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Sunday, 24 February 2013

Want to Build Lasting Relationships? You Need to Know, Like and Trust People!

My good friend, Tracey Murphy of HR Track (www.hrtrack.co.uk) is a dedicated networker and she has a little axiom that she uses to say that she likes to do business “with people I know, like and trust”.

That works for me.  It seems to encapsulate all that is good and appropriate in defining a relationship in business.

There isn’t, or shouldn’t be, any distinction in that statement between customers, suppliers, stakeholders, staff, community; in fact anyone with whom we are in contact during the normal business day.

It is worth picking it apart slightly to examine the specifics.  As far as customers are concerned the verb “know” is really significant.  Marketing methods have changed dramatically over the past few years and are still changing.  There is less face to face contact and this can be a problem.

The old methods of the blunderbuss approach with vast mailings no longer work as they did and in any case are becoming vastly expensive.  Far better to identify those companies with whom we want to do business and then work on them to build a relationship.

This implies a good deal of desk research which is comparatively simple these days to identify the important people in the target businesses, their size and performance record, product range, and so on.  What it means is that we can build a dossier about the company before actually meeting them and that is a great start in knowing them.

A stage further is the face to face meeting to develop that knowledge and to get a view on whether it is a business with whom we really do want to deal.  That is a start on the road to liking them which is, I believe, a vital component.  It may seem something less than businesslike but we are human beings as well as business people and we much prefer to deal with people that we actually like.

Suppliers are another case in point.  Why should we not develop relationships with them to encourage them to want to deal with us and to offer great service?  I recall a client (Richard) who was a manufacturer of electronic equipment and who held a suppliers’ conference every couple of years.

At one of these he made the point that he would prefer suppliers to refer to their components by his part number rather than theirs.  One of the suppliers stood up and said that their software system would not be able to do that at which Richard smiled gently and said, not to worry, that there was another suppler in the room who could do what he wanted so supplies would still be available.

That resulted in a very quick amendment to software and Richard had dual supplies which is precisely what he wanted.

A small thought.  There is no better way to develop a close relationship with a good supplier than by paying them on time and even early.  Your Finance Director might not approve but regular supplies from a trusted supplier can be lifeblood.

In the end, good relationships built over a period of time with promises being kept, good quality of the product and great service being given at all times will eventually lead to trust and that will be mutual.

Of course, the same applies right throughout the piece with whomsoever we come into contact.  Trust can only be developed in an atmosphere of visible and proven honesty and probity; a genuine desire to please and to fulfil needs with a consistency of approach which guarantees satisfaction.

It is not easy to reach this nirvana but the result is well worth the effort.  In the end, of course, we are talking about a consistency of values and culture which can only be driven into the business by the leader.

Why not start the process with a suppliers’ conference (and pay them on time)?
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Sunday, 17 February 2013

Some Team Members Being Mutinous? It’s Time for Confrontation!

A couple of cases recently have brought to mind the occasional need for leaders to be more assertive in their relationships with some people in the business.

Leaders need to be more assertive?  Are you kidding, I hear you say?

Not at all.  It is very surprising how diffident leaders in business can be when it comes to dealing with even slightly difficult members of the team.

First things first.  If the leader has an inclusive and collaborative relationship with senior members of the team which is always desirable, rather than any “top down” direction then that freedom can, from time to time, be abused or at least, tested.

If we give our people the freedom to express themselves, then we must expect occasionally for strange concepts and ideas to be expressed and sometimes forcefully.

Leaders need to lay down ground rules of behaviour which should be an integral part of the statement of values which underpin the whole of the ethos and culture of the business.

There is a fine line to be drawn between disagreement and outright mutiny.  We should welcome some disagreement from time to time because that will engender debate whereas mutiny implies entrenched positions which are unacceptable.

The two cases in mind are different but the answer is much the same.  In one case, the team member has started to express strong opinions about his role and responsibilities which are counter to the needs of the business and he is becoming a problem.  Focus on specific activities is what is needed, not a radical change in his functions.

In the other case, a small department which to some extent has legacy issues, mutely and deliberately refuses to do as the leader directs and visibly does what they think is required and what they obviously prefer to do.

There comes a time when the leader has to exert or at least assert authority for the greater good of the business. This can often run counter to the innate instincts of the leader and can lead to that often feared situation - confrontation.

It really is curious how many outwardly strong and confident leaders are reluctant to confront difficult situations and difficult people. Not surprising therefore that some situations can run on and on and get out of hand.

At some stage a solution is essential and only the leader can make that decision.  However, confrontation can be achieved in different ways primarily by assertiveness or by aggression.

My great friend and renowned speaker, Lynn Leahy, taught me long ago that there is a huge difference between being assertive and being aggressive.

Assertiveness assumes that instructions are given with respect to the feelings of the team member whereas an aggressive approach rides roughshod over anyone’s feelings just to get the job done.

What is required in both these cases is assertiveness, a firmness of approach which permits no discussion but only a change in attitude and an acceptance on the part of the individual of the needs of the business.

It is called “biting the bullet” or “grasping the nettle” and is a necessary and hopefully seldom needed part of the armoury of the leader. 

There comes a time, however, when it must be done and as  Shakespeare said: "If t'were done, t'were better done quickly".
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Sunday, 10 February 2013

Budget Time Coming Round? Try Dynamic Budgeting Instead!

