DEVELOPING A MINDSET OF OPTIMIZATION

Your workforce is your most valuable asset. The knowledge and skills they have represent the fuel that drives the engine of business - and you can leverage that knowledge. - Harvey Mackay

As a CEO, you need to elevate your mindset and obsess about getting more from your current resources and efforts.  You must ask yourself and others better questions.  You must start to ask yourself, “How can our business get greater results from every action we take, every expenditure we make, every effort we expend, every relationship we have”?  Avoid status quo like a deadly virus.  You must embrace fully the philosophies that, “good enough never is” and “we can always do better”.

Optimization (also known as leverage) is a mindset of maximizing your results while simultaneously minimizing the amount of time, effort, risk, money, and energy you expend.  It’s all about getting greater productivity, performance, profitability and payback from your ideas, assets, knowledge, systems, processes, practices, people and opportunities.  Overlook nothing; leverage opportunities are everywhere.

Optimization is all about using your mind and limited business resources in new and better ways.  It’s about using your creative intelligence as an incredible force to increase your sales, customer satisfaction, profits, quality, etc.  Optimization is about freeing yourself and your organization from limiting beliefs, the “we've always done it this way” attitudes, and established industry practices.  Optimization is searching for opportunities within and without your company where the application of focus or force will yield substantially multiplied results.  For example, if you start using telephone calls to follow-up your direct mail campaigns, you may multiply your sales results by staggering amounts.

Just as a tire jack can lift the tremendous weight of a car for a tire change, so too can the strategy of optimization help you significantly lift your company’s revenues, improve operations, and lighten your daily load.  A lever, fulcrum and slight force can lift significant weight if you know how to use these tools.  Learn about leverage so you can begin to elevate and optimize your business results.

To master the art of optimization, you need to adopt an opportunity mindset.  To leave the status quo behind, you need to ask continually the following types of questions:

• What is the best and highest use of our time, talent, and treasures?
• What resources are we under utilizing?
• How can we maximize our returns/output and minimize our input?
• How can we work smarter, not harder?
• Which strategies will give us super-sized results?
• What processes or departments within our business are under-performing?
• What past or current relationships could we more fully leverage (i.e. customers, employees, vendors, suppliers, advisers, etc.)?
• What other industries could provide us with some innovative best practices?
• Where are the hidden opportunities within our business, our employees, our suppliers/vendors, our business partners, our customer base, our competitors, and our business processes?
• How can we get a greater return/payoff using the least amount of money, time, risk, etc?
• How can we be more effective, more productive?
• How can we get better every day in every way?
• What suggestions from our customers should we pursue first?

Expand your mind and your leadership potential and your business and opportunities expand exponentially.  The more you grow as a leader, the more your business grows as a market leader.  Think optimization, not status quo.   

Keep Business Management Simple

"So much of what we call management consists in making it difficult for people to work." - Peter Drucker 

To be an effective CEO, you must adopt a big-picture perspective.  As leader, don’t overcomplicate business.  Keep it simple and straightforward.  Simplicity allows for clarity of focus and focus allows for superior performance.  Here is a simple framework by which to see and guide your enterprise.

As owner/CEO, you are solely responsible for the company’s leadership process (direction, strategy, focus, goals, accountability) and the business development process (building a systems-based business that is self-managing, self-improving, and nearly runs itself).  As such, there are only a handful of additional major processes you need to ensure are in place, well documented, and working smoothly and optimally: marketing, selling, operations (customer fulfillment), customer service, and back-office functions. 

In brief, the marketing process generates leads, the selling process generates customers by closing leads, and the operations process fulfills the promises made to the customer.  Completing the business cycle is the customer service process that follows up with the customer to ensure satisfaction with the current transaction and uncover any other unmet needs. 

Since the purpose of any business is to find, satisfy and keep customers, marketing, selling, operations, and customer service processes should be your top priorities and areas of focus.  Other functions, while important, should be secondary priorities and support this main mission.  These back-office support functions are: a finance/accounting process to manage money; human resources to manage employee issues; and infrastructure to manage technology, facilities, administration, etc. 

