Suggestion: To most non-financial individuals, the terms profits and cash are used interchangeably, which is incorrect.  The phrase “cash is king” is very true.  Let’s help to find where cash is likely hiding.

1.       Accounts Receivable:  Collecting owed revenues is one of the more common places to find cash.  Make sure you monitor the aging of your accounts receivable and be in contact with your customers to ensure they make payments on a timely basis.  You can incentivize them by offering discount terms on existing or future purchases for paying sooner.

2.       Inventory:  Inventory in raw material or finished goods is nothing more than cash setting on the shelf.  The fewer the inventory turns (gets sold), the more cash you have spent but have not converted into revenues.

3.       Scrap/Rework: If you’re a manufacturer/assembly company and have a higher than normal level of scrap or rework of material/product, you are taking inventory that should be converted to revenue, and turning it into an expense and impacting cash.

4.       Prepaid expenses:  If you have an expense that you have prepaid in order to benefit from discounts, you have traded current cash for future cash.  The benefits may be worth the trade but if you’re short of cash, it may not be worth prepaying.

5.       Accounts Payable Discounts: Suppliers and vendors want their cash position to be healthy and often are willing to provide discounts if their invoices are paid in a more timely manner.  Not taking advantage of these discounts is leaving cash on the table that could be in your checking account.

These five areas are just the more obvious areas where tangible cash can hide.  One of the largest and most subtle cash hiding places are found in low productivity. In most companies, the labor force is one of the largest uses of cash.  The more productive the company, the sooner and more cost effectively the product can be converted into revenues (cash).

Let us know your thoughts about where you have found cash hiding in your organization.

Bulletin:  Tools are instruments used to assist in getting a result.  Tools by themselves do not get the result unless they are in the hands of a knowledgeable user.  Here is a tool to help get to the core of a problem;

The tool is called “WHY”.

This is a multiple function tool that can help anyone get to the key issues causing a problem so that it can be resolved effectively.

Function One; Use WHY in the form of a question when someone brings you a problem and use it until you cannot use it any more.

Example:

My car won’t run.
WHY?
It won’t start?
WHY not?
When I turn the key, I just hear a clicking sound.
WHY do you think it clicks?
Maybe it’s the battery.
WHY do you think it is the battery?
It has been taking longer to start the past several weeks.

Result: Start by checking the battery

Function Two: Use W.H.Y as an acronym to help to prompt the questions that need to be asked when searching the core issues of problems;

W-What is the problem?
-Gather as many symptoms as possible.
- Create a detail description of the problem

H-How do you think it happened?
-Gather as many possibilities for the cause of the problem as possible

Y-Your action taken so far?
-Gather the actions taken and results of the action taken (in great detail)

It’s a process of elimination once the information is gathered using the WHY Problem Solving Tool.  Some resolutions will be obvious and others will be more obscure, but keep asking WHY and probing with the What, How, Your Actions and you will get to the core of the problem more efficiently.

Getting to the core of any problem is key to a timely resolution.  Using the WHY tool is one way to approach the situation.

Let us know which problem solving tools you use!

Here are a few suggestions:

Recognize that Mo has left.  Productivity and morale are down, innovation is marginal, the organizational energy level is flat, and status quo is the theme of the day—Mo has left the building.

Accentuate the positive. It is much easier to focus on negative events or results than on the positive, but if the recognition received is punitive based on negative results, the only motivation to improve is fear.  Fear and money are the two most commonly used motivators and are both very short term.  Find results, activities, events, and actions that are positive to the organization and its stakeholders and make them public.  They don’t have to be large; they just have to be positive.

Reset short term goals. If the organization’s goals are too long term or unachievable; that will open the door for Mo.  Review the short or mid-term goals and make sure they are achievable.  New targets that are clearly doable can rejuvenate an organization.

Cross train wherever possible.  Setting up a cross training or mentoring program will create greater benefits to the organization and the workforce.  The company has a more effective workforce and the employees have expanded their knowledge and skill levels-that’s a win-win.

Innovate, innovate, and innovate. Focusing first on the product or service to innovate may cause you to lose more Momentum.  Why?  Because it is much harder to innovate something that is driven by market acceptance, development timelines and competition with existing product investments.  So where do you innovate?  Don’t look at just what you produce, but look at how you produce it.  Innovate internally by looking at your back office processes, how you work with suppliers, how and what you communicate, by streamlining the work flow between activity centers, etc.  Create a new organizational mindset that focuses on making it just as important to innovate how you produce as it is to innovate what you produce.

