Engage your Employees to Beat a Business Downturn

“I have recently had to let some people go. They were great people, but with our financial projections, we had to downsize. Some of my current staff has begun to get a bit discouraged about the company as a result of slowing sales and their friends no longer working here. What are some ways that I can make sure my remaining team stays excited and engaged during a tough time?”
– Worried Business Owner

Get your people involved in the come-back.

Have a meeting and show them the numbers – where revenue was the last few years, and how much it’s dropped off. Explain the relationship between sales, headcount, and profits. Take questions, give straight answers, and encourage discussion.

Share your vision for the future. It might be emerging from the recession stronger than ever, or simply surviving. Regardless, give them the unvarnished truth. And, be sure to set the tone as positive and optimistic.

Ask for their active participation and support. First, banish the rumor mill and negativity. If your people have concerns or complaints, they should voice them in company meetings, to a supervisor or to you. No grousing around the water cooler.

Put a mechanism in place to collect ideas for improving the situation: Customers. Marketing and sales activities. Cost of goods. Overhead expenses. Productivity. Receivables. Cash.

Of course, your team will want to know how things are going. Have regular follow-up meetings and post results on the wall. Show them that their ideas are being implemented. Share the results, and acknowledge those who submitted ideas. Learn from mistakes and celebrate even small wins.

That’s it. Transparency, engage your team, be smart and work hard.

 

It’s Free!

free

It’s a typical day at Bob’s Company, Inc. Bob notices that a recently-hired employee is now eligible for dental benefits. So, Bob hands her an application. As he walks away, she asks, “What’s the cost?”

Bob’s reply? “It’s free. The company pays for it.”

If this was a movie rather than an article, the startling shower music from “Psycho” would come on at this point.

Or maybe it would turn into a take-off from “Young Frankenstein.” Instead of “It’s alive!” the line could be “It’s Free!”

Shame, shame on Bob. He wasted a terrific opportunity for a “teachable moment” with a new employee.

Of course it’s not “free.” Every benefit provided by the company costs good money.

Free. What was Bob thinking? He should have responded something like this: “Our dental insurance costs about $25 per month. The company pays for it. It’s part of your compensation – just as our other benefits are.”

Too often employees think only about base wage or salary when the subject of compensation arises. This happens because we business owners and employers let it happen. You’re likely to hear something like “I make $35,000 per year.” You are very unlikely to hear an employee say, “Well, my base is $35,000, but on top of that my employer generously pays another $12,000 for my health insurance. Counting my paid time off, my other benefits and my payroll taxes, I cost my employer a whopping $58,000 per year.”

So, how do we get our “bang for the buck”? How do we get our employees to recognize and appreciate all aspects of the compensation package – so the company can enjoy a fine ROI in the form of increased employee satisfaction, improved productivity and reduced turnover? How do we drive the “entitlement culture” out of our companies?

Here are some approaches to use:

  • During hiring interviews, listen for signals. If the candidate is focused like a laser beam on your vacation plan or grimaces noticeably when you explain that you don’t pay 100% of the health insurance, these are not good signs. (Note: Yelling “Next!” is not a tactful way to end an interview.)
  • Your candidate job offer letter should outline the entire compensation package and focus on the total value – not just the salary.
  • Make ongoing education part of your company’s culture. Talk about the cost of doing business. Let your folks know how much insurance rates go up every year. Make sure the employees know that they have a vested interest in the company’s success … if they help the company succeed, you can continue to subsidize their insurance costs and provide excellent benefits.
  • Print a year-end statement for each employee, showing his or her total compensation and benefits costs.
  • Consider all aspects of compensation costs when budgeting and projecting pay increases. Example: Let’s say you like to provide an average 4% pay increase per year, and your total company compensation expense (including benefits) is $800,000. A 4% overall increase is $32,000. If you expect your health insurance to go up $5,000, you now have $27,000 left for salary increases. (Back to education: Explain your rationale and the math to your employees. Involve them in the decision. Maybe they want more salary increases and are willing to bear more of the insurance costs. If they help make these decisions, you’ll get better buy-in.)

