Christophe Pelletier

Death of the resume

May 11, 2009

Does a resume still have any use nowadays?
I am asking the question because more and more screening of candidates is now done through a computer system.
Further, more and more resumes are written by “professional” writers, so one can wonder how much of the candidate they can truly find on the piece of paper.
For having recruited quite a few people myself, I must admit that reading all the resumes can be quite a lot of work, but on the other hand, I always found much more information in what was not written and in the overall layout and style of the resume than in the factual data.
I have not hired many people based on their past history, but much more on their personality, because once at work, that is much more important.
Moreover and very understandably, the name of the game has become to get the interview. This actually supports the point I just made above. So, what you see more and more is tactical writing to make sure that the keywords that the computer screens upon are included. The next step, which is made in many cases is to simply lie and give false information.
Of course, I am not saying that resumes are useless, but I believe that they are overrated.

Um, if you look at it as a first date, which could lead to a long-term commitment, what would you think of someone telling you only what they think you want to hear and/or telling you lies, instead of showing their true self? You probably would not want to have to do anything with that person. Oddly, this seems to be a normal state of affairs when recruiting. Interesting, isn’t it?

There are simple ways of assessing a person even without having a resume at all, but unfortunately, this is not used much. Maybe because they are a bit unconventional and less mechanical. Yet, progress and improvement only come from innovation!

Comments Off on Death of the resume | Business Management | Tagged: Human Resources, Resume | Permalink
Posted by Christophe Pelletier

Too old to change. Or was he really?

May 11, 2009

As the Sales Director of the poultry plant, I also was managing our sales office in Germany.
The problem with that unit was that it had not generated any new significant customer for years, and as we were growing aggressively, we needed to grow in Germany as well as we were in our other markets.
Many discussions and meetings further, I came to the conclusion that the German sales office was simply useless and that we should sell to the German customers directly from our plants in The Netherlands and in Belgium.
Of course, this was a very bumpy situation. My superiors trusted my judgment, but were quite afraid of losing business in Germany (our largest market), which the General Manager of the sales office was of course not missing to tell them over and over. After all his job was on the line…
Anyway, the decision to shut the sales office was made and we had to figure out the next step.
Most customers were very old relationships, and this was important to take that into account when deciding who to appoint as the sales person for Germany. From the whole office in Germany, we decided that we should keep only one person for sales, the nine other employees would go.
There were two inside sales persons, and two sales reps. Quickly, the two inside sales persons did not make the cut and were eliminated. The 2 sales reps were very different. One was a young fellow, quite aggressive, well-connected and able to move large volumes, although quite a bit of a loose cannon, and with the tendency to yield to the customers when it came to price. Lots of volume but not much margin.
The other sales rep was in his early 50’s, a very good relationship manager, but with no track record of developing new accounts for a long time. General opinion was that he would get good prices but low volumes. General thinking was also that he was to old to change and adapt to the new strategy, and would be useless to the organization.
Yet, I chose the latter sales person, even though I shared the same worries as everyone else, but I knew one thing: he would listen and do as told, and he would bring a sense of continuity and trust to the existing customers.
We decided to keep him, and I would spend quite some time in Germany with him, visit all existing customers and accompany him in some new prospecting activities.
I presented him the sales plan, the objectives and the timelines and there we went. He simply became the best salesman we had. From a very apathetic and almost unproductive salesman, he turned into a dynamic, entrepreneurial and enthusiastic representative that brought new business, and lots of it. In the first year, our sales grew in Germany by 24%, while the industry average was only 2%. His performance was stimulating the other sales people, including me, to perform better in their respective markets.
He was not too old. He just had lost passion, because he had no clear idea of what was expected from him. In the new structure, this changed, and then he could do what he was good at: selling! And he did a great job, because by then he had become happy at work!

Comments Off on Too old to change. Or was he really? | Happy at Work, My True Stories | Tagged: Fulfillment, Happiness, Human Resources, Management, Performance, Success | Permalink
Posted by Christophe Pelletier

