Scientists believe that about 150,000 years ago a huge volcanic eruption created a cloud of ash that covered most of the Earth for 6 years. Not all sunlight was blocked but enough so that most plants and animals died.
Those life forms that survived “the long winter” were the smart and the strong. Those life forms that perished were the weak and those who couldn’t adapt to the change. It’s kind of that way in business.
We are in an economic downturn and a culling of the herd is taking place.
Never Time Enough
Errors, glitches, screw ups, misunderstandings, omissions, the left hand not knowing that the right hand exists much less knowing what it’s doing; all drive up the total cost of doing business. Vendors, sellers and customers all pay for inefficiency.
Too often the unofficial motto of some companies seems to be “we never have time to do things right, the first time.” A “redo” is the most expensive and unprofitable work that a business does. Some businesses make money in spite of themselves.
By documenting the knowledge it takes to get things done right the first time, their best biz ways, companies can improve their efficiency and better prepare themselves to deal with reduced sales, slow cash flow, thinner margins and major business disruptions. Moving from “word of mouth” operations to written policies and procedures promotes efficiency of action.
The Closet Report and Dead Customers
You’ve most probably have encountered inefficiencies that have left you scratching your head and wondering what the heck is going on.
Steve Epner of BSW Consulting, Inc. tells a story about a report that clearly illustrates wasted time and effort. It seems that a woman in a company spent the last 2 hours of each day compiling some data into a report. She’d leave it on the corner of her desk and the next morning it would be gone.
When asked what the report was for and who it went to, she didn’t know. The woman had been trained by her predecessor to do the report but was never told why or to whom it went.
It turned out that about 3 years before the CEO had asked that the report be generated and left for him to pick up at the end of each day. After a while he decided he didn’t need it and he quit picking it up, but forgot to tell the preparer.
As the reports piled up the janitor took note that they were unsightly and got in the way of his cleaning. He started moving the report to a nice safe out of the way closet. He referred to it as the “closet report.” When the stack in the closet got too high, he’d toss them out and start a new stack.
My friend Russ Case use to tell a true real story about a hospital room in England where the patients unexpectedly kept dying. All the equipment was checked and double checked, the air was tested, the water and food were checked out and found to be safe. The deaths continued and the toll hit 10 before the cause was found. Again, it was the janitor.
It seems that this room has a shortage of electrical outlets and when the clean up crew came in they’d unplug the life support equipment so that they could plug in their cleaning equipment. To protect their hearing the cleaning guys wore ear muffs and couldn’t hear the patients’ death struggles.
Profit and Survival Enhancement
The former head of the Federal Reserve, Alan Greenspan, issued a warning in March 2007 that the world’s largest economy could be heading for recession.
U.S. consumers have helped keep the world economy afloat in recent years by borrowing against the rising value of their houses to finance spending. Now, hit by higher gasoline/energy/transportation prices, a crumbling housing market and an increase in worldwide demand for more credit..the economy has soured.
During an economic downturn the demand for goods and services drop off and a number of businesses, most especially those already struggling, fail.
Just in case Greenspan is right, here are some thoughts on how businesses can position themselves to better survive an economic downturn.
Companies run on money, fail to pay the phone company, the IRS, the power company, employees and suppliers and you are out of business. So now, before you have the need is the time to secure long term financing. Don’t delay, sit down now with your lender and work out a line of credit that you can draw on as needed. The time to borrow is when you don’t need it because when you do need it you may find you can’t get it.
If you already don’t know, you need to identify and embrace your core customers. Think of the 80/20 rule. Do 20% of your customers make up 80% of your business, if so you best know those customers, their needs and desires and the names of their kids.
You also need to know how any downturn in business would effect them, they may be your buddies now but if they fail you don’t want them taking you down with them. Run credit reports on core customers on a regular basis to help you remain confident of their ability to pay…and to possibly increase their credit line, if they need and can handle an increase.
Invest now in finding new customers.
Don’t allow your salespeople to become order takers who service existing customers and forget how to sell. The sharpest tool becomes dull from misuse or nonuse.
Putting all your eggs in one or a few baskets may be efficient and profitable during good times but can come back to haunt you during an economic downturn.
Even during good times it’s important that your people be under a little stress so that they don’t become lazy or indifferent toward their work. And hearing that some guy got the sack for not showing up or failing to work hard keeps the other employees on their toes.
Weed out weak employees and cross train the strong including senior managers. This is always a good idea but becomes critical when business slows.
Combine Overlapping Business Functions
In theory customer service is the customers’ champion, the guys who care and who make things right. However, in practice and most especially in regard to consumer customer service, customer and service is an oxymoron. It’s as if the “mad hatter” was in charge. Mumbo jumbo and then more mumbo. B2B customer service tends to be better because of competition for the same limited customer base and the larger sums of money involved.
In the course of dealing with why customers have not paid according to terms, the credit area deals with many different segments of the business chain, both internally as well as outside the company. Credit is kind of like being the guys with shovels following the parade.
Consider combining customer service with credit for improved efficiencies and communications.
Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com, WalkingBear has authored hundreds of business articles, has worked with numerous companies in a wide range of industries since 1982 and has spoken at many venues including the Shakespeare Globe Theater in London.
