The “5″ P’s of Marketing

There are many misconceptions as to what is marketing and what it can do for an organization.  Marketing is best described as a process intended to increase the perceived value and to stimulate demand for a product. A product, in our case, will mean both a physical product and a service, which is then translated into revenues through the process of sales. For an organization to be as effective as possible, starting as early as the initial product design phase, it is important to consider how it plans to market its product,

Most students learn about marketing through an explanation of the “Four P’s of Marketing”, as first mentioned by E. Jerome McCarthy.  However, this article expands the discussion of the marketing viewpoint to include a fifth “P.”  These five P’s should be included in any discussion about promoting the organization’s products within a target market.  Our “five Ps” of marketing are:

1. Product
2. Price
3. Place
4. Promotion
5. Profitability

Product- A product comprises a physical item or service which an organization produces for sale to customers within a selected market, whether directly to consumers or through wholesalers/resellers, retailers, original equipment manufacturers (OEMs), value-added resellers (VAR), etc.  Factors that should be considered in marketing the “product” are the following:

• Form

• Functionality

• Quality

• Packaging

• Support

• Warranty/maintenance/repairs

• Branding

Form - The look and feel of a physical item or the description of a service.  How does the product look to the potential consumer?  If the intended consumer cannot visualize how they will benefit from the product at first glance, then the demand for the product must be generated from one of the other attributes of the product.

Functionality- How does the product function? What does it do? How does it do it?  How does the product benefit the intended customer?  How does the product surpass the functionality of that offered by the competition?  Marketing the functionality of the product is a key point in most campaigns.  If the form factor is not distinguishable from the competition’s product or service, but there is a difference in functionality, then a neutral form factor may not be a limiting issue.

Quality- How well does the product function or benefit the customer?  Is it constructed in a way that the customer believes it is worth purchasing?  Does the customer perceive that the service will benefit her?  Does the way it is presented give the prospective customer the feeling of a quality program?  Will the product hold up over time?  Can it be reused repeatedly?  Are the benefits of the service sustainable over time in order to make the expense worthwhile?

Packaging- Is the product packaged in a way that it catches the eye of the prospective customer?  Does the packaging reflect other attributes of the product (functionality, quality, benefits, price, etc.)?  Does the packaging design reflect the mission of the organization as well as the product attributes?  Packaging always should be considered as a piece of advertising for both the product and the organization.

Support- Customer support is a significant product attribute for customers.  The customer wants to know that he will have support if he should have questions or problems with the product.  Is there personal support through a toll free number?  Is there email support? How about the availability of a frequently asked questions (FAQ) listing? Is there a physical location where customers can go for assistance?  Often, customers will pay a higher price if they know they will have good customer support available.

Warranty/maintenance/repairs- In addition to support, how well does the organization stand behind the quality of its product?  How comprehensive is the warranty and what is the warranty coverage period?  How easy is it to return the product to have it maintained, or to return for repair or replacement?  Not mentioning these benefits may cause a customer to shy away from the product.  Assuming all other attributes are comparable, good warranties sell products. Repeat sales come from customers who have been treated well when products have problems.  How the customer is treated when a product fails may determine if that customer makes another purchase.

Branding- How recognizable is the name of the organization or product?  Is the organization or product logo recognizable to most customers?  How powerful is the brand? Can it create a market segment such as Kleenex, Coca-Cola, Google, etc?  When you need a tissue, do you ask for a Kleenex or do you ask for a tissue?  When you are thirsty, do you ask for a cola or a Coke?  If you are searching the Internet, do you say you are searching it or are you “Googling” it?  These are all examples of extensive branding efforts that have survived the test of time.  In order that customers ask for a product by brand name, the goal is to have a brand that reflects the attributes of the products provided by the organization.

Price- Product pricing should always be developed through the collaboration of many disciplines within an organization.  Make sure that the price established will generate adequate profits or returns to the organization after all expenses, including those costs required to produce and sell the product.  Pricing strategies are key issues when developing successful marketing programs and often consume much of the marketing attention in many organizations.  Pricing schemes should include, at a minimum, the following items:

• Base Price

• Discounting

• Discrimination Pricing

Base Price- The price the organization believes is a reasonable starting point for the market they are approaching. This is often called “suggested retail price” (SRP) or “manufacturer’s suggested retail price (MSRP).  The base price is the level on which all further reductions, for whatever reason, are based.  The base price should be at a level being anticipated by the market we are attempting to penetrate.

Discounting- Discounts are price reductions that are extended under defined circumstances.  The primary reasons for providing discounts are to increase the number of units sold or to stay competitive within a price-sensitive market.  A commodity-based market is an example of a price-sensitive market.  This is true because in a commodities market there are very little product function or feature differences between sellers, so the price is the primary differentiator.