Spend your time and energy focusing on your company’s core processes and competencies – those functions that you do extremely well as an organization and which add real value to the customer.  Keeping business simple will help you stay focused on what is most important.

To simplify your business and your life even more, consider outsourcing (turning over day-to-day responsibility to an outside provider) your back-office functions such as payroll processing, tax preparation, legal, HR, technology, facilities management, etc.  Seek advice from your CPA, attorney, or banker about outsourcing arrangements.

Planning for Results

How do you create a simple business plan?  How do you achieve results?  Again, you must keep things simple and focused.  With your team’s involvement, agree on and set yearly goals.  Then, on a 90-day cycle, gather your team and hold your people accountable for the agreed-upon results.  This implementation process is just as important as the goals.  Do not tolerate excuses; insist on execution and results.

In short, you must select a few key strategies and implement like mad.  Success is more about execution than anything else.  Focus on the vital few instead of the trivial many.  Energy focused on a few highly important goals is powerful. 

Please note, we are not talking about setting goals to achieve incremental improvements in performance or processes.  We are talking about big and bold goals – goals on steroids.  Be innovative and think big.  Go for breakthroughs, not mere incremental gains.  Realize there are no rules or restrictions.  As long as what you do is moral, legal, and ethical, do not be shackled by company history or industry standards or practices.  In short, kill the “we have always done it this way” mentality.  Shake habitual thinking patterns.

Performance goals, at a minimum, should be set in the critical success areas we just discussed, leadership, business systemization, marketing, selling, operations (fulfillment), customer service, and back-office operations.  In fact, your yearly business plan could be nothing more than 3-5 monster-size goals in each one of these key areas.  Once you have your yearly goals established, assign a person to champion each cause.  Give each person the authority, time, and tools to make things happen.  On a 90-day cycle, hold each person accountable for progress on his or her goal(s).

These audacious, challenging, and adrenalin-inducing goals should be SMART (specific, measurable, aggressive, realistic, and timed).  Force your people to stretch.  What gets measured gets done.  What gets rewarded gets repeated.  As a leader, insist on aggressive implementation, follow-up, follow-through, and results.  Intentions and plans are mostly meaningless; implementation is where success is found.

Shape Your Business: Become a Sculptor to Strike it Rich

It is time to mold your business to run more efficiently, effectively and consistently.  Don’t let your business evolve haphazardly and re-actively.  Proactively shape it or re-shape it to make for smoother operations, consistent customer satisfaction and profitable results.  You must turn chaos, confusion, and anarchy into order and discipline.  Time to standardize and document your business.

Challenge your old beliefs about how your business should work.  It is never too early to shape or too late to re-shape your business.  It doesn't matter if your business is 20 years old, 2 years old, 2 months old or on the drawing board, start shaping the company to run without your being woven into the very fabric of the business.  Design it to run without your supplying all the effort and energy.  You cannot control everything, you cannot control everyone.  Let go!  Start behaving like a strategic business owner.

You do not want to create merely a job for yourself.  The ultimate goal of creating a business is to sell it one day, at the highest premium possible, to your employees, family members, or an outside buyer.  You deserve an acceptable return on your investment of time, talent, and treasure.

No matter what size, age or industry, every business should be prepared to be sold.  Yours is no different.  This “start with the end in mind” strategy should help focus you on building an effective business model that doesn’t have you at the center of its universe, relying on your presence, personality and perspiration for its success.  Again, you should not be the business and the business should not be you.  This work-in-reverse approach not only maximizes your selling price, but also minimizes your hassles and headaches while you own and run the business.

As stated earlier, your goal is to design or re-design your business to work without you.  Your business model should be sculpted in such a way that it can be easily replicated dozens of times in cities around the country or world, requiring only your vision, not your physical presence and exertion.  Whether you ever expand or not, such an ambition should help you focus on building a systems-dependent (not owner-dependent or people-dependent) business that generates repeatable performance and consistent results.  You must help others get results.  Without other people, you don’t run a business -- you work a job.