Networking? Yes! but…

May 11, 2009

It is everywhere and on everyone’s lips: networking. The panacea for success!
Last week, I could read an article on CNBC hinting toward a different look at networking. According to the writer of the article, networking and spraying business cards all over the place might have you appear a loser, eventually.
Like everyone else, I have networked and I still do, but I have also changed my views on the topic. I do not believe that networking as such is a bad thing, but just like any other “strategic” activity, it needs to be carried out with a clear plan.
There are lots of networking venues and formats, being in the physical world or being online. Therefore, you are not short of possibilities.
The main problem I see is that the cheapest and the most open to the largest number, the lower the efficiency of your networking. This, in my view, happens for a simple reason: all the people looking for help join these venues.
For instance, I am on LinkedIn. Great system as such. However, I got invites out of the blue from people whom I do not know, who do not introduce themselves, who do not seem to have the slightest interest in knowing who I am and what I do. All I receive is a spam email asking me to join their network or some unknown group, in which most of the time nothing ever happens. Surely, I will be able to show off, claiming that I have 10,000 contacts, out of which probably 9,997 will be absolutely of no help. Of course, this is not appealing for me, and most of such requests end up in the archive file!
Therefore, with such mass networking, you end up meeting mostly people who cannot help you, as they are already so busy keeping their heads out of the water. But, of course, maybe over a few years from now, and if they remember you out of the thousands of other unknown contacts that they have met, it will benefit you.
Although research shows that we all are connected within 6 degrees of separation, the best and most reliable contacts we have are our first degree ones. They are the ones that can recommend us or introduce us to the second degree. Generally, second degree contacts will be willing to get to know you, as they will trust what our common contact tells them. In my opinion, this is the best way to start developing a network. Go one degree at a time!
Another efficient way to get to know the “right” people is to network within your profession and/or your hobbies circles. People who share similar interests will be more open to expand their contact list.
If you are in a hurry to get help, get the help where it really is: with people and organizations that actually help others, not with the ones who just organize venues where you are left at your own devices with the wrong crowd.
If you are looking for a job, get in touch with people who actually are involved in job seeking (and finding for this matter)!
If you want yourself and your talent to be noticed, you need to do more than distributing business cards and sending dull invites. You must make some impact. Do something that people will notice and, most of all, will remember. This way, you will have demonstrated what you can offer to others and to organizations.
Your networking will be more successful by helping others, than by hoping that others will help you.

Comments Off on Networking? Yes! but… | Business Management | Tagged: Networking | Permalink
Posted by Christophe Pelletier

The hopeless rude guy from Planning

May 11, 2009

When I became Sales Director of the poultry processing plant, I also supervised the Inside Sales/Planning/Logistics Department.
One of the employee of that department was causing quite a few conflicts with the Production Department, mostly because of very poor communication skills. Requests sounded more like barking and politeness was a scarce commodity from his side.
That problem probably should have been addressed a long time ago, but OK, I had to deal with it now.
All I got was criticism about his conduct and “fire him!” kind of advice. Yet, he had many years of experience and had quite a lot of knowledge. That bothered me to just take the short cut and let him go.
So, I had a meeting first with him alone and later with his supervisor. In the first meeting, I addressed the problems and made him clear that I wanted to understand what caused him to act the way he did. With his supervisor, we reviewed his job description and analyzed what he liked and what he did not like about his tasks.
And bingo! We discovered that he felt very uncomfortable dealing with foreign customers having to speak in languages he did not master. The stress of the phone ringing and hear someone speaking German or English was just too much for him and he reacted his stress on his colleagues.
We decided to remove the customer contact from him, allocate that to another employee who actually enjoyed the sales side more than the production side, and dedicate our difficult friend more to the technical and planning side of production. Within days, I was receiving positive feedback from production people who were wondering what I had done to him, because now he was such a pleasure to work with.
And for him, as he was in his late 40’s, we also avoided a painful layoff that might have had severe personal consequences.
He was now doing what he liked and what he was best at. And he became very happy at work!

Comments Off on The hopeless rude guy from Planning | Happy at Work, My True Stories, Team and Performance | Tagged: Fulfillment, Happiness, Human Resources, Management, Performance, Success | Permalink
Posted by Christophe Pelletier

My experience with experience… and talent

April 5, 2009

Experience is one of these words in business that need very specific description to be understood. Just like quality, everyone wants it, everyone offers it, but what does it really mean?
Experience is very valuable, and nobody would argue about that. One of the most common misunderstandings about experience is to confuse it “number of years of experience”. Although one might legitimately think that the quality of experience is proportional to the number of years, this still needs to be proven. For having met people claiming more than 20 years of experience in their field, what they were actually showing was 20 times of only one year of experience, as they had been doing the same over and over again in the same position in the same company in a very routinely manner. Actually they were little adaptable and often acted as resistance agents to the change needed to improve the company performance.
Other people show an impressive list of many different experiences in very diverse fields, and yet this would not prove that they master any of these fields, either.
Too often, when recruiting, we tend to focus more on the quantitative side of experience than on the qualitative side (yes here is the “quality” word). A common misconception is to think that experience and talent are some of the same. They are not.
When recruiting people for my teams, I always have looked at their personality, and mostly their area of talent. This is what I have always looked for in a resume, and not so much for diplomas or the succession of jobs. This has always worked quite well, as each and every one of these teams has delivered superior performance.
The funny thing about the recruiting process is that job postings almost never list personality traits or talents. Instead, they focus essentially on education and experience (which in this case is actually job history).
Experience is valuable to an employer only if the potential employee knows how to share it and transfer it to his new colleagues and to his new employer, and this why personality is at least as valuable as experience.
Another misconception about experience is that people who have been in the business longer have more experience. As my personal experience has showed me, this is as untrue as youth being a guarantee for energy and dynamism. In fact, this is where the talent factor plays a paramount role: talented people, besides being more talented than their peers, also have the ability to learn much faster in their area of talent, and thus can catch up very quickly on any apparent shortage of experience.

