Posts Tagged ‘profitability’
It is not only important for managers to recognize the challenges that they will face, but also to understand how to meet and overcome such trials. Preparation provides them with a starting point and the impetus to change.
As the complexity and depth of challenges increase, managers cannot afford to ignore the issues that currently confront them. Doing so will create a domino effect of problems that will continue to plague them until dealt with. More importantly, managers will learn that the obstacles, barriers and challenges to their business will continue at an alarming rate, fueled by technological advancements and changes in the global economy.
Cognizant of the above circumstances, managers can devote more time to meeting the strategic challenges that continue to confront their business. At the same time, more of the tactical issues must be pushed to the frontline employee. The strategic nature of many challenges precludes most managers from micromanaging the activities of their people and forces them to deal with the macro-issues of management.
Related: Adapt or be Bypassed
Several critical management challenges identified are listed below, along with specific strategies managers can employ to meet these challenges.
Reinforcing Employee Support Systems
The rapid flow of information between managers and their employees is the biggest challenge to be faced. It is recommended that managers conduct a complete reassessment of their employee support system. The best approach is to flowchart the entire system so as to completely understand its methodology and complexity. Over time, support systems tend to become increasingly complex and redundant as new elements are put into place, which overburdens the process.
Managers should consider a complete redesign of their support systems; this can start with a fresh set of goals and objectives to use as a foundation. With these goals and objectives in mind, managers should analyze the type and form of information that both they and their employees require, and the best means of obtaining and delivering that information. The key is to remember that most managers and employees are awash in information, but starving for knowledge. Managers should look for the best methods possible to deliver knowledge over information, providing support data and information if it needs to be referenced. Some vital areas to examine are:
- The effective use of performance metrics to evaluate work.
- The conversion of reports into action plans.
- The minimization of data flow to eliminate information overload.
Realigning Internal Processes
Managers must conduct a comprehensive analysis of the buying habits and patterns of their customer base. As buyers become more sophisticated and are forced to face the realities of increased global competition and a depressed economy, their behaviors change. Managers must examine and monitor these changes, and analyze future trends: when compared to their existing processes, most will find profound shifts. The impact of the Internet on information gathering must be addressed along with the overall increase in risk factors that change the way companies handle their purchasing. The key is to realign the internal processes using all of the available tools and technologies to closely match customers’ buying behavior and to maximize the use of their people’s time and resources.
The business landscape is evolving and changing. It is important to monitor these changes and continually adapt and modify the operating processes accordingly.
Strengthening Employees’ Understanding of Customer Profit Economics
There is no doubt that many changes in the economy and marketplace have precipitated a shift in customer economics. If anything, many companies have been induced to reevaluate the manner in which they conduct business. Companies are purchasing more carefully and examining the return on investment a specific product or service delivers to them. Consequently, unless employees understand the economics of their business and how their product or service fits into that picture, they will be quickly discounted.
Managers should require their people to conduct a review of their companies’ major accounts in order to understand the specific application of their product or service, recognize the importance of that product or service to the customer, and glean how the product directly contributes to the customer’s profitability. Only when employees know how their product contributes to customer success can they successfully position themselves to contribute to the bottom line.
Reconstructing and Realigning Reward Programs
As companies realign their internal processes and require more servicing of accounts, managers must adjust their compensation plans to reflect these changes. Compensation plans should be designed so that employees perform desired activities and functions, which can include business development and service. Research shows that employees will gravitate to where they are making the most money. If they are paid on commission it is unlikely service will be important to them.
Managers should identify and prioritize desired behaviors. Based upon what they come up with they will have a platform for creating a compensation program that meets their goals.
Flattening Decision Making
Managers are challenged to move the decisions typically made by managers directly to their frontline people. Employees are thus given the latitude to make quick and timely operational decisions that can positively impact the speed and quality of results.
Strengthening Employees’ Understanding of Their Companies’ Profit Economics
Employees should be educated in the profit margins of the products/services their company sells. They need to understand the impact an order has on their business as well as the financial ramifications of customer concessions. Once furnished with this information, their performance should be evaluated not only on their specific work-related activities, but also on the profitability of the portion of business for which they are responsible.
Excerpt: Overcoming Management Challenges: Pinpoint Management Skill Development Training Series (Majorium Business Press, Stevens Point, WI 2011) $ 17.95 USD
Timothy F. Bednarz, Ph.D. | Author | Publisher | Majorium Business Press
Author of Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It (Finalist – 2011 Foreword Reviews‘ Book of the Year)
Linkedin | Facebook | Twitter | Web| Blog | Catalog |800.654.4935 | 715.342.1018
Copyright © 2012 Timothy F. Bednarz, All Rights Reserved
Performance plans are action plans, not static documents. Effective performance plans must detail the specific actions leaders and employees must follow to accomplish the goals and objectives set within it. Leaders understand that without meaningful performance standards, measuring and evaluating individual performance becomes difficult if not impossible. Once the plan is implemented, meaningful performance standards allow leaders to modify and adapt their plans to actual conditions.
