“You are surrounded by simple, obvious solutions that can dramatically increase your income, power, influence and success. The problem is, you just don't see them” (Jay Abraham, marketing consultant).
Let’s talk about a simple strategy that will help you harvest an abundant crop of new ideas that are sure to motivate employees, give customers a better buying experience, and increase financial results and rewards.
Though perhaps unnoticed, the people around you possess a wealth of experience, talent, insight, and creative ideas that are just waiting for the right opportunity to be shared.
Sadly, many useful and innovative thoughts that could improve your business are never expressed. Why? You don’t have a system to tap into the collective intelligence of workers who are intimately involved with your business operations; this includes the average everyday folks that rarely speak up.
Everyone in your organization is potentially a problem-solver and an innovator. If you have an idea-rich culture of continuous learning and improvement, your employees are always thinking: "How can I do this easier, faster, better or less expensively.” Researcher Alan Robinson says ideas are "free" and employees will gladly make improvements as part of their job if the environment you create is right.”
So what kind of system can you create to harness the knowledge, imagination and renewable energy of your employees?
Some companies have tried putting up a suggestion box. Employees write suggestions on a form and drop them in a special box. Managers (sometimes) read the suggestions and implement the ones they think will work. However, suggestion boxes typically aren’t very effective. They allow anonymity leading to frivolous suggestions or mean-spirited remarks. They focus on problems but not necessarily solutions, and solutions are not always feasible. They often suggest more work for other people who are already busy, and thus no action is taken. And this old-style system usually doesn’t reward successful implementation and sustained results stemming from the suggestion. There is a better way!
Your Employee Involvement Program
Here are some ideas to implement a business system that will solicit real improvement ideas, generate enthusiasm from employees, and save or earn your company thousands of dollars over the coming year.
- To begin, let’s get rid of the “suggestion box” and replace it with a filing system by worker name. After all, we expect every person to submit many suggestions (see #2)—often small ones— over the course of a year. It’s also a good idea to review the employee’s file of suggested improvements during evaluations or other interviews.
- Next, how about giving the system a new name—something that emphasizes solutions instead of merely suggestions. You could call it the “business improvement program” or the “employee ideas program.” If those sound a little lame, have a brainstorming session or contest to name the system. Let me know what you come up with.
- The person with a new idea for a solution or improvement completes a brief form (get a sample form in The Zone) and hand delivers it to their supervisor or someone who could provide the time and resources needed. Good ideas might help with cost savings, productivity, process improvements, revenue-generation, and so forth. A brief plan to implement the proposal is also included. The merits of the idea are discussed, and an action plan generated.
- Ideally, the submitter of the new solution should be responsible for its implementation. Ownership increases the likelihood of success. Active participation by the submitter removes one of the major complaints with the old suggestion box: “I gave the company a good idea, but they didn’t do anything with it.” Lack of action kills the motivation of any improvement program.
- Always thank employees for their time, effort and feedback. Positive reinforcement will keep the good ideas flowing. Create a reward system for people whose ideas are successfully implemented. Frequent acknowledgment of small improvements is more effective than occasional recognition of a few. Consider a gift card, day of vacation, or tickets to a sporting event. When others see that good ideas are rewarded and appreciated, they will join in. If appropriate, give financial compensation, perhaps some when the solution is first implemented and the rest over time with proven results. The reward system helps the submitter maintain ownership and a vested interest in assuring that the new solution is understood, accepted, and practiced by everyone.
- If you want to create a little healthy competition, do something visible like posting a chart that shows the number of ideas submitted by each person, team or department. Be creative. Recognize winning ideas in your weekly Business Improvement Workshop. Celebrate achievements with something like a pizza party.
- Maintain a simple log of new ideas presented, the person’s name, and date implemented. This helps the supervisor know what is going on at a glance and allows for a frequent review of progress. Again, talk it up at the Business Improvement Workshop.
Never Stop Improving
Get connected with your knowledgeable, imaginative, inspired, resourceful, eager-to-contribute employees who are quietly working in their cubical or on a production line. Capitalize on this great hidden treasure you are already paying for.
Every little improvement—hundreds a year— will make your business better and better, until one day, you have a smooth-running, people-pleasing, money-making system!
