Do these now

October 21, 2015 -  By

LM1015-iStock-clock-nowTo avoid the breakdowns that often occur as ideas progress from the abstract to the actionable, all owners M-U-S-T do the following things to ensure their businesses achieve results.

M

Manage your balance sheet. Managing from your profit-and-loss statement only takes you so far. It doesn’t answer the question, “Am I building a sound business?” The balance sheet is your bottom line health barometer. You must keep balance sheet ratios in line to have a healthy company.

Measure performance. Measuring employee and company performance drives achievement and contributes to goal setting. Look for effectiveness, efficiency, quality, timeliness and productivity, as well as if and where improvements are necessary.

Manage organizational culture. Companies often don’t think about culture until it’s too late. When your business struggles with quality and responsiveness, it’s most often tied to competing internal subcultures and sending of mixed 
signals, which confuse individual employees and the whole crew. Only then do owners realize they lack alignment on shared goals, camaraderie and accountability. Unify your culture by forging better internal relationships across divisional turf and reinforce the right behaviors for better performance.

U

Understand key financial ratios. When top companies benchmark performance, balance sheet ratios are as critical to success as profit-and-loss ratios are to sales. Current ratio and quick ratio are liquidity metrics that let you know if you can pay your bills. Your debt-to-equity ratio lets you know if you have too much debt. And your retained earnings and equity balance let you know if you’re increasing value. Banks care about the balance sheet, and ratio compliance is a key factor in lending decisions. The best companies maintain dashboards of key ratios and performance targets and strive to hit them.

Urgency. Creating a sense of urgency in your culture helps employees share your commitment to become an outcome-oriented—not a task-focused—business. Owners must lead by example. A lack of urgency at the top leads to a lack of urgency at the bottom, creating unengaged employees who lack commitment.

Use at-risk compensation to encourage achievement. Employee complacency is a challenge. It’s common for world champion sports teams to slide from the top following a championship year because success can be taken for granted. It happens with companies, too. Young, successful companies slip into complacency because employees can make good livings and take the success for granted. Keeping employee base salaries lower and allowing compensation to increase based on performance is a better way to operate. It also prevents the agonizing challenge of having to reduce pay during economic downturns. The base remains low, and the at-risk factor shrinks if economic conditions limit company performance.

Usher in high-performing people. High-performing companies employ high-performing people. Look for achievers who can dive into problems to figure out solutions, people who can take on broader responsibilities and those who have the ability to remain agile. Sometimes you have to craft a position that best fits a person’s needs instead of forcing a high-potential person into an ill-defined job.

S

Strive for a safe work culture. Efficiently managing health and safety risks in the workplace is essential to your business and your customers’ businesses. A poor safety record increases costs through workers’ compensation modifiers and high insurance rates, rendering a company less competitive or profitable. Equally important: Customers won’t award work to companies with poor safety records because it may affect their own rates. Companies have had contracts cancelled because of their safety records. Institute plans for prevention, response, hazard management and recovery.

State your values and mission clearly. Good company values make happy employees. Employees aren’t motivated by company profits or profits they see going to owners and their families. They care about their own well-being and contribution to a greater good. Organizational values play an important role in how employees rate their job satisfaction—whether it’s honesty, respect, quality, environmental awareness, loyalty, commitment or work ethic. Values act as your moral compass and inspire employees to go the extra mile. When values aren’t aligned or are confusing, small problems develop into larger ones if the employee and company fundamentally disagree about their guiding motivation.

T

Tackle problems head on today. Problems, like wounds, seldom heal by themselves without leaving a scar. When they keep mounting, it’s natural to take shortcuts to alleviate the distraction, but a quick fix never solves the core problem. Solve problems by looking at the totality of what they represent, and use problems as opportunities for continuous improvement to break down silos, improve communication or evolve.

Trim waste to maximize 
margins. Waste is what we refer to as a dumb tax. You either pay it or try to pass it on to a customer. These dumb taxes eat profits and make you less competitive, ultimately costing you sales. Determine the root cause of the waste and streamline processes to save time, protect resources and improve operational efficiencies, employee engagement and the overall strength of the business.

Tailor services to customer needs. A successful customer service strategy isn’t based on assumptions, which can be a critical mistake that can affect revenue. Understand what your customers want before they do. Find out what level of service and responsiveness they expect, learn how far they’re willing to stretch for your service and what they’re willing to pay. Strategically customize your services by understanding the source of value your company provides, tailoring your services to align with customer needs and providing value at a lowest cost.
Wilson, a consultant with Bruce Wilson & Co., is a 30-year industry veteran. 
Reach him at bruce.wilson@brucewilsoncompany.com.

 

Photo: ©iStock.com/alexsl

This article is tagged with and posted in 1015, Business Planner 2016, Featured
Bruce Wilson

About the Author:

The author, of the Wilson-Oyler Group, is a 30-year industry veteran. Reach him at bwilson@wilson-oyler.com.

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