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Sunday, 22 February 2015

"The Customer is Always Right". Always? Really?

The old adage that the customer is always right is generally true from the customer's perspective but is it always the same case for the supplier?

I had a member of my Vistage CEO peer group who was importing finished and packed foods mainly from Europe and selling to wholesalers and large retailers.

He sold to a total of around 250 wholesale outlets and had perhaps 10 major retailers on the books.  He decided to do a Pareto analysis (80:20 rule) of the customer list and it changed his life and the life of the business.

As might be expected approximately 20% of the customers generated 80% of the turnover as well as gross profit.

In addition he found that a high, too high, proportion of his staff were involved daily dealing with the orders from the smaller customers.

What was more, the number of complaints, returns, arguments about price and very slow payments meant that most of the people were engaged in the wholesale sector and the important group of customers was not being given the attention it deserved.

Accordingly he took a major decision, a very brave one, and wrote to virtually all his wholesale customers telling them that he would no longer be supplying them from three months hence.

He also negotiated a deal with a major food service company to take on the 250 wholesale customers and the job was done.

In fact their new ability to devote more time and effort to the major retailers resulted in enhanced relationships with the result that his turnover and net profit almost doubled within a year.

In another case the group member was in thrall to a major national outlet with in excess of 50% of his output (about £3million) going to the one customer.

Reading the values statement of the retailer would normally lead one to believe that they loved their suppliers, that their relationship was all-important and they desired mutual satisfaction and success.

Really?  They could have fooled the world at large that they were a lovely company to deal with, but certainly not my member. He came to a Vistage meeting one day and announced that he was stopping supplying the retailer and would give them 3 months.

Another brave decision. In fact he replaced the lost business within six months at better prices and then took the major retailer back (at their request) on very enhanced terms.

What it says, of course, is that we need to look as carefully at customers as we do our suppliers. For example how often have we heard sales people complain that we can't chase an unpaid account too hard for fear of "losing a good customer"? For my money a good customer is one who pays on time with a cheque that doesn't bounce.

If we really analyse the true cost of a slow payer we would be surprised. For example how about all the telephone calls to their accounts department plus the cost of the hours taken up? Add to that the fact that the customer is using you as a bank and ask yourself do the prices charged really reflect the costs incurred?

Start with a Pareto analysis and take a good look at the 80% of customers to see which ones are good to deal with and are profitable. There will be some. Then check on those that take up an inordinate amount of time and effort compared to their level of profitability.

Derive a list of dodgy customers and tell them that there will be an immediate price increase in order to bring them to a level at which it is worthwhile trading with them

If they decide to go elsewhere congratulate yourself that they are now diminishing your competitor's profits, and then search out the good ones on your sales ledger.

If a customer can’t deal with you on an adult and commercially viable basis then it is time for the sailor’s farewell. On the other hand identify the good ones and remember that great service leads to great relationships and great customers.

Tidy up your customer list and make sure that, as far as possible, you are optimising the returns from your efforts.  The results can be startling.

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Sunday, 15 February 2015

Are Your People Fearful of Change? Solve the Problem, Just Involve Them!

The perennial subject of change keeps raising its head in mentoring sessions with members of my Vistage CEO peer group.

The overwhelming questions that continue to surprise are: Why do people seem to fear change so much?  Why do they see it as a threat and not a potentially exciting opportunity?

Any negative reaction to change has a mutually dampening effect on management who think that it is great idea and much of the rest who immediately think that their jobs are at risk.

Dr Steve Peters, author of The Chimp Paradox says that the negative reaction is the "chimp" brain perceiving danger and going into Fight, Flight or Freeze mode.

These are perfectly normal reactions to a perceived danger but the question must be asked: "What in our communicating this change, still does not seem to mollify the people?"

The fact is that in any go-ahead business in a period of growth after recession will be initiating and implementing change throughout the business as a matter of course.

It has to be accepted that the dark years after 2009 have left a legacy of concern that change was more than likely to imply danger or a threat to the normal run of events.

Getting over that legacy is a major contributor to the need for the maximisation of engagement and involvement of everyone in the enterprise.

Tom Peters, that wise sage, said recently that excellent businesses do not believe in excellence, only in constant improvement and constant change.

Please note the use of the words "improvement" and "change" in the same sentence.

The fact is that foresighted leadership implies a consistent ability to see where sensible change can lead to improved performance so why not change?

In the same way that people resent having to achieve other people's objectives that have been imposed on them, so they immediately see danger in a process if change that they don't necessarily understand.