Comments Off on My experience with experience… and talent | Business Management, Talent at Work, Team and Performance | Tagged: Human Resources, Management | Permalink
Posted by Christophe Pelletier

The best time for prospecting

April 5, 2009

In most cases, companies do their prospecting at the worst time, which is when they have surpluses to sell.
This statement might sound a bit surprising at first, but as I am going to explain, this will make quite some sense.
As long as sales are in balance with production, most companies will try to find commercial arrangements with existing customers to deal with minor volume fluctuations. After all, when you deal with a regular business contact who knows your company and products, it is easier to set up some promotion deals and move extra volumes.
In the same idea, as long as companies can move their own production without much trouble, they do not see the point of actively going out there prospecting for new customers, as they have nothing to offer. Or so they think.
When surpluses reach levels that are not manageable anymore with the regular customer base, then they initiate a massive prospecting campaign to be able to move the extra volume.
All of this will sound like plain logic to most business owners, so why is actually the best time for prospecting the time when you are sold out?
The answer is simply because it puts you in the driver’s seat, which is not the case when you need to get rid of your products.
In many industries, surpluses for sale rarely happen to an isolated company, but very often the whole sector is suffering. The reason can be because the recent times had been quite good and everybody thought that they should increase their volumes to meet demand, but when a whole sector takes this kind of action at the same time, you can be sure that this volume increase is also going to come onto the market at the same time. The result is a saturated market, in which all participants need to move the extra volumes, sometimes at any price (and also at any cost). So prospecting in such conditions gives all the power to the buyers, who have nothing else than being patient as the sales people will come over and over again trying to out-price each other so that they can move their production. This results only in margin erosion.
In the same way, when you are short of product, in many cases there is a fair chance that your competitors have to deal with the same, and are not able to satisfy demand from their own customers
Why prospect when you have nothing to sell?
There are two main reasons for this. First, because this way, there is a lot less pressure to reach a deal, which helps you being much stronger in the commercial negotiation. Secondly, because this could be the time that you mean the most to a customer by helping out, as you could fill a gap left by one of your competitors.
Of course, you might ask how to help out and sell something you do not have. Massaging your sales and production planning can be a way to do this, or playing broker for once can do the same, and helping out makes your company look quite good, which will be useful when you are the one who needs to be helped out.
Prospecting, not out of necessity, but as a strategy to grow your business at the expense of your competitors is the way to go, and is also the most cost-efficient way. After all, remember that, on average, prospecting to get a new customer costs between 10 and 20 times as much as growing with an existing one. So, it better be well-targeted, margin oriented and fitting in a sound business strategy!

Comments Off on The best time for prospecting | Business Management, Competitors | Tagged: Growth, Management, Performance, Sales | Permalink
Posted by Christophe Pelletier

Always be market-driven!

April 5, 2009

This is always the right approach, even when the market is good. The alternative, being production-driven will only bring you gloom eventually.
A very recent example to illustrate this is the construction industry in the USA. The reason why they are in trouble is because they forgot to be market-driven. As their market was good, and easy, they became overconfident and instead of being business people, they actually became speculators. They assumed that the market was to never change, that the only way would be up, and they built more and more houses without having any contract at all, as they thought that there always would be buyers.
By ignoring how markets function, they created their own demise. First, markets always fluctuate; they never go up in a straight line, so they had to prepare for a downturn. Secondly, they ignored the simple law of offer and demand. By taking demand for granted, they did not anticipate the possibility of ending up with more offering than the market would absorb. And thirdly, they did not produce according to what they could sell, but they produced an inventory; that is the production-oriented error.
Of course, one could argue that the situation they face is the result of the sub-prime mortgage fiasco. This is untrue. The sub-prime issue just accelerated the problems for the construction industry. If they had built only on the basis of solid contracts, all their houses would have been, per definition, sold.
Of course, the number of mortgage defaults and foreclosures is pushing prices of houses down, but this is by far not the only reason why houses in the US are losing so much value. The inventories of unsold newly built houses are huge and the market will have to absorb the surplus.
By not being market-driven, the builders have brought themselves in a working capital crunch. Their accounts payable are going up (yes they have to pay their bills) and their accounts receivable are not coming in fast enough because of the inventories. So, in order to pay the bills and not get into bankruptcy, they have to move the inventories. Profit becomes second to cash. This is why they are selling much cheaper than they had speculated. If only they had been market-driven…
The US builder story is just a superb illustration of the advantage of being market-driven, but this is actually a very common story. Especially when a market is good, companies tend to think that this is the normal state of affairs. Add to this a normal dose of greed and then you have the perfect recipe for a disaster to happen.
Know your market and do not let yourself drag into overconfidence!