P.S. - Get the "Business Improvement Suggestion Form" in The Zone.
After World War II, business leaders in Japan developed a strategy to become more competitive and profitable. Since then, “Kaizen” (change for the better) is widely practiced in businesses around the world. It is commonly referred to as “Continuous Improvement.”
Kaizen is a deeply held belief that every day managers and staff can turn problems into opportunities and find ways to become better for customers, employees, vendors and stakeholders. It is a compelling desire to achieve operational excellence.
"Traditional Western philosophy may be summarized as, 'if it ain't broke, don't fix it.' The Kaizen philosophy is to 'do it better, make it better, and improve it even if it isn't broken, because if we don't, we can't compete with those who do'" (Steve Hudgik, Graphics Products, Inc.).
Continuous Improvement—Kaizen—is an idea whose time has come for the small to mid-size-business community!
So, What Exactly Is Kaizen?
Kaizen is the ongoing, systematic, incremental improvements in the way things are done. It is a relentless attempt to eliminate the unnecessary activities, delay, waste, and variation of business processes that add cost without adding value. Kaizen results in improved lead-time, efficiency, quality, productivity and customer loyalty.
The goals of Continuous Improvement are simple: 1) make things easier 2) better 3) faster and 4) cheaper” (Shigeo Shingo, pioneer of Lean Thinking). It is the new "best solution"—from the customer’s point of view (five customer types).
Watch Honda’s 30 second commercial that captures the spirit of Kaizen
Kaizen is a mindset and practice that encourage reflection, teamwork, standardization, mastery of the process, experimentation to find better ways, comparison to baseline accomplishments, incremental and ever-evolving change, and the ongoing improvement of results. It asks the simple question, “How can I do this better?” Kaizen is the everyday quest for perfection!
Masaaki lmai, father of Continuous Improvement, teaches, “Kaizen means ongoing improvement involving everybody, and without spending much money. You can't do Kaizen just once or twice and expect immediate results. You have to be in it for the long haul.”
Many larger companies have adopted one or more formal methodologies to achieve Continuous Improvement” (e.g., Six Sigma, Lean Thinking, or the Theory of Constraints). However, these powerful strategies are rarely considered by small business owners—a fact we hope to change!
Things Can Always Be Better
Daily improvement applies to every area of your business—a shorter lead-time attracts more customers, modified words on a web page induces more visitors to buy; bottled water in the reception area pleases guests; an improved business form or application reduces errors; a more compelling radio ad boosts sales leads; and so forth. There are hundreds or even thousands of possibilities for improving within every organization.
Below are 10 ways to help the philosophy of Kaizen—Continuous Improvement—take hold in your company.
- Start with Yourself – Many entrepreneurs are so busy “sawing” they have little time to step back, read, ponder, analyze, plan, and essentially “sharpen the saw.” Get connected with your numbers (leading and lagging indicators), and with customer, employee and vendor feedback. Read skill-based business books and articles. Spend time in the Zone working on your business (Michael Gerber). Seek ways to improve your own personal performance, and encourage those around you to do the same. Your company—people, products, and processes—will improve at the rate you improve. Lead by example!
- Involve Everyone – Kaizen is a strategy that involves every employee, from management to the cleaning crew. Hold business improvement workshops at the company, department or team level—perhaps even at the location of the business system you are attempting to improve. Challenge employees to routinely submit suggestions for positive change. “In Japanese companies, such as Toyota and Canon, a total of 60 to 70 suggestions per employee per year are written down, shared and implemented" (Steve Hudgik).
- Challenge the Status Quo – Throw out all your old fixed ideas on how to do things. Replace “sacred cows,” personal opinions, and “it’s the way we’ve always done it” with performance facts and data. Numbers are the language of improvement. Avoid the emotional traps of blaming people or making excuses that prevent you from discovering the real problem. Once you have established the new best way of doing something, stick with it until a better way is found. When confronting old ideas and traditions, apply the Rules of Engagement.