There are many ways to provide discounts that are tailored for the purpose of stimulating sales:

- Volume discount-Offering a lower price based on the larger number of product units being purchased or the total dollar volume of the order (can be retail or wholesale).

- Seasonal discount-Offering a lower price for products that will not be demanded due to entering a new season, e.g., summer clothing sales in the fall..

- Bundle discount- Offering a lower price when a customer purchases more than one product at the same time.

- Special Pricing- Offering a special price is a form of discounting that is based on a particular circumstance.  Special pricing may be offered to an organization that partners with the selling organization to cross-sell each other’s products.  Also, special pricing may be offered in a co-branding agreement, which benefits both companies promoting their products or organizations into the future.

Discrimination Pricing- Price discrimination is the process of offering the same product to different customers at different prices.  Price discrimination is done every day, and the only time it becomes visible is when someone calls attention to it.  If an organization sells its product to one organization under the exact same terms as to another organization – but for a different price – it is practicing price discrimination.

There are dangers to the selling organization for treating the organization’s customers differently.  An organization that is exposed for using this practice may lose customers due to their dissatisfaction with this inequality of pricing.  There are state and federal laws that protect consumers and organizations from pure discriminating practices, and an organization may be subject to punitive measures if found guilty of willful price discrimination.

Place- “Placing the product” implies focusing on all of the distribution components required to deliver the product to the customer.  When it comes to placing the product, there are two primary issues that may impact an organization:

• Product availability
• The cost of moving product to each market

Customers do not want to wait for a product.   Instead, they want it is stock when they are ready to purchase it.  Furthermore, organizations do not want to pay a high cost to get the product to those customers.  To balance these two issues, there are four factors that come into play. These factors include:

• Transportation

• Warehousing

• Distribution

• Order/Inventory Control

Transportation- How are the products getting to the customer, to distribution centers and to warehouses?  Which form of transportation highway, rail, air or sea is the most cost effective to satisfy the needs of the market?  Shipping by sea can be the least expensive way to move product overseas, but it may take too long to replenish inventories from the customer’s perspective.  In many cases, there can be a combination of transportation methods used, such as sending by rail to a distribution point and then trucking to the customer location.

Warehousing- Storing products as close as possible to the greatest number of prospective customers is the overall objective of warehousing.

In order to satisfy customer orders, where is the best place to store product in the most cost effective manner while meeting customer demands?

Different products have varying warehousing requirements, e.g., heavy duty equipment, electronics, perishable goods, etc.  Organizations shipping product by rail may find warehousing requirements need to include being next to the rail-line or the availability of a rail spurs to allow for more effective material- handling activities.  Long haul trucking methods for moving product cross country may require warehousing near major interstate highways.

Distribution- Developing the best distribution channel for an organization’s product is important to how an organization will market its product and to what degree.  There are four primary distribution channels. They are:

• Direct- Selling direct to customers through company stores, catalog, Internet, door-to-door, etc.

• Agents- Independent individuals or groups may sell product on behalf of the organization to customers, distributors or retailers.  Agents usually do not purchase product from the selling organization. Generally, they take orders and the selling organization fulfills those orders and pays the agent a commission or other form of compensation.

• Distributors- Independent individuals or groups that purchase the product directly from the selling organization mark up the price for their profit margin and resell to the customer. Distributors are also called wholesalers or resellers.

• Retail- Retailers buy product from the selling organization or agents of the selling organization and sell directly to the customers.

Order/Inventory Control- The order/inventory control process is essential to ensure that product orders are properly handled through delivery to the customer and that adequate quantities of product are available to fulfill orders.  Use of real-time computer systems or Internet systems can provide instantaneous communication between customers and suppliers.  Orders can easily be tracked and customers can feel more confident that their orders are going to be fulfilled properly.  Inventory control systems work through the supply chain to ensure that components and finished product quantities are managed properly so that product is available when the customer places the order.

Promotion- Promotion is the process of communicating information about the organization and its product to target markets with the goal of stimulating demand and, therefore, generating additional sales of product.  Promotion represents several different forms of marketing communication.   Key factors within the marketing communications tactics are as follows:

• Advertising

• Sales Promotion

• Public Relations

Advertising- Advertising is the method used by an organization to publicize and position products to their target market, including product launches, image and brand building.  Organizations control the content, the target audience and timing for their advertising, all with the intention of reaching the greatest number of potential customers.  Forms of advertising include media (TV, Radio, Print, etc); direct mail, brochures, car/bus signage, bill- boards, handouts, web site/web networks and a direct sales force.