Comments Off on Always be market-driven! | Business Management, Competitors | Tagged: Management, Performance, Sales | Permalink
Posted by Christophe Pelletier

Do you feel lucky, CEO?

April 5, 2009

Just a little bit of paraphrasing Dirty Harry to bring up an unusual topic of business management: Luck.

This is an almost taboo to discuss in business circles where everyone prefers to talk about plans of all sorts, about talents and skills, and about management, like luck would not exist. Well that is except for bad luck, which is still valuable as an excuse.

Unlike you might think by reading the first lines of this article, I am not a proponent of luck in business management. Actually, I am quite the type that will consider all sorts of scenarios and contingencies beforehand, but I also have to admit that luck, good or bad, does exist. So instead of arguing if luck is real or not, I have chosen to find ways of having some handle on it.

Luck exists

I would define luck by the occurrence of something that was not expected (or in many cases not anymore) to happen and which has positive impact on the performance of the business.

Every manager has experienced it. Sometimes the business environment is tough, you have tried everything you could to get the results you need and for a long time, nothing seems to work, most of the time as a result of adverse external reasons. You are not alone to experience it, your competitors struggle with the same challenges, and then when you are starting to wonder how to turn around the situation, it happens! You get what you wanted and business looks bright again. It has happened to all of us and yes then we all think the same: we have been lucky!

Luck is not a management tool

Although we all experience luck once in a while, this is not something that a manager can count on, just because of the unexpected character of luck.

Luck is not something that you can factor in, and yet it still is a factor in too many businesses. This is especially true in businesses that have been very successful or that have thrived in a very positive environment.

Just to give some examples, I would mention some hedge funds companies that instead of hedging were more interested in speculating. As long as the environment was positive, the speculation worked superbly, making some traders make personal fortunes and looking like finance wizards, until that day when things were just not as usual and the hedge fund goes bust. Actually, such traders were always doing the same, it mostly the environment that changed and they did not anticipate.

Another recent example I see of a business running too much on luck is the mortgage industry: just by making the assumption that a home is an investment that can only grow in value, some terrible mistakes have been made. Everything was going quite well until that day, when the interest rates had increased again and the mortgages had to be reset, getting home owners in trouble and also the lenders with all the ramifications that we still currently see.

A business runs on luck when people do not analyze what the company is doing so well. It is very human to be less concerned about when a business is doing well than when it struggles. At the first sign of a bad result, you see management starting to ask lots of questions to know why the results are under forecast. When the business does well, then management tends to think that they really had it all figured out and tend to minimize the impact of external factor in the good performance. They are lucky, they take it for granted and become complacent, thus setting the stage for future bad luck!

Attracting luck

Running on luck and being complacent is just bad management. But what good managers can do and will do is to create conditions to attract luck. This can be done very easily.

The best way to attract luck is to assume that you will not be lucky and that you as a manager must make it happen. Assume that nothing will go as you wish, plan a worst case scenario!

Too often, I have seen companies heading to a disaster, just because they took action too late. They reacted instead of anticipating.

Anticipation is indeed the key, and it starts with a critical attitude towards planning and forecasting. A simple rule of thumb is to consider that you will achieve only half of what you aim at, that it will cost twice as much and that it will twice as long to achieve. Once you have your operations and departments working on that worse case scenario, you are creating more opportunities because you are planning to achieve a lot more than what is in the actual business plan. Of course, it costs more energy and time, but in the end you create more conditions for “luck”.

And should be really lucky and achieve more than you can handle, like generating more sales than you can fill in, just realize that you only have a luxury problem. It might not easy to solve but it is luxury!

The conclusion of this story can be sum up by the saying “Fortune favors the audacious”.

Comments Off on Do you feel lucky, CEO? | Business Management | Tagged: Business plan, Management, Performance | Permalink
Posted by Christophe Pelletier

The little divide between buyers and sales people

April 5, 2009

Last year, I posted 2 questions on the LinkedIn Q&A just to see if sales people and buyers were sharing the same views on the deal process. I was asking sales people what in their view explained not closing a deal, and I asked buyers what mistakes they found sales people were making that turned them off from buying from them.

Although the survey has no pretention of being scientific, some very clear conclusions seem to come out.

What turns buyers off the most are:

Arrogant, pushy or condescending attitude.
Telling lies or pretending to know more than they actually do.
Talking and telling their story instead of listening to what the buyer wants.
Trashing the competition.
Sales person not identifying their needs.
Poor follow-up from the sales person.
Sales people looking for excuses or blaming others or something for poor performance.

What the sales people see as a reason for a failed sales negotiation are:

Not having established the customer’s needs.
They were not talking to the right person.
Their product does not add value to the customer.
Poor pre-qualifying of potential customers.
Not having established a good enough relationship.

So, clearly the buyers are looking to be treated like mature responsible professionals. They want to hear how the product or service that the sales person offers adds value to them and meets their needs. They are not interested in hearing lies or negative story about other suppliers.
They want the sales person to identify what they are looking for and then hear why the supplier product is the best for them. That is all.