- Get Specific – The dollars—made or lost—are in the details of your business systems and processes. Drill down. Use a 5 Whys Analysis and keep asking “why” until you get to the root cause of the problem. Improve specific steps or components in your business systems and processes; there is no other way! Get defects to less than 1%. Cut lead-time in half. Do little things to WOW customers or employees. Pennies earned from small improvements add up fast.
- Keep It Simple and Inexpensive – Ideas for incremental improvements that bubble up from workers are usually easier to implement and less expensive. Like our friend MacGyver , apply creativity and craftiness before cash. Following the 80-20 Rule; do the twenty-percent of things that get you eighty-percent of improvement results. And do it NOW! Don’t wait to achieve perfection.
- Focus on the Right Things – Improve the core business systems that enable you to find and keep customers, and earn more money. Find ways to provide customers greater value and a better buying experience. Zero in on removing the obstacles, bottlenecks, and weak links in your business processes that slow lead-time, order completion, and collection of cash. Fast throughput of products and services produces happier customers and more profit. Remember: Quality plus speed equals low cost. Put emphasis on improving business systems that drive your Balanced Scorecard goals or that improve a line-item number on your financial statement.
- Provide Training – Kaizen involves setting performance standards for your business systems and processes and then continually improving those standards. Good training and supervision help employees to meet those standards on an on-going basis. Continuous Improvement requires ongoing development of your most important asset—PEOPLE! Tom Peters, business management author, teaches, "If your company is doing well, double your training budget; if your company is not doing well, quadruple it!” As process changes are made, face any resistance by employees head on—Listen-Thank-Consider-Decide.
- Look for Breakthroughs – Up to this point, we have focused on small incremental changes. However, Kaizen will sometimes produce breakthrough improvements—a moment to celebrate! What’s a breakthrough? Chet Holmes, sales and marketing guru, says, “Let me explain a breakthrough. It's when you find a method of doing something [system] that dramatically accelerates your ability to accomplish your goals (“The Ultimate Sales Machine”).
- Never Stop Improving – Stop immediately to fix quality or customer-related problems. Don’t let them accumulate for later handling. Reflect daily (in the Zone) on your opportunities for improvement and innovation. Make business improvement workshops a weekly habit. Implement a suggestion-box type of system that calls for employees to submit so many improvement ideas per month or year. And be sure to compensate them appropriately for implemented solutions. Just one improvement a day is 260 improvements a year!
- Get Box Theory Products – Forgive me if this seems a bit like a sales pitch. I seriously believe that applying the Box Theory™ Way and software tool is the most important thing you can do to get Continuous Improvement going in your company. It is a one-of-kind product based upon decades of proven principles—not too hard, not too basic, but just right for the small to mid-sized-business owner.
Continuous Improvement Forever
In Japan, Kaizen is a system of improvement that not only includes business but every aspect of personal life. Like Systems Thinking, it becomes second nature.
[fname], Continuous Improvement of people, products and processes should be the endless quest of entrepreneurs, business owners, and managers. Wouldn’t you agree?
In short, Continuous Improvement of common tasks produces an uncommon organization! Now, what improvement could you make today?
President Woodrow Wilson said, “If you want to make enemies, try to change something.” Or it could be said, “Try to improve something.” This often has the same outcome.
Challenging the Status Quo
Creating a results-driven business culture—with discipline, measurement and accountability—can be a new way of doing things for many small business owners and their employees. Care must be taken that these elements do not discourage or even become threatening. When people work together—solving problems and sharing ideas—the exchange must be positive and motivating.
System development challenges the status quo. It puts the business under a microscope and exposes ugly blemishes. It questions long established traditions. It recognizes no “sacred cows.” The only goal is to find the best way of doing something. This scrutiny sometimes makes people feel nervous, threatened, angry, or frustrated.
When seeking truth, you must be prepared to face the brutal facts and emotions surrounding your current business practices and proposed solutions.
Most people involved in systems improvement want to make a positive contribution and arrive at the best solutions. So be careful not to put people under the microscope or blame them for performance problems, especially in an open meeting. Instead, focus on faulty business systems that prevent people from doing their best. (If a person is mismatched to the job, make the change as soon as possible.)
Look for the Best in People
In his book, "Results Rule!," Randy Pennington describes a Positive Performance™ management process based on the following core beliefs:
- "Individuals need to be treated with dignity and respect.