Sales Promotions- Sales promotions include several communications activities that attempt to provide added value or incentives to consumers, wholesalers, retailers or other organizational customers in order to stimulate immediate sales. These efforts are an attempt to encourage product interest, product trials, and purchases. Examples of techniques used in sales promotion include event sponsorships, coupons, samples, premiums, point-of-purchase displays, contests, rebates, and give-a ways.

Public Relations- Public relations (PR) consist of a variety of activities that are intended to promote a positive relationship or image with customers and prospective customers.  Image building and maintenance is the role of public relations.  Tools used include press release announcements, trade articles, charity events or contributions, and integration with promotional activities.

Profitability- The fifth “P” of marketing is Profitability, which is calculated as the sales price minus all costs associated with creating and selling the product.  What does marketing have to do with profitability?  Everything!  Marketing people must keep all their activities geared toward the primary goal of creating demand for and the selling of a product at a price that generates the profits planned during the earliest stages of product design.  All too often, marketing people are only concerned about sales, market penetrations and customer response.  However, if all these numbers are excellent and the product is selling below profit targets, the organization will miss its profitability goals.

How does marketing make such a miscalculation?  Occasionally, marketing has full authority for pricing and discounting.  If the product base price is not set correctly or if this base price is discounted improperly, then the end results are reduced profits.  There needs to be a check and balance with leadership to ensure that pricing contributes the correct and anticipated (budgeted) profit margins.

Often, promotion and advertising activities that were planned to generate sales are deemed inadequate; and, therefore, new programs are put in place and executed at a higher price without making a change in selling price.  The effect of this tactic is lower profits.

Whether the organization has a product or a service for sale, in order to be in the most advantageous position to convert prospects into customers, the marketing department must focus its efforts on Product, Price, Place, Promotion and Profitability.

The five Ps are the core disciplines to an effective marketing function within any organization.

Tags:business, change, cultures, Leadership, management, organizational basics, performance improvement, process improvement
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Marketing and Sales Differences

Marketing and sales are often used in the same sentence as though they were synonymous.  This happens frequently enough that many organizations structure these functions into the same department and cost centers.  Being combined in this manner is not a major issue for most organizations, as long as they understand the true functional differences between the two disciplines.  Make no mistake; there is a significant difference between marketing and sales.

In simple terms, marketing is described as the process of stimulating demand for a product or service.  A sale is the process of closing a sale, and I would add an important factor that is often overlooked as a part of the sales process. That is the collection of sales proceeds that are booked as revenues for the organization.  However, if the organization is non-profit, then sales is the process of closing on the contribution AND collecting the funds.  In many organizations, once the salesperson or team arrives back at the office with the signed contract, they consider that sale complete; and, it is then up to accounting to collect the cash from the customer or contributor.

Most sales leadership will say that sales should be selling, not collecting; and, they are correct in most cases.  Then again, if the customer or contributor does not follow through by paying the funds as agreed to in the transaction, who then has the best relationship with the customer or contributor? Accounting?  Doubtful.  No, it is the sales person who closed the transaction initially.  They should assist in the collections process if there is a need; after all, the life blood of any organization is cash flow, not signed contracts or donation pledges.

Marketing consists of a number of activities that are required to stimulate demand for a product or service.  Those are covered in detail under the marketing process titled The Four Ps of Marketing by Jerome McCarthy.

Going one step further, Arago Partners LLC has published an article which expands the description of the activities of marketing to The Five Ps of Marketing ( http://www.aragopartnersllc.com/documents/MarketingandSalesDifferencesPDF.pdf) .  The activities for stimulating demand for a product are the structural aspects of the product (design, feature, function, quality, etc.), the price, the placement, the promotion, and the profitability.  Each of these five Ps of marketing is an activity that must be developed, tested and launched in order for the sales process to most effective.  Of course, the sales process can proceed while all activities are being completed; but, they should all be in place to enhance the greatest level of effectiveness for the sales process.

As stated earlier, the sales process has the overall objective of closing the sale.  Closing the sale should mean the customer signs the contract or pledge and commits to the payment of funds to consummate the transaction under the terms of the contract or pledge.  So far, the emphasis of this article is to point to the differences between Sales and Marketing, and that primarily means the “closing of the sale”.  The close is the final step in the sales process, so let’s discuss the initial steps that lead up to the close.

The sales process is made up of seven stages:

• Leads
• Qualifying the lead
• Contact
• Presentation
• Handling objections
• Closing the sale
• Post-sale service

Leads- Finding prospective sales clients or customers can represent up to as much as 60% of a sales person’s time, depending on the market and types of products or services being offered.  Since Marketing has the objective of stimulating demand, if there is an effective marketing program in place, the availability of sales prospects should be adequate.  There are several proven techniques for finding prospects: referrals, networking, and lists.

