Winning in business is not easy – customers demand more and more value for less cost while competitors try every trick in the book to steal them from under your nose.
Add to this one of the worst economic downturns in over a decade and signs that things will worsen before they improve and you realise that now is the time for the fastest, smartest strategy you and your team have ever had to plan and execute.The two “How-To” components of this feature are designed to give you the very best tools to strengthen your business’s prospects of not only surviving the downturn but, more importantly, being positioned for the upswing that will inevitably come.
You need to Set the Tone
Goal Lower The Anxiety Level In The Office By Being Candid About The Challenges – And Opportunities – Ahead
It’s easy to blame the economy for all the reasons a company is suffering: Customers are cutting back on their expenses, advertisers are trimming their budgets and stock prices are sliding. These problems may, in fact, be attributable in part to the downturn, but going with the “It’s the economy” defence sends a subtle but potentially dangerous message to employees: It implies that the situation is totally out of the company’s hands and left in large part to fate. This is exactly the kind of attitude that raises anxiety levels in the office and disrupts employees’ focus on the problem at hand: turning a business around.
- Don’t just rely on a message
An email from the top explaining why the company is in the red can’t tell employees all they need to know. Speak to them in small groups and be as candid as possible about where the company stands. This is also a good time to suss out any rumours.
- Open the books
Giving employees the numbers behind company performance clarifies where the business needs to change and how their jobs connect to the bigger picture. But be warned: “If you’re going to be transparent, take the necessary time to teach employees about how the business works,” says Rich Armstrong, general manager of the Great Game of Business, a coaching firm that teaches open-book management. He advises managers to start with what employees probably already understand, like operational numbers, and then connect the dots with how those numbers increase gross margin and generate cash flow. Above all, keep finance jargon to a minimum.
- Focus on the future
There’s no need to sugar coat it. Pulling the company through the downturn isn’t going to be easy, but emphasising the challenge can have its benefits. “It’s a great time for your employees to realise that they can play a role in discovering opportunities for the company,” says Vince Thompson, a former manager at AOL and author of the book Ignited.
2. Enlist the Team to Fix What’s Broken
Goal Motivate Employees And Find Out How And Where The Business Needs To Change
Traditionally, the top execs decide the strategy and let it trickle down. The problem with this tactic is that it rarely makes the emotional case needed to mobilise employees around a common goal, says Paul Bromfield, a principal at Katzenbach Partners, which has advised companies like Aetna, Credit Suisse, and Pfizer. “This is about problem-solving and discipline, and that’s where employees come in,” he says. “Companies should be harnessing employees in the effort to identify where to cut costs and how.”
Not only will utilising workers’ expertise make them more invested in the company’s success, it also gives management a more honest look at what’s not working. Senior leadership tends to focus on just one area of cost-cutting, Bromfield says, like products, headcount, or moving operations offshore. Employees, on the other hand, can use their collective wisdom to eliminate clumsy (and costly) procedures across divisions. Here are four guidelines for involving staff in the process:
- Identify key influencers
“If you’re really going to mobilise people, you can’t do it from the top,” Bromfield says. Find the key employees who hold sway in their departments and get them to embrace and spread the change effort. These are the people who know how things really work (not just the way they’re supposed to work) and have a way of bringing together the right people to get things done.
- Let teams do the problem solving
Form groups around the influencers and motivate (rather than mandate) employees to identify what’s slowing down business. Often the best place to start is to look for processes and bureaucracies that annoy the team. Set a basic timeframe to achieve cost savings, but let each group work at its own pace.
- Make it a conversation
Schedule brown-bag lunches or other informal occasions to talk to employees about their findings and where they might be hitting roadblocks. In the early 1990s, Bromfield’s former client Texas Commerce Bank held focus groups with thousands of its employees to find out what procedures most frustrated bankers and customers. Using the feedback, the company nearly doubled its $50 million cost-savings goal.
- Follow through
Many cost-saving programmes fail because management implements the initiative halfway or lets inefficiencies creep back after meeting short-term goals, which doesn’t sit well with employees. Adopt the changes wholesale or not at all.
3. Get Back to Work That Matters
Goal Make Sure Your Team Is Tuned In To Growth Opportunities
The problem with a downturn is that while cost cutting is absolutely necessary, it can make everyone gun-shy about pursuing new initiatives and opportunities for investment. However, if your department, and in turn the company, is going to emerge from the slump in a competitive position, there are a few key investments you can’t afford not to fight for now.