Although sales people acknowledge some of the previous issues, they see the weakness mostly in the preparation and in the person on the other side. None of them mentioned that their demeanor was part of the problem. Addressing the preparation is a good thing, and yet the area where they can score the most is pretty easy: it is about asking questions to the buyer and listening to the answers. It is so much easier to offer the right solution once you know which problems need to be solved.

For sales people it is not about showing all you know, it is about thinking along with the customer. I guess that kills the idea that to be a good sales person you must be a smooth talker. No, to be a good sales person, you need to want to help others. And if your product is useless, then pass the message onto your boss and adjust your offerings.

Comments Off on The little divide between buyers and sales people | Business Management, Competitors | Tagged: Purchasing, Sales | Permalink
Posted by Christophe Pelletier

The fun about delegating

April 5, 2009

In this article, I wish to address one of the most effective management technique, which is also one of the most poorly used: delegation.

First, just a few facts
Delegation is in the very essence of management, since a whole team of people have to do the job. This group has been hired for a very simple reason: one person cannot do the job.
In order to make the teamwork towards the goal and work as one entity, management jobs have been created. Their role is not to do the job but to get the job done. And all the trouble lies in this subtle nuance.

What does make delegation work?
You have hired people to do a job, and that is for this very purpose that you have to supervise them.
You have hired them because there are competent; so do not worry of having them do what you have hired them to do. If you doubt their competence, why did you hire them?
You have lots to supervise and to attend to, so define clearly who does what and who is accountable for as well as by when the job goals must be met. Delegating will save you precious time.
Be very specific about what you expect form your staff.
Give feedback and ask for feedback, when you communicate, be brief and to the point. Your staff expects you to do that. And remember that communicating effectively is not the same as talking/socializing too much.
Be present and walk in on a regular basis. Better many short contacts during which you will immediately hear the most important information than long periods of no contact interrupted by long formal meetings.
When you do this properly, as a manager you will feel fulfilled, you will be happy to go to work, as very likely your team will perform quite well. On the other side, your staff will feel appreciated, will have confident and will take more initiative that will benefit your company and will be loyal.

So what does go wrong with the delegation sport?
What situation do you get when the manager does not delegate properly?
The manager spends more time being involved in his staff’s daily activities. The result is staff frustration and lower motivation. Nobody likes having someone looking over his or her shoulder all the time.
The results of such behaviour are many. The most typical are an overworked manager who loses his ability to look at the big picture, wasting his time in things that would be done anyway (remember? he hired competent people) and getting more and more pressure from his own supervisor, as he is having more and more difficulties to meet the deadlines.
Competent people are not interested in working in a messy environment nor are they interested in having the feeling that their boss does not trust them fully. This will result in higher turnover, which will even increase the workload of the overworked manager.
The main cause of bad delegation is fairly simple: an insecure manager who does not trust others.

Comments Off on The fun about delegating | Business Management, Happy at Work, Leadership, Team and Performance | Tagged: Human Resources, Leadership, Management | Permalink
Posted by Christophe Pelletier

Employee turnover, performance indicator of management

April 5, 2009

We all have heard this a million times: employees are the most valuable assets of a company. It sounds great, but in the everyday life, we can see many examples of companies forgetting this nice statement.
So, in the practice, what is the most valuable asset of a company? Did I hear you say it? Yes! Money! Well, this was an easy one, because management reviews the financial weekly and monthly, while they evaluate their employees only once a year, and that is if they ever do. And when they evaluate, in many cases it is only to bring up all the “bad” things they can to discourage the employee to ask for a raise.
Well, this is what mediocre managers do. The good managers know that the quality of financials are a consequence of the quality of the motivation and therefore of the performance of their employees.
Employee turnover is a sign of the quality of the company culture, and this for a simple reason. Why would people leave a company if they are happy and that they are treated fairly? Really, there are not many reasons why they would or should. Most employees would prefer to spend their all lives in the same organization. And most employees go to work with the desire of doing a good job and thus not have any conflict with the boss. Of course, there are always employees who will look to find something somewhere else, but these are a small minority.
The higher the turnover, the lower the morale and the poorer the company culture. For the reasons that I was indicating above about the general employee loyalty and ethics, it will have to take a fair amount of frustration and actually the realization that there is no hope for improvement for an employee to decide to go browse on the job market again. It has been said before, and it is very true: employees do not leave companies, they leave their manager. Ha! That is a good one for you to ponder about when someone leaves your department, isn’t it? Of course, it takes two to tango and there are many reasons why things do not work out the way they should, and maybe another reason for the employee to leave is simply that communicating on the issues at play did not happen. So it also takes two to divorce.
Managers have performance contracts, but these contracts are mostly linked to financial results (the important asset class) and some “non-financial, which in many cases end up to be some interesting project that are never quantified when it comes to their real added-value or degree of difficulty. Very rarely will employee retention (another expression) for employee satisfaction be an integral part of the performance contract.
And this is quite sad, because employee turnover is a plague. It costs a lot, just like it costs a lot to replace a lost customer. First it will cost financially, because the company has to place a job ad, and might have to pay some severance. Then several people in the organization will have to spend time for the selection process and the interviews. Once the new employee is hired, you can be sure that time (time is money) will be spend on training the newcomer, and this period can last up to 6 months, depending on the jobs. Indirectly, it can cost you money too either because people talk and the turnover will eventually give your company a poor reputation and in some cases because the employee who left might attract with him customers away from your company.
Some managers, reading this would say that the turnover is high because they have to fire people. Well, that is another indicator of the quality of the company, as they would not recruit the right people…

