Are you ready to ‘Git-R-Done’?

BY RICH SCHMITT
Management specialist

As we enter 2008, I personally am remembering the old saying, “If I had known I was going to live this long, I would have taken better care of myself.” Some of us are also saying, “If I had known there would be a downturn, I wouldn’t have hired so many people, ordered so much product, opened the new branch, etc.” (If we could predict the future, we might be working on Wall Street or in Las Vegas -- depending upon our preferences for climate and companionship!) 

The reality is that we sometimes find ourselves in tough situations wishing that we had taken a different course along the way. Unfortunately, wishing doesn’t change anything, so this month I want to challenge all of you to take time during January and February to list your toughest problems to tackle for 2008. You should then to use that list as your guide for moving forward to address those problems head-on. I recommend that you create a written punch-list of your top 20 problems, opportunities and areas to dig-into. Then prioritize the list and get moving. Here are some thoughts on putting together your list:

• Focus your limited resources on the current and future money-makers -- All companies have limited amounts of dollars, people, brains, energy, etc., that they can invest in the company. This is a fact of life. There are also limited numbers of product lines, places for branches and market segments to serve. So you must get focused on the ones that produce now and the ones that will produce for you in the future. Sort all resource burners into two groups: The ones that are returning on your investment and the ones that are not. Most of this is a pretty straight-forward financial ranking that helps you get acutely focused on the investments in energy, time and money that are returning.
• Take action or, when appropriate, make an explicit decision to not take action -- Some of my friends in the Southwest, and maybe other places too, use a phrase that I like: “Fixin’ to.” It means getting prepared to do something. There is another phrase that I have also heard, “Thinking about fixin’ to,” which is one step removed from getting ready to do something. These are both important steps in getting to that better place -- but nothing happens until you move beyond the thinking and preparing, and actually implement, initiate or make the changes. At times you may decide to stay the course. Status quo is almost always a viable option. I only object when it is the default option that is taken because nobody has the guts to make a decision and move forward.
• Make sure you are seeing and focusing on the real problems -- Each of us has a perspective. That’s our view of the company from where we sit. We would be naïve to think it is the only view, that our view is always correct or that we can see everything from where we sit. If I was consulting with you, I would spend time talking to you and a significant number of your people. My process is to talk to a lot of people in many different jobs and at all levels in your company. In other words, I want to see your company through a bunch of different sets of eyes. After I see your company from the top, bottom and all sides, I have a well-rounded picture and can apply my experience to make recommendations. You should be talking to your people, at all levels, to get a clear picture of your situation then to use your experience to make appropriate decisions and changes. If your people no longer level with you, you might need an outsider like me to help with the process.
• Admit to your mistakes and move on -- Everyone makes mistakes. Even owners who are very successful make mistakes. My dad used to say, “After you have taken a bite out of a rotten egg, you don’t need to take another bite to confirm it -- much less eat the whole egg to prove that you are good at choosing eggs.” As I consult, one of the key reasons for continuing an obviously stupid course is, “The owner/boss/manager made this decision and he doesn’t like to be wrong.” Everyone is tiptoeing around pretending that he didn’t make a mistake. What the boss doesn’t realize is:  Everybody knows about the stupid decision and people talk among themselves about the stupid decision. Pretending it didn’t happen doesn’t change the fact that it turned out to be a stupid decision. The owner/boss/manager doesn’t look stupid when he makes a decision that turns out to be wrong. Every boss makes decisions that are wrong. He looks stupid when he and the team perpetuate the situation to protect his ego.

Protect yourself from getting off course

As my flight instructor used to say, “It is normal to get off course. There are a lot of things going on so everyone gets off course. The only unacceptable act is to continue on a course when you know it is the wrong course. When you find you are off course, you must do everything in your power to get back on course.” 