Learn about the customers of your weakest competitors, writes Michael Roberto, a blogger for Harvard Business Publishing and management professor at Bryant University. While competitors are busy shoring up their relationships with large, established clients, it could be the perfect time to swoop in and court their smaller customers.
- Research and Development
Take a cue from Apple’s Steve Jobs. When asked by Fortune magazine recently about Apple’s strategy for the downturn, Jobs pointed to how the company survived the 2001 tech bust by upping its R&D budget. “It worked, and that’s exactly what we’ll do this time,” he told the magazine.
Separate the value-added activities from the wheel-spinning exercises, Thompson suggests in Ignited. Instead of giving up on new projects in a downturn, shift focus so that the team is investing time in identifying and prioritising the projects that will generate the most benefit for the company. Even if the final product will have to wait until more resources are available, doing the legwork now means the product will go to market faster when the time is right – and employees will stay engaged in the meantime.
4. Acknowledge and Reward Deserving Employees
Goal Recognise Achievement, Even If Resources Are Scarce
Employee bonuses and raises are among some of the first expenses that upper management cuts during a downturn. But even if extra compensation isn’t in the budget, that doesn’t excuse managers from rewarding employees. “We have always had a policy of rewarding our top sales executives and managers,’ says Ivor Jones, CEO of KreditInform, a highly profitable South African company.
Lack of recognition, both financially and verbally, is one of the things that does the most damage,” says David Sirota, founder of the management-consulting firm Sirota Survey Intelligence.
One easy, no-cost way of recognising valuable employees is to improve their quality of life. “The best reward you can give people is autonomy over how they spend their time,” says Jody Thompson, a former Best Buy human resources manager who, along with Cali Ressler, helped create the company’s Results-Only Work Environment programme. That means giving employees your trust and the flexibility to work at home (or wherever suits them) whenever they want to – without any judgements. This gives workers more control over their time, and sometimes even a little extra cash. Sun Microsystems has found that employees who worked an average of 2,5 days at home each week saved $1 700 (approximately R13 000) a year in fuel and vehicle wear-and-tear.
Danger, danger, danger
Save Rewards For The Worthy
Keeping your employees engaged doesn’t mean rewarding them just for doing their jobs. The most effective rewards are significant but well deserved. Libby Sartain became head of Yahoo’s human resources department in 2001, just as the company received a hard knock from the dot-com bust. She decided that instead of quietly giving large bonuses to over-achievers, which wasn’t providing much bang for the buck, Yahoo needed to regularly single out the top 15 to 20 stellar individuals and teams – not only to reward them, but to help the rest of the company understand what made these employees outstanding.
The following year, the company gave its first Superstar Awards. Candidates were nominated by their peers for significant achievements and awarded cash prizes ranging from $5 000 (R39 000) to $50 000 (R390 000). The Yahoo Superstar Awards programme is now in its seventh year and has honoured employees for contributions like creating the Panama advertising system, inventing a way to advertise on instant messages and fixing a troublesome accounting problem. “This isn’t egalitarian, this is a meritocracy,” Sartain says, acknowledging that some managers resisted the idea at first. “When people saw the winners, they understood why they won, and it took hold and became part of the culture.”
As a result of the positive response to the online worksheets that accompanied the May 2008 Entrepreneur magazine article entitled Benefit or Bust: Managing Your Business in an Economic Downturn, as well as their relevance to this article, they are included as tools to assist owners and managers in their quest to ensure success during the tough months that lie ahead. In order to get maximum benefit from them it is recommended that you carefully work though the questions and exercises. Write down your answers and follow up on what you write. Just reading without ever doing will never deliver the results that drive success and wealth creation.
1. Focus On Value
Identify the value that your product or service creates:
- What customer problem does your product or service solve? Describe the problem.
- How does your product or service solve this problem effectively? Describe the solution.
- How is it different from products or services designed by competitors to solve the same problem?
Identify the target market for your product or service:
- Who are the people, or the businesses, with the problem that your product or service is trying to solve?
- What drives their buying decisions?
- Will the driver of their buying decisions change under tighter economic conditions? If so, how?
Recognise the link between your target market and your value offering:
- Why do the people in the target market (described in task 2) want what you offer (as described in task 1)? Identify specific reasons why your target market should buy from you.