You invest lots of money in your company in the form of salaries and benefits. Chances are, payroll and related expenses are the largest line items on your income statement. Spend the additional time and effort to maximize the investment. Done right, it can pay you back many times over.

PS: Bob’s story has a happy ending. He realized the error of his ways and corrected his statement to his employee.


Talking about Values is Good Business

What do “values” have to do with business? Everything!

This isn’t about “touchy-feely.” I see core values as a hard-nosed business practice, just like reducing costs. It’s simply a way to ensure that everyone on the team knows what is important.

As owner, you can – and should – shape your company’s culture. You can let it happen or you can make it happen.

So, what makes up a culture? All sorts of things. Fun versus serious. Honest versus dishonest. Friendly versus confrontational. Lunch with others or eat at your desk. All this and much more is the stuff of company culture.

A big part of a business’ culture centers on its values. You may not care whether your employees eat at the desk or go out, but you darn sure better care whether they are being honest with your customers.

My recommendation: Determine what principles are important to you, and then inject them into the workplace.

If you don’t spell out what’s important, then the implication is that either nothing is important or everything is important – trouble either way.

Here’s an example: Barry is the new guy in sales. He was put place with no orientation on what’s important to the company. He brought some bad habits, including breaking promises to customers. His manager doesn’t find out until a furious customer calls him.

But George works at a company where breaking promises to customers is unacceptable. The owners and managers “walk the talk”, setting the example for others. It’s discussed in meetings and in new employee orientations. It’s used in performance reviews and job descriptions. Do you think George shares Barry’s cavalier attitude toward commitments to customers?

This is the difference between ignoring what’s important and building a values-based culture on purpose.

Adopting a set of values is not about picking a litany of lofty goals that nobody can live up to. A company must identify those principles that the top people are passionate about and can adopt without hesitation.

What values to pick then? Each company must answer that question for itself. The answer may be found in things like the founder’s personal values and vision for the company.

Whatever values are chosen – and a handful is plenty – the company needs to really work at making them second nature for all employees. This doesn’t happen overnight. About the time you think your staff is getting tired of hearing a message, that’s about the time it’s just starting to soak in.

Here is perhaps the most powerful sign that it’s working: Your employees start enforcing the culture. When you hear one of them tell another, “That’s not how we do things around here”, you’ll know your work is paying off.

Adopting and living up to a set of guiding values can literally transform your business. Don’t assume your people know what’s important. Tell them. It’s hard work and a long process, but it will eventually have a positive impact on your bottom line.

Transparency and Leadership: Avoid Emily Litella Syndrome

Emily Litella, in one of her typical on-air rants: “What’s this I hear about computer parking lots? We’re in a recession, people are losing their jobs, and now we have parking lots for computers! It’s an outrageous waste of land and money!”

Jane Curtin, with her typical disdain for Emily: “It’s commuter parking lots.”

Emily: “Oh … Never mind.”

A note to those of you too young to have experienced Saturday Night Live’s original cast from the 1970s: Look up Emily Litella on Wikipedia. Better yet, see her on YouTube. Played by the late, great Gilda Radner, Emily was a commentator for the SNL Weekend Update news. Emily always jumped to rash and incorrect conclusions because she never had the right facts.

Do your employees do the same thing?

I constantly encounter business owners who are worried that their employees will find out either how well or how poorly the company is doing. Of course, lately it’s trending toward the “poorly” end of the spectrum – but either way, here’s my usual response:

“Your employees aren’t dumb. They’ll probably figure it out. But even if you can hide the truth, why would you? In the absence of facts and information, your employees will make assumptions and jump to conclusions. Their decisions and behaviors will be based on these false assumptions. How do you expect that to work out?”

A little transparency goes a long way.

That word – transparency – seems especially relevant today, given our current state of affairs. Think about the world of big-business, banking, and high finance. A string of crumbled companies, bankruptcies, lost pensions, mass firings, devastated families and broken dreams. Don’t even get me started on Congressional “leaders” who make deals behind closed doors and ram legislation through without even allowing their members to read bills before voting.

Many of America’s economic woes could have been avoided, but for a lack of transparency.

I’d argue that transparency gives rise to leadership.