Comments Off on Employee turnover, performance indicator of management | Business Management, Happy at Work, Talent at Work, Team and Performance | Tagged: Business Organization, Human Resources, Performance | Permalink
Posted by Christophe Pelletier

Intelligent growth

April 4, 2009

Everybody in the business community will tell you: you must grow your business.
But what does this mean exactly? What do you grow? How do you grow?
For having seen the good, the bad and the ugly of growth, these questions are quite important.
My answer is: Grow your business intelligently! And of course, all business leaders do exactly this, don’t they?
Well…
So let’s get back to the basic questions first!

What to grow?
This is the tricky area.
The risk for a successful business is to think that growth will be linear. In other words, if you produce x units and make a profit of y, by growing to 2x you will make 2y profit. Sometimes you do, sometimes you don’t.
Good business people want to make money and what you should grow is your profit. There is no point of selling more if you do not make more profit, as that means that you do not make money on the extra sales. Then, why invest and hire and complicate your business if you do not have any marginal advantage in doing so? This sounds obvious and yet the number of companies that do exactly the wrong thing is amazing. Volume matters within certain limits but margin must come first.

How do you grow?
The first thing you need to know is how big is the market, who are your competitors, what do they plan to do and how do you compare with them. If they are stronger than you , maybe you should keep a low profile and not go into a frontal confrontation with them.
If you are the stronger player, as most CEO’s like to think of their companies, realize that this does not make you invincible.
The key is a sound and realistic business plan.
Start with the sales plan: how much more can you sell for a profit in the market? Then you have an idea about the required volume of your operations.
Then review all the costs implications that the new situation will create and look at the bottom line. Here the key is to not do any wishful thinking or to make the numbers match because your boss demanded some bold performance from you. A helpful rule of thumb is that you probably will sell only half of the extra volume for the profit you think you can make, and the extra costs will be double of what you expect. Enter these revised numbers in your P&L budget and see what comes out.
Base your assumptions on ambitious but realistic data, and while having a dream is nice, do not let you lead by vain objectives. It is nice to be the largest, only if it makes your company the richest, too. Market share is nice, but it is not an indicator of success, never forget that the force that will drive your ability to get the price you want is the law of offer and demand. Even if you had a market share of 90% but had grown the business beyond what the market can absorb, you will not be able to keep the prices high, and depending on the elasticity for your product, you can very well end up selling at a loss. Always be market-driven!
There is nothing wrong with being conservative. There is much wrong in having your organization taking too many risks.
Another key point in your growth plan is the phasing. You need a longer term view on where you want to be and set yearly goals for your growth plan. Be aware that you can go only one step at a time and that you cannot skip steps. Like with building a house, you start with the foundations, then build the floors one after another, and you do not build floor#2 before you have finished floor#1.
And finally, you have a choice of either growing organically or acquiring another company (see my previous article on M&A).

Remember that the most important for a business is to keep existing, and growth is only one of the ways to achieve this.

Comments Off on Intelligent growth | Business Management, Competitors | Tagged: Business Organization, Business plan, Growth, Mergers & Acquisitions, Performance, Profit | Permalink
Posted by Christophe Pelletier

Mergers & Acquisitions: Buy wisely and manage efficiently!

April 4, 2009

Your business is successful and the next step for growth is to buy other businesses. This is a great opportunity for your company to get to the next level, but be aware that an acquisition can be risky. About 6 out of 10 acquisitions fail to deliver the expected results.

Buy wisely!

Do not rush and do your due diligence to know what you are buying, what the value is of the company you are interested in. Know about the history of the company, how many times it has changed owners and the reasons why.
A cheap company is not necessarily a good deal. If the current owner is selling at a discount, he must have a good reason and you’d better find out.
The best takeovers are acquisitions of well-run companies with a good track record. They have the least amount of potential trouble entering your business and their staff have a positive attitude. Only drawback for the short-term for you is that such good businesses are not cheap. However the return on the investment is likely to be quite good. Poorly performing companies sold cheaply, on the contrary… Should you choose to go for such wrecks, make sure you know how to fix up a business and first of all, get rid of all the managers that have brought that company in its current state, they only would undermine your company.

