A fun way to promote a brand & illustrate a point.
“We believe that the easiest way to change peoples behaviour for the better is to make it fun to do.”
There are a number of things to be learnt from the video below.
Firstly Volkswagon have nailed the viral video. At the last time of looked this video had been viewed over 8.9 million times. This is one video of a series. Have a look at The Fun Theory for the others. Volkswagon instead of trying to market their vehicles have set and image for their brand in a fantastic way. It is a brilliant use of Web 2.0 to build their brand but they are not selling their cars etc.
The other lesson from this is the fact that if we make it fun and amusing for people to do then we can change people’s behaviour for the better. Economists have long held the belief that people react to incentives. Too often in business this is taken to mean more money. But if we make a workplace fun for the employees and experience for the customers then we will get loyal customers served by engaged employees.
Watch the video and look at the two lessons from this. How can you promote your brand in a unique way and how can you make it fun for your team and customers?
Don’t allow anyone to sit-down at your next meeting.
An experiment at the University of Missouri compared decision making in 56 groups where the members stood during short meetings to 55 groups where members sat during meetings.
Where people stood they took 34 percent less time to make the assigned decision, and there were no significant differences in the quality of the decision. This seems to be a trivial item but wait a minute.
How many employees is in your firm? How many short (up to 30min) meetings do you have? Also there may be meetings that are taking longer than this but if the people attending were made to stand would be a short quality meeting. Sometimes it is necessary to sit down but often this is not the case.
If your firm has say 5000 employees and if during a year each employee replaced a sit down meeting with a standing meeting then this would mean 35,000 minutes – just over 583 hours per year.
So be careful before you sit down at a short meeting – ask the question “can we stand and get on to other tasks?”
Is a Happy employee an Engaged employee?
There is much written and spoken about the need to have our team fully engaged. Best Buy in the States determined that a small increase in their engagement index added over $100,000 profit to each store. There is much research that shows loyal committed customers come about when their enthusiastic engaged employees.
But the story does not end there.
A CEO of a business employing about 200 people said to me recently that all of his team were happy. At the time I did not react but rather we continued to talk about business issues. It was only later that I thought about his comment.
What does it mean when we say “employee engagement” or “engaged employee”?
Rather than some complex explanation I feel it could be simply stated that an engaged employee is one who is committed to the cause.
If you are committed to the cause you will go the extra mile. When the team are committed to delivering the product or service with the mission, values, intent of the business they will do those little things that matter, be an advocate to everybody and otherwise generally love helping. A person committed to the cause is a not a person who turns up at 8:30am and leaves at 5pm and just does his or her job in between.
A happy employee though likes the workplace, the work, the pay, the fellow team members but that does not mean they are committed to the cause. A happy employee does not mean they will go the extra mile in customer service, advocating the business to others or otherwise going the extra mile.
I have seen employee surveys which ask questions to determine whether the employees are happy. This could lead the management into a false sense of security. Engagement is more than happiness.
Are your employees engaged or just happy?
Photo courtesy of midiman
Margin and Markup – Does your team know the difference?
There is a lot of focus in business on net profit, ebit, roi, or other similar measures. However before all that a business needs margin. It is imperative that all in the team understand margin and what affects margin.
Margin is the sale price of the good or service less the costs incurred directly in making/purchasing the goods or services available for sale(also known as variable costs). Margin is also known as gross profit. This gross profit is what covers overheads, fixed costs and hopefully there is net profit.
Each type of business will have different norms for what variable costs and gross margin are. For example in a retail business it could be as follows:-
Sales 100
Variable Costs 70
Gross Profit 30
Overheads / Fixed Costs 25
Net Profit 5
In a retail business the majority of the variable costs are usually tied up in stock / inventory. Other sectors would have different standards.
From this we need to explore margin and markup which are often confused. Markup is the sum applied to the cost of goods sold to determine the sales price. Margin is the sales less cost of goods sold. In percentage terms margin can only be between 1 to 100% whereas markup range from 1 to over 5000% percent. At 50% margin the markup is 100% but after this as margin increase the markup increase exponentially.
One of the biggest item that impacts on margin is discounting. This seems to be the first tool to increase volume of sales. But before any discounting is entered we must consider the impact of the discount on the margin and calculate exactly much extra sales the business will need to recover the discount. Volume sales is not the only way to make profit. Smaller volume sold at a better margin can lead to more profit.
Another issue is adjusting prices to reflect the change in the cost of goods. When you import goods the currency changes can significantly affect the margin. So if the costs have increased and the margin is declined by 10% points, how much does the prices need to increase? No the answer is not 10%. If you put the prices up 10% then you would only increase margin by 9% points not 10. Now if you were turning over $30 million per annum then this could cost the business $300,000 in profit.
In setting the price of goods ensure that you know whether the software you are using is using markup or margin. If you put 30% into the program and it is set as markup when you wanted 30% margin then you have just lost 6.9% of your profit. If the desired margin was 80% and instead the goods were priced at 80% markup this would mean you have lost 22.8% profit.
