Management Techniques

In order to effectively manage[1]

1. Employees must understand what results are expected of them;

2. Employees must understand how those results are measured;

3. Employees must know if their results have met the minimum level of expected performance;

4. The frequency that employees must report those results and be held accountable must be determined by their level of authority;

5. There must be immediate feedback for unacceptable results with a meeting where the manager asks two questions—“Why did we fail? And what are we going to change tomorrow?”

These five steps will be further analyzed in the next five posts.


[1] Effective management is getting a group of people to do something that they would not ordinarily do and enjoy doing it. (Paraphrased Douglas McArthur)

MICRO-MANAGEMENT

Everyone knows that micro-management is wrong but few people really know what they are talking about when they use this term. Micro-management takes place when the supervisor (owner) is more concerned with the process than with the result. This is a critical distinction. Employees resist being held accountable for the “way” that they do something but understand being held accountable for a result that they did not accomplish. When the emphasis is shifted to the result, then the manager can use a failing result as an opportunity to train in the process. If the manager merely harps upon the process insisting that it be done the way he or she did it then they will fail in their corrective action.

More on Meetings

TEN RULES FOR EFFECTIVE MEETINGS

clip_image002[6]

Communications are vital in an organization. Everyone loves communications and everyone hates meetings. The implementation of the following ten rules will make your meetings more effective and more productive.

  1. Every meeting must have a Chairperson who is responsible for the meeting. There can only be one Chairperson. The Chairperson has specific duties and will be held responsible for those duties. Their most important functions are to keep the meeting moving, stay with the agenda and to start and finish on time.
  2. Every meeting MUST have a written Agenda. The Chairperson must prepare the Agenda twenty-four (24) hours prior to the meeting. If the Chairperson is not the owner, the Agenda must be submitted to the owner for their approval PRIOR to its distribution. The Agenda must list
    1. Who is to attend
    2. The start time
    3. The end time (it can end sooner, it cannot end later) and
    4. The bullet points of what is to be discussed
  3. There MUST be a written statement of purpose for the meeting. In 25 words or less the Chairperson must write out the purpose of the meeting. This is the focus statement. For standing meetings the purpose is probably only written once and is reused for each meeting. This statement is read by the Chairperson to start the meeting.
  4. From its purpose statement, each meeting can be classified into one of three types: (1) Long-range communications, (2) intermediate-range communications, or (3) short-term communications. It is best if all agenda points are kept to the same classification. Mixing them is difficult.
    1. Long-range communications are agenda items that, as a rule of thumb, will have their impact in more than three months.
    2. Intermediate-range communications are agenda items that will have their impact one week to three months from now.
    3. Short-term communications are those that will have an impact in less than one week—possibly even the same day. SHORT-TERM COMMUNICATIONS SHOULD BE REMOVED FROM AGENDAS AND HANDLED IN HUDDLES, NOT MEETINGS.
  5. Use Huddles. For all short-term communications a huddle should be used instead of a meeting. A huddle is a “mini-meeting.” It is scheduled just like any other “meeting.” It must start on-time and it must end on-time, however it can be scheduled for no more than FIVE MINUTES. That is the maximum. Everyone MUST get up to leave at the ending time. It is not used for discussion, it is used for short-term communications—What are you doing today? Anyone need help with anything today? That type of communications. There must be a penalty for not being on-time or not attending. (For example, you must bring doughnuts to the next huddle.) No agenda, minutes or other formalities are used.
  6. The Meeting must START ON TIME with the Chairperson reading the purpose statement. The Chairperson then designates one person to record the “minutes” of the meeting. The Chairperson must be taught how to handle people who come in late. Usually the greeting of, “Suzy you are late, you can catch up on what you have missed after the meeting with me” politely and non-confrontationally gets the point across. For chronic tardies, some remedial action must be taken. “If you are on-time, you are late; if you are five minutes early, you are on-time.”
  7. The Minutes of the meeting include the following:
    1. The date and exact time that the purpose statement was read
    2. Who was in attendance at the start, who came in late, and who left early without commentary or judgment
    3. Notes are taken on a copy of the Agenda and are summarized into summary paragraph at the end of the meeting
    4. Time and date of the next meeting, if any.
  8. Use Action Pads. A piece of company stationary is taken to the printer and one-copy, three-hole punched pads are made. These pads are used as follows:
    1. The purpose statement is put at the top of a page and the Agenda is placed below it. This same page is then used for notes and the summary statement at the bottom. The minutes are also kept on this page. At the end of the meeting the copy is sent to the owner, the original is put in a meeting binder.
    2. Each action point is written out. The Chairperson cannot move to the next agenda item until an action point is written out. That action point describes:
      1. The required action
      2. iWho is responsible for it, and
      3. The date and time that it will be completed.
    3. The original of the Action Point is placed in the meeting binder, the copy is given to the person responsible for carrying it out.
    4. The person responsible for carrying it out writes out what was done on the bottom of that same page and returns it to the chairperson at the appropriate time.
  9. Use a Meeting Binder. For standing meetings a hard-covered, three-ring binder is used; for all others either a soft-covered binder is used or they can be consolidated into a master three-ring binder. This binder includes the Agenda, minutes, summary statements, and action points of each meeting in chronological order. The binder is in the Chairpersons possession during the meeting and kept in an agreed upon location.
  10. Have fun. The Chairperson should make the meetings move quickly and be fun. A trivia question about the company at the end of the meeting with some little prize, or have food available can be helpful.