In an open environment, leadership is a must. It requires you to carefully choose the “people on the bus” who are worthy of trust and who will act in the business’ best interests with the information given to them. It also means that you’ll have to explain the information – to mentor and train your team – so they’ll know what it all means.

Transparency allows full and effective delegation. “Here’s the goal. Go make it happen.” Knowing the organization’s goals, financial status, and available resources allow confident decision-making.

Integrity – a cornerstone of leadership – goes hand-in-and with openness. Shady business practices are like fungus and vampires. They don’t thrive in the bright light of day.

Business owners who worry that their employees will know the company’s status are withholding information and keeping their employees in the dark – and still expecting good results. It’s much like asking someone to play a sport without keeping score.

Delegation? A secrecy-cloaked environment throws a blanket over every potential solution. Aside from the top leaders, nobody has the big picture: “What should I do? What can I do? What resources are available? What methods make sense for our current financial situation?” The lack of information will result in questions, false assumptions, and faulty decisions … making micro-management necessary.

So often, the small business community looks to the captains of industry for answers. It sure seems to me that the example set lately by the big business community calls for a shift in thinking.

Why can’t the small and mid-sized business community set the tone for a change? Let’s start a revolution of our own. Let’s be the example-setters. Let’s be the poster-boys and poster-girls for transparency. For integrity. For solid business practices. And for leadership.

The Emily Litella act was funny on TV. It’s not funny in your organization. Open up and get Emily off your payroll.

It’s Not My Fault!

“It’s not my fault!”

How many times have you been a customer and heard that line?

It usually happens right after you bring a product or service defect to the attention of someone at an establishment where you’re spending your hard-earned money.

I was on the receiving end of this statement recently. It was tempting to give a customer service lecture to the person in front of me, faultless as he may have been.

This particular situation involved receiving the wrong fast food order. I had ordered the medium Unrecognizable Chicken McParts and instead received – and was charged for – the aptly named Super Sized version. For a moment, I thought perhaps they’d brought me the entire crate of McParts straight from the walk-in freezer but they assured me this was indeed packaged for individual sale and consumption. (Disclosure: While I may find it amusing to poke fun at the fast food industry, that’s where I had my first job. Accordingly, I’m somewhat sympathetic to fast food employees. Even so, until they start putting the right stuff in the bag, they will be the target of my “how-not-to-do-it” business lessons.)

As a small business owner, I pay special attention to the way service is delivered when I’m the customer. Most folks reading this are probably equally aware of nuances that might be missed by others: The words that are said and how they’re said, body language, the care with which transactions are handled, and so on.

It’s almost unfair to use fast food joints as examples of how to (or how not to) conduct business. After all, they make it awful easy to identify faults.

So, let’s raise the bar and discuss another industry. In fact, let’s discuss your own company.

Have you had the “it’s not my fault” talk with your people lately? Have you ever had it?

Chances are, if nobody has had a direct discussion with your employees they don’t intuitively know that the customer doesn’t care whose fault it is. Even if the customer does know who’s to blame, “blame” isn’t on the agenda. Getting the problem fixed quickly is.

Here’s a good discussion to have with your troops:

  • Every company makes mistakes – including ours. The difference between companies isn’t whether mistakes are made, it’s how they’re handled when they occur.
  • When the inevitable error does happen to one of our customers, apologize. You represent the company, and you’re doing this on behalf of the company. It’s not admission of personal guilt or fault, and it doesn’t invite repercussions.
  • Take steps to get the customer’s problem resolved. If you can’t do this yourself, be sure it gets handled.
  • When you make a mistake – whether it impacts a customer or not – admit it. Learn from your mistakes and share it with others so we can all avoid that mistake in the future.

As business leaders, it’s important for us to shift the focus from fault and blame to learning and improvement.

Banish “It’s not my fault!” from your workplace. Replace it with confident, competent service that keeps your customers coming back.

Great Expectations

Ever heard someone say, “There’s no such thing as a short-sleeve dress shirt”?

The pocket protector crowd (think of Dilbert) might disagree with that statement, but those who know far more about workplace apparel than I do accept it as gospel. To quote anchorman Ron Burgundy, “It’s a given.”

There are many “givens” in business. Time is money. You only get one chance to make a good first impression. Cash is king.

