Luis was not having fun. He remembered how difficult it was for the company to make payments on the third machine.
“Management is about making resources productive. This third machine is not productive. The floor space it sits on is not productive,” I said.
“But we paid a lot of money for that machine, and our company cannot get out of its lease for this space. And what are we going to do if we need the machine?” Luis objected.
“Anyone can manage an idle machine. What are you going to do?” -TF
Luis began an aggressive calling plan to get his money collected, put holds on new orders for customers who were past due and began requiring deposits on large orders. Nothing happened at first. Luis stayed off kilter for the better part of two weeks. Slowly, he calmed. Payments began to come in, not enough to have a party, but enough to breathe.
“Management is about making resources productive,” I repeated. The first thing to manage is capital. Next are your physical assets.
“Our building, our equipment?” Luis confirmed.
“The first decision is to decide what is necessary. You haven’t thought about that since this company was a start up. Back then, you thought about it a lot. You outsourced some production until you could afford your own machine. Then you bought a second machine. You moved into a new building so you could bring in a third machine.
“Now, you can’t keep the second machine busy. You tell me, what is necessary?” -TF
“Where’s the money?” I asked.
Luis looked at me and squinted. “What do you mean, where’s the money?”
“Look, you asked me to come here and help you straighten out this mess. Where’s the money?” I repeated.
“That’s the problem, there isn’t any money,” Luis replied.
“Yes, there is, there always is. Luis, the first resource a manager has to manage is capital. But before you can manage it, you have to find out where it is. Sometimes you think you know where it should be, but if that’s not where it is, you can’t manage it.
Sometimes your capital is tied up in a machine. Sometimes your capital is tied up in unbilled work in process. Sometimes your capital is tied up in Accounts Receivable. Once you find out where your capital is, only then can you manage it. So, where’s the money?”
A raw nerve had been struck. Luis shuffled some papers on his desk. “It’s here,” he said, pointing to the third column in his AR aging report. “It’s over 60.”
“Well, now we know where it is, we can manage it.” -TF
“The forecast was a bit optimistic,” Miguel observed. “We went back and looked at our sales activity. Not our sales results, because those were dismal. I gotta tell you, my guys were pounding the shoe leather. It’s funny. The same salespeople with the same customers, but not closing sales like they did three quarters ago.”
“Working harder isn’t working anymore?” I asked.
“No, I think my guys are going to have to work differently, not harder,” Miguel replied.
“And who will decide what they do differently?”
“What do you mean?”
“Whose job is it, to decide what is necessary? How to go to market? To make the efforts of your salespeople more productive?”
Miguel’s face slowly revealed a mild panic. He stared straight ahead. “It’s me.”
“It’s time,” I nodded. “It is the job of the manager to take the resources of the company and make them productive. It is only managers who make those resources productive. As a manager in this company, you are the only one who can make your sales team productive. The job of management is more important than ever. The decisions you make in the next twelve months will determine whether your company will survive.” -TF
My friends, as we look forward to 2008, understand that January 2009 will be a very different landscape. And we have twelve months to prepare. While Investor’s Business Daily proclaims we are teetering on a recession, that teetering point is still some months away. This is not a time for panic, but a time for preparation.
Lee Thayer, (Leadership 2004), speaks about necessity and its importance in the workplace. The entrepreneur, who starts a business, only puts in place that which is necessary. Only necessary equipment is purchased. Only necessary people are hired.
As time advances, and the business becomes more complex, necessity becomes more complex. And management decisions are made to bring on more infrastructure to support that complexity. Sometimes those decisions are accurate; sometimes those decisions miss the mark.
During this next year of preparation, look around. Re-think your work-flow. Re-think your personnel structure. Carefully examine what your customer wants, to make sure what you deliver is necessary.
Over the next few weeks, I will share with you economic insights to help you prepare. Those of you connected to residential housing are already working hard to survive in a recessionary climate. For those, thankfully, outside that environment, who think you have dodged a bullet, pay attention. January 2009 will be a very different landscape. -TF
“Good work, so far,” I said. “If things work out this way.”
“Well, it’s a plan,” Miguel replied.
“What if things don’t work out this way?”
Miguel closed his eyes, trying to visualize something he had not considered. When he opened his eyes, I could tell he had drawn a blank.
“You expect things to occur, your customers to want a certain product line and your volume of orders to reach a specific threshold. What will you do if these things don’t happen?” I continued.