Now none of this is necessarily sophisticated analysis but does your team understand these issues. What happens if the sales person in negotiating with a buyer applies 40% markup instead of 40% margin which the business wants. The buyer would have got a bargain. This message is applicable to a small business as it is a large business. GM in the States went under because it could not sell enough cars at high enough margin.
Photo courtesy of agentakit
Some observations on achieving superb team performance
Getting performance from any group of people means a permanent change in the way they think and operate a business. To achieve this permanent change it is necessary to consider some aspect of human behaviour.
People want to be great. If they aren’t it’s because management won’t let them be. People do not generally intentionally set out to do a bad job. This usually only comes about when the culture has turned sour.
Performance begins with each individual’s expectations. Influence what people expect and you influence how people perform.
Expectations are driven partly by goals, vision, symbols, metrics and partly by the context in which people work. That is by such things as the pay structure, incentives, operating practices and importantly decision making structures.
The actions of managers shape expectations.
Learning is a process, not a goal. Each new insight creates a new layer of potential insights.
The organisation’s results reflect the individual and the individuals performance. If you want to change the results, you have to change yourself first.
To make changes that will lead to great performance focus on goals, expectations, contexts, actions and learning. The leadership responsibility is to establish the conditions which superb performance serves both the company’s and the individuals best interests.
9 indicators to use for cashflow analysis
Cash flow is the lifeblood of any business. It is imperative that we have a system to analyse and manage the cashflow.
So lets look at some important key elements to cash flow management and analysis. Cash has a cycle through a business. Each dollar or revenue incurrs direct costs. After this there are other variable costs and overheads which are met. But from this net income a business must pay its taxes and any loans or other finance obligations. It is the complete understanding of the cycle of cash in a business that leads to great cash flow management.
Working capital is that which is difference between current assets and current liabilites. Current assets include cash, inventory, accounts receivable and current liabilities include accounts payable and other short term finance facilities.
Accordingly we must calculate the average days it takes to collect our accounts receivable and the time it takes to pay the accounts payable. Also it is important to measure how often we turnover the inventory or stock. Each dollar of stock is a dollar less of cash. The faster we turn over the stock the better the cash flow will be. If we are turning the stock over fast then we are making the dollars we have invested in the stock work harder for us.
So from this we are measuring :-
- Debtors (accounts receivable) days
- Creditors (accounts payable) days
- Inventory days
From this we can then calculate two more important measures :-
- Working capital cycle – which is Debtors days + Inventory days – Creditors days
- Working capital % – which is ((Accounts receivable + Inventory – Accounts payable)/Revenue * 100)/365 * days in period.
The higher the working capital cycle the more costly it is to fund.
After this we then need to look at the situation from an overall perspective. This can be done by calculation the cash from operations and the net cash income. Cash from operations means the cash generated prior to interest,tax, asset purchases and any dividends or drawings. Net Cash income is the cash left after the payment of all obligations.
Related to these we can calculate the profit to cash conversion ratio. This is the percentage of Earning before interest and tax that is converted into cash after operations. This can indicate the connection between cash and profit. But remember profit is not cashflow.
So the three extra things to look at are :
- Cash after operations
- Net Cash Income
- Profit to cash conversion ratio
Lastly we can look at:
- cash wastage.
This is where we compare the growth in accounts receivable, Cost of Goods sold and Operating Expenses to revenue growth. Growth is in excess of revenue growth then this is cash wastage. If growth in inventory is more than Cost of Goods Sold gorwth it is considered waste. Whilst a growth of accounts payable which is less than Cost of Goods sold this is also considered waste. The cash wastage is unsustainable growth.
This is on overview of cash flow analysis and if you have any questions please contact me.
What are the assumptions?
Whether we are talking politics, business, or life in general ideas are presented, statements are made and often there are underlying assumptions being made. We need to think about what these assumptions are.
For instance the discussion at the moment about the Emission Trading Scheme (ETS) makes the assumption that carbon is the evil greenhouse gas. However this is not universally held and even very authoritative scientists say that the methane may be the real villain. This is not an argument about climate change, rather it is about the assumption that carbon is the evil villain. Now I don’t know who is correct but my point is that assumptions matter. There is much debate about the ETS but the underlying assumption does not seem to be questioned.
Now this is just as applicable in a business context. We could be making decisions about whether a particular strategy or managment idea be implemented but have we considered the underlying assumptions that are implied.
So for instance if you were change the bonus structure (or implement a new bonus scheme) in a business then the assumption is that the financial bonus is the best way to motivate our team to achieve the result. This may be the case but we need to consider whether this correct.
We make assumptions about how customer or employees will behave every day. So in considering a new strategy re-examine the assumptions being made.
So what assumptions are you making in your business?
Photo by laurakgibbs
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