Ideas make businesses grow. But good ideas are only effective if they are implemented into the operation of the business. Once they are made a part of normal business activities, their success, or lack of it, needs to be determined. Without measuring whether a new technique or process is working, it’s difficult to know if the practice should be continued or abandoned.
Owners and managers often are much more eager to try new ideas than they are to follow up and monitor the progress of the new practice. For example, offering customers a discount on services through a coupon mailing campaign sounds like a good idea. However, if the results of the marketing effort are not tabulated, the mailing may have ended up costing more than it produced in extra revenue.
Just because an idea sounds good doesn’t mean the concept will produce profit for the business.
What I am writing about is a system to run the business. No system, no results. Part of any successful system includes measuring the effect of the new activities and comparing them to past practices. Essentially, you are setting a standard for performance, engaging in the new practice, then seeing if the new practice meets or exceeds the results of the standard you set.
It’s a simple three-step system. And it is the only way to assure that changes in your business are working.
In fact, even if you don’t make any changes in your operations, you still need to determine if the business is performing as expected. Sales, costs, profit margins, number of new customers, number of repeat customers - all of that information needs to be monitored to see if satisfactory results are being achieved from the current management practices.
1. Standards First: Before you begin any comparisons of past and current performance, you need to have a basis for comparison. That requires a standard. It doesn’t have to be formal or sophisticated, just a number for comparison.
For instance, if the percentage of repeat customers calling for service and repair work, compared to the number of total customers calling for service, is usually about 75 percent and it suddenly drops to 50 percent, there is a deviation from an established standard. Something changed. Maybe the change is good because large numbers of new customers are calling as the result of a promotion. However, if nothing else has changed, there may be a cause for concern, or a reason to initiate a promotional program to entice former customers to call for service again.
Data by itself doesn’t tell us much. Only when it is compared to some standard does it make sense. Changing what you are doing after looking at numbers without comparing them to an established standard is like trying to aim at a target you cannot see. You don’t know where to aim, or what to change. So set a standard first.
2. Keep Score: In order to have a standard, you need to keep track of some important data in your business. A few examples of what you should be monitoring might include: amount of the average invoice; number of calls a technician makes per day (too high a number is as bad as too low a number); percentage of call backs; sales for each technician, etc.
All of this data allows a manager to set standards for all the important parameters of the business. Without good information, management decisions suffer. Even though it takes some extra effort to collect this valuable data, the time spent putting together a system to gather it will pay off.
As the business grows, your standards for comparison will change. They may also change when you are attempting to add a new line of business or seeking business in an area you did not previously target.
Standards are dynamic and should be adjusted as business conditions change. However, you always need them to measure the effectiveness of your policies and practices.
3. Accountability: One owner or manager soon exceeds his ability to monitor all the activities in the business and to measure the data, implement changes and then check the results of the new practices. Trying to stay personally “hands-on” for all activities in the business will soon frustrate even the most capable manager. It will force the one person who should be looking forward, making strategic, long-range decisions to be looking at a mountain of details.
Another part of the system can help here. By assigning responsibility to qualified employees, managers are free to set longer-range goals. Part of any successful system includes delegating authority to accomplish day-to-day tasks to people in your company who want to excel and are willing to be responsible for results; they are accountable. That doesn’t mean all their decisions have to be perfect or even workable, but it means they correct what doesn’t work and keep striving for the best results.
For example, you could assign responsibility for monitoring and improving call-taking to one person, holding them accountable for making sure your call-taking department does what needs to be done to keep customers calling and scheduling service appointments.
It’s both challenging and unfair to turn such responsibility over to a person who is not prepared for the job. So a prerequisite for assigning accountability to an employee is to be certain they are ready and capable for the job. Training is the answer. Before any person is put in charge of a department or activity, they need to be fully trained.
Often outside help can be more thorough and cost-effective. There are excellent seminars available to train everyone from technicians, call takers, dispatchers and other key employees in service businesses.
What’s exciting about this concept is that it allows you to get the best training for your people while you stay focused on running the business. The same analysis can be applied to all departments, too. Once you have the best people in positions where they can exercise their creativity, applying the latest proven techniques from the industry, your business will be taking the lead in all your market areas.
Plus, you won’t have to spend as much time on nuisance items, putting out fires. While you are focusing on plans for expansion, cash flow needs and marketing campaign ideas, the company runs itself.
Outsourcing: Seeking outside expertise is not just a good idea for training personnel. These days there are experts available who can assist with everything from bookkeeping, accounting, managing payroll, handling the legalities of hiring and firing, complaints from employees or direct mail campaigns.
I am not suggesting you immediately outsource many of the company activities, but you may want to compare the costs and results that some of the outsource companies have achieved - particularly considering their costs. Whole departments have been eliminated - no extra personnel, benefits, office space, etc. - by using outsource contractors. Check carefully to see which vendors have experience and quality reputations. There is a lot to be said for simplifying operations.
Don’t change everything at once. Step-by-step progress will work best, one department at a time.
Applying The System: Once you have capable and accountable people in each department or outsourced the functions of that department, you will have simplified the overall operation of the company - and the time you need to spend on daily activities.
Now you can apply the system concept to your job, too.
- You receive data from each department that shows its progress toward the company goals you have set.
- You will be able to see which departments need attention, more resources or changes in practices or personnel.
- You can manage without having to dig into the data for each department.
The system concept offers the solution to many smaller service businesses’ problems. It permits the owner/manager to pay attention to the important aspects of the business instead of running around, out of time, trying to resolve issues that other employees can resolve.
Besides freeing top management time, it produces the data needed to make good decisions, and make them quickly. Personnel decisions are easier, marketing decisions can be addressed, and recordkeeping is simplified. Virtually all of the data can be saved on the company computers and recalled as needed.
Be The Leader: However the system you set up is applied, one conclusion is always the same: The leader needs to lead. When the leader is chasing problems and trying to catch up, leadership is not working. Someone has to steer the ship, keep it heading in the right direction. Being busy, even frustrated and working feverishly, is not a substitute for leadership decisions. So all service businesses need someone making the major decisions.
One way to assure that need is met is to implement the necessary systems in the company so data is available for that leadership. Once you have the systems in place, you are not assured of perfect decision making, but you will be able to catch shortcomings of any department early. You will be able to take advantage of employees’ creativity. And run the business without running in place.