Build a team at work

by Mike Rudd

So, how do you bring diverse personalities together to work as a team?

It is the business owner’s responsibility to bring a group of people together that work harmoniously and produce a profit. Sound easy? If it was, the overwhelming amount of business failures would be considered an exception rather than the norm.

So how do you bring diverse personalities together to work as a team? The team should produce a profit that not only accounts for risk recovery, but provides enough working capital to assure the long term success of the business enterprise.

The importance and ability to work on the business, as opposed to in the business, is first and foremost. All too often the pressures of the daily employee issues (such as how to find, train, motivate and reward them) and cash flow issues (such as satisfying vendors, covering payroll and all associated burdens of capital investment and ready cash reserves for the next crisis) force reactive choices. Decisions are then made on a short term basis and ultimately cause a cascading series of events with no possibility of recovery.

Successful business owners know that the difference between success and failure comes down to the ability to develop a strategic plan, tactics to execute that plan, and a financial platform to provide timely and accurate information in an easily understood format. They must communicate clearly defined expectations to all employees and reward profit enhancing behavior with incentives.

Strategic planning, in a nutshell, is the focused analysis of the company’s strengths, weaknesses, opportunities and the daily threats faced in the struggle to thrive and survive. It can be as simple as a single page bullet point outline, or a document that consumes hundreds of thousands of company dollars to produce.

Regardless of the size and complexity, a strategic plan must define the direction and blueprint for focused action. Focused action is the operative phrase. Unfortunately, more often than not, the planning process becomes a wish list with no definitive quantifiable action by the business or its employees.

Tactically, there are three primary functions the business must execute. The first primary function is revenue generation, and there are several areas that a business can look at to produce revenue. The most important to be considered is retention and growth of the current customer base. Specific actions that may be considered could include:

• A review of current products and services purchased by customer type and the frequency of purchase. Determine why the customer purchases these products, and develop ways to constantly improve the perception of value and customer satisfaction.
• Identification of products and services that match the customers need profile, but have been purchased from other vendors. Identify critical features within the product group or services that appeal to the customer. Are the features and benefits of the competitor’s products and services superior, or is the customer just unaware of the advantages of your offerings? Understand the strengths and weaknesses of the competition to allow your business to develop tactics and overcome customer perception.

The next step in potential revenue generation is the development of new customers. In order to develop new customers, there are several areas to consider:

• Identification of target customers starts within the businesses existing customer groupings. These are often customers that are currently in the marketplace, but are purchasing from the competition. These customers tend to use the same product and service mix currently offered by the company. With the appropriate incentives and value enhancements, the conversion to revenue generating customers is more efficient and cost effective than developing new customers outside the current market niche.
• In developing new customers outside the current market niche, or geographic area, identify current products and services that will fulfill a need that is not currently being met and is most cost effective. When entering a new market, assess the competitive environment to obtain an understanding of the competitor’s pricing strategy, marketing objectives and processes. This includes promotions, discounts and incentives that are offered to the customer that enhance sales.

The second primary function that a business must execute is within operations. "Do what you said, when you said it would be done." Sounds easy, but in reality many business owners rely on employees to do that. Employee accountability and motivation are the key ingredients to employee productivity.

Accountability: So often, business owners judge the productivity of the employees by the apparent effort being expended. However, more often than not the effort is unfocused and the results do not support the goal of efficiency or profitability. In order to hold employees accountable there must be clearly defined duties and responsibilities that seamlessly interact with the other employees of the company. Clearly defined duties and responsibilities are only one half of the equation. The other, and perhaps more important, is the development and implementation of specific performance goals and expectations. The development of performance requirements must include the employee’s input and be specifically quantifiable. If the employee is included in the development, there will be resistance and a lack of ‘buy in’ which makes accountability difficult, if not impossible to establish.

Motivation: What’s in it for me?
As an employer, there is a constant battle between paying competitive wages and not pricing the company out of business. Then add cost, the burdens imposed by the government and any additional benefits including any discretionary bonuses that are given to the employees, it is no wonder many business owners are disillusioned and discouraged by the lack of productivity in their employees. The best method of employee motivation is excess profit based incentives. The objective of a profit based incentive plan is to tie the employees to increasing the profitability of the business. Employees have limited control of company matters such as overhead items like rent, utilities, interest expense, owner’s wages and capital expenditures to name but a few. However, they do have control over profitability. The areas that employees generally have a significant impact on relates to variable costs such as time, materials, waste and warranty. Tie employee income to the efficient utilization of the company resources so that, in essence, the employee becomes a partner in the profitability. When employees are tied to the profit, it becomes their focus to make sure that you "Do what you said, when you said it would be done." When that happens, the company is profitable and the employees will make sure the underperforming employees shape up or ship out.

The third and final function of a company is keeping score and that is the business owner’s responsibility.

Identify the company’s critical variables. Every business has specific key indicators that give management the ability to monitor the company’s pulse and activities. Develop a chart of accounts that reflect the company’s actual operations. The tendency is to set up a chart of accounts that reflect the tax based accounting system that only reflects revenue and expenses. Ideally, the revenue categories will reflect the actual income streams of the company. This allows for margin contribution analysis, but it also allows for sales activity accountability. Direct variable expenses should include all costs involved in the production of the product or service. This might include things such as labor and burden, materials, sales commissions, royalties, equipment rental, or any other cost that fluctuates with revenue growth or decline. Indirect overhead consists of costs that may be semi-fixed or semi-variable but must be allocated to all of the production components, such as estimating wages, supervisor wages, sales wages and expenses, small tools and supplies, training and repair and maintenance of equipment and vehicles. The remaining area to measure is general and administrative overhead. These expenses occur regardless of revenue such as rent, depreciation, interest expense, office wages and burden, owner’s compensation and utilities.