These were just a few ideas to get you thinking.  Let me know your ideas and we can collaborate on helping others.

Managing a business requires a broad set of skills and attention to all parts of the business. Many CEO’s are good at making or selling “things” (goods and service offerings) but some don’t spend enough time monitoring the overall health of their business. Keeping close tabs on the performance of the business is critical, particularly as our economy works its way through this recovery. The easiest things to monitor are sales and cash in the bank, but that is only part of the picture. Positioning the company for growth requires additional effort to understand and monitor not only sales but also those activities that impact profitability and cash flow.  A key to successfully growing the business is identifying a set of key metrics that provide the visibility to help chart the course for the company’s growth, let’s review “What to Measure:”

Margins - The first step is to understand your gross profit margins (sales minus cost of sales). Begin by segmenting sales into groups of products or services that are similar, such as product families. Segment the cost of products and services into those same groups or product families. This will enable the monitoring of margins by product family and make decisions about pricing and position you to monitor costs in each product line.

Expenses – Next, monitor those costs that create and market the products and services, such as research and development, marketing and sales expenses. To the extent possible, group the costs to design and market products so that those costs can be compared to the margins generated by the sales of those products to facilitate decisions about continued and new investment.

Receivables – Once the products and services are sold and the quicker the receivables are collected, the sooner the cash is available for supporting the business. Speeding collections starts with taking orders accurately, invoicing correctly and following up with customers to ensure that all steps have been done by the company to support the customer’s approval process. Measuring these key steps will help reduce issues and speed collection resulting in better cash flow and reduced write-offs and increased profits

Inventory – If the company creates or buy products for resale, measure how quickly the overall inventory turns (inventory used or sold), and if the company has a process that supports it, measure how quickly groups of inventory turn. Every dollar tied up in inventory is a dollar in cash unavailable for other operating needs.

Operations – Look for operational metrics such as employee counts, number of hours billed, square footage, etc. Besides looking at those operational metrics, try to combine financial metrics with operational metrics to provide a fuller picture of the business.

Measurement steps – Create a scorecard using a spreadsheet or by purchasing a scorecarding product. In either case, look for a balance between the level of effort to collect the data and the frequency of providing the information. Start at a higher level of information and keep it simple. Add more complexity as additional areas are identified that warrant more analysis. Look at the trends in the metrics over several years to get a big picture view about where things are improving and where attention is warranted. Also, check with the bank to get industry standards so that a baseline can be established for comparison purposes.

By frequently measuring the important trends in any business the management will be in a better position to control the growth of the business.

I use to discount that response, “but we are different”, because I knew that they were not different when looking at the “required” activities needed to correct their situation.  However, after many years of working on many different operating and performance challenges for organization, I have come to the conclusion that they probably are different, but how?

Like people, organizations are like “snowflakes”, no two are exactly the same.  Even identical twins are not identical in every way say clinicians.  Why would an organization be treated as if it were the same as another?

Have you ever seen two organizations with the same exact cultures?  Cultures evolve over time based on leadership influences, operating practices, environmental factors, and results (positive or negative).

Have you ever see two organizations with the same exact operating processes?  Operating characteristics are created from external influences and proprietary methods and practices that have proven to generate the results required by the organization.

Have you seen any two organizations treat their customers in exactly the same way?  Customer relationship management is not a computer system, but a reflection of the respect that the organization has for their customers, and the customers respect they have for the organization and its products or services.

So what is the significance of knowing that no two organizations may be the same? It is important NOT to prematurely classify a company or its workforce as having the same issues or initiatives as others that may be in their same market, industry or organization type.   This means internally and externally to the enterprise.

If you’re a CEO, don’t make the mistake of trying to clone your new assignment into an exact copy of your previous assignment, no matter how successful you were.  You have a new environment that may need changing, but your success will depend on how you integrate new activities with the existing operation and culture.  It all takes time and patience.

If you’re a sales person, you better do your homework on the prospect and not assume they are like your last sale, they are not.  Your techniques may be the same, but their need for your product or service will probably be for different reasons than you last client.  Get to know them, understand them and serve them—then you will have a loyal customer.

If you’re a vendor or supplier, don’t assume that your customers require the same type of service.  They may require the same level of service, but delivered in different ways.  Your objective it so know them well enough and to care enough about them to meet their requirements for uniqueness.

No matter what your connection is to an organization, do not overlook the importance of having a trusted relationship with that organization.  It is this trusted relationship that will make that connection between the organization and yourself a more successful one.

