Engaging the employees – a key to success.
Staff Engagement
I was reading a recent article on Business Week website about employee engagement. I recommend the complete article to you.
The article quotes some research undertaken by Gallup which determined that less than 30% of the workforce is truly engaged
To quote from the article – “That’s less than 30% of employees who work with passion and feel a profound connection to their companies. Yet employee engagement leads to increased customer engagement, which leads to real revenues…”
The article goes on to give an of a store in the electronics retail chain Best Buy. The store management measured employee engagement and realised the store was not going well. This affected morale, employee turnover and profits. Using this information they instituted a number of changes which had the results of increased employee engagement, substantially lowered employee turnover and increased profits. Taking this it was translated across the chain. It was determined that for every one-tenth-of-a-point increase in employee engagement, each Best Buy store increased profits by $100,000 a year.
This highlights the fact that there is a huge profit motive to ensure management engages with the team.
As I have previously written on this blog we must tell the team exactly what is expected of them and then let them go to achieve this. We can get what we want if they know what we want. Employee engagement is one of the keys of business success. Ignore it at your business peril.
Fear of the cashflow hampers business.
Business owners particularly in these uncertain times get very concerned about the cashflow that I believe affects their decision making. We need to be on top of cashflow, it needs to be properly managed but by focusing on this alone we affect the long term performance of the business.
This short term focus makes us assume all clients are good if they have a cheque book. But we can’t be all things to all people and if we take on unprofitable clients or try to provide services to people that whilst profitable but not to the level of our main services then all we have done s added to the management drama of the business.
This short term focus can make us not devote the time and resources necessary to improve systems, services etc. But it is only by investing in these areas will we have a more enjoyable and more profitable business.
This short term focus can lead to poor customer service. By trying to do everything, serve as many as possible and manage the team the result will be a decrease in the priority given to making the customer service fantastic.
So remember the focus on the systems, client selection and client service are not urgent but they are extremely important to the long term development of an enjoyable business. Stop chasing the profits and todays cashflow, focus on the customer and deliver a great experience.
The need to manage growth (yes some businesses are experiencing growth)
Even in these tougher economic times there are still businesses that are experiencing significant growth. Whilst we always want growth it comes with its own set of challenges.
Systems and procedures come under stress. Often new procedures are added on an ad-hoc basis in reaction to situations arising. In isolation each of these procedures may make sense but taken together it may end up a mess. Also these ad-hoc systems can suck the life of the team morale. Given these potential problems it is necessary to sit down and look where the business is going and put in place the systems for the business necessary for when it is much bigger than now. By taking this time the impact of the systems on the culture of the firm can be properly considered. The hardest thing in business is to maintain the great culture that is place as the business grows.
In a growing business cashflow is king. (This is always the case in any business but in a growing business it becomes supercritical). So with this it is critical to know what is happening in the numbers. If all that is measured is the daily/weekly bank balance and then the monthly profit and loss statement / balance then the business can easily run into trouble. I do not propose that a business should measure everything that moves. What I am saying that in a growing business it is important to measure what is important to the client and also measure the items that affect working capital. So what it is that is important to a client and how do you measure it. This will vary from business to business however to give an illustration of a financial advising firm – the best ways to measure whether clients are happy is to measure the number of referrals. Unhappy clients will not refer, only happy clients will.
Unfortunately many small businesses do not know what their working capital needs are. It is necessary to measure debtors days, stock turns, creditors days, cash balances and whatever else in your business that impacts on working capital. How much working capital is needed to fund the sales growth? What happens if the customers become just a little slower in paying? As business growths because of the stress on the sytem it is an unfortunate consequence that debtors days can extend. This can be because not enough time is spent on chasing up outstanding income. However the greatest reason for the debtors extension is usually because there has not been enough screening of customers.
The measurement of working capital and it’s various component parts is not something to be done once a month but rather at a minimum every week.
There are other challenges that come from growth but these two (systems and cash) are the two most critical. Also these apply to any business even if due the current economic situation there is not a lot of growth.
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