What then is the solution to this problem?  Management sees change as vital to the improved performance of the business but doesn’t communicate the need effectively.

There is no doubt that the more people are involved in the design of the change process, the more likely they are to subscribe to its success.

Please note: thus does not mean incentives, especially financial ones, but rather an involvement of people at all stages of the process so that what is being suggested is owned by everyone.

This may seem to mean a tortuous process of consultation but if it is designed properly it will speed the process of acceptance at all stages.

If people are involved in the process then they will feel the ownership and are more likely to ensure successful achievement.

Psychologist Frederick Herzberg said that factors such as involvement, achievement, responsibility and recognition are all positive motivators.

Demonstration by the leadership that the people are trusted to understand the problem and then to put forward valid solutions is a powerful motivator.

There is a route to the successful implementation if change in an organisation.  It starts with an understanding that changes at whatever level and for whatever reason would improve performance to everyone’s benefit.

Follow that with discussions at all levels to solicit the thoughts and opinions of those likely to be most affected by any change.

Remember that the operator on the shop floor is more than likely to perceive a need for change simply because he/she is close to the action while management is not.   
In fact proper use of that old chestnut, the Suggestion Box, can bring out all sorts of great ideas.

While that will not necessarily get over the occasional need for change to be imposed due to circumstance, it will contribute greatly to the general acceptance and hence the smooth implementation of change.

It leads to those most desirable of outcomes, renewal and regeneration, both of which are born out of mutual trust and a realisation that change is not to be feared but rather embraced, accepted and enthusiastically implemented.


"How many Jewish mothers does it take to change a light bulb?

None, don't worry about me darling, I don't mind sitting in the dark."

Download my book "Leading to Success" from Amazon Kindle
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Sunday, 8 February 2015

Do Your People Really Know Where the Business is Going? Try the Make or Break Method!

One of the biggest inhibitors to success as a leader, especially an SME leader, is an inability to push back against the daily flow of irrelevant and generally useless information that hits the desk and the devices.

One of our Vistage USA speakers, Herb Meyer, refers to the exponential growth in the availability of data with a corresponding inability to take it all in and to use it effectively.

He makes the point, very strongly, that there is now a vast amount of data that needs to be selected and appropriately filtered to transform it into information.

At this stage it needs to be considered, re-filtered, assessed and then re-issued as intelligence on which we can take action.

Because of the virtually limitless amount if data available searching and assessing it is no longer a purely management function.

It manifestly requires detailed and specialist treatment to derive a flow of relevant intelligence to assist the leadership of a business to make sensible and considered decisions.

Over the years I have encouraged members of my Vistage CEO peer groups to focus on that which is important, not urgent and to set, as far as possible, no more than four priorities for attention by the leader.

These priorities must be communicated to the top team and must be treated as sacrosanct; in other words nothing must get in the way of completion.

It takes considerable strength of will on the part of the leader to push back against upward delegation, against the flow of over intrusive irrelevancies and against hidden agendas.

So far, so good.  If the leader can achieve four genuine priorities each month then that would be a significant accomplishment.

However people being people there can always be a temptation to select easily achieved priorities so how about starting the process with this question?

“What is the ONE number or activity that matters above all else?”

To rewrite that statement, how about defining your absolute priority for the business as; “what is the one factor that can make or break the business?”

If you can achieve that commercial nirvana, the state of mind that transcends personal suffering and induces complete peace, then you are likely to have achieved even more.

Not only will you be focusing on what is really important for the business but you will also be closer to understanding the purpose of the enterprise.

The function of the leader is to keep that sense of purpose firmly in the consciousness if everyone in the business and to achieve the engagement of all the employees.

Harvard Professor Theodore Levitt used to say that if you don't know where you are going then any road will take you there.

People need to know the answers to two personally vital questions:

“How am I doing and where are WE going?”

The personal question is a matter of empathetic feedback for everyone in the enterprise and this needs to be delivered on a regular basis not left to the annual appraisal.

However the question which applies exclusively to the business and indeed all the stakeholders in it is "where are we going?".

It is the role of the leader to define and communicate the purpose and the objectives of the business over the short and long term.

That needs to involve the setting of four priorities for the business each month together with the overarching "make or break" factor.

To that needs to be added regular measurements of achievement communicated at all levels in the business.

Communicate those factors to the people in the business and see how the sense of engagement will be enhanced simply because people will feel personally involved.

Download my book "Leading to Success" from Amazon
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