I see four areas of failure that have an impact on organization because they are unsure of what the future holds.  Looking out into the future trying to predict what actions to take, without keeping focused on the near term, the organization may encounter four key failures:

• Failure to execute
• Failure in focus
• Failure in confidence
• Failure in trust

Failure to execute is an issue during both certain and uncertain times.  If the organization cannot translate their strategies into tactics and act on those tactics, the organization will continue to operate on daily activities as they occur (Parkinson’s Law), whether or not they are the correct actions.  Execution goes beyond planning and strategizing, it takes a work plan and a willing workforce to implement the plan.

Failure in focus comes from being so concerned with the unknown, that there is a paralysis of the leadership and a shortage of direction.  This inability to chart a course and take action is a symptom of an organization that is unwilling to take risk.  The enterprise will move forward, but the wasted resources from a lack of direction can take a lasting negative financial impact.

Failure in confidence points to the level of uncertainty experience within the organization.  If financial strength is an issue and a lack of focus, then the confidence that the direction will produce the desired results is weak.  Without confidence, risk becomes a major issue that cannot be easily overcome.  If a lack of confidence lingers, it can have a long term impact on the organizations culture.

Failure in trust causes operating activities to slow and the cost related to wasted resources to rise.  Internally this factor shows up on inter-departmental turf wars and office political power plays.  Externally the impact is a lack of cooperation, delayed deliveries, incomplete communication and an increased reliance on contractual measurement of performance.  The end result is a lack of cooperation and performance.

Look at these four failures as the trees and the level of uncertainty as the forest.  Knowing how to see the benefit of focusing on the trees will make the forest of uncertainty much less daunting.

Advertising does not build relationships, it only hopes to influence the moment and convert those few seconds into a buying decision for a product.  Word of Mouth (WOM) is the best and most reliable method of promoting a product.

A Testimonial from one person to another brings with it a level of positive bias and a tested experience. These endorsements or referrals are provided from one trusted person or company to another.  It is the trusted relationship that makes the recommendation more credible.

Word of Mouth (WOM) relationship building is growing rapidly due to wider use of social media applications (e.g. blogs, facebook, myspace, twitter).  How can your company use a WOM approach to expand your loyal customer base?  I am working with an organization that has some new and innovative ways to use this technology to help businesses grow – I will be writing more about this approach next month.   To provide a little more introduction and background to WOM, I am offering you a FREE look at an e-book that is the first of a series on how to use digital applications to expand your presence in your market.

Click here for your FREE eBook access: http://wom10.com/Pages/business-tools-book

PR if done correctly can be a game changer for an organization.  PR can also backfire if not taken seriously and can have a negative impact on your image with prospects, customers and your industry.  I recently read a blog post on bNet that outlined the 10 Breakthrough PR Techniques from a Master. The interview with Lou Hoffman, President and CEO of Hoffman Agency, provides an excellent set of techniques and examples of how to use PR to maximize its effectiveness.

Click here for the interview:  http://blogs.bnet.com/ceo/?p=3620&tag=content;col2

What are your experiences, positive or negative, with PR?

Here are five common reasons why new products fail:

1.  Lack of market knowledge- Whether a company is new or established in a market, a common mistake is underestimating the impact of market change.  Markets change for a variety of reasons, and if a company does not stay connected with their market, they may begin operating under obsolete assumptions.  This leads to poor performance and often enterprise failure.  A few examples   of market change are as follows:

• Lower customer demand- Customers are not interested in the product or service.  Three levels of consumer demand are based on the customer’s needs, wants and desires. Depending on how the customer views the importance of the product will determine if they are going to change their buying pattern.    Companies that do not know how their customers view the company’s product will probably not be conscious of the reasons for the customer demand drop-off.Recessionary times tend to impact those products that customers view as wants or desires.  These are usually products that entertain or follow trends, and are purchased with discretionary income (electronics, trend clothing, high-end cars, etc.).  Needs are those products that are more commodity items and are thought to be indispensible (food and personal items, telephone service, public transportation, etc.).
• A change in customer preference- Customers are migrating to other products. Customer buying decisions can change for several reasons.  These reasons can be due to product differences, technology developments, advertising and brand influences, regulatory requirements, and perceived value increases.  Knowledge of current and upcoming market changes is critical to any company’s ability to respond and sustain operations.
• A change in sales and distribution methods-Customers want to purchase their products in a different way. The Internet has changed the buying habits of much of the world’s economy.  How has it impacted your products in your market?  Brick-n-mortar stores are still strong points-of-sale for products if they provide a positive buying experience. Most business-to-business and retail organizations have added Internet stores to sell their products in addition to their brick-n-mortar stores. Wholesalers and distributors are expanding and contracting in many markets, depending on the product type.  If the company’s strategy is not to have a large sales force to distribute your product, then the Internet, wholesalers and distributors may be helpful.  However, the wholesale/distribution route may not be the best approach if your company wants strict control over the sales and service process, and a strong relationship with your end customers.It all comes down to how the customer wants to buy your product.