What is an effective business system?  It is simply an integrated web of separate processes, procedures and policies.  A business system allows you to get consistent results through other people – tremendous leverage and freedom!  The business system is your documented instruction manual for “this is what and how we do it” at our company.  Some typical operating processes are as follows:

·         Selling

·         Marketing

·         Manufacturing

·         Inventory management

·         Order processing/customer fulfillment

·         Customer service

·         Billing and accounts receivable

·         Procurement/accounts payable

·         Facilities management

·         Accounting/finance

·         Human resources (i.e. hiring, firing, reviewing, promoting, paying, etc.)

·         Information systems

·         Store opening and closing procedures

Your business with such processes fully identified and explained will allow your employees to deliver amazing consistency.  Employee discretion is minimized.  Such a system will also free you from having to touch every transaction, make every decision, answer every question and solve every problem.  You can manage by exception!  Such a carefully crafted enterprise will also give you breathing space to think and act like a strategic business owner as well as the time to do personal activities that matter most to you. 

Without such a business system in place, no one will want to pay a premium for your broken business.  They would not want to buy a dysfunctional business that is solely dependent upon you for its day-to-day operations and survival.  If it were obvious that you are a prisoner to your business, why would anyone want to buy into such a life sentence?   They would not or would pay very little for such a systems-deficient business.  Please grasp this; no one wants to buy a job, a series of headaches, or an owner-centered and owner-dependent business. 

To maximize your company’s eventual selling price, realize that buyers want to acquire a smoothly running, money-generating machine.  Buyers want to purchase a business system that runs on near autopilot, foolproof status.  They want to buy a fully documented, organized business system that gets predictable results.  They want an asset that has proven processes, predictable revenue streams, and strong growth potential.  They want to buy a well-designed, hassle-free, cash flowing asset, not a “pain in the ass”.

Creating A Vision For Your Business

Jack Welch, former CEO of General Electric, has stated, “Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.”   Clear visions have helped shape and propel impressive companies.  For example, Fred Smith, founder of Federal Express, had a vision that packages could be delivered around the United States by the next morning.  Disney wanted to make families smile.  Dominoes wanted you to have hot, delicious pizza delivered to your door in 30 minutes or less or it was free.  Coke wanted to have its refreshing beverages within the reach of every person in the world.  Microsoft wanted to create beneficial software that would compel people to have a computer on every desk at work, home and school.

Jonathan Swift said, “Vision is the art of seeing things invisible.”  Don’t sell vision creation short.  You must learn to understand, value, and appreciate the essential role of an exciting vision for a healthy and growing business.  Start thinking and planning more.  Escape the tyranny of the urgent and focus on one of the most important tasks you can do – create an exciting future destiny and direction for your business.  Effective visions also help lead the leaders – keeping them motivated and challenged.

Let me state a warning.  Fully realize that your employees must buy into you as a leader before they buy into your vision.  They must believe and trust in you to believe and trust in your vision.  You may need to do some repair work to establish yourself as a caring and competent leader before you start creating and selling your vision.  You will need to connect with their hearts before connecting with their heads. 

To create a new vision or sharpen and update an existing one, allow yourself a month.  See yourself as the Chief Listening Officer during this early phase.  You cannot build a vision or business on your own.  For buy-in later, seek the input of others now.  Include your employees, customers, suppliers, distributors and business advisers in the process.  Spend a week or two gathering input from these stakeholders about your company’s direction, strengths, weaknesses, threats and opportunities.  If they do not participate in this creation phase, they will not want to participate in the vision implementation phase.  Also, study your industry trends and your current and emerging competitors.  On all fronts, do your homework.

After listening to and studying others, be certain to listen to your inner voice and gut.  While other’s input is critical, know that the buck stops with you.  You are ultimately responsible for the vision of your business.  Your vision ultimately becomes your company’s direction, objectives, priorities, strategies, and tactics.  It is that magical and that important.

Therefore, get away from the daily interruptions and go into your CEO Cave.  This could be your home office, at a coffee shop, at a park, library or beach.  Spend two to three days forming or crystallizing a picture of what you want the business to look like in one year, three years, and five years.  See things the way they can be.  Dream the big dream; unleash your spirit.  See the business in your heart that you truly want to create.  A bold, daring, super-sized vision, even if only partially achieved, yields greater rewards than a small, wimpy vision fully achieved. 