Here’s another one to add to the list:

“If you’re the owner, nobody cares as much as you.”

Many business owners haven’t yet heard this valuable fact. Or, they’ve heard it and refuse to believe it. As a result, they have unrealistically high expectations for their people. Then, when their employees fall short of these lofty expectations, the owner is disappointed, surprised and maybe even angered.

Ultimately, in a situation like this, the employee leaves – either voluntarily or through termination for “poor performance.” Of course, the owner’s expectations were never clearly defined, never written down, never explained and were very likely a moving target.

Let’s run down the list of what the business means to a typical entrepreneur. We’ll call him Bob. For Bob, the business is:

  • a source of income for him and his family, now and into the future.
  • his single largest chunk of wealth, exceeding the equity in his home.
  • a vehicle to fund his interests, such as charitable giving and playing golf with business associates.
  • Bob’s way to set his own direction, be his own boss, and pave his own path.
  • his baby. He had the idea, launched it, nurtured it, and grew it into what it is today.
  • his future retirement. Someday, when he’s ready, he’ll sell it and use that cash to fund his golden years.
  • a source of pride. Much of Bob’s ego is tied up in the company’s growth and performance.

Now let’s make a list of what the company means to Joe, one of Bob’s employees:

  • It’s a job.

OK, Joe may think of it as a career. Joe may be emotionally attached to the company and may be a big part of its success. Even so, you have to admit that Joe’s list is much different than Bob’s.

Here’s my point: Business owners must adjust their expectations to the givens of the workplace. If you learn to accept “Nobody cares as much as you” as a given, you’ll save yourself from the inevitable aggravation and consternation: Anger. Firing. Recruiting. Rehiring. Retraining. Low morale. Missed opportunities.

Get real and get used to it. Nobody cares as much as you. It’s a given.

Some readers may find this attitude to be in contrast with my position that employees can think and act like owners. It is not. Many employees can and do think and act like owners. They will rise to the challenge and accomplish the most incredible things. I see it all the time. But there is one indisputable difference between an owner and an employee:

If the business fails, the employee experiences a job-changing event. But for the owner, failure is a life-changing event, potentially bringing total financial ruin on the owner’s family.

Yes, employees can be wonderfully loyal, incredibly hard-working and intensely dedicated. But the fact remains that if and when the hammer comes down on the business, it is the owner who takes the biggest blow. It stands to reason, then, that the person with the most on the line – with all respect to faithful employees – will care the most. After all, the owner’s connection to the business goes far beyond livelihood and career.

Consider the following simple formula for effective leadership:

  1. Have realistic expectations for your employees.
  2. Make your expectations known.

So, do what it takes to foster loyalty, hard work and dedication among your team. Return their gift of loyalty by being loyal in return. Create a win-win work environment. Share information and solicit their opinions. Thank them for a job well done and reward them for exceeding goals.

Help them learn to think and act like owners. But remember, they are not owners. You’re the owner. Don’t blame your employees for drawing a line.

Again, have realistic expectations. You owe it to your employees, to your business and to yourself.

What’s Your Number?

numbers

“What gets measured gets managed.”

 It’s hard to argue with that piece of wisdom. That said, here’s another old saw to consider:

“If everything is important, then nothing is important.”

Between these two valuable quotes is a balance and a guideline for business owners.

All businesses have certain numbers that define success. Some, like profit, are universal. Every business must take in more than it spends, so an argument could be made that this number – profit – is a definition of success for every business.

But what about other numbers? There’s certainly no shortage of other things to measure – sales, costs, margins, cash … the list goes on and on.

They’re all important. But don’t forget: “If everything is important, then nothing is important.”

Focusing on a small, carefully-selected handful of numbers and actually doing things to improve them is much more likely to lead to overall success than scattershot oversight of dozens of different numbers.

Some business owners create a scoreboard or “dashboard” of metrics – to pull selected numbers out of the blizzard of income statements, balance sheets and other reports – and single them out for an appropriate amount of attention.

This is how the “What gets measured gets managed” piece comes into play.

So, how do you cut through the scads of potential metrics which might be worthy of your undivided attention, and discover the select few which will truly make a difference?

