Early Warning Systems for Your Business

March 9, 2009
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In nature, the prey that survives never sleeps, never loses focus and never, ever becomes complacent. Flocks of birds, herds of gazelles and schools of fish all have “Early Warning Systems” that help them to take evasive action before a predator attacks.

Today’s entrepreneur is preyed upon by a host of “business predators,” including declining disposable income, unmotivated employees, brutal competition and crushing overhead. All these challenges are then aggravated by your client’s doubt and uncertainty over his or her financial future, which can lead to postponement or cancellation of your services. It truly is eat or be eaten out there.

But just like a frightened gazelle, your real problems as a company owner occur when you don’t recognize these business predators in time to take evasive action. Remember, now more than ever, complacency in business leads to arrogance, which if left un-checked brings on bankruptcy!

Your company’s EWS should focus on three main parts of your business: your employees, your customers and your cash flow/finances. All three of these vital areas have to function in lockstep to keep your business healthy and growing in critical times.

Employees

Nothing is more important to the welfare of your company than employees who are motivated, excited and genuinely grateful to work for you. The opposite is also true. It is essential to dig for your unmotivated workers, identify the cause of their dissatisfaction and resolve the problem. If it cannot be resolved, you must get these folks out of your company before they demoralize your other employees and tick off your customers. So here are some employee EWS:

Listen. No, I mean really listen. Instead of a shallow and superficial social relationship, try for a deeper rapport with your employees. (This does not mean “hanging out” with them at the local pub.)

For example, are you genuinely interested in your worker’s welfare? Have you discovered what their goals are? To the degree possible, are you committed to helping your people achieve their dreams? (For more on this subject read the excellent book, The Dream Manager by Matthew Kelly.)

Analyze. Look for trends. Your employee EWS should track chronic lateness; lower production per hour; fewer up-sells; reclusiveness and poor attitude. They are all symptoms of a bigger problem. Reach out to the employee – not to beat him or her up, but instead to let them know you care about them. The hidden bonus is when you check with your workers on their lagging financial numbers (see “Weekly Flash Report” below), you introduce the vital principle of accountability, and we all perform better when we know we need to “answer for our sins.” Once you have both listened and analyzed, you should…

LTKHTAD. That’s right, “Let Them Know How They Are Doing.” Human beings have an innate need for two things:  guidance and recognition. So do it. Give your people the training they need, not only in technical procedures, but also in the “values and culture” your company embraces. Then, both privately and publicly, recognize their accomplishments. The beautiful thing about this recognition is it costs very little, just your time and some caring involvement in your people’s lives. Honestly, if you just can’t or don’t want to make this “employee emotional investment,” you should rethink your goal of building a large business. Simply put, if you are going to grow and prosper with quality employees, you must provide them with much more than just a paycheck.

Customers

Employees will seldom tell you that “something is rotten in Denmark” in your company. So augment your employee listening program described above by cultivating a very acute customer EWS with routine feedback systems. This close relationship with your clients not only will create positive Moments of Truth, it will also give you a clear vision of your company – including any business predators lurking nearby!

Quality Checks. Do you call each and every residential customer the very next day after their cleaning? You should. Introduce yourself, ask your courtesy question (“Am I calling at a good time?”), explain the purpose of your call and then go down your list of pre-prepared questions. If your customer displays any reluctance to answer your quality check question, reassure them that you appreciate the unvarnished truth and you are constantly trying to improve your company. On the other hand, if your customer is delighted write down what they say and use the LTKHTAD principle from your employee EWS, preferably where you can give public recognition for a job well done. However, for your quality check program to truly be valuable you must…

Listen. Once again, really listen to your customer, especially to the statements you would rather not hear. Listen to the tone behind the words. Dig deeper if necessary. While your customers are not perfect it is more likely your employees who have a motive to hide their sins. So quit living in denial and focus on the verbal clues (including a reluctance to answer) that your customer is sending you.

Financials

After listening to your employee and customer EWS, you still have one more vital area to focus on- your financial reports. Financial guru Chuck Violand sums up the importance of financials by saying, “Every number tells a story.” And so it does. But too often we don’t …

Listen. I know you care about your numbers. Only a simpleton would believe the financial reports of a business are irrelevant. However, there are multiple challenges to the careful analysis of your financial reports. Everything from physical exhaustion, boredom, burnout and simply being overwhelmed are all working against you. Fight back with two key strategies:
  1. Isolate and prioritize and
  2. Develop a sense of urgency


You must identify the key information in your financial reports. (Hint:  This task may require outside consulting help but your payback will be enormous.)  The trap for many of us is when we receive 20 or 30 pages of monthly financial reports, flip through them, focus on that last number at the bottom of your P&L and sigh, “All is well.”

Maybe not, and here is why:
  • You are over-inundated with too much superfluous data and
  • By the time you receive and focus on a monthly report it may be too late.

After all, by the time the month passes, the reports are prepared and you get around to actually focusing on them, you may be looking at events that happened two or three months ago! This is an eternity in today’s brutal business environment. You must lock in on that key word in your EWS, “Early.” Do this by implementing a…

Weekly Flash Report. Your job is to distill down the possibly thousands of customer/employee/financial transactions you make in just one week in your business to just one page containing the “key indicators” of your business health. This key EWS is your “company at a glance.” My weekly flash report was prepared every Monday for the previous week and was required to be on my desk by 8 a.m. every Tuesday.

Every company will have different key indicators to include in their flash report. To determine what you should focus on, just analyze what are your company’s “predators” and what are their early warning indicators. (Note: many times percentages of decrease or increase will be more valuable than numbers alone.)

Identify and track the telltale signs of low employee morale, poor customer satisfaction/referrals, poor cash flow/collection practices and, maybe most importantly, future projected expenses/income. These “pending costs/work-in-the-pipeline” numbers may be the most important part of your flash report. Surprise parties are great, but no one likes to be surprised financially. So keep running amounts, not just on work completed with anticipated collection dates, but also work-in-progress.

Many years ago, after being paid on two or three extremely lucrative restoration losses, I remember well my office manager exulting over our overflowing business checking account. My reply? “Kay, I’m delighted we are swimming in money. But don’t tell me how much money we have now. I want to know what is in the pipeline!”

The business EWS we’ve covered will alert you about lurking business predators before they can attack. But – and we’ll look at this next month – all the EWS in the world won’t help with you sitting isolated in your office.

Author’s Note:  For a free sample copy of the Flash Report I used in my cleaning/restoration company, e-mail me at stoburen@StrategiesForSuccess.com and put the phrase “Flash Report” in the subject line.

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