- Most people want to do a good job and will do so if given the opportunity and ability.
- The leader’s job is to create the environment for employees to succeed as individuals and as a group.
- Everyone is responsible for performing in a manner that helps the organization achieve results and build strong relationships.
- Treating individuals responsibly means that we earn the right to expect them to act responsibly."
During brainstorming and discussion, allow open dialog, inquiry, and free expression from all participants. Say to the group, "I am open to other points of view." Then listen carefully as employees or customers contribute ideas. When you convey appreciation for shared thoughts and feelings, people are more comfortable in expressing their views. Those who are passionate about their opinions (advocates) should not be stifled if they are communicating appropriately. In the end, business owners, leaders, or voting team members make the final decision.
The process is this: Listen-Thank-Consider-Decide.
Build Trust and Hope
Ann Bruce and James Pepitone give us "12 Cornerstones for Building Trust and Hope in an Organization”:
- Respect your followers.
- Watch how you say things.
- Communicate openly.
- Listen and don’t argue.
- Avoid zingers, digs and putdowns.
- Point out the positive.
- Appreciate what others have to say.
- Acknowledge that trust is a mutual exchange.
- Increase trust gradually.
- Be truthful with yourself.
- Show your human side"
I once worked with a business owner who communicated to his workers the attitude: “It’s my way or the highway.” His strong opinions shut down communication and the valuable suggestions and ideas of others.
It is best to arrive at system solutions based upon facts and not personal opinions. Be objective and unbiased; seek evidence, including business statistics, reports, surveys, and other forms of measurement. There is not a right or wrong solution until proven with results—hard data whenever possible. Listen to those with the “eyes of experience” (insiders) as well as those with the “fresh eyes of objectivity" (outsiders).
Encourage Continuous Learning and Improvement
By introducing change, you may be greeted with resistance, but more often, there is a sense of relief that improvement is coming. Don’t be afraid of change, but implement new business systems with care and patience. Your employees will appreciate it.
Remember: When you include employees in the system development process, you will get greater buy-in and support.
So, get all of your people to become Systems Thinkers. Set stretch goals based on your Balanced Scorecard objectives. Aim for tangible financial results. Assign accountability. Handle conflict. Involve team members in the decision-making process. Put your faith in data. Encourage continuous learning and improvement. Hold effective system improvement meetings. Unleash everyone’s potential. And celebrate success.
What your customers and employees think of your company, and how much profit your company generates, are the result of small and simple things—mostly unnoticed—that go on every day in your business operation.
A Valuable Lesson
In 1849, a young merchant from Massachusetts was caught up in the excitement of the California gold rush. He sold everything he had to move west and seek his fortune. He was told the gold nuggets were so big that a person could hardly carry them.
The world’s largest Gold Nugget ever found.
Discovered in 1872 and is called the Holtermann Nugget.
It was 630lbs in weight.
Day after day, the young man dipped his pan into the river and came up empty. All he had was a growing pile of rocks to show for his efforts. Discouraged and broke, he was ready to quit. Then, late one afternoon, an old experienced prospector happened by and said to him, “That’s quite a pile of rocks you’ve got there, my boy.”
The young man responded, “There’s no gold in this river. I’m going back home.”
Walking to the pile of rocks, the old prospector said, “Oh, there is plenty of gold in this river. You just have to know where to find it.” He picked up two rocks and smashed them together. One of the rocks cracked open, revealing several flecks of gold that sparkled in the sunlight.
The young man noticed a bulging leather pouch tied around the prospector’s waist. He said, “I’m looking for gold nuggets like the ones in your bag, not just tiny flecks.”
The old prospector opened his pouch and extended it toward the young man. He looked inside, expecting to see a handful of large nuggets, but was shocked to see that the pouch was filled with thousands of tiny flecks of gold.
The old prospector said, “Son, it seems to me, you are so busy looking for large nuggets that you’ve missed filling your pouch with these precious gold flecks. The gradual accumulation of these little flecks has brought me great wealth.”