Referrals are the best form of prospect gathering.  They are often from other satisfied customers and come with an endorsement from a satisfied customer, a certain amount of product or service knowledge and a certain level of commitment toward the product or service.  Always make sure to show gratitude to the appropriate customer for the referral.

Networking requires the effort to reach out to prospects, to introduce them to the products or services and to let them know where to learn more about the products or services.  Networking is most effective within associations, social networking groups, trade shows, publications, and events.  Cold calling is usually the least effective and least desirable method; but, depending on the market and product or service, it may be the method of choice.  One-on-one contact produces the most effective results but comes at the highest cost.  Relationship building on a personal basis will produce the greatest results over time, if the sales process is considered a marathon and not a sprint.

Lists can be purchased or developed; but, in both cases, they will contain a number of prospects who meet a profile that should be conducive to a sale of the product or service.  Lists can be developed as a result of doing a mailing, telemarketing, surveys, contests, a give-away, and follow-up from networking at large events.  There are several listing organizations that will sell a directory or list of names and contact information based on a desired profile.

A method for determining the effectiveness of a lead generation program is to compare its results to the Rule of 45, which simply states that 45% of all leads should be converted into a sale.

Qualifying the lead- Converting a lead into a sale implies that the lead needs to be evaluated to see if they truly are a candidate for the product or service, which, in turn, increases the probability of closing the sale.  This evaluation process requires a certain amount of information about the prospect to determine if there would be a demand for the product or service.

Are they in an industry that would have a need for the product or service? Have they shown interest in the product or service in the past, either directly or indirectly?  Would their operation need the product or service?  Would they have the financial strength to purchase the product or service? Are they similar to other existing or past customers?  All these questions are ways to qualify the prospect before taking the next step.

Contact- Either prospects will initiate contact or the selling organization will initiate contact with the prospect.  In either case, it is important to be prepared for this first contact with a plan as to what is to be accomplished.  The goal is to move the prospect closer to a decision to purchase the product or service.  An effective sales contact establishes a level of interest in the product or service and gains a commitment for a second contact. This can be either a face-to-face appointment or a second call with the potential to send out additional information about the product or service to be used during the second meeting.  As long as the prospect’s final answer is not an unequivocal NO, then the contact was a success and there is still an opportunity to make the sale.

Presentation- This stage provides the opportunity to present the pertinent information about the product or service that is thought to be of most value to the prospect.  All the reasons why the prospect should want to purchase the product or service should be explored during the presentation.  Highlight the strongest benefits of the product or service as well as the potential cost savings or ability to generate greater sales by the prospect.

Show how the prospect can better compete in its marketplace due to the benefits of the product or service.  If the presentation is a telephone call, try to send materials in advance of the call so that the prospect can follow along with your presentation while on the phone. If possible, tailor the presentation to the culture of the prospect.  If they have a casual culture, then do not prepare a long, formal presentation.  Just use talking points and brochures/catalogs that can be referenced by the talking points.  Make sure to rehearse the presentation, try to anticipate any objections, and be prepared to convert the objections into positives.  If the presentation is in person, arrive 10-15 minutes early, dress professionally, know who you are meeting with as well as their direct contact number, and provide handouts of the presentation materials. If applicable, bring a sample product, demonstrate it, and be prepared to make a follow-up appointment before leaving.

Handling objections-There will be objections during the sales presentation.  The handling of these objections in a positive manner can still lead to the sale.  It is important to address each objection head-on.  Objections often point to a lack of understanding by the prospect, and their objection is a way to show they need more information about your product or service.  A few proven techniques for handling objections are as follows:

Ask the prospect to explain their reasons for not wanting to purchase the product; take notes in order to be prepared to address these issues.

If the prospect is incorrect, carefully show the facts about the product that would refute the prospect’s error. Do not say “you’re wrong”, as that will put the prospect on the defensive and bring the conversation to a quick negative close.

Paraphrase the prospect’s objection to make sure you understand their position, soliciting a confirmation from the prospect that you have the correct understanding of their objection.

Closing the sale-This stage separates marketing from sales.  Closing a sale requires a prospect to commit to purchase the product by signing a contract, issuing a purchase order and or making a down payment.  Verbal commitments should not be considered closed sales, no matter how strong the relationship with the prospect.  Sales should be considered closed once the revenues are booked on the selling   firm’s accounting system and the prospect begins making payment, either partial or in full, for the product or service.  There will be signs during the sales process that indicate the prospect’s readiness to purchase the product. Here are a few to look for:

• They ask about specific price, terms, warranties, availability.
• They ask about options and features, especially if customized to their application.
• They request a sample or trial of product or service.  Make this a condition of the sale and make it available once the sale is closed.
• They discuss customer support.
• They ask for references from satisfied customers.