Craft a marketing message that highlights the match between your target market’s needs and the product or service you offer.
- Assume that you are sending a short email – only a few lines long – to all your customers and prospects telling them how you can solve a specific problem that they have. Write the email down.
- Integrate the message into all your communication over the next 90 days.
2. Look To Solve Alternative Problems
Identify new customer needs:
- Take some time to brainstorm – alone or with others in your business – new customer needs that have arisen as a result of the changing economic environment
- Create a mind map of ‘new’ customer needs that relate to the product or service offering of your business:
Questions to prompt your thought process:
- What has changed in my line of work?
- What are people or businesses struggling with?
- Where are the needs of people or businesses not met?
- Where have we seen the majority of customer complaints of late?
- Discuss each of the needs on the mind map; circle those that could be turned into viable new business opportunities.
- Do some high level research into each of the needs identified and write up a mini business plan (no more than three pages) for at least three of the needs identified in this analysis. If you brainstormed in a group allocate each member of the group one need to research and write a mini business plan. Agree to meet in two weeks to review and discuss the business plans and decide which ones to take forward.
- Identify three geographic markets in which you currently don’t operate that you think may offer attractive expansion options.
- Identify people you know in each of these locations who will be able to give you insight into the market including the opportunities and risks.
- Make contacts with each of the people identified in task 2 and get their opinion on advantages and disadvantages of the new market for your product or service. Write down your key findings.
- Look for additional information on the Internet about advantages and disadvantages of the new markets you are looking at. Write down your key findings.
- Based on this evaluation, identify the most promising new market and plan a business trip to investigate this market. Evaluate which product or service offering would work in such markets, and whether trading in or servicing such markets would be viable.
- If things still look promising, plan a business experiment in the new market – take your product or service into the new market for a limited period with a limited pre-determined investment cap. This will allow you to assess whether there is potential for long-term growth in the new market, without risking too much up-front.
4. Focus On Efficiency
- Review all processes and activities in your business
- Identify core processes in the business for developing and delivering products or services to customers
- Within each process identify the key steps related to that process, the costs that are being incurred, and question whether each cost can be eliminated or perhaps reduced.
- Review a monthly profit and loss statement (income statement) for your business and identify unnecessary costs that could be eliminated or scaled down.
- Make a list of monthly costs to be eliminated or reduced.
- From the monthly income statement, identify large fixed costs. Discuss with others in the business whether it would be viable to translate any of the fixed costs into variable costs.
- Create a competition for employees encouraging them to identify unnecessary expenditure and inefficiencies in the business. Reward people who uncover significant savings for the business.
How To Have Your Store Run Smoothly Without You (So You Can Take A Well-deserved Break)
Below are some tips that can help ensure the smooth running of your store even when you’re not around, and let you take that break without the stress.
It can be hard for business owners to take time off from their retail stores – whether that’s because they’re too busy, need to be around to make decisions, or simply feel they can’t relax without knowing how the business is tracking. But taking a break can be incredibly important, if not sometimes necessary. And as we head into the busiest retail season of the year, taking a break now before the rush could be the best thing you do – for yourself and even for your business.
Below are some tips that can help ensure the smooth running of your store even when you’re not around, and let you take that break without the stress.
1. Make the most of technology that lets you keep an eye on your store from anywhere
The beauty of living in this modern age is that there’s an abundance of tools that can help you run your store even when you’re away. To do this, cloud-based software is the way to go. Using a cloud-based solution to run your store means that you will no longer have everything housed on your computer server in one place. Instead, you can access files, sales and stock data, financials, business reports, customer and even employee data from anywhere, in real-time, and from any device provided you have an Internet connection.
The other beauty of cloud-technology is that it’s usually relatively inexpensive compared to more traditional systems. If you haven’t done so yet, look into some cloud-based software options, such as point-of-sale and inventory management, accounting and finance, customer management, and employee management and scheduling.
2. Develop a store manual
Create a manual that your staff can turn to when you’re not around. Document procedures, contact information, and anything else that will help your employees to know just what to do in your absence. Some of the sections you may want to include in the manual are:
- General store information – What do you stand for? Who are your target customers? Instil this information in your staff. The more they know (and love) your business, the easier it’ll be for them to make decisions in line with your company values. Include details on personnel conduct, pay and scheduling, store access, conditions of employment, store policies, etc.
