4. A Self-inflicted Constraint – A company's culture, rules, or policies can have a detrimental effect on results (e.g., lack of accountability, not hiring older people; sticking with the "sacred cows" of work practices).

  5. A Personal Constraint – Personal traits of an owner or manager can hinder performance (e.g., disorganization, procrastination, perfectionism, indecision, fear, incompetence, lack of time, or failure to face problems. Do you have any beliefs or behaviors that are holding back your business?)

  6. An External/Market Constraint – Obstacles can exist that you have no control over (e.g., market size; customer attitudes; competition; the economy). You can often adapt to these these external constraints over time by adjusting your business strategy.

As with a medical diagnosis, the symptoms of a business problem don't always point directly to the cause of the problem. In fact, most of the time, the problems you experience are not the real constraint. Just as a cough is only a symptom of an unhealthy system within the body, the pain or frustration you feel about your business may only be the effect of a deeper problem. Physical constraints are more apparent than logic constraints.

Consider this: While there can be a variety of problems within a system, only one step of the process at a time is the constraint on the whole system—the weak link and true cause of restricted output.

You can only improve the results or output of that system by eliminating the weak link or elevating its performance. Time, effort and money spent to strengthen the other links in the chain—the other steps in the process—will not improve the system output. The weak link governs the performance of the entire system!

 

Bottleneck of a Process

 (Answers: Step 4; 14 per hour)


Once you have strengthened or elevated the weak link, another link or step in the process becomes the weakest and may deserve your attention. Thus, by always focusing efforts on the weakest part of the system, you get the maximum benefit from your business improvement efforts.

Because only a few core systems drive your business results, and each has just one constraint at a time, you can now focus your energy on the few problems that really matter the most. Improve, grow, stabilize, and then tackle a new constraint. Watch your business take off!

Theory of Constraints: Performance = Full Potential – Constraints

Throughput

The Theory of Constraints assumes that a system has a single productivity goal. The challenge is to increase the output, or "throughput" of the system by managing the constraint that blocks your ability to reach the goal.

For example, the throughput of a marketing and sales process is measured by the dollar value of orders written. The throughput of a production system is the dollar value of products shipped. For a business system as a whole, the measurement of throughput is the cash collected from the sale of its products or services.

Many company owners mistakenly think they need to optimize all of their business systems and processes (logic constraint). They often measure individual processes and reward performance independent of overall business results.

Surprisingly, the improvements of quality or efficiency, as important as they are, do not always lead to a corresponding improvement in throughput. In fact, an optimized system can create a negative effect on the next system by overwhelming it with inputs.

Improving any but the weakest step within a process creates excess output that piles up in front of the weak step, often called a bottleneck. Bad things happen when work piles up, when you overfeed a process. Don't create any more inventory or work-in-process than is necessary to maximize throughput!

Remember: The key is not just to eliminate the bottleneck of a particular system, but to elevate any system in the chain that constrains the throughput of the entire business. All of your core business systems must work in synchronization to achieve the best result. While efficiency and cost cutting are important, the best measurement of real improvement is increased throughput—revenue and profit.

In my experience with small businesses, insufficient sales are usually the major constraint on the throughput of the business. No matter how efficient the operation, without a steady flow of sales into the pipeline, the output is always disappointing.

By the way, your cost of goods plus overhead expenses create a monthly sales break-even point for your business. Throughput should cover those costs as early in the month as possible. You only make a profit on orders shipped after you reach the break-even point!

TOC in Action

Kid's Korner manufactures and distributes a unique line of children's furniture and accessories through five retail stores located in shopping malls. Owners want to double annual sales from three to six million dollars without the cost of adding more stores. They also want to preserve the margin in their product by staying in the retail market. They decide to put their resources into Internet marketing.

The first constraint the owners face is that not enough people visit their sorry website. They hire a person skilled at search engine optimization (SEO) and Google Adwords to improve online traffic. With more people coming to the site, their constraint is now the low percentage of visitors who become paying customers.

The owners hire a professional copywriter to improve their message and add an irresistible offer of free shipping. To their surprise and excitement, product sales start to take off! Sales throughput, however, does not increase as expected. They soon discover the next constraint, their inability to fulfill all of the orders on a timely basis. They add a person to the shipping department, and the problem is solved; throughput goes up.

The results from the website continue to exceed the owner's expectations, but now they can't keep all of their products in stock—a new constraint to overcome. For example, they have a line of lamps that come in twelve different styles. Production is hampered because they have to break down and set up the production line for each style.

A review of sales data shows that four lamp models account for 75% of their lamp revenue (see Pareto Principle). They make a difficult decision to trim the models to four. A miracle occurs! While they lose a few sales, production is much more efficient and the throughput on lamps dramatically increases—overall business throughput also jumps.

Lamp production has improved enough that sales again become the constraint for this item. The owners decide to take advantage of the productivity and warehouse the excess inventory. This proves to be a costly decision. It ties up needed cash. Demand drops drastically on one of the stocked lamps, and a production flaw, not caught during the inventory buildup, causes a significant amount of rejects and waste.

The owners revise their strategy and begin to pace lamp production with sales—no inventory buildup of potentially obsolete items, no cash sitting on shelves, no hidden production flaws. They discover that more profit is made when sales and production flow through an evenly paced system.

By applying the Theory of Constraints, the owners focused on the critical systems that would increase throughput and help them reach their six million dollar goal. While you may have a different business model, these principles also pertain to your company.

Now, go find the contraints—weaklinks, bottlenecks, obstacles—that are hindering the throughput of your business! (Check out the "Elevating Constraints" section to learn five ways to eliminate bottlenecks.)

The Next Step...

Tags: Laws/Principles, Efficiency/Speed