Remember, there are no rules while you create a desired future state.  However, don’t deal in pure fantasy.  There is a difference between a vision and a delusion.  Stay somewhat grounded.  You must see things the way they are now in order to visualize the way they can be.  You must build from a foundation of realism, acknowledging your company’s current strengths, weaknesses, opportunities and threats.  However, once you gather the facts, let go and let her rip.

Grab hold of the future, bring it into the present, and then go about creating it.  Give yourself and your employees something to be proud of.  Find a voice to express the common dreams, emotions, potential and needs of your team.  Let your vision inspire, motivate, and galvanize your team.  Small visions do not stir the soul.  Give people a reason to follow, something to shoot for.  Make the vision intoxicating -- something that captures their imagination.  Show them the finish line in bright, Technicolor detail.  Sell more to their hearts than to their heads.  People change when their feelings change, not when merely their thoughts change.  Powerful visions unite groups and take them to new heights and places. 

Keep in mind, employees want purpose and passion to lift them and propel them.  Find a larger purpose for your company than merely making money.  Don’t settle for being a random collection of people and assets trying to make a buck.  A purely financial focus will not sustain the troops over the long term.  Make coming to work a meaningful and fulfilling event for your employees.  People want to work in a challenging and rewarding environment.  They want to learn, grow and reach their potential – the full expression of their talent.  People are drawn to great leaders, great visions and great causes.

Having trouble thinking big?  Ask yourself bigger questions! 

• Why does our enterprise exist?
• If our business were shut down, what would be missing in this world?
• What is our crusade?   What could be our crusade?
• How do we engage the hearts, minds and souls of our employees?
• How can we make our company great, meaningful and different?
• How can we change our industry, community, and even the world? 
• How can we measurably improve the lives of customers? 
• How can we make our employees and their families’ lives better and more fulfilling? 
• What higher calling or spiritual dimension can we embrace?

After listening to others for two weeks and thinking deeply yourself for two weeks, a vision for your company should be coming into focus.  Bottom line, this vision should help your employees and yourself re-acquire the fire and passion for your company’s direction and purpose.

Greater Wallet Share: Help Customers Buy More, and More Often

"Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them." - W. Edwards Deming

To be successful at getting your current customers to spend more with your organization and more often, you must increase the "perceived value" of what you offer.  You must educate your customers so that they desire your products/services even more.

To make this happen, you must first increase the collective "self-esteem" of your organization.  You and your employees must believe that you are different, better, special and highly valuable to your customers, even worth a premium price.  You must fight the "we are a commodity" mindset with every fiber of your mind, body, and soul.  The day you believe you are in a commodity industry or business is the day you begin to die.  If you are similar to the others, you must break out from the pack.  For example, add more services to your offering, give greater performance and money-back guarantees, provide on-going education seminars for your buyers or consider packaging/bundling other products or services with yours.  Again, be different and more valuable.

Here are some ideas to increase the average purchase size and frequency of your sales:

·         Raise your prices, if you can.  Educate your buyers on the superior advantages, benefits and results you provide them and explain "the reasons why" you need to raise prices - increasing manufacturing costs, customer-service enhancements, better guarantees, better ingredients, etc.

·         Upsell.  If your client/customer can achieve better results and more satisfaction, educate them on buying a higher-end product/service.  Do a better job of assessing their needs and matching to products/services that will give them the optimal buying experience and satisfaction.  You will increase your profits and their fulfillment.  Auto dealers are masters at getting customers to buy car models with the higher-end feature packages (i.e. leather interior, better stereos, etc.)

·         Cross-sell.  If you have multiple product lines or service lines, communicate and educate your customers/clients on the full spectrum of your solutions -- services, products, and expertise.  Continually ascertain their challenges/problems and match up with the other solutions you offer.  CPA firms, for example, cross-sell their audit clients on tax and consulting services.  Banks cross-sell their checking customers on investments, mortgages, lines of credit, credit cards, etc.

·         Bundle better.  Consider packaging complementary products/services together.  If a customer is going to buy a gas grill, for example, offer them a complete package of cooking utensils, mesquite wood chips, barbecue book, grill cover and apron.  By saving them time and helping them to buy a more "complete solution", you can probably charge a premium for this "barbecue in the box" offering.  At the very least, they will have bought more than they otherwise would have - you made buying easy.