- Customer service – Have an entire section dedicated to taking care of customers. Include information on conduct, customer service standards, lost and found procedures, and dealing with difficult customers. Also, provide detailed instructions on how to handle theft and shoplifters.
- Cashier procedures – Include information on the operation of your POS software, the types of payments you accept and how your loyalty program works.
- Contact information – Take note of the tools you use in your store (computer, accounting software, analytics, cameras, etc.), and provide basic instructions on how to operate them. These tools likely come with their own manuals, so make sure that employees know where those documents are and how to contact the vendor if required. Include the contact details for the individuals or entities that your store deals with, including vendors, suppliers, business partners, contractors, etc. Also have a list of emergency contacts, such as the local police and fire department, as well as medical facilities in the area.
3. Appoint a second-in-command
Pick a second-in-command (or 2IC) to take charge of the store in your absence. This person should be someone you trust who knows the business.
It’s best to hire someone from the inside — ideally an individual who’s been in the business for a few years (this demonstrates loyalty) and has shown strong leadership skills or initiative.
4. Empower your staff
Of course, the success of your store doesn’t depend on your 2IC alone, which is why it’s important to empower all your employees always do their best, even when you’re not around. This can be accomplished by giving them adequate training and by fostering an open environment that recognises the efforts of each team member. Encourage questions and be sure to give them specific as well as big picture answers so they know exactly how their actions affect the company.
It is important that you clearly define the roles of each staff member. Establish who’s in charge of what and require your employees to be accountable for their actions. Finally, believe in your employees and show them that you do. Trust you did your job right when you hired and trained them and that they’ll be fine even when you’re not there.
5. Do a test run
When should you start planning for your absence? That depends on the nature of your leave and how long you’ll be away. If you’re planning to be out of the office for a few days, then giving your staff a heads up a week or two before would be enough. But if you’re planning for maternity or paternity leave, then obviously your team needs to be notified months in advance.
Still worried? Implement a test run by consciously getting out of the staff’s way for a day or two. Work from home for a while or stay in your office instead of the sales floor and tell your 2IC to handle the store. Consider hiring secret shoppers who can put your staff’s skills to the test and have them report the findings, so you can figure out ways to improve.
With Christmas and holiday season fast-approaching, now is a great time to start empowering your team so you can find the time for a well-deserved break.
Stop Surviving And Start Thriving In Business
It will inform your operations, which will inform your human and asset capital and lastly, the financial investments you make.
To thrive – and not just survive – in business you need three basic building blocks: 1) attract more customers and clients; 2) who spend more; and 3) buy more often. But how do we make this happen in the tight, recessionary environment we find ourselves in South Africa?
Despite the tough economic conditions, businesses can still thrive. In fact, many small businesses have been found to thrive in difficult economic conditions and are known as counter-cyclical businesses.
So how do you turn the tide from surviving, to thriving? You need to start thinking creatively, making informed decisions and being agile in the business environment. Always start with your marketing strategy. It will inform your operations, which will inform your human and asset capital and lastly, the financial investments you make.
Ansoff Growth Matrix
Business leaders continuously explore various growth strategies to retain and grow market share. One of most respected and often used is the Ansoff Growth Matrix. It was first published in the Harvard Business Review in 1957, written by strategist Igor Ansoff to help management focus on the options for business growth. Ansoff suggested that an effective strategy considers four growth areas, varying in risk. This strategic planning tool guides us to understand our current situation, contemplate strategic options and consider the associated risks.
- Market Penetration: Market penetration has the least risk of the four options. Here you are selling more of the same things to the same market. You know your product and market well. The question is, how can you defend your market share and sell more to your existing customer? You may consider special promotions or introduce a loyalty scheme.
- Product/ Service Development: Product and service development is slightly riskier as you introduce a new component into your existing market. The advantage is that you sell to a customer/ client that you know, and they trust you. Ask yourself how to grow your product and service portfolio? You may consider adding new services and products or modifying your existing offering.
- Market Development: With market development you target new customers and clients with your existing products and services. You sell more of the same things to a different market. You can consider new sales channels, online or direct sales. Do a proper market dissection to target different groups of people, considering different age groups, gender and demographics.