Think about your business. Two questions:

1)    Are there things related to your specific business model that are absolutely critical to ongoing success? For instance, if you are the low price leader, then cost of sales is likely a primary area of focus.

2)    Are there things going on in your business right now that deserve attention? Examples might include things like declining quality, too much dependence on one customer, or high employee turnover.

If you find that there are specific things that warrant a permanent place on your scoreboard, then add them and leave them there. Or, perhaps you’ll discover that a temporary issue needs attention – so it gets a spot, only until it is resolved.

In most cases, these big-picture, corporate-level “critical numbers” will have underlying “drivers” – activities which must be done to move the number in the right direction. A simple example: weight loss. If your critical number is pounds, the drivers would be calories in (eating) and calories burned (exercise.)

The best drivers measure activities and behaviors, as in this weight loss example. If you want to change a number, you’ve got to change someone’s activities or behaviors.

These are the numbers that deserve a significant amount of time and attention. That’s not to say other numbers aren’t important. They’re just not as important.

Identify and break out your critical numbers and drivers. Get them on a scoreboard for all to see. Talk about them. Teach and learn about them. Assign responsibility for them. Track them. Most importantly, be sure to move them in the right direction.

Your business will be more successful for the effort.

It’s the Spread

“Thirty six thousand dollars!”

“You’re proposing to pay him thirty six thousand dollars a year? We can’t afford that.”

“It will be tight, but I’m pretty sure that’s what it will take to get him. I really like this candidate.”

Discussions such as this happen all the time in small businesses. The company is in a hiring mode, the recruiting and interviewing has happened, and now it’s time to narrow it down to a specific candidate and make an offer.

It can be agonizing. I’ve been there and I’ll bet you have, too. Help is desperately needed but the best candidate seems too expensive. Heck, maybe any candidate seems too expensive.

Let’s listen in on the discussion the other interested parties in this situation are having:

“Thirty six thousand dollars!”

“Honey, you were making forty thousand when you were laid off. I don’t think we can afford to accept thirty six.”

“It will be tight, but I’m pretty sure that’s the best they can do. I really like this company.”

Two sets of people on either side of a salary negotiation. Both are looking at the same number and of course considering things from their vantage point, and with their own interests in mind.

The number they’re all focused on – annual salary – is the number we all use. Employers use annual salary to measure the cost to the company, and employees use it as the measure of compensation received.

But let’s dig deeper. What’s the real, full cost to the company for a $36,000 per year employee?

Salary                               $36,000
Plus payroll taxes           $  3,750
Plus benefits                    $  6,000
Total cost to company:  $45,750

What appears to be a $36,000 cost is in reality going to cost the company almost $46,000.

Now, let’s look at the employee’s side of the ledger.

Salary                                                           $36,000
Less payroll taxes                                        $  2,754
Less income tax withholdings                    $  7,200
Less employee’s share of benefits cost     $  1,000
Employee take-home:                                 $25,046

To drive home the point:

Employer cost                                  $45,750
Less employee take-home              $25,046
Difference                                          $20,704

That’s quite a spread between the company’s actual cost and the employee’s actual spendable net.

I suggest that these are the two numbers that deserve the attention of the folks involved. In this light, the annual salary almost becomes meaningless.

Yet, time and energy are spent negotiating a number that has little real-life importance.

I know – we won’t stop talking about annual salary. Too much pride is tied up in that number, and it is admittedly a convenient yardstick.

To me, the big deal is the spread. Here are the take-aways:

  •  Employees deserve to know what it costs their company to employ them, and the total value of their compensation package. Let’s tell ‘em.
  • Both employers and employees can help reduce the spread. For instance, employers can choose pre-tax benefits, reducing payroll tax. Employees can make healthy choices and wisely spend deductibles and company-provided benefit dollars.

I’d rather spend my time cooperating with employees to reduce the spread than arguing over annual salary. How about you?

Create a Simple Company Procedures Manual

Virtually everyone recognizes the importance of having an office procedure manual, but actually creating one is a big job, so it doesn’t get done. Here’s a SIMPLE way to get it done:

1) Buy an ordinary three ring binder. Mark it “Procedure Manual.”