To help the prospect come to the decision to purchase, try the following:

• Incentives can help, whether in price, feature, service or delivery.
• Trials of product or service as a condition of a sale.
• Walk through all the positive reasons the prospect has already mentioned that the product or service is good for their situation.  Make sure to keep a list during the sales presentation, so it can be used at this stage.
• Ask them for the sale.  “We want your business. You understand the benefits of our product or service to your organization, so let’s get your order entered.”
• Fight through the objections until either the prospect declares unequivocally that they do not want the product or they move forward and enter an order.

Post-sale service-The only way to insure future sales to an existing customer base is to make sure they receive the services that they expect.   Long-term relationships built upon positive service results increase the potential for additional sales from existing and referred customers.  Referral prospects provide a much lower sales cost, because they come already interested in your product or service as a result of the benefits they have seen from the organization referring them.  That existing customer has done most of the “heavy lifting” of the sales process and now the closing process is all that is left.

Post-sale service is most often neglected by organizations and is one of the primary causes for unsatisfied customers and loss of future business.  Organizations invest heavily in marketing and public relations to promote their product and organizational image, all for the purpose to increase sales or donations.  Yet, if the post-sales services are not maintained in a positive fashion, then those investments are not likely to produce the desired results.

Marketing and Sales are very much aligned in the purpose of increasing revenues for most organizations, but they clearly are different functions, requiring different skill sets and strategies.   Another way to look at it is marketing hooks prospects and sales lands customers.

Tags:business, change, Leadership, management, Operations, organizational basics, performance improvement, process improvement
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STEPS TO BECOME A MORE SUCCESSFUL PERSON

You are a success ….

….IF you are able to look within yourself and realize that you are the only one who is responsible for yow you feel about yourself…

….IF you realize that others may hurt your feelings and that life may be cruel at times, but realize that how you react to these situations and how you let them impact your feelings about yourself, are all within your control.

….IF you can achieve the goals you have set for yourself…Let your goals be the things that are truly important to you and not the things that someone else may think are important for you…Keep your goals current to your needs, And…Keep focused on them always.

….IF you can try to leave the world a better place.

….IF you can appreciate the simple things in life and pass on your wisdom to those closest to you.

….IF you can appreciate the simple things in life and pass on your wisdom to those closest to you.

….IF you can realize that life is to be lived and not just endured.

….IF you have the faith and strength to go forward when life seems darkest.

….IF your smile is contagious to those around you.

….IF you look for the benefits in every situation, for that is how we learn.

AND

….IF you can laugh, cry and show unconditional love with those closest to you when they need you most.

Tags:business, change, Leadership, management, organizational basics
Posted in Success/Careers | 1 Comment »

“You Get What You Pay For”-Rewarding Incorrectly Will Hurt You!

Most organizations will say they reward “results”, yet that is not necessarily true.  Organizations establish a formal or informal process to incentivize their workforce to achieve a desired level of performance.  Depending on the size and culture of the enterprise, this compensation plan may include all employees, just management or something in between.  All such plans establish some target or metric that the company measures in order to determine if the plan’s thresholds are achieved or not.  The establishment of these metrics is where the error usually occurs, which truly hurts the overall performance of the company.  The metrics will fall into one of three categories; Intentions, Actions and Results.

Intentions-These are deliverables that are planned to be delivered in the future.  This is the weakest of all metrics.  It is difficult to see how an organization could build a compensation plan around rewarding for nothing more than “hope”.  Yet, many corporations reward senior management for just that, “they had great intentions”.  We even re-elect politicians based on their “intentions”, and we seem to accept that metric over and over again.  I am not sure why?  If you want to grow a culture of discontent within your company, reward your management for intentions.

Actions-These are deliverables that are focused on activity.  An associate of mine uses the tag line “doing=1/2 done”.  One of my favorite sayings is “don’t confuse efforts with results”.  Rewarding actions or effort is a way to move initiatives forward, but not a way to get them done.  I can see a compensation program that would breakdown a larger project into steps or stages, and reward based on the number of steps completed, but there are very few other examples to support rewarding actions.  Rewarding actions will not hold the workforce accountable for the end result, yet there are a large number of organizations that do just that; reward the starting of something, but not the completion of it.  Unfortunately, it appears many governments (local, State and Federal) seem to have adopted this method for rewarding their agency officials.