Discover the Gold Flecks in Your Business Processes
The tiny flecks of profit in your business are found at the detail level of your business operations. You may have to crack open and examine your business processes to find them. Small changes to eliminate waste—deviation, defects, and delay—will fill your pouch with the gold you seek. Daily innovation and improvements will gradually make you wealthy.
Remember: “By small and simple things are great things brought to pass."
Occasionally, I like to ponder on the words of people who truly understand the “nuts and bolts” of business operations, and how to get exceptional results. I especially like statements that bring new insights to Systems Thinking. Below I have included a few quotations that might give you a big idea to improve your business.
“The most effective way to improve productivity is to eliminate [unnecessary] work” (Bill Conway, self-made billionaire), and similarly, “There is nothing so useless as doing efficiently that which should not be done at all” (Peter F. Drucker, management consultant and author).
“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency” (Bill Gates).
"Continuous improvement is not about the things you do well—that's work. Continuous improvement is about removing the things that get in the way of your work. The headaches, the things that slow you down, that’s what continuous improvement is all about” (Bruce Hamilton, continuous improvement educator).
“Where there is no standard, there can be no improvement. For these reasons, standards are the basis for both maintenance and improvement” (Masaaki Imai, father of continuous improvement).
“Four goals of improvement: 1) make things easier 2) better 3) faster and 4) cheaper” (Shigeo Shingo, pioneer of Lean Thinking).
“There are two reasons why we change. We learn enough that we want to, or we hurt enough that we have to” (Shigeo Shingo).
“A relentless barrage of ‘why’s’ (see 5-Whys Analysis) is the best way to prepare your mind to pierce the clouded veil of thinking caused by the status quo. Use it often” (Shigeo Shingo).
“You are surrounded by simple, obvious solutions that can dramatically increase your income, power, influence and success. The problem is, you just don't see them” (Jay Abraham, marketing consultant).
“The man who will use his skill and constructive imagination to see how much he can give for a dollar, instead of how little he can give for a dollar, is bound to succeed” (Henry Ford).
“Failure is only the opportunity to begin again more intelligently” (Henry Ford).
“If management is not removing the obstacle, management is the obstacle!” (Author unknown).
“If your business depends on you, you don’t own a business—you have a job! The business owner should be devoted to business development, not doing business” (Michael Gerber, E-Myth).
“Customers always seek the ‘best deal.’ They reward companies that serve them best and allow the others to fail. It is how the customer feels about your business as a whole that matters most. Everything about your business—advertising, cleanliness, return merchandise policy, courtesy and knowledge of employees, product selection, price, location, delivery time, and so forth—is what they are choosing. Your entire business is your product and it must shine throughout. When it does, YOU become the “best deal!” (Ron Carroll)
“Real waste lurks in places that don’t look like waste” (Shigeo Shingo).
“One thing you can’t recycle is wasted time” (Taiichi Ohno, considered father of Lean Manufacturing).
“Tell me and I will forget, show me and I may remember, involve me and I will understand” (Chinese Proverb).
“Reward those who Do, Train those who Can’t, Replace those who Won’t” (Henn’s Creed).
“In God we trust. All others, bring data” (W. Edwards Deming, Total Quality Management), and similarly, “Without data, it’s just an opinion!” (Author unknown)
One good idea—IMPLEMENTED—can put big bucks in your pocket. Which idea above can you leverage for greater success?
You can read some other thought-provoking statements about business systems and processes at www.BoxTheoryGold.com/quotes-about-business-systems.
The Law of Cause and Effect governs all business outcomes. To change an effect or result you have to change the cause.
With that thought in mind, consider this profound statement by Rick Shefren, online marketing guru.
"Your business is perfectly designed for the results you are getting."
With all the plans, strategies, goals, innovations, business practices, and culture that make up your organization, you are getting exactly the results that your business systems and processes are currently capable of producing.
In addition, the amount of demand for your product or service accurately represents the perceived value you bring to the marketplace. And your bottom-line earnings are a precise reflection of how well you execute your business strategy.
In other words, in the free-enterprise system we pretty much get just what we deserve (discounting natural disasters, government intervention, and other things out of our control).
