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!

Copyright 2009 The Happy Future Group Consulting Ltd.


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!

Copyright 2009 The Happy Future Group Consulting Ltd.


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.

Copyright 2009 The Happy Future Group Consulting Ltd.


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.

Copyright 2009 The Happy Future Group Consulting Ltd.


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…

Copyright 2009 The Happy Future Group Consulting Ltd.


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!

Copyright 2009 The Happy Future Group Consulting Ltd.


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.

Copyright 2009 The Happy Future Group Consulting Ltd.


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:

  1. 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.
  2. 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.
  3. 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”.
  4. 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.
  5. 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.
  6. 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:

  1. What to deliver.
  2. When to deliver.
  3. How to measure progress and know where you are in the whole process.
  4. 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.
  5. 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

  1. Set superior goals to your team. If you in this, then you will not beat your competition
  2. Set superior goals to your team members. If you fail in this, see above.
  3. 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?
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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).

Copyright 2009 The Happy Future Group Consulting Ltd.