·         Offer volume or frequent buyer discounts.  If you can get your customers to buy more and buy more frequently, reward them with incentives, discounts, extra level of services, etc.  Since you have maximized your cash flow, be willing to reward them with a few extra perks.  Bookstores and airlines have "frequent buyer" programs.  For example, video stores and coffee stores give you a free serving when you buy a certain number of times.

·         Offer other products/services that will complement what you already sell.   Ask the question, "Who else sells something that goes before, after or along with my customer's purchase?"  For example, if you sell computer products, consider selling "technical needs analysis" services on the front-end or installation and computer training services on the back-end.  Be sure it makes economic sense to add such services to your business.

·         Communicate with your customers often and give them buying ideas/solutions via mail, phone, email, newsletters, in-store displays, etc.  For example, if you are a hardware store, and as early fall approaches, use direct mail and in-store displays to communicate to your customers the need to fill cracks and seal coat their driveways.  Sell them on the benefits of taking such action.  Package all the supplies together (sealant, crack filler, broom, gloves, removal cleaner, "how to" booklet, etc.) and offer a single-solution price.

·         Conduct special events to educate your existing customers on your additional service/product offerings.  Do this in an informative manner and in a way that has "their best interests" at heart.  Hold a "sneak preview" for your new products, services, models, etc.  Hold exclusive events for your best customers.  An upscale luxury auto dealer might hold a wine and cheese party with a musical quartet to unveil the newest car models.

·         Endorse other people's products or services to your client list and get a cut of the action.  For example, if you are an upscale jewelry store, consider offering elaborate vacation packages to your customers via an upscale travel agency.  Mail offers to your customer database, endorse the travel agency and their offering, and receive a set percentage of any revenues generated.  Instead of adding computer training to your computer store, form an alliance with a reputable training company and negotiate for a "cut of the action" for introducing/endorsing them to your customers via email, direct mail, telemarketing, etc.  To maintain the goodwill of your customers, make sure you do your "due diligence" and introduce only high-trust, high-integrity, high-value organizations to your customer base.

Leadership 101: Lead Your Company to Greatness

Before you are a leader, success is all about growing yourself. When you become a leader, success is all about growing others. —Jack Welch

What does a leader look like, sound like and do?  There is no one correct mold.  Great leaders come in all shapes, sizes, voices and styles.  However, great leaders share a common outcome – they oversee getting important things done!

While leadership is hard to define, you know it when you see it, feel it, and hear it.  An effective leader creates clarity about where the business is headed and how each team member can contribute to the cause.  Such clarity helps reduce confusion and wasted actions and energy.  Clarity also helps your employees to make better decisions within established boundaries.  As a result, you can breathe more and supervise less. 

Additionally, a leader motivates individuals to work together optimally as a team for a common cause or vision.  A real leader pulls others along rather than push others around.  Leadership is about communicating, not shouting out commands.  You cannot coerce people to follow you for long.  Command-and-control leadership never earns the hearts, minds and will of others.

Real leadership is all about influence, the ability to make others want to follow you and your cause.  Proof of leadership is found in the loyalty and commitment level of your followers.  When you turn around, are your employees eagerly and energetically following you and your vision?  If not, commit to improving as a leader.

In addition to creating clarity of purpose and direction for the organization, a leader also creates the right conditions and climate for her/his team to succeed.  It’s simple; you cannot succeed on your own.  You need energized and committed followers as much as they need an effective leader.  It’s a partnership in pursuit of a common cause.  You are nothing without engaged followers.  It’s a symbiotic relationship – a leader needs his/her followers to get important things done. 

To help you develop a solid foundation of knowledge, here is a list of some fundamental leadership practices:

            A Leader Creates Clarity of Purpose & Direction by:

·         Knowing where the company is going and why

·         Developing and articulating a compelling vision for the business

·         Selling the benefits of this vision to employees with facts, emotions, stories, symbols, etc.