There is Only One Way to Improve Results
Two old sayings come to mind:
“If you always do what you’ve always done, you’ll always get what you’ve always got” (attributed to Mark Twain). And...
“The definition of insanity is to doing the same thing over and over again and expecting different results” (attributed to Albert Einstein).
The brutal fact is this: To get better results you must improve the design and execution of your business systems and processes—AT THE DETAIL LEVEL. There is no other way!
Once again, “your business [systems and processes] are perfectly designed for the results you are getting.” To get better resuts, keep on improving!
The productivity of people and operations can make or break your company. High productivity doesn’t happen by itself. However, dramatic improvements are common when you apply correct principles to your business systems and processes.
Early in my career, and as a pleasant surprise to me, I doubled productivity in a manufacturing environment by applying some of the principles below. At the time, I was amazed by the results. It seemed like a miracle. Now I understand it as simple Cause and Effect.
How to Create a Productive Workforce
- Be sure that each employee is a good fit to their work assignment. And keep in mind that people perform at their highest potential only when they are focusing on the most valuable use of their time. (Avoid having high-paid people spend time doing lower-value work.)
- Invest in the learning and growth of your workforce. Provide clear job descriptions, relevant training (80% hands-on, 20% classroom), and educational activities such as in-house workshops. Tom Peters said, "If your company is doing well, double your training budget; if your company is not doing well, quadruple it!”
- Set performance standards, stretch-goals, and schedules or deadlines that engage workers and give them a target to shoot for. Productivity increases as people get closer to the goal, so make them short-term. Hold workers accountable for their results.
- Develop a business culture where productivity is recognized and rewarded. (This begins by putting people into effective business systems.) Turn work into a game and keep score. People work harder at play than they do at work. Add incentives (including compensation), fun, team competition, and don’t forget to celebrate victories. “When employees are happy, they are more creative and productive.” (Daniel Gilbert, “January-February 2012 Harvard Business Review”).
- Measuring performance drives productivity and improvement. “When performance is measured, performance improves. When performance is measured and reported, the rate of improvement accelerates” (Thomas Monson, business/religious leader). Be sure to identify and carefully monitor your key performance indicators.
- To improve the productivity of any business activity, increase the frequency of performance feedback to those engaged in the activity; the more frequent the feedback, the better the results. It is best when workers know where they stand in relation to goals, without waiting for others to tell them.
- Create small work-group teams that bring added resources, talents, ideas, and energy toward the accomplishment of organizational goals. (The whole really is greater than the sum of its parts!) Teamwork tends to bring the best out in people and is essential in any great human endeavor.
- Focus-Finish-Focus-Finish. Multi-tasking, “wearing multiple hats,” or being “spread too thin” are signs of a start-stop work-flow and a loss of continuity and momentum that destroys productivity. When people focus on one task at time they are most efficient at getting work done.
- Address negative attitudes or personal issues of employees. For example, take action if they don’t like their job, supervisor, or co-workers, or when they have serious personal, family, or health problems. Stop excessive chit-chat, personal phone calls, or wasting time on the Internet. These productivity busters will also diminish the productivity of co-workers!
- Avoid administrative type meetings that kill time for a lot of people. Instead, use emails or memos to keep people informed. The meetings that boost productivity include job training and process improvement meetings or workshops.
Best Productivity Tip of All
Creating a work environment with good systems and the ten productivity boosters described above will encourage discipline and excellence, and put more money in the pockets of you and your stakeholders—GUARANTEED!
Now, here is a bonus tip: When people enjoy their work and are performing at their best, they will also stay with the company longer. Retention of good people is perhaps the best productivity booster of all.
Ten Tips to Increase the Productivity of Your Business Processes!
The Systems Thinker does not always know the right answers, but he is one who asks the right questions. Effective questions are the key to problem solving, innovation, and unlocking your full potential. In fact, enlightened questions often point to enlightened solutions.
It takes as much skill to ask the right question as it does to give the right answer!
Never Stop Improving!
When drilling down on a problem (5-Whys), or conducting a business improvement workshop, here are a few questions to get people thinking and energize your team.
- What is standing in our way of being a much better company?
- What new market opportunities can we exploit? What other business strategies would increase market share and growth?