The Fremont Business Operating System

Attendees at a “Minding My Own Business” Workshop have been exposed to the Fremont Business Operating System.  This system is the baseline for all management consulting performed by affiliates of The Fremont Group.  It starts with a clear identification of your goals—and the goals of your spouse.  What is it that you really want from your business.  Once the reason for your business to exist is identified, a financial model of your business must be created.  What results are required in order for you to obtain your goals?  Many small business owners operate like the football coach with a game plan that reads, “if everything goes right we will only lose by a touchdown!”  That coach won’t keep his job for long and the business owner who doesn’t have a game plan designed to win the game won’t survive long either.  From the development of the financial model it can be identified (1) if the goals are obtainable; and (2) the results that must be accomplished in order to obtain the goals.  This model then becomes the cornerstone of the company.  It is the basis for organizational structure—what results are required from each position, the communication and evaluation of those results, accountability, and incentives.  It creates the profit plan and the sales plan.  It is the basis for pricing—the use of break even pricing and the establishment of pricing models.  The financial model is a road map that you modify as you make wrong turns—after all, man plans and God laughs.

Put together, FBOS is your strategic plan.  Owners who operate without it can be successful—particularly if they are lucky—but those who operate with it and diminishing their reliance upon luck.

Note–Fremont Business Operating System, FBOS and Minding My Own Business are registered trademarks of The Fremont Group

QUANTITATIVE ANALYSIS OF FUNCTIONALITY—WHO IS SUPPOSED TO DO WHAT AND WHAT RESULT DO THEY NEED TO PRODUCE?

In a quantitative analysis of functionality, each function of the business is defined in terms of the result that it must produce. As this organization has grown, it is apparent that positions were developed around people, not functions. The organization must be re-examined in terms of functions. Positions must be created and defined in terms of what the “system” requires of each position not in terms of what each employee wants to do. The proper assignment of all functions will eliminate gaps and duplication. Gaps are those functions that no one in the organization presently chooses to perform. Presently these unassigned functions all fall to the owner and interfere with his ability to do his job. Duplication is when more than one person chooses to perform the same function. This is the root of “finger pointing” and is often done be employees referred to as “empire builders.” It is critical to remember that you own the business, you own the system and you, and not your employees determine which positions perform which functions. In a small business people often wear more than one hat—which is fine—what cannot happen is more than one person cannot wear the same hat. A company, which does not regularly perform this task, ends up in organizational chaos. Duplication and gaps are the leading cause of inefficiency.

Each function is then defined in terms of a result. It is not sufficient to merely state the tasks that you expect of each person. You must convey to them the result that you expect. Job descriptions must be written in terms of measurable results, not as a list of tasks. The results for each function are determined by the results that are needed to accomplish your financial plan. When you have each position’s functions defined in terms of a measurable result you can establish accountability. You cannot have accountability without it.

Incentives now can become rational—they are bonuses paid for performance exceeding the result that you have paid them for. Cash bonuses can only be paid for results that either increase sales above the plan or reduce costs below the plan.

This is often the most important organizational exercise that a company can perform. This analysis provides a rational basis for compensation, accountability and incentives—organizational structure. This company is currently no where near able to establish systems of compensation, accountability and incentives upon a rational basis.