·         Establishing direction, strategies, and objectives for the company

·         Developing a simple business plan

·         Defining roles for and responsibilities of your employees

·         Establishing clear expectations for individuals

·         Developing processes to hold employees accountable for getting results

·         Encouraging individuals to work as a team; elevating the needs of the team over the needs of the individual

·         Focusing employees on key priorities and results (organizational focus)

·         Setting standards, monitoring performance and giving feedback

·         Reminding everyone that the business exists to serve and satisfy customers as well as to earn a healthy profit

·         Influencing the thoughts, feelings and behavior of employees

A Leader Creates the Right Conditions (climate, culture) for Success by:

·         Being a true leader (CEO), not another employee – taking the time to think, plan, see the big picture, and solve problems

·         Building and maintaining a strong, healthy team

·         Marshalling resources to support the strategy of the business

·         Allowing others to do their jobs, not micromanaging them

·         Allowing employees to share ideas and in the decision-making process – avoiding command-and-control leadership

·         Getting others to believe in themselves and the mission of the company

·         Serving and caring for others – being a giver, not a taker

·         Getting the right people on board and the wrong people off

·         Establishing a goal-oriented environment

·         Maintaining open and honest communication; being open to positive and negative feedback

·         Helping the company to face reality – the good, the bad and the ugly

·         Accepting 100% responsibility for the results of the business

·         Being bold and decisive even in the face of limited information

·         Driving out fear of mistakes; encouraging experimentation and innovation

·         Teaching and motivating others to reach their potential

·         Monitoring financial performance and taking decisive action, when necessary

·         Maintaining a positive culture through interviewing, hiring, reviewing and rewarding the right type of employees

·         Ensuring the company is a fun place to work

·         Being a competent, caring and connected leader of good character

·         Creating a sense of urgency

A company without a leader is like a sports team without a head coach and without a game plan.  Both scenarios will result in players (employees) doing their own selfish thing, running around without a purpose, with no sense of accountability, making repeated mistakes, posting lackluster performance, and most likely losing the game.

Your business doesn’t need more defensive linemen; it needs an in-charge head coach.  Let your employees do the daily “blocking and tackling”.  Create the game plan and let your employees play the game.  Watch and coach from the sidelines, do not get in the trenches – you will lose vision of the whole field.  Focus on creating clarity and conditions for success for your team.

Keep What You Have, Grow What You've Got

The more you engage with customers the clearer things become and the easier it is to determine what you should be doing. - John Russell, President, Harley Davidson

Don’t underestimate the need to satisfy and retain customers. Most businesses put too much money, time, and effort into chasing new customers/prospects and far too little resources trying to keep their current ones. However, we all know that you can’t fill up a bucket if you don’t plug the current leaks. Real profits and stable revenue streams come from long-term relationships and repeat business with your current loyal, profitable customers. Some experts declare that 80% of a company’s future growth comes from existing clients, if served and cultivated properly. As such, customer satisfaction and retention should be your #1 marketing priority.

Again, the purpose of a business is to attract and retain customers. You can’t grow and remain in business without keeping the customers you currently have. First, you must measure your current attrition rate (loss of customers) and set a goal for dramatically reducing this rate. For example, let’s say, on average, that you lose 20% of your customers every year. A realistic goal would be to reduce this attrition rate to 10% per year. Bottom line, it is easier and nearly eight times cheaper to serve and retain current clients/customers than to pursue new ones.

Once you have plugged the holes in your attrition bucket, you want to serve better and get closer to these profitable and worthy customers. You want to better understand their needs and then fulfill as many of these needs as possible with additional products and services. Continually communicate with your customers. Give them value. Give them solutions. Focus on them and their needs, not on your products/services.

Communicate with them in person, in letters, in faxes, in emails, via your website, brief newsletters, etc. Don’t worry, you can’t over-communicate with your customers. Like employees, keep them informed, involved, and inspired to continue doing business with you. Also, repeatedly ask your customers the following questions:

• “How are we doing?”
• “What other needs do you have?” and
• “How could we improve our value to you?”

Your objective is to provide them with more value more frequently and as a result, you will benefit with more profits. Never sell a customer only once. Real profits come from repeat business. As such, set goals to increase the frequency and size of repeat business. You want ongoing relationships and ongoing sales.