- What does our target market want that they are not currently getting? What innovative products, features, benefits or services could we add?
- How do we plan to get more customers? How can we sell more to each customer (cross-sell or up-sell)? How can we make our customers more aware of all our products and services?
- What are our most frequent or difficult customer service questions? What gives our customer the most pain or causes the most complaints in doing business with us? How can we give the customer a more pleasurable buying experience? What specifically are we doing to create loyal customers?
- How can we provide better quality products or services than our competitors? How can we deliver faster than the market norm? What can we do to reduce cost or give more value to customers than the competition? (Better, Faster, Cheaper).
- What business systems and processes must we excel at? What system most needs improvement? What new systems would add value to our market and attract new customers? What new system or process would rock our industry (e.g. FedEx overnight delivery)?
- How do we plan to attract the best employees? What can we do to retain loyal employees? How do we provide a better place to work? What would help employees become more empowered or productive?
Asking questions of customers or employees not only provides valuable information, it shows that you have a genuine interest and respect for the ideas and opinions of others. If you listen carefully, wanting to be taught
, people often reveal information that can dramatically improve your business
and bottom line.
Asking questions is also the best way to teach. In the words of a professional trainer, “To tell is to preach. To ask is to teach.”
Chet Holmes, a well-known marketing and sales teacher uses questions very effectively. Go to THE ZONE and check out his three page article, “Creating Great Businesses.” Chet gives an example of how he helped one business implement nineteen important improvements, all stemming from a single question.
So, what question would get your team fired-up to make improvements?
Organization leaders generally have a pretty clear picture of the direction they want their company to go. However, research shows that just 5% of the workforce understands their company’s strategy, and only 25% of managers have incentives linked to strategy (Kaplan)
To help remedy this, Doctors Robert S. Kaplan and David P. Norton of Harvard Business School introduced the Balanced Scorecard in 1991. It has gained wide acceptance as an effective strategic management system, a performance measurement system, and a communication tool.
Simply put, the Balanced Scorecard enables organization leaders to convert mission, vision and strategy into specific and measurable goals, with action plans to achieve those goals.
The scorecard is described as “balanced” for the following reasons:
- It recognizes the need to balance financial indicators of success such as sales with non-financial indicators such as customer satisfaction. (business measures)
- It balances internal requirements of employees and processes, with the external requirements of customers and shareholders.
- It looks at past performance (lagging indicators) such as financial statements as well as current performance (leading indicators) such as the measurement of daily business systems and processes.
- Finally, it provides a balance between short-term and long-term objectives.
A completed Balanced Scorecard will not only link your business strategy to measurable company goals, but it aligns employee efforts and business processes to those high-level objectives. It is the foundation for creating a culture of continuous improvement!
The Four Perspectives of Balanced Scorecard Goals
When setting Balanced Scorecard goals, you will look at your business strategy from four different perspectives.
- The Financial Perspective promotes strategies for growth, profitability, cash flow, return on investment, and mitigation of risk, as viewed by an owner or shareholder.
- The Customer Perspective promotes strategies for creating product value, market differentiation, and customer loyalty.
- The Internal Processes Perspective promotes strategies for developing high-performance business systems and processes—operational excellence.
- The Learning and Growth Perspective promotes strategies that create a culture of continuous learning, innovation, and the personal growth and retention of valued people.
While a Balanced Scorecard may seem like a tool for big-business, it is simply a form divided into four sections, one for each of the four perspectives. In column one, you write several objectives within each perspective. In column two, indicate a unit of measure such as numbers, dollars or percent. In column three, express the target goal in that unit of measure. In column four, briefly indicate your plan of action to achieve the target goal.
Below is an example of an abbreviated Balanced Scorecard developed by a home builder.