2) Put some ordinary lined notebook paper in it. Congratulations! Your company now has a procedure manual!

3) Have everyone in the company contribute to the creation and upkeep of this manual. Whenever a repetitive task arises, the most likely person (whoever does that task) takes a few minutes to hand-write a procedure on one of the blank pages. Give it a title so it’s obvious what it’s for.

4) Assign an administrative person the task of periodically taking these hand-written procedures and typing them into a computer using a word processor program like Word. Put a “Revision Date” on each one so you always know whether you’re looking at the most current version. Replace the hand-written procedures with those printed from your computer.

5) Add to it and tweak it over time. It’s never really “done.”

That’s it. The hard part may be getting your employees to stop “winging it” and to actually follow your new procedures.

Common-Sense Small Business Policies and Procedures

Successful companies don’t make it up as they go along.

For your business to be successful, you need a set of policies, procedures and systems.

Policies

Whether written or not, every company has policies. Policies cover things like whether a product can be returned, under what circumstances an employee will be fired, how long an employee needs to be on the job before being eligible for health insurance, and whether company computers may be used for personal emails. Here are some guidelines:

  • Keep your policies simple, clear, and as few as possible.
  • Don’t create a policy for everything, but do create them for important issues.

A good time to develop a policy is when someone asks for the first time, “What’s our policy for …?” If you don’t have an answer and you expect the question to come up again in the future, you may as well develop a policy to cover that situation. Discuss among the management team or, if appropriate, get an attorney involved.

Procedures and Systems

Can you imagine a fast food restaurant that allowed each employee to decide how to make a burger? Or a bank without formal processes for accepting a deposit? I’m not suggesting creation of unnecessary red tape or nonsense. I am suggesting that …

  • once someone spends the time to figure out how to do something, it’s a waste to let other employees spend the time (also known as “money”) to figure it out again.
  • it is irresponsible to let the company’s know-how go out the door daily at 5PM.
  • you don’t want important business processes to be done “Jim’s way” or “Judy’s way.” You want important business processes done the company’s way!
  • the only path to consistent product and service quality is to have simple, clear procedures and systems.

So, what’s the difference between a procedure and a system? I can probably best explain by example.

Let’s take hiring. You might have a procedure for conducting an interview. (I use the word “procedure” pretty loosely. It might just be a simple checklist. In my mind, a procedure is anything in writing – even in pictures – to guide the steps someone takes to accomplish a task.) You also have a job application and a form asking for the applicant’s approval to perform various background checks.

All of these checklists, procedures and forms make up a hiring system.

Please don’t get hung up on these terms. Feel free to give these things different names. The important concept is documenting:

  • what you do
  • who does it
  • when it gets done
  • how it gets done in sufficient detail to ensure quality and consistency, and prevent duplication of effort.

Let’s look at another example that can help make my point. Suppose you start a store and are the only employee. In the early days, you’ll be doing all kinds of tasks … some simple, and some complicated. One task might involve buying and restocking product for sale in your store.

Let’s say you hire a new store sales employee, Kathy, and you want her to take over the purchasing process. Your training choices include:

  • Show her how you do it, and hope she takes notes or has a good memory, or
  • Type up a simple procedure and give it to her while she’s being trained.

Which do you think will work out best?

If you go the route of most small businesses – which is to show rather than write a procedure – eventually Kathy “gets it.” She starts doing the job, becomes good at it, and over time probably adopts new approaches to the job that you don’t even know about. These changes may impact important things like your cost or delivery lead times. But, none of her improvements get written down.

After a year on the job, Kathy quits. All of this knowledge that Kathy gained – which belongs to you – walks out the door.

So you hire her replacement and show him how to do it the old way. You haven’t been involved in purchasing for over a year. Kathy handled it. You don’t know anything about all the changes she made to the process. You’ve lost a year’s worth of important business knowledge … because nobody bothered to write down a few simple bits of information.

So, even if you’re the only employee, take the time to write down what you do and how you do it. Put it in your computer and print it out. By the time you have your first employee, you will probably have a good start on an procedures or operation manual. Think how much easier it will be to train your folks and how much smoother the operation will run.

Remember: Successful companies – like yours – don’t make it up as they go along.