Results-Results are definite deliverables.  These are usually dates, dollars, ratios, numbers or other such “objective” measurements.  They are tangible events that can be tracked and measured.  Compensating your management and workforce based on results will provide a greater level of accountability to your company.  Without accountability, the enterprise will aimlessly move forward in a manner much like a sailing ship without a rudder.

Tags:business, change, cultures, Leadership, management, Operations, organizational basics, organizations, performance improvement, problem solving, process improvement
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Shifting From Accountability to Entitlement-Whose fault is it?

I recently read an article about the shift within corporate America from a workforce that expects to be held accountable, to a workforce that looks for entitlement.  Why should we even be concerned with this shift?  We should be concerned since a growing level of entitlement within our population is having an impact on the level of productivity found in the United States workforce.  In my opinion, there are several reasons for this shift.  A few key reasons for the shift to an entitlement attitude are Diluted Leadership, Unionism, Executive Compensation Levels and Government Growth.  Let’s explore how these factors are contributing to this severe problem for the corporate America:

Diluted Leadership-Unfortunately I’ve noticed a decline in the level of “Leadership” in the US over the past few decades.  Too often, C-Level executives are more concerned about their own careers and compensation than the overall performance of their corporation.  Political Correctness continues to be a filter used before decisions are made and actions taken.  These diluted leaders are not leading.  You don’t find them rolling up their sleeves and taking a position in front of their company, saying “follow me”.  No, they are behind closed doors, sending out others to experiment with their plans, and if successful, then they surface to gather the spotlight.  I like to call these diluted leaders “empty suits”, and there are many major fortune 1000 companies that have employed these empty suites.  True leaders set attainable deliverables and hold everyone accountable to the process of reaching those deliverables, even themselves.   They are not afraid of holding themselves and their executive team to the same levels of accountability as they do the rest of the workforce.

Unionism- Although this may not be popular with unions and some union members, I believe that most unions have outlived their original purpose and are not providing constructive benefits to their members.  There are certain  skilled trade unions that maintain standards and require continuing education to upgrade the skill level of their members, but a vast majority of unions go far beyond that objective.   For example, anytime a union recommends a strike to its membership, and goes as far as to whip them into a lather to carry out a strike, I believe it has gone beyond its usefulness to its members, the companies employing their members and the economy.  My experience with unions over the years has convinced me that no one wins when a workforce goes on strike.  The enterprise loses momentum and both the company and the union members are often unable to recover from the financial losses they incurred,  possibly for several years.

Unions can promote an unhealthy level of entitlement within their membership.  Ironically,  if there was true corporate leadership (not diluted leadership) within more companies, unions would be less popular.

Executive Compensation- Nothing leads to the heightened level of entitlement thinking in a company more than an unreasonable level of executive compensation.  A few research studies that I have read state that over 75% of the fortune 500 executives receive over 400x more than the compensation of the average American worker.  European and Japanese executives have been reported to receive approximately 130x and 40x  their respective average workforce compensation levels.  When a workforce sees under-performing executives receive bonuses or exit packages in the $millions, it is difficult for the non-executive workforce to be understanding when the company then claims that they do not have the finances to compensate the average workforce more fairly.  The crux of it is that although the general workforce may actually be compensated fairly, because the executive levels were compensated so unreasonably high, a sense of entitlement and discontent grows within all levels of the company.

Government Growth-Governments at all levels, Municipal, State and Federal are growing.  One study recently reported that approximately 25% of the total US workforce is employed by government or governmental support organizations in one way or another.  Despite good intentions, governmental organizations have never been shining examples of efficiency and effectiveness.  A growing number of workers are searching out government positions because the job security and benefits are generally higher than the private sector, often with fewer required work hours-further fueling the entitlement attitude. Less accountability, union protection, lower levels of accountability, political filters applied to performance and a “don’t make waves and you’re safe” culture is a toxic breeding ground for entitlement attitudes.

Personal comments: My fear is that we are slowly following in the footsteps of the European Union.  In the book Mind Set! (John Naisbitt), he states that the European Union leaders commited themselves to creating “the most competitive and dynamic knowledge-based economy in the world by 2010″.  What have they accomplished since that commitment;  Higher taxes and bigger governments, less innovation, slower productivity growth, restrictive labor laws and declining export market share and rising protectionism.  Naisbitt further states “Europe is increasingly losing ground in trying to become the world’s economic driver, because it dearly embraces what one of its famous sons, Sigmund Freud, wrote: “It is easier to suffer than to act.” The EU countries all have a strong culture of entitlement which is part of the reason for their anticipated shortfall for 2010.