Financial Perspective (How can we increase growth, profitability, cash flow, and return on investment?)
|Increase Sales growth
|Number of new starts per month
||10 new starts
||Expand geographic market/open new office
||Percent income from operations
||10% profit margin
||Reduce construction cycle time and unit costs
Customer Perspective (How can we create product value, market differentiation, "killer customer care," and raving fans?)
|High quality homes
||Points/quality rating of subcontractors
||Subcontractor must maintain 90 point avrg. of 100 possible
||Create a “quality” score sheet for each sub and provide job feedback
||Average days to complete
||30 days from building permit to close
||Intense scheduling system/reduce delay
Internal Processes Perspective (What systems can we create or elevate to achieve operational excellence?)
|Minimum time from contract to building permit
||Days in process
||Submit app to city within 5 days of customer contract
||Reduce upfront interface and preparation time with customer
|Effectively schedule sub-contractors
||Percent of work started at scheduled time
||75% of jobs started within 1 day of schedule
||Purchase BuildStar management softwar
Learning and Growth Perspective (How can we promote learning, innovation, and the personal growth and retention of valued people?)
||Number of subs that are certified
||75% of subs are certified
||Create subcontractor certification program
|Improve staff building-process skills
||Number of skill sets X number of people
||Create a staff training program
For instance, let's say from the financial perspective you want to increase sales by 20% next year. Your unit of measure is dollars. Your target goal is $1,000,000, and your plan of action is to spend 20% more money on lead-generation advertising.
In another example, from an internal processes perspective, your goal is to reduce product defects. Your unit of measure is percent. Your target goal is 99% yield, or expressed as 1% waste. Your action plan is to apply Six Sigma analysis to the manufacturing process and dramatically reduce production errors.
The Systems Thinker also aligns goals at the system level with the major Balanced Scorecard objectives of the company.
Let's take a closer look. A company Balanced Scorecard has an objective of 10% sales growth in the coming year. The action plan is to add six more sales per week. Based on sales conversion rates in this example, the marketing department must achieve twenty-four additional leads per week. Their action plan for this Scorecard objective is to increase the weekly advertising mailers by 1500. Likewise, the production department must increase its target to manufacture six more units per week. Every department plays a role in achieving the high-level company goals.
By cascading the strategy and objectives down through all levels of the organization, every employee and internal process is engaged in achieving a common set of goals. People throughout the organization ask, “Which company objectives or measures are we in the best position to influence?” and “What can we do at our level to help the organization achieve its goals?”
Strategy is everyone's job in a Balanced Scorecard environment. It is a top-down responsibility to communicate strategy and unite the workforce, and a bottom-up responsibility to internalize and execute the strategy.
In one page your Balanced Scorecard tells the whole story—everything important—about your organization's current strategy and targeted objectives!
I have prepared several worksheets to help you determine your unique business strategy and create a company Balanced Scorecard. You can get them in the Zone.
Things are not always what they seem. In the picture below, do you first see the old woman or the young woman? Can you see both?
In business, sometimes the best solutions—the simplest and least expensive—are not so obvious. We are often counseled to work “smarter instead of harder.” The Systems Thinker is able to see through operational illusions to understand things as they really are—to solve business problems in the smartest possible way.
Consider two principles that may seem counter-intuitive, but are important to squeezing the most value out of your business operations.
Improvement Principle #1
“If you need a new process and don't install it, you pay for it without getting it” (Ken Stork).
If you have a business system that is sputtering along, you can be sure there are excessive mistakes and inefficiencies. Perhaps you also have customer dissatisfaction and defection. To let the system continue will run up direct as well as indirect costs. So, if you don’t improve the system now, you’ll eventually lose the money you might have used to install a new one. You will pay for it without getting it! Every day you wait is taking money out of your pocket.
Improvement Principle #2
You always pay for the "A" employee. The lesser cost of a "C" employee, plus the hidden cost of inferior performance, poor decisions, and costly mistakes, is equal to or greater than the higher cost of the "A" employee. Within the same job description or grade, replace "C" employees with "A" employees to improve system performance and reduce costs.
So, what is an "A" employee? These people have a history of getting results. They aren’t afraid of accountability and scorekeeping. They are self-confident and able to apply past successes to new assignments, but they are also teachable and eager to learn. "A" employees will make good things happen in your business, especially when their personal goals are aligned with your company goals. As Jim Collins says, “Get the right people on the bus and the wrong people off the bus” (“Good to Great”)
Keep these two principles in mind, and remember: Systems Thinkers find ways to save and earn money that many business owners never discover! At what stage of Systems Thinking are you?