Organizational Structure: Making Your People Responsible for Enforcing the Cost Controls That Produce Your Minimum, Mandatory Profit

It is nice to have goals, but the goal alone is only a wish. The owner must also have systems; procedures and controls designed to deliver the planned results. This is your organizational structure—the delivery system of your plan. How are you going to do it?

First the owner develops his plan. He determines what he wants. Once defined he then must determine how to structure his people in order to deliver those results. What result does each person have to provide in order for the plan to be achieved? The company’s Organizational Structure is the delivery system for the owner’s pre-determined results. Once every job is examined in the context of the owner’s plan, the results can be defined, however until the plan is determined it is impossible to write a job description. If properly done, each person understands the result that they must produce and their results are constantly measured. The monitors provide the owner with a comfort level of knowledge and focus the employee upon their job. An employee’s job is to deliver to the owner their pre-defined result. That result is derived from the owner’s plan.

McDonalds has a cadre of MBA’s constantly identifying a better, more “idiot-proof” system of delivering a consistently prepared hamburger with the lowest possible level of employee. Compare their effort in developing and refining their systems and procedures to the time and effort that you spend in developing you systems and procedures and is it any wonder that they have better systems than you do? You cannot manage people you can only manage systems. People do what they want to do; systems do what you want them to do.

Imagine that you were going to set up the business in a city 1000 miles away. You are going to run the business from your home without ever going there. What would the jobs be? What result would each person have to achieve? How would they communicate with you each day so that you knew that they were really doing their jobs? Draw the organizational chart for that business identifying the functions rather than the people. That is the same structure that you should have at home. What is each position responsible for? Have all of the business’ tasks been assigned? How can we measure the results of each job? How can it be simply communicated so the employees really understand it? How should they report their results to me? Most importantly, how should they be held accountable for those results and what incentives can be provided for them to produce results beyond those that I am already paying them for?

People are going to do what they want to do. You must establish systems that make them want to do what you want done. First you must communicate to them what you want done and it must be done in a measurable form.[1] They must understand that those results are why they get paid. One of their results must be to provide you with reporting that you determine will give you a comfort level in the knowledge that they have actually done their job. They must also understand that something bad is going to happen to them if they do not deliver their pre-determined result—accountability. Incentives are additional compensation for producing more profit for the company than they have already been paid to produce. Since profit is only generated by lowering expenses or increasing sales, the only cash incentives that a company can have are for efforts that either lower expenses or increase sales in an amount greater than they have already been paid to produce.


[1] Even a receptionist can have job standards—answer the phone before the third ring 95% of the time, answer the phone a specific way 100% of the time, etc.

Do You Own A Job or a Business?

When the owner is spending more time doing other people’s jobs than he is doing his own he has a problem. His job is to run the company and when he is doing other people’s jobs, he isn’t doing his.  Working in the business means doing the tasks that should be done by and employee. Working on the business means doing the tasks that should be done by the owner. The owner who does employee’s jobs doesn’t own a business he owns a job.

An owner starts his own business in order to achieve his goal of being his own boss. He discovers that he may not have a direct supervisor anymore but his income is still dependent upon him performing the same tasks that he performed in his employment and in addition to that he is swamped in “paperwork” and employee problems. He may (or more likely may not) have a greater income, but his hours and responsibilities are so greatly increased that all he has is a bigger job than the one he left. If he had put in this many hours and this much effort for his former employer he would probably be ahead of where he is now. All that he tried to achieve was self-employment and he has achieved that.

There is a significant difference between owning a business and owning a job. Having a business means that he makes his money off the efforts of others, rather than off the efforts of his own. You should make money off of every employee; therefore any business with employees should make money.

Owning a job

Some people are content with a job. As long as they are content with the hours, inability to get away, and their current compensation then they need not be changed. When a person has a job they end up with excessive work hours. They are doing the job of one or more employee and trying to do their own job (run the company). They cannot get away because systems and controls have never been established that allow them to delegate the functions of operations to others. They have no way to really know that the functions are being properly done without being there. Their compensation is limited to the number of hours that they are willing (or able) to work. They have no hope of opening a second location because the operations depend upon the personal attention of the owner and he can only be in one place. They can never sell their business because they are the business. If they left, there would be no business. Eventually the assets are sold but they years of sweat equity go uncompensated. They are good at some of the tasks and not as good at others. As their business grows they are required to do more and more tasks that they are not good at. Eventually they get overwhelmed, fail to grow and die.