Tags:business, change, cultures, Leadership, management, Operations, organizational basics, performance improvement, problem solving, process improvement
Posted in Operations | 2 Comments »

Seven Ways a CEO Can Hurt Your Organization

There are organizational leaders that are what I call “empty suits”.  They look the part, they sound like they know what they are doing, they have impressive resumes, and yet their track records for organizational results are mediocre at best.  Years ago, there was an article (author unknown) that outlined the characteristics of Chief Executive Officers who were unable to help their companies reach set objectives in spite of the positive accolades for their hiring.  The article was written to open the eyes of Boards of Directors, who are responsible for hiring and managing CEOs.  More recently, much has been written about the less than stellar performance of many CEO’s and the devastating impacts on their companies.  I have updated the original article by adding certain characteristics that I have experienced which further defines the seven points.  The presence of any one of these seven points should be enough to cause concern to the Board, and any two or more should be enough to cause a Board to take corrective action. I offer up the “Seven ways a CEO can hurt your organization”.

1. Poor Leadership
   • Lacks the confidence of key personnel
   • Hires/retains weak people in key positions or fails to fill key roles
   • Fails to grow/retain successor(s)
   • Focuses on their personal benefits, not those of the organization
2. Poor Vision
   • Lacks clear understanding of where business is going
   • Lacks focus on organization and priorities
   • Is unable to strike key partnership relationships
3. Poor Results
   • Has major and sustained poor financial performance or missed targets
   • Shows major loss of market share or competitive position
   • Is unable to forecast timing/nature of recovery events
   • Is more concerned with being “politically correct” than attaining measurable results
4. Poor Understanding of Business
   • Misses key industry trends and changes
   • Lacks understanding of fundamental profitability factors
   • Cannot crisply define what it takes to win
5. Poor Work Habits
   • Does not put heart and soul into business
   • Sets bad example/role model for others
   • Is not viewed in industry as a key player
   • Hoards information to increase power base
6. Poor Management Style
   • Uses the “demand and control” management style
   • Allows top management infighting, not working as a team
   • Demonstrates unpredictable decision processes, leaving organization too scared to act
   • Starves key programs but spares sacred cows
7. Poor Board Candor/Communication
   • Controls flow of information/agenda, preventing focus on or sufficient time for critical issues
   • Does not allow ready access to VPs and other key individuals
   • Keeps favorite non-strategic programs or perquisites out of board review and approval process
   • Loads the Board with special interest persons/cronies

Tags:business, Leadership, Operations, organizational basics, performance improvement, problem solving
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Full Service Professional Organization Failures: Why?

Full Service Professional Organization Failures:  Why?

Professional organizations spend a great deal of time and financial resources advertising that they are full service; yet, I continue to find customers that are very dissatisfied with the services they receive.  Relying on good faith and advertising claims, when selecting a full service Professional Service organization to support your needs, is not always enough to ensure satisfactory results.  Here are a few thoughts to keep in mind.

The Deception

The deception, intentional or not, is that professional organizations advertise and represent themselves as being “full service” when they are not; at least not to the degree that the client expects.  Examples of professional organizations that represent themselves as being “full service” are those entities that provide legal, accounting, investment, banking, insurance, engineering, and/or a variety of other consulting services.  In most cases, these service providers are extremely professional, highly skilled and ethical.  The client gets short-changed, however, when the service they need is a subordinate skill within the full service provider.   The client receives results, but not to the level they expected based on the description that the “full service” provider promised. Why is this happening?

Hasty Diversification

Service Providers need cash flow to operate like any other business.  Diversification is a way, if done correctly, that they can expand their revenue base.  Those Service Providers that hold true to their core skill-set usually maintain exceptional customer loyalty.  Those who diversify too quickly, into sectors they are not highly experienced in, run the risk of upsetting customers, losing business and ultimately suffering revenue losses.

When a Service Provider decides to diversify, it is important that they seriously consider and evaluate the risks associated with moving away from their core skill-set and operating culture. Often, when a firm diversifies, they choose not to make the financial commitments that are necessary in order to go first class.  They instead put their “service toe” in the water to test the “revenue” temperature, before making a true commitment (i.e. allocating finances for research, training of existing employees and/or hiring experts) to the expansion.  In the meantime, they advertise and prematurely represent themselves as “full service”.

Unfortunately, this is a common scene for many struggling companies. There are accounting firms that offer bookkeeping, tax, insurance, investment and retirement planning services. There are banks that offer banking, planning, investment, and retirement products.  There are legal organizations that offer a wide array of legal services (personal, corporate, wills/trusts, real estate, etc.) and business development services.  There are sales/marketing firms that offer marketing, web development, social media advertising, branding, graphics, and customer care support.  Each of these companies may spread themselves too thin with hasty diversification. They all have a core skill set and operating culture that made them very proficient in a particular area, but not in all.  So what to do?

