Is that all it takes for business success? 7 Ingredients? Indeed it is. And here are the 7 ingredients:
- a clear plan
- solid cash management
- the right people
- noticeable differentiation
- “owner” mindset
- trust
- standards
A Clear Plan
Most organizations have a plan. The problem is the plan is either too simplistic – which means it really is a budget, or it is far too complex. Either way in most organizations, the majority of employees have very little access or understanding of the plan. The measure of a clear plan is that – it is readable and understandable, and the person reading it, is able to translate the plan into actionable steps. This is important because it gives employees a line of sight to the end goal. A good plan has 3 characteristics to it. It is cleat, it is compelling and it is consequential. and it gets people behind it.
Solid Cash Management
If there is one thing that a business must have, it is positive cash. Cash to a business is like blood to a human. No cash and you are dead! Now solid cash management doesn’t mean screw your suppliers by paying them as late as possible. On the contrary,many of your suppliers also need their cash from you to survive. The trick to to cash management is to resist spending what you don’t have, collect when it’s time to collect and pay when it is time to pay. Most organizations leave collection to people in accounts and finance and treat collection as a by-product of the selling cycle. Collection is never an accounting function nor an accounting KPI. It is most appropriate to be part of sales accountabilities and sales key performance indicators. A good rule to follow is unless payment has been collected, sales doesn’t get credit for the transaction.
The Right People
There is a saying that goes like this “when in doubt, do not hire” and I fully subscribe to this wisdom. The difference between the right people and warm bodies can be up to 300% in performance. And the definition of the right people are people who subscribe wholly and fully to your company values – as practiced not preached. Nordstorm’s with its legendary customer service, has 50% of all new hires leave within 12 months as they just can’t fit it despite the fact that income for sales people in Nordstrom’s is easily twice the national average.
The human mind is program, first and foremost for survival. It works continuously to understand its environment and from there survival algorithms are developed to govern behavior and responses.
In the workplace, dramatic shifts in performance can be attained simply by changing the “rules for survival.” Of course the first tendency is to resist the changes in rules, but after the changes are internalized , people will perform to the new rules. With the right reason and motivation, people are capable of achieving the impossible .
Noticeable Differentiation
Whatever that you are trying to sell, be it pencils or airplanes, make sure your product or service has a noticeable difference. A difference that your customer is able to recognize, appreciate and pay for it. That small noticeable difference is what stops you from getting pulled into a price war. If everyone is producing cylindrical pencils, you produce an octagonal pencil. Your noticeable difference is that your pencil will not roll off the table!
Owner Mindset
This is one of those things that we all know for a fact but just don’t put it into place. If everyone from the Chairman to the janitor thinks like an owner, you will make far more money then you can ever conceive. And how to get everyone thinking like an owner? Be 100% transparent with the numbers, link everything you do to the P&L and Balance Sheet (EVA), and pay & bonus people in direct proportion to the company’s EVA performance. If you are treated like an owner, allowed to participate in the business like an owner and get paid like an owner, you will behave like an owner.
Trust
A word that is so easy to say but so hard to do. If you want success, you need to have trust. Doesn’t matter if your are Nordstrom’s or the Yakuza (Japanese mafia) – without trust the organization simply will never meet its full potential. The best part about trust is that it is free, it is in everyone and no one will disagree how important it is. yet it is so elusive. The only reason it is elusive because it plays to the divide and rule strategy of most leaders today.
Standards
After everything is said and done, an organization is only as good as the standards it upholds. If you tolerate mediocrity, you will get mediocrity. If you only allow for world class, you will only get world class. Standards are not set by the boys on the floor. Standards are set and defined by what the CEO and the Board. accept as performance. If you accept missed monthly targets, then you accept low standards. If you spend all you time complaining and correcting your subordinates tardy work, you are also setting low standards.
The secrets to success are hardly a secret. nor are they rocket science. Most of it we learnt as kids, in our games, in school and at home. Somehow in the rat race to the top, and as organizations pit man against man, we loose sight of how simple most things are and in place we induce complexity. Complexity allows us to explain away a great many things. As I was told by a wise old Japanese man – the trick to success it to make everything simple.
This article was originally published on July 2007.