Over the recent past I have been banging on about the value or otherwise of annual appraisals of team members as well as the danger of running the business metaphorically using the annual accounts.

It occurs to me that the value of the annual budgeting exercise also needs to be examined. First of all, what is the purpose of the annual budget other than the fact the auditors demand it so that they can report to HMRC (or the IRS) and the bank also likes (!) to see them?

If asked most business leaders would say that the budget gives them an opportunity to monitor performance against an acceptable and carefully crafted standard.

Oh yes?  The number of ways of devising the annual budget is as the sands of the sea and in many cases, just about as useful.

I have known situations where the budget was written by the finance department without any reference to activity; the numbers alone seemed to be far more important. 

In other cases the sales department has the honour and carefully assesses each major customer in an effort to guess what their turnover is likely to be in the year, and so on.

Having gone through that process with a former employer, part of a large conglomerate, we were told that the projected profit was inadequate and needed to be increased.  The helpful head office account suggested that we increase the estimate of turnover and reduce costs like, for example, marketing.

A very bright idea but we did as suggested and, lo and behold, the budget was accepted.  Sadly however performance was in accordance with our original estimates and far away from the amended version for which we were, to say the least, castigated.

“It’s your budget” they said: “Why are you not meeting it?”  Ah, the delights of corporate laned.

My old friend and Vistage speaker, the late and sadly missed Brian Warnes had other ideas about the value of the annual budget.  Brian had an interesting career leaving university to start life as a physicist. He then was commissioned in the Household Cavalry and did strange things as an intelligence officer.

On leaving the army he then retrained, for heaven’s sake, as an accountant. Perhaps because of his scientific training he rebelled against the tyranny of the annual budget which he described as generally being a “limp forecast of mediocre performance” and devised an entirely new concept which he called Dynamic Budgeting which was, to all intents and purposes, break even analysis.

Break even is calculated from the “five line P&L” which is:

Sales (volume and price) minus variable costs (labour and materials) = gross margin minus fixed costs = net profit.  For break even, fixed costs must equal gross margin.  Therefore to calculate break eve sales, divide fixed costs by the gross margin percentage.

The clever trick is to keep the break even sales below 75% of actual sales ad this calculation can be done weekly for example. It gives the leader a view of the trends so that if the break even percentage of sales is increasing, then action needs to be taken to increase the gross margin which is, after all, the true revenue of the business.

If this is on the leader’s IT system plotting both actual and break even sales on a rolling annual basis then it is feasible to keep a regular check on profit performance and make quick changes should they be necessary.

Annual appraisal v. regular one-to- ones?  Conventional budget v. dynamic budget?  I know which I prefer.

Read Brian’s book, The Genghis Khan Guide to Business (http://www.amazon.co.uk/Genghis-Guide-Business-Charles-Warnes/dp/0950943207/ref=sr_1_2?ie=UTF8&qid=1360330400&sr=8-2)  and change your life (or your Finance Director)
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Sunday, 3 February 2013

Are Your People Engaged? Take Action to Ensure That They Are!

The whole question of leadership in business revolves around relationships with our people and there are two primary criteria espoused by one of my Vistage members which are:

·       People

·       Communication

It says that we must have the best possible people in place, we must trust them, we must deal with them courteously and we must communicate with them in a mutually effective manner.

It is important, I reckon, to make sure that the business is not a “top down” organisation, with all the decisions being made by the senior team, or worse, by the top man/woman.  

Kenneth and Will Hopper, in their great book, The Puritan Gift www.puritangift.com extol those companies which involve their people to the extent th at they develop “bottom up” style of management.

Think on these things:

People cannot implement what they do not know - when strategy is implicit and not explicit

They do not implement properly that which they cannot understand - when strategy is developed in isolation

We do not implement that to which we are not committed - when strategy is imposed from outside on to those accountable

We give up on a strategy whose implications have not been anticipated - when the critical issues have not been identified in advance

Operational people are generally not good strategic thinkers - when they are excluded from the strategic development process!

People find it very difficult to hit a target they cannot see, or embrace aspirations which they don’t share or are not shared with them

All of this means that people must feel and, indeed, be involved (the currently fashionable word is “engaged”) and it can take a leap of faith to implement it.  

It all comes down to that emotive word “TRUST”.  Unless we trust our people and allow them to make decisions (and mistakes, as well), they will never feel involved and will always just be doers and not thinkers.

There are further implications.  If we rightly give our people the freedom to make decisions and to act on them then almost irrespective of the result it must be accepted by the leadership.

That can be difficult if the result is not to the liking of the leader but if we give people freedom then we allow them to act freely.

However, freedom should be given with some strings attached. The team member must be accountable to the team, the leader and the business for the decision, the subsequent action and the result.

This will need the three accountability criteria of Monitor, Measure and Evaluate. 

Monitor means that the team member must keep the team and the leader informed as to progress. Measure implies that some form of measurement should be evolved and again reported and finally, the whole project needs to be evaluated together to examine the detail of the success or lack of it and to learn from the experience.

Overall the whole process demands a “no blame” culture and that in turn demands great courage and understanding on the part of the leader.

People do make mistakes, the leader included, and very few of them are life threatening. 
The trick is to learn from them and make sure that the system will not allow it to happen again.
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