Know that “Full” Service may not be synonymous with “Fully” Satisfied

As the prospective client, it is your responsibility to select the Service Providers that meet your needs.  You may not need the “world class” provider, but you want to make sure you have selected a firm that will leave you fully satisfied with the results you receive.  Here are a few steps you can take to improve your chances of receiving the services you need:

• Look to referrals from trusted colleagues that had a similar need and were satisfied with the results.
• Ask your other Service Providers for a referral.
• Regardless if a referral or not, provide the prospective firm with a detailed, written requirement of the services you need and the results you expect to receive.
• Interview the principals whenever possible.
• Ask detail probing questions about “how” and “who” will perform the service you are requesting.
• Ask if they provide frequent progress reports as to the status of your project.
• Have a written contract that clarifies the deliverables in detail.
• Don’t be afraid to question unclear situations or statements—YOU ARE IN CHARGE.
• If along the way, their weaknesses surface, try to get them back on track. If you are unsuccessful, don’t be afraid to terminate the relationship and move on.

Most enterprises gravitate to the “Full Service Provider” out of convenience.  They do not want to take on the role of a “general contractor” that works with multiple Providers offering separate skilled services.  This approach may initially require more time and energy, but long term it may also save you money (in fees and delayed revenues) and provide more desired results.

Tags:business, change, cultures, Leadership, management, Operations, organizational basics, performance improvement, problem solving
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Organizations-Playing Offense or Defense

Organizations in today’s economic times are either playing offense or defense, whether they know it or not.  What determines which style of play?  Cash or operating capital availability.  With the credit markets shrinking, cash on hand has become a significant criteria for survival and the opportunity for growth.  Those organizations that have lived from month-to-month off their line of credit are now in trouble.  Those lines of credit are being reduced or foreclosed on due to a lack of payment.  Organizations that have kept their on hand cash balances in proportion to their debt have a chance to survive the current slumping economy.  The organization that maintained a healthy cash position now have a chance to take advantage of that strategy and take advantage of great bargains on asset purchases, merger/acquisitions with competitors, product development, etc.  Everything is discounted, and if you have the cash you can make short term deals that will multiply in the long run and make your organization more successful.

Tags:business, change, cultures, Leadership, management, Operations, organizational basics, organizations, performance improvement, process improvement
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The Importance of Cash Flows to Your Enterprise

It should be obvious, but unfortunately, it is not for many organizations- “Cash is King”.  Especially in a downward business cycle or extended cycles called “recessions”.  Cash levels will determine if your organization will operate offensively or defensively.  Just because you have profits does not mean you have the cash needed for your operating capital needs.  Profits look good on the Profit & Loss Statement, but are no true indication of the financial strength of the company.  An organization can be “profit rich” and “cash poor”.  Having cash provides many opportunities to make short term changes and purchases that will produce significant long term benefits. The influx of cash from debt or equity clearly come with strings attached, and in downward cycles, these actions may have severe consequences when there is a shortage of cash to repay loans or meet the terms of financing, which puts the organization on the defensive or unfortunately even “out of operation”.  Leaders should always insure that cash collection is a priority to the organization no matter what business cycle you are experiencing.  Resist the temptation to spend cash on activities that do not produce a positive ROI (Return on Investment) for either the short and long term, or both.  Four “quick” strategies for increasing cash; reduce spending, accelerate the collection of account receivables, renegotiate or slow the outflow of accounts payable payments, and lastly, increase revenues.  No magic there.  What is usually forgotten is that the organization does not have a plan or processes to work these four strategies.  Make sure everyone in your company understands the importance of cash flow to the ongoing operation of  the enterprise, and spend quality time creating a cash flow plan during both growth and declining times; Having a plan, awareness and a commitment of the entire organization, and you have improved your chances for sustainability.

Tags:business, Leadership, management, Operations, performance improvement, process improvement
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Layoffs-think before you act

During these times of the recession, most management start cost cutting by laying off employees.  This may be a mistake, depending on the knowledge level needed for your product or service.  Consider lowering payroll costs through eliminating or deferring bonuses, salary annual increases, reducing contract labor, reducing salaries across the board (management first, then other employees); if you have to let permanent employees go, consider restructuring the organization, eliminating management first, flatten the organization and reallocate employees to other areas of the company and establish a mentoring program to support those taking on new responsibilities.  A JOB AT A LOWER SALARY IS USUALLY LOOKED UPON AS BETTER THAN NO JOB AT ALL.

The recession is short lived in comparison to the damage that management can do if they do not handle the down turn correctly

Tags:business, change, Leadership, management, Operations, organizational basics, performance improvement, problem solving
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