Is it you, or your team, getting in the way of profits?

Saturday 01 June 2013

Why do small businesses frequently fail to deliver growth or profit as expected, when hardworking, intelligent owners dedicate all hours to deliver the best possible service or products?

And why is it that the same owners often blame not being able to find the right people for the job as a key reason – yet, in the same breath, claim that the difference between their business, and their competitors, is the quality of staff?

This is a difficult contradiction to reconcile, especially when more often than not, both reasons are given with complete conviction. It is hardly a revelation that in most small businesses the owner is often all things – head of sales, operations and finance all rolled into one - as well as the person who makes sure all the little things get done. In fact, last week the owner of a local business, which had almost tripled in size four years ago, said he took the bins out last week - and made everyone else tea that morning - because ‘you know, times are tough’.

Whilst these are rather trivial examples, there are many things business owners do on a daily basis, either because of the worry about the cost of someone else doing them,or the ability of their team to do it ‘right’.

The problem lies in the hidden costs of undertaking such minor tasks, and that there are only so many hours in a day. The cost of doing the book-keeping instead of business development, or delivering orders, or picking up stock - rather than reviewing prices or negotiating with suppliers - is huge.

When I start to work through this cost with owners they agree; but, of course, the original reasons for them undertaking such tasks in the first place have not gone away. They cite such reasons as: ‘why can’t they sell like me?’ or ‘why can’t they do it as quickly as me?’, and ‘If only I could find someone as good as me!’

Michael Gerber, the small business guru, believes that such questions are irrelevant for two reasons. Firstly, you can’t duplicate yourself and if you could, would you really want to? If you did, your clone would, in all likelihood, take on-board the training, get cosy with the customers and then go off and set up in business themselves. Sound familiar?

Secondly, and most importantly, any deficiency in your team or your business is no one’s fault but your own.

The first time I heard this I went into denial, followed by (when I realised it was true) a very short bout of depression. However, quickly after that I felt liberated, realising that if it was my fault then there must be something I could do about it!

Large organisations rely heavily on documented policies and procedures and then train the staff rigorously to follow them. They then have a formal review process to ensure procedures are followed.

In small organisations procedures will generally evolve but they are not likely to be documented, and training is not high on the agenda. Therefore, a consistent ‘best-practice’ procedure is rarely followed, and the only time someone realises this is when a job goes wrong and/or a customer complains.

In some small organisations, documented procedures exist, but the team is not trained in, or following, them. Gerber believes that it is very difficult to get someone to do anything well, if they do not want to do it, and that the trick is to create a game that they want to play.

I have seen an example of this with a customer of mine who runs an e-commerce business.

In this case, the issue was the failure to successfully convert enquiries into firm orders. However, there was success when the business contacted clients by phone. The problem arose because the team did not particularly like making cold calls, so other tasks were being prioritised.

Once the problem was identified, the team was incentivised by a large leader board on the office wall, which clearly recorded the value recovered by each member of the team from unfulfilled orders. A new profit stream is now being generated as a result of the ‘game’ which motivates the team to act in the interests of the business.

So, the next time you feel you are wasting your time doing the books, feel frustrated, or moaning about someone on the team, stop - and ask yourself the following questions:

‘What must I learn?’

‘What can we put in place so that this does not happen again?’

Then you can focus on the business development opportunities you have been putting off for far too long.