Leaders must use solid standards to monitor and evaluate all aspects of performance. Any measurement used should determine and create an action both on the part of the employee being evaluated and on the part of the leader performing the evaluation.
There is a natural tendency for a leader to focus his or her activities on more prominent areas that will be highlighted and spotlighted, yet every element of the performance plan must be fully addressed.
It should be noted that any standard a leader creates will direct, limit and change the behavior and performance of their employees. This is important for leaders to understand because what and how they choose to evaluate can have either a positive or negative effect on the performance of their organizational unit.
A common pitfall in establishing performance standards is overdoing them. It burdens all involved with excessive factors and controls. Leaders know that to be effective, they need to set performance standards that are relevant and meaningful. It is far better to have fewer meaningful standards than to establish many useless ones. When applied, these standards will present a true picture of the performance of their organizational unit at any given point in time. Four areas to focus on in creating meaningful performance standards are:
What to Measure
The specific elements that need to be measured will vary by organizational unit. Typically, performance standards are set around productivity and profitability. Most leaders establish performance standards by setting specific performance expectations. Examples include:
- Progress is evaluated by the reaching of specific milestones linked to individual goals and objectives.
- Profitability is evaluated against the budgets established for each activity.
- Efficiency is evaluated by the resource utilization within the organizational unit.
Each organizational unit has key factors that determine their success. Leaders identify these factors as indicators of performance and look for trigger points that are early indicators of the success or failure of these factors. For instance, if a leader is managing a manufacturing unit, he or she may focus on projected orders as a key indicator of their unit’s future activities. While a production supervisor may not be interested in these future indicators, a leader looks beyond the immediate horizon to maximize the efficiency of their unit.
How to Benchmark
Once leaders know what they want to evaluate, they need to benchmark each critical measurement. This establishes degrees of confidence and reliability in their numbers. They review these statistics over a meaningful period of time to establish a benchmark of past performance in each area. The longer a leader reviews the past performance of a specific area, the higher the degree of confidence and reliability he or she establishes.
Once key performance standards are benchmarked, leaders establish “triggering events” that result in taking immediate action. Since the benchmarked statistic is the standard, a triggering event can be predetermined. This event or “flag” occurs when performance rises above or falls below a specific percentage of the benchmarked standard. This provides leaders an early warning system to proactively deal with performance problems before they get out of hand.
How Frequently to Measure
Leaders are careful not to overburden themselves with needless information. They use performance standards as a means to keep their finger on the pulse of their unit’s performance. They can easily determine the frequency for receiving reports of their unit’s performance. Some statistics are meaningful on a daily basis, some hourly, and still others only when reported over prolonged periods of time.
What Measurements Indicate
Key performance standards need to inform leaders of the overall performance of their organizational unit. Specific measurements can trigger corrective actions, while others indicate the progress of the unit against performance plan goals and objectives. Effectively utilized, solid performance standards lead and direct the leader’s actions to fine-tune his or her unit’s performance. The right balance of key standards points the way to improved overall performance and productivity.
Excerpt: Planning to Maximize Performance: Pinpoint Leadership Skill Development Training Series (Majorium Business Press, Stevens Point, WI, 2011) $ 16.95 USD
If you would like to learn more about performance planning techniques, refer to Planning to Maximize Performance: Pinpoint Leadership Skill Development Training Series. This training skill-pack features eight key interrelated concepts, each with their own discussion points and training activity. It is ideal as an informal training tool for coaching or personal development. It can also be used as a handbook and guide for group training discussions. Click here to learn more.
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Timothy F. Bednarz, Ph.D. | Author | Publisher | Majorium Business Press
Author of Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It (Finalist – 2011 Foreward Reviews‘ Book of the Year)
Linkedin | Facebook | Twitter | Web | Blog | Catalog |800.654.4935 | 715.342.1018
Copyright © 2012 Timothy F. Bednarz, All Rights Reserved
The United States Nuclear Navy has an enviable record for engineering excellence and safety. From its inception in the 1940s, Admiral Hyman Rickover (U.S. Navy) established exacting standards for every aspect of its operation. Not content to remain
behind a desk, he was present on the bridge of every newly launched vessel as it underwent its sea trials. He was truly immersed in the details of each project and every mission, and left nothing to chance. This included interviewing every naval officer before they were allowed into the nuclear program. He stated that, “The man in charge must concern himself with details. If he does not consider them important, neither will his subordinates. Yet ‘the devil is in the details.’ It is hard and monotonous to pay attention to seemingly minor matters. In my work I probably spend about 99 percent of my time on what others may call petty details. Most managers would rather focus on lofty policy matters. But when the details are ignored, the project fails. No infusion of policy or lofty ideals can then correct the situation. To maintain proper control one must have simple and direct means to find out what is going on. There are many ways of doing this; all involve constant drudgery. For this reason those in charge often create ‘management information systems’ designed to extract from the operation the details a busy executive needs to know. Often the process is carried too far. The top official then loses touch with his people and with the work that is actually going on.”