Miguel shifted in his chair. “I know. I was thinking, as I put this plan together, am I working to finish the plan just to get it done? Or am I really thinking through different scenarios. This year already seems a bit weird. Sales have been sluggish even though we have really been working our bids.”
“So, what do you think?” I asked.
“I think I need to spend some more time playing the what-if game.”
Joel posted this question in response to yesterday’s post.
Question:
I am assembling a “Mission statement/mission focus†plan, and I have a question: I think my team simply needs a more positive and customer driven focus. Misbehavior is not the main problem (as far as I can see), but if I can tune up any issues at the same time it would be fine. What changes would you make to the above plan?
Response:
Widen the question. How can we, as Managers, create a discussion about any topic to stimulate thinking, and a positive response in behavior?
Using this skill is one of the most important activities of the Manager. I use this process in the classroom and in most meetings I run.
It’s a simple Gap Analysis, containing three parts.
Here is what it sounds like related to customer service issues.
Get your team together. I usually allow seven minutes for each question, with seven minutes as a wrap-up. This is a powerful thirty minute meeting. -TF
Our next Leadership program kicks off Wednesday, January 9, in Fort Lauderdale. For registration, simply reply to this email or visit www.workingleadership.com.
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Lauren, sitting at her table, moved all her papers, notebooks and other junk to the side. From a folder, she drew a single sheet of blank paper, selected her favorite pen. “Where do I start?” she asked.
“What is today?” I replied.
“January 4?”
“No, in your imagination, it is December 31, 2008. Close your eyes and think. Think about your different customer segments, your product lines and product mix, your services and service mix. What position do you hold in the market? What is your market share? Who are your key personnel? What are your core competencies? What breakthroughs have you achieved during this past year? What processes have changed? What does your physical plant, your facilities look like? Economically, what were your revenues? What were your gross margins and net to the bottom? Remember, it is December 31, 2008.”
Lauren was furiously writing the questions. “This is going to take some time,” she finally spoke.
“Yes, and it’s likely to take more than your brilliant brain to create this vision. Why don’t you gather your best and brightest minds together to help you?” -TF
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If you would like to download our 2008 Planning Template, it’s free on our website, www.managementblog.org.
“I know planning is important, but I have so much to do today,” Lauren explained, hoping I would let her off the hook.
I nodded my head. “I know you have a lot to do, today. How much of what you do today will be effective?” I asked.
“What do you mean? I have phone calls to return, emails to answer, meetings to go to. I have a couple of employees I have to speak to about things they were supposed to take care. I have a couple of projects that are behind schedule. A lot of things piled up over the holidays.”
“How much of what you do today will be effective?” I repeated.
“Well.” Lauren stopped. “I know some things are more important than other things.”
“And, how do you make that decision? How do you know what you do is effective? How do you know what you do is important?” Lauren’s posture shifted. She backed off the table between us. She was listening. “I will venture that 80 percent of what you do today will be wasted time and only 20 percent of what you do will be effective. How will you know you are working on the 20 percent?” -TF
Welcome back to work. The holidays are behind and a new year begins whether we are prepared or not.
Our next Leadership class in Fort Lauderdale kicks off January 9. We still have a small number of openings for the class. If you have a manager that you would like to place in the program, please reply to this email or visit www.workingleadership.com to register.
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“What’s going to be different about this year?” I asked. “What’s changed? What has happened in the past 12 months that will have an impact on the next 12 months?”
Lauren looked pensive. “It’s been a tough year,” she replied. “Much of our business was connected to the housing industry and that’s been in the tank. We launched some new projects in response, but it wasn’t fast enough. We lost a few good people.”
“What do you plan to do?”
“I have some ideas, but I don’t know if they are going to fly. We have to be very careful with our expenses and make sure we don’t squander away what opportunities we have.”
“How are you going to make sure that happens?” I continued to push.
“I know, you are going to ask me about our planning for this year. I don’t know, it’s just difficult to imagine what this year will bring.” Lauren stopped. She was waiting for me to agree with her, but I stood my ground and let the silence do the heavy lifting.
Finally she picked it up. “Okay, so it’s difficult to imagine the next 12 months, but, it is still important.”
“It is important. Not the plan itself. The important part is the process of imagining what your future will be like.” -TF
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Our planning template is available on our website as a free download. Here’s the link. www.managementblog.org.