The areas that we see companies off course are varied but here are a couple of the common areas to consider:

• Opening/staying in a location -- I don’t subscribe to the idea that new branch locations should take years to become profitable. Whether you start them from scratch or acquire them, branches are in place to make money. Properly planned twigs should generally be profitable in six months and full branches in about a year. There are, of course, exceptions but locations that are not producing quickly are candidates for a “turn-around” level of focus and effort. When the turn-around doesn’t work, it makes sense to cut your losses and focus your limited energy on activities that do make money.
• Hiring/promoting/retaining individuals -- Hiring and promoting people are darn tough activities. At top levels, if you’re hitting better than .500 you might be kidding yourself because few companies are that good at selecting people. When you hire a person and he/she does not perform, I recommend two options:  1) If you determine that the person is immoral, lazy, ill-tempered or generally unacceptable, get him or her out of your life as fast as legally possible;  2) If he/she has not worked out in a role but you feel the person is absolutely perfect for another role in your company and there is an opening, give him or her one additional chance at one other role.  If the person doesn’t work out in that role, don’t eat another bite of this egg to see if he/she gets better with age. I see “great guys” who are bounced around companies because they, for whatever reason, cannot perform but nobody wants to let them go. If you take a hard look at your company you will probably see, at least, a couple of people fitting this description. Make sure their next bounce is out of your company.
• An individual who used to be a performer is no longer producing for the company -- This is a difficult situation but I think the company should work with the person to bring up his/her performance in their current role. When they know you care and that their contribution matters, many people will improve their game. When that is not possible, the person should be moved to another role where he/she can contribute -- with an appropriate adjustment in pay. If the person still cannot perform, will not move or refuses to change, you are forced to make a tough decision but, I feel, you must make an explicit decision. I have seen instances where the company created a role that didn’t require the person to come to the office to fulfill his duties. I feel this is appropriate in very rare situations, but it is better than having someone set a poor example for the rest of the team. This may sound hard-hearted, but I think the company owes people a job for their current and on-going contribution to the company with compensation that is related to that contribution. It is critically important to understand that keeping these sad souls is not an act of charity. Keeping these people hurts the company and demoralizes the hardworking people who do produce for you. (As with all labor actions, check with your labor attorney since your state may have laws related to these suggestions.)
• Taking-on/retaining product lines or vendors -- Product lines and vendors are also tough to select. Ideally, all new vendors and product lines involve a prenuptial that describes how you and the vendor will work to make the product line a success, and how the divorce will play-out if you are not successful. It describes what each party will do and is always in writing. In this industry, I find that most people are honest and trustworthy but making good on promises only works if that person is still in a position to keep the promise. With the way that vendors change directions and personnel these days, having the agreement in writing still might not be enough -- but it is your best possible chance. 

Each date written into a prenuptial should be tracked and reviewed in advance and presented to the president for approval. In other words, each opportunity to send back inventory or balance inventory is reviewed by senior management to determine if the company wants to exercise its option. I’ve seen instances where these key opportunities to return or adjust inventory were squandered simply because a lazy inventory manager didn’t want to put in the extra work. I don’t minimize the work, but exercising these agreements can help your company not get stuck holding the bag.

As a rule of thumb, you only add lines that are forecast to make gross margin equal to or more than the company’s target.  Rather than bringing on lines forecast to be losers, you might be better off investing money and energy in selling more of your current lines that are performing for you.

When you have lines performing below the company’s target for profitability, each of those lines should be reviewed to determine if the performance can be improved or if the line should be dropped.

• Buying/using software or technology -- Technology should be implemented based upon its return on investment. When technology doesn’t perform, it should be changed or reconsidered. In some cases, more training is required and in other cases, the vendor should be encouraged to help make the technology perform as promised.
• Marketing programs and promotions -- Just like technology, every marketing program is put in place to produce a return on the investment.  Ideally, you are measuring the return of each program and promotion, then changing or eliminating programs that are not producing for you.

If you find that you’re stuck in the “fixin’ to” stage, sometimes the first step is to have a consultant look at your situation and make recommendations. (Give me a call or e-mail me and I will be happy to discuss the process.) In many cases, my recommendations will only confirm your assessment. The key difference might be that I’ll give you the information and the plan you need to move from the “fixin’ to” to the “got it done” stage that makes a real difference in your performance.

Rich Schmitt is president of Schmitt Consulting Group Inc., a management consulting firm focused on improving the profitability of distribution and manufacturing clients. Rich is also the co-owner of Schmitt ProfitTools Inc. (SPI), a business producing print, CD-ROM, web and palm-based catalogs as well as pricing management and analysis software for wholesalers.