Owning a business

A business owner owns a few hard assets and his systems. Why does a 1000 square foot building sell for hundreds of thousands of dollars if it is a McDonalds? Because it has ironclad systems that produce a pre-determined return based upon location. McDonalds is completely SYSTEMS DEPENDENT. Most small businesses are PEOPLE DEPENDENT. McDonald’s systems allow for the least qualified person in each position and they are so strong that the people are irrelevant to the success of the business. Most small businesses purposely become dependent upon the most qualified person in each position and become held hostage by their employees. Since the value of most small business pales in comparison to the value of McDonalds, we can assume that a SYSTEMS DEPENDENT business is better than a PEOPLE DEPENDENT business. This can only be achieved through a conscious effort on the part of the owner to do his job rather than other people’s jobs.

In order to own a business you must try to own a business. That means that significant time and resources must be spent working on the business rather than working in the business.

Fremont Offers Extraordinary, One-Time Discount On “Minding My Own Business Workshops”™

The Fremont Group, a non-profit corporation dedicated to bringing quality and affordable management consulting services to small business owners, is using a substantial grant to subsidize workshops for small business owners. The workshops are based upon the book, “Minding My Own Business” written by Dirk Dieters specifically for small business owners. Regularly $875.00 the workshops are being offered from July 15th through Labor Day for a Summer-Recession discounted priced of $150.00! The workshops are one-on-one sessions—just you and the professional for 2-3 hours where each aspect of your business is examined. You learn the six responsibilities of a small business owner and are able to rate yourself in each category. Additional follow-up work is also offered on a sliding scale according to ability to pay.

“Minding My Own Business Workshops”™ have been successfully presented in nearly every state. Success is defined as the owner agreeing that they are leaving with something that they can immediately use to make a difference in their business. If that standard is not met, your fee is refunded. An $875.00 fee has never been refunded.

Take some time to examine:

  1. What is the minimum, mandatory percentage of profit that your business must make? Do you have a plan in place to produce it? What is your planning process? How do you hold yourself accountable?
  2. Do you have cost controls in place that will produce that minimum, mandatory percentage of profit? How do you use your budget? (Do you even have a functional, variable budget?) How do you project your cash flow? (Or do you run your company by mailbox management?) Is there a real AR/AP policy and procedure?
  3. Are your employees responsible for the enforcement of those cost controls? How do you hold people accountable? Do you have rational incentives in place? How do you control turnover? Recruitment? Development? Training? Retention? How do you use your job descriptions?
  4. Is your sales system really working? Are sales produced by people or by a system? How do you sell internally? Do you have a sales plan in place that is designed to really win the game?
  5. Are you keeping all of the money that you make? Do you have a tax plan in place? How do you review risk management?
  6. Are you having fun? Are you the highest paid employee? Can you take time off? Does your business make your life better or worse?

All owners can benefit from this workshop. Only those who are ready to change should attend.

Looking For Employees? So Is the Competition

Almost regardless of the economy, everyone who you would want to hire is working. You can no longer take the same approach to staffing that you could in a slow economy. Your next employees are currently working for someone else—and your employees are looked at as someone else’s next employees.

Turnover is one of the most expensive events in a company. When turnover occurs the costs include: the lost production when the person leaves, the cost of outplacement, the risk of legal claims by the departing employee, the cost of the time spent placing ads and interviewing, the cost of the lost productivity during the new employees first weeks, and the cost of the lost productivity from the person training the new person. Turnover is inevitable, but we want to be sure that turnover occurs in our quitters and not in our climbers.  There are four things we do with employees—we recruit them, we train them, we develop them and we retain them.  Do you have a plan for each?

Recruitment—the company needs to convey during the recruitment process the company’s mission. The incoming employee needs to understand what the corporate culture is in the business and be “sold” on being a part of that team.[1] Since the labor market is so tight, we cannot merely recruit the unemployed. The fact is we are going to be taking someone else’s employees—and they are going to be trying to take ours. The recruitment process must be designed to address this issue and get quality employees who are going to stick with the company.  First you have to determine your staffing requirements—how many people will you need to have one year from now?  Then factor in employee attrition—how many of your current employees were here two years ago?  That tells you how many successful hires you will require over the next year.  Rule number one—don’t wait for an opening to come about and then hire under duress.  Recruiting is an on-going process.  If you need 12 people over the next year you should be hiring the best one you can find each month.