Manage efficiently!

Once, you have bought your takeover target, make sure things go very fast.
Although you might have not yet decided who should get which position in the new company, you must have already decided how the final organization chart should look like. Move toward this structure as quickly as possible, but do not rush into that either. Make sure you know the potential of all the staff you will now have. Do not lose talents, but find ways of making a good use of it; this is easier than having to go look for them again in the future as they might not be available anymore.
The key for a successful merger is intensive communication, a very hands-on and practical approach. Tell everyone what your vision is, how you see it getting executed and be open to challenging remarks, as there will be many of them. Intensive communication prevents insecurity, gossip and politics. On this last point, have a zero tolerance policy: do not allow politics of any kind, especially when you risk to have a poisonous conflict between newcomers and existing employees from your original company.
Do not spend much time on philosophical and intellectual activities about company cultures, the theory of mergers, hollow slogans such as “mergers of equals”. You need the right structure with position filled by the right people to execute the strategy and that is all.
When you hire new people, you do not waste time telling them about the theory of job hunting or treat them with false compassion. You just do it.
If you have to figure out the strategy after the merger, clearly you bought without a plan. Remember that the failure of preparation is the preparation of failure.
Good luck with your next acquisition!

Comments Off on Mergers & Acquisitions: Buy wisely and manage efficiently! | Business Management, Team and Performance | Tagged: Business Organization, Human Resources, Mergers & Acquisitions, Performance | Permalink
Posted by Christophe Pelletier

Managing for profit

April 4, 2009

Every company has potential to improve results. Most of the time, sub-optimal performance is the result of not focusing enough on the most effective areas of their business. There can be many reasons why this happens, but short-time priority overriding long-term goals; too many projects given to staff, and lack of time generally are the main culprits.

As such the theory for managing for profit is simple.
Profit being the difference between the company revenue and its costs, many think that it is all about cutting costs and selling more. Well, it is not quite that simple, either. The key is management. It is the ability to organize, to motivate and to lead an organization in such a way that the P&L account be optimized.

Let’s have a look at the P&L account then, and let’s keep it simple.
+ Revenue
– Cost of Sales
= Gross Margin
– OPEX
= EBIT

From this, you can see one very important thing: money comes into a company from only one end: the revenue generated by sales.
Further, you can see that your gross margin must exceed your OPEX in order for your company to make a profit.
These are 2 extremely important points to always remember.
As a manager, you must work to maximize the gross margin while operating with the lowest possible fixed costs possible.
Read this very carefully! I did not say cut the costs and make as much gross margin as possible. This latter statement only leads you to the vicious circle of commoditization of your product, lower quality and service and eventually a mediocre reputation and definitely sub-optimal results.

So let’s get back to the proper statement: “maximize the gross margin while operating with the lowest possible fixed costs possible”.
This means that your focus is on 2 main areas:

Maximizing the gross margin
Keeping the OPEX at the lowest possible level, yet allowing you to achieve the highest margin.

To achieve this, your business plan is the basis. And your business plan must start by the sales plan, since this the area that will bring you the money to pay all your bills. The reason why your business not only exists but also stays alive and thrives is that you have satisfied customers who want to buy more from you. If you think differently about this, just imagine your company losing customers or getting bad publicity. Ok, now you agree with my statement.

Maximizing the gross margin

Here, too, just let’s have a look at what influences the gross margin:

Revenue = Volume x Unit Price
Cost of sales = variable costs needed to produce what you sell

To maximize the gross margin, you need to make sure that the selling and the costing are part of the same, since your sales force causes the cost of sales.

The gross margin is the indicator of the performance of your marketing. On the contrary to what many seem to think, it has very little to do with your Production department. This latter one just produces the orders on request of the Sales department.

And this is exactly where general management plays a crucial role: you must make your sales people accountable for the costs they create and for the consequences of their actions, and for them to justify their existence inside your company they must sell for profit, not just move volume, like unfortunately it is the case in many companies.

Sales people must be able to calculate a price that generate profit, and make sales plans that meet this very same objective. Too many sales people tend to prefer to say yes to the customer, because they are afraid of losing them. Loyal customers will not leave you if you disagree on the price, they will negotiate, and that is another area where you must train your sales people to be superior.

That is why any new contract also needs approval of other departments, such as Production and Procurement. This approval is not necessarily a recurrent act, but can also be determined for each line of product, for instance, no sale allowed for a price lower than so much. Deviation from this must be a concerted decision at management level.

Another extremely important item that must be the responsibility of your Sales department is the collection of accounts receivables. Since a transaction is an exchange of goods or services against money according to agreed terms, these goods and services are sold only when they are paid on time. And the best way to make sure that you have solvent and disciplined customers is to make sure that your sales people have done all their due diligence in this area before making a sale.