- Diversification: Diversification is very risky. Here you consider introducing a new, unproven product or service into an entirely new market that you may not fully understand. You may need new expertise, acquiring another business or venturing into another sector. The main benefit of diversification is that during difficult times only one component or element of the business may suffer.
Related: My Business Is Growing… What Now?
The fifth element: Passion
In addition, I would add one more element critical to business growth: Passion. It is the single component most critical to business success and, combined with any one or combination of the four areas of the Ansoff Growth Matric, it can equip small business owners with all they need to thrive in their business environment. Passion determines your business success, so make sure you have it in heaps to reap the rewards of your hard work.
6 Common Decision-Making Blunders That Could Kill Your Business
Among the logical errors nearly everybody makes is thinking only everybody else makes logical errors.
Humans are often very irrational. If you’ve ever explored behavioural economics or psychology, you may have found a host of examples demonstrating situations when we make objectively bad decisions.
Below are six of the largest decision-making blunders we all make. Avoiding them will dramatically improve your decision-making, your quality of life and success.
1. Sunk-cost fallacy
Of all the ones on this list, the sunk-cost fallacy is the most common. Many of the decisions we make are final or difficult to change. For example, let’s say you invest R1 000 in Facebook, and the price of the stock goes down to R600 the following day. The fact that you put in R1 000 initially is irrelevant to the situation at hand; you now have R600 worth of Facebook shares.
What this means is that once the decision is made and our cost is incurred, there’s no point thinking back. You already put in the time, money or other form of investment. Considering that in any future decision is illogical, despite how tempting it is. Instead, present yourself with the new options at hand — without considering the sunk cost.
2. Narrow framing
Would you take this bet? You pay me R1 000 if a flipped coin lands on heads and I pay you R1 200 if it lands on tails. Most people would say no. We tend to be risk-averse, unwilling to risk something like R1 000, despite the reward being a bit greater.
Now, what if I offered you that bet, but I promised we would flip 100 coins? Each time, the loser pays up. Would you take it then?
Almost certainly, right? The chances that you lose money, overall, are extremely slim. This idea can be applied throughout life. When we’re in situations that will repeat themselves over time, we should take a step back and play a game of averages.
3. Confirmation bias
Another common one in the worlds of psychological and behavioural economy is confirmation bias. It hurts our ability to keep an open mind and shift our opinion. When we have a held belief, we typically look for information that confirms our opinion while ignoring data points that tell the opposite story.
For example, if I’m really excited about a new software product that I just integrated into my business, with ten of my employees as users, I might have made up my mind about the quality of the service before we put it to use. I would then be more likely to listen to the three employees who enjoy it, not the seven who don’t.
There’s almost always information that will validate our opinions, no matter how wrong they might be. That means we need to always look for conflicting evidence and, from there, make judgements based on more well-rounded information.
4. Emotionally driven decisions
When we’re angry or upset, we’re much worse decision-makers. When you have to make an important decision and happen to be in a bad mood, you should hold off. Instead, wait until you cool down and can think more clearly. It will remove the outside influences and let you think more rationally.
5. Ego depletion
This one makes intuitive sense, but it’s one of the most common ways to make bad decisions. The idea of ego depletion is that when we’re drained, physically or mentally, we’re less likely to think critically. Think about the times you’ve been exhausted after a long day of work. In those moments, you don’t want to have to think hard about anything. Instead, you want your brain to work automatically.
What that means is that when you’re tired and faced with challenging choices, you’ll rely more on your instinct or automatic processes as opposed to analysis and thought. That can be extremely problematic in situations that require effort.
6. Halo effect
The halo effect says that once we like somebody, we’re more likely to look for his or her positive characteristics and avoid the negative ones. This is similar to confirmation bias, but it’s oriented around people.
Related: 10 Stupid Mistakes Smart People Make
For example, let’s say I just hired someone named John, who was great during his interviews. Through his first few weeks, John does a few things well at work, but he also does many things poorly. The halo effect — brought on by his wonderful interview persona — could cause me to ignore his poor attributes and emphasise his good traits.
This can be detrimental to our ability to make judgements about others. We have to realise our biases toward certain people and eliminate them.
These are a handful of the many decision-making errors we’re all prone to. Although it’s challenging to scrutinise your preconceived notions, doing so is worthwhile. It gets easier over time and will, ultimately, make you a more effective decision-maker — personally and as a business owner.
This article was originally posted here on Entrepreneur.com.