Training—one of small businesses weakest areas.  Training is not only the technical aspect of the job—if they didn’t have some of those skills you wouldn’t hire!  Training is also teaching “your system.”  How you want things done in your company.  You own the company.  You will succeed or fail based upon your system.  Never let an employee create your system—teach them to use yours!

Development–a company must offer their people the opportunity to “move up.” This is why growth in a company is required. You may not want to grow, but if you don’t you will die. Failure to grow eliminates the development opportunities of you best employees and causes them to leave for better opportunities. Not all employees want to develop, but your best ones do. Therefore it is crucial that the opportunities within a company be identified and communicated to each employee.

Retention–what keeps your employees working here if someone across the street offers them $1 per hour more? This is where benefits, working conditions, and morale come into play. It can even be argued that development opportunities are really retention devices. There needs to be a plan for retention or you end up with turnover.

I highly recommend “Minding My Own Business” available for sale from this site.  The coverage of these topics is excellent.

[1] One of the first elements of team building in an organization is to clearly define how the team should function and then “sell” that attitude to each incoming employee. For example, “As an employee here we expect three things—that you at all times exhibit a positive attitude, that you at all times work as a team and that at all times you use our system. These are conditions of working here. If you decide that you cannot comply with these conditions, please do not submit your application for employment.”

Strategic Planning for Dummies

The owner’s job is to lead the company. Leadership is having a plan and getting your people to focus upon their part of the plan.[1] Answer the following questions:

· How much money are we planning on making this year?

· What will be required in sales according to the plan?

· What will be required in Gross Profit according to the plan?

· What overhead level is permissible according to the plan?

· Other than money, what other results must the business generate this year?

These issues are at the top of the pyramid. These are the financial issues that must be addressed. The company must have a financial plan. The owner’s additional goals can only be met if the financial goals are met. Once those have been clarified, other goals can be fulfilled. The business is supposed to make the owner’s life better—it is not supposed to be the owner’s life. The owner must also define the other goals that they wish to achieve. Then, of course you must have a plan designed to do it.

The Plan

Imagine a football coach. We all know that he has a game plan established for every game. He would lose his job if his game plan said, “if everything goes right we will only lose by a touchdown.” This is done is small businesses every day. The financial plan of a company is their Profit Plan. How are we planning on making our pre-determined profit? What sales are required? What gross profit is required? What overhead levels are required? What is our plan for overhead absorption by profit center? Obviously your game plan must be designed so that the targeted performance produces your desired result. Once established (and the more specific the better) then it becomes the role of your Organizational Structure to focus your people on their individual results that they must produce in order to perform their part of your plan. The company’s financial reporting monitors these results so that people can be held accountable and incentives established and monitors the company’s progress in relation to the plan.

Every plan must address the following objectives: first it must assure that the business continue to function and stay in business for the next week, month, six months, year, etc. Second, the business must make money and third the business must grow. Any plan that does not address all of these objectives is fatally flawed. Business continuation is obvious but often overlooked. There are cycles to the business and the owner must be prepared to be able to withstand the “down” cycles. The owner must also identify and develop a management plan that includes key management succession and a structure to shift reliance from people to systems to assure business continuation. No employee (owner included) should have the ability to hold the company hostage. Lastly the business must grow. This is vital not so much for the owner’s short-term return but rather it is required for retention of employees. A growing business offers more opportunity for employees and is more likely to retain the better people. Failing to grow eliminates those opportunities and causes the better people to leave—are reverse Darwinism—that is eventually fatal. Without retaining and challenging the best people succession of management is compromised.


[1] “Nobody puts a proposal for a new comprehensive strategy on your desk and asks you to make a decision about it. You have to put it there yourself. And once you use your view of the big picture to formulate a strategy, you have to call on a wide range of skills to achieve a series of objectives. You must devise a business strategy tailored to your goal. You need to communicate the goal and strategy to…all the employees. You have to give greater responsibility to people at the front line and then create a secure atmosphere where they will dare to use their new authority. You must build an organization that can work to achieve the goal and establish measures that guarantee you are moving in the right direction. In short, you have to create the prerequisites for making the vision a reality.” Moments of Truth, Jan Carlzon, HarperPerennial 1989.