Minimizing the costs

As well for the cost of sales as for the OPEX, you must minimize the financial impact they have on your P&L account. To do so, you must focus on the following:

Negotiate the purchase of your materials and services at the lowest price possible for the quality you need to buy.
Buy what you need to have in inventory, but as much as possible try to limit your inventories at the lowest level possible.
Have efficient processes and operations. Beware of hidden costs such as too high maintenance and operational costs such as energy consumption
Have an efficient organization with as few and as talented people as possible. Do not go in any fancy expensive project unless it will bring you a profit return of at least 50% per year.
Offer a fair and motivating salary and benefit package to your employees. Motivated and satisfied employees are more efficient, get sick less and work harder than employees that are not, and this pays off.

Conclusion

To manage for profit, your sales department must be the driving force, they must focus on generating profitable business (“margin before volume”), they must act like entrepreneurs who have a responsibility to the activities they create in other departments, must keep a close eye on accounts receivables, and most of all know how to price what they sell.

To manage for profit you must set up and manage a lean and efficient organization. You must be cost efficient before being cheap. This latter will only work adversely on the efficiency of your company and will cost you a lot more in the end.

Comments Off on Managing for profit | Business Management, Team and Performance | Tagged: Financials, Human Resources, Performance, Profit | Permalink
Posted by Christophe Pelletier

How to build a team that delivers superior performance?

April 4, 2009

In this title, we have several items we need to address in order to answer the question. These items are:

Build the team
Deliver
Superior performance

Build the team
Either, you start with new staff or have to deal with existing employees, building a team comes down to the following:

First of all, you need to know what results you want to achieve, short-term, as well as long-term. This is the only way you will need what talents and skills you need to have in your team.
You must have in your team all the abilities you require, but how there are distributed between the team members is somehow secondary. Just like a sports team, you need a mix of those skills and talents. The team members must be complementary. You will not succeed if you have only goalkeepers or only forwards.
Next to the talents and skills, you must make sure that the team members are compatible with each other. Another essential element for a successful team is the interpersonal “chemistry”.
You, as the manager, are the one that will have to nurture this chemistry, by making sure that all the team members will work towards the common goal. Individual agendas are simply not acceptable if you want superior performance.
You must make sure that your team members are in a position in which they do what they do best. There no worse waste than having people doing things they are not good at, or not being able to do what they have that can add lots of value to your company. This sounds obvious, and yet it is one of the most common sins that organizations commit.
Since your team members have all their own particular mix of skills and talents, change the jobs descriptions and task distribution to make sure their abilities are used at their maximum, if needed. Changing a job description is easy, but changing a person is not.

Deliver
In order to deliver a superior performance, you need to identify the following:

What to deliver.
When to deliver.
How to measure progress and know where you are in the whole process.
Communicate regularly and frequently with your team members about the progress made and give immediate feedback to make sure that the plan is on track.
Make such meetings efficient and never leave without making an action list allocating responsibilities and timelines for the completion of these actions.

Superior performance
In order to achieve a superior performance, you will need the following

Set superior goals to your team. If you in this, then you will not beat your competition
Set superior goals to your team members. If you fail in this, see above.
Know your competition and what they want to achieve. If you do not know this, how can you know that your goals are aiming higher than theirs?
Communicate a lot with your team members. Make sure they know what you expect from them, and let them know how they are doing. There is nothing like too much communication. There is something like too many inefficient meetings, but that is for another article. If you want to achieve superior performance, count on average a very minimum of half an hour of communication with each of your direct reports per day.
Use performance indicators to monitor progress. This is different from an incentive, such as a bonus. An incentive helps getting a better result (well at least that is the idea) by promising a reward. A performance indicator as the term says it, just indicates how good a performance is at a given point in time, and helps you take corrective action if needed.
Encourage a bottom-up communication. Your staff are the ones closest to the action. You, as the manager, are one step further. What they see, hear and experience is of great value, as very often they have the best views on how to deal with business situations. Listen to what they have to say! All they expect from you is to give them directions and make the harder decisions.
Nurture a culture of entrepreneurship! Since you have selected people with superior abilities, let them express their full potential by delegating and encouraging them to take initiative. Although their level of talent makes this easy, this does not mean that you should be lenient in the way you supervise and manage. Delegating just saves you a lot of time that you can spend on coordinating and communicating.
Nurture a culture of performance! This sounds obvious, and yet this is where many companies fail. This is not about pep talks. This is about creating an environment where beating expectations becomes a game. This is about involving your team members in setting the superior goals. You know when you have achieved this when your staff tells you enthusiastically that they think they can exceed the previously set goals.
Nurture a culture of challenge! By this, I mean healthy positive challenge, of course. Talented people know they have talent and they like to express their opinions. Feel good when your staff challenges your ides and your objectives, especially when they claim that they can achieve even more. Of course, your role here as a manager is to make sure that they are realistic, by challenging them, too. Do not feel threatened by such behaviour; it is very sound and stimulating. Nothing kills initiative and enthusiasm as negativity and dictatorship (on the other hand, authority is good).