Colin Powell (U.S. Army) noted, “Sometimes details are neglected because they’re not sexy enough… Running anything is primarily an enormous amount of grubby detail work and very little excitement, so deal making is kind of romantic, sexy. That’s why you have deals that make no sense. Good leaders don’t view details… as grubby. They view the mastery of detail as an integral part of leadership.”
As military leaders, both Rickover and Powell recognized the value of being immersed in details. They understood that in a combat environment, overlooked details can be costly in many ways, especially regarding the lives of the men and women who serve under them. This immersion in detail was also observed in other military leaders, including Robert E. Lee, U.S. Grant and Robert Wood (Sears).
A desire to immerse themselves in details isn’t limited to military leaders. It was observable in the behaviors of other great leaders, including Steve Jobs (Apple), Bill Gates (Microsoft), Elizabeth Arden (Elizabeth Arden), and Estée Lauder (Estée Lauder) to cite a few.
William Boeing (Boeing) began his career in the lumber business before he saw the future of aviation. In addition to Boeing he also created the United Aircraft Corporation and United Airlines as subsidiaries. (The Federal government ultimately broke-up Boeing as a monopoly in 1934.) As Boeing grew his aviation business, “[he] continued to run his timber business and was able to absorb details of both lumber and airplane enterprises. Years later, he could recall the description and topography of a parcel of land and the species and quality of timber that it would yield. He believed in details and told his managers that many a wrong decision stemmed from a detail overlooked or incorrectly interpreted.”
Another aviation pioneer, Juan Trippe (Pan American Airways) immersed himself in every detail of his emerging business. “When [he] got Pan American Airways into the air in 1927 he knew every wrinkle in its flying equipment (a lone tri-motored Fokker), every part in his stockroom, every wavelet in the go-mile mail route between Key West and Havana.”
When viewed from the perspective of “ruthless efficiency,” the practice of immerging oneself in the details of managing a successful enterprise makes absolute sense. Large and widespread companies by their very nature, creates potential waste and duplication. This is underscored by a report issued by the U.S. Government Accountability Office in March 2010 entitled, Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue, which reported wide spread waste and duplication of efforts throughout the Federal government, costing taxpayers up to $200 billion annually.
The great leaders intuitively understood the potential for waste within large organizations, and immersed themselves in the details of their businesses to increase efficiencies, drive down costs and improve profitability. John D. Rockefeller (Standard Oil) is a notable example. “Of all the lessons John absorbed from his father, perhaps none surpassed in importance that of keeping meticulous accounts… The titan had to know to the last pipe, to the last oil storage tank at each of his refineries, to the last Standard Oil tanker at sea, to the last penny in Standard Oil’s Accounts Receivable, and to the last of whatever else he could think of in his business, where everything was, how the item or person served his purposes, and their exact value.”
Oprah Winfrey (Harpo Productions) openly admits her lack of management acumen. She delegates that aspect of the business to professional managers within her organization. Yet, this does not stop her from immersing herself in the details of her business. “Everything is personal at Harpo. While Oprah does delegate operational decisions, she is all over her content. Before O gets shipped to the printer, she reads every word and scrutinizes every picture—typically working on the magazine, via her office PC, from 3 P.M. to 8 P.M. Tuesday through Thursday and all day Friday, when she doesn’t shoot her show. ‘She’s into every little… thing, the commas, the exclamation points,’ says Gayle King, who, as editor-at-large, is Oprah’s eyes and ears at the Manhattan-based magazine.”
Winfrey’s attention isn’t just limited to her content. She personally signs all checks and pays close attention to how her money is being spent.
Excerpt: Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It (Majorium Business Press, 2011)
If you would like to learn more about the attention to detail exhibited by of the great American leaders through their own inspiring words and stories, refer to Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It. It illustrates how great leaders built great companies, and how you can apply the strategies, concepts and techniques that they pioneered to improve your own leadership skills.Click here to learn more.
Copyright © 2011 Timothy F. Bednarz, All Rights Reserved