2.  Lack of product differentiation-The customer cannot see the value of the product being introduced.  This lack of differentiation can be between your competitor’s and/or your own product.   If you’re releasing a new version of an existing product, how are the two products different?  Why would a customer purchase a new version, if the older product still provides value?  How different is your new product when compared to the competitor’s?  Differences that are valued by the customer will influence their buying decision.  Look at your product’s quality and performance from the customer’s perspective.

• Quality-How does the product hold up in comparison to previous products or the competition? Consider how durable, flexible and adaptable the product or service appears to your customer base.
• Performance- How does the product perform?  Take into consideration speed, usability, features, functions and how well it does what it is supposed to do.

3.  Lack of brand recognition-The customer does not identify the new product with your company or prior products. Companies that are not concerned about creating brand awareness are making a critical error.  It is important to balance brand recognition with the cost of creating the brand.  Brands evolve over time as the customer’s perceived value from the purchase of products or company services increases.  The objective is to have customers identify the purchase of your product and/or company with their most positive buying experiences just by seeing the brand (name, logo, motto, song, etc.).

4.  Lack of customer support-The customer cannot get the level of support they want.  A company that is only focused on the sales side of their product or service may fail to build strong customer relationships resulting in a loss of customer loyalty.  Without loyalty, there is nothing to keep the customer from switching to your competition without notice.  A company that is focused on developing a long term sustainable operation knows that it is imperative to develop strong relationships with their customers.  This is accomplished by offering effective sales and customer support.  Except for on-line Internet sales, the front line customer care effort should come from the sales force, even after the sale is closed.  Customer care organizations, departments and services can help satisfy the customers when there are issues that must be resolved, but the sales person who closed the sale should still be involved.  We all know it costs more to get a new customer than it does to save one.  New products that are launched without a customer support effort in place are destined for problems.

5.  Lack of product development process- Many new products never get to market because the company does not have a product development process. Product development should be viewed as a process, and not an ad hoc event.  The process starts with an idea.  The more innovative the organization the more ideas.  The idea gets tested as to viability in the market.  Market viability means that the company knows their customers and their buying habits.  The idea gets a development assessment.  The company must then determine how practical it is to create the product out of the idea.  The idea then gets a value test (i.e. what is the value to the company (revenues/profits, market share, etc.) and to the customer (performance, quality, price, availability, etc.).   If the idea passes all tests and assessments, then a project is chartered, prioritized and funded.  A company without a process for product development is taking a significant risk of having the new product effort terminated before reaching the market.

Let’s explore the attributes of effective teams:

Definition of an effective team- An effective team “is a small group of people who are mutually accountable to achieve a common purpose and performance goals through their collective talents and collaboration.” (Kristiina Hiukka, BigAgendaCoaching.com)

8 Attributes of an effective team leader:

• Creates a compelling mission for the team
• Knows the priorities:  1. team mission, 2. team, 3. individual members and 4. themselves
• Communicates concisely, clearly and openly (communication occurs when both sides understand what the other is trying to convey–until then it is just talking)
• Encourages feedback
• Supports and encourages diversity
• Supports members by mentoring and coaching
• Delegates authority and accountability
• Selects members for their skills and desire to participate
• Promotes continuous improvement
• Fosters a positive team culture

7 Attributes of an effective team member:

• Strong discipline skills
• Good communicator
• Proponent of working in teams
• Enjoys collaboration with other member
• Self motivated
• Strong work ethic
• Self-directed within team roles and responsibilities

10 Attributes of an effective team:

• Clear purpose
• On-going supportive leadership (coaching/mentoring)
• Enabling processes and structures
• Supportive organization
• Members possess the “right” skills
• Commitment and trust of members
• Clear roles and responsibilities
• Clear team ground rules and protocols
• Open communication
• Performance goals and accountability
• Adequate resources
• Support group diversity
• Members are us-directed
• Self-directed
• Driven to continuously improve