10 Tips to Bottom Line Up Management
By Rich Russakoff and Mary Goodman

Bottom Line Up management is common sense but not often common practice. For Stage 1 Entrepreneurs, many of these tips will be new and compelling. For the more seasoned Entrepreneurs, we hope they will provide the impetus to remain connected and to check that their systems are current, effective, and complied with. We’ve selected these tips through the filter of WIN – What’s Important Now!

1.    CEO: think of it as an acronym for Cash, Equity, & Operations. It’s the CEO’s job to make sure the company has enough cash to meet its obligations, build equity, and maximize profits through operational efficiency and excellence.

2.    Scrutinize your large &/or past due receivables. Are there any accounts deceivable? Even if the economy has little or no impact on your business, some of your customers may not be as lucky. We doubt that Circuit City or Mervyns were completely current with their vendors and suppliers when they closed their doors.

3.    Create Profit focus through Margin Focus. Just as sales are the leading indicator of revenue, gross margins are the leading indicator of profitability. You get the behavior you exhibit, expect, tolerate, and reward.

4.    Identify profit drivers, not just revenue drivers. Incorporate the profit drivers into bonus and commission structures.

5.    If looking for bank loans, consider smaller, community business banks. They may be more aggressive and accommodating. They’re under less regulatory scrutiny right now and therefore may have fewer constraints.

6.    To reduce debt, follow these three steps: 1) Get cash flow positive. 2) Don’t add to debt – keep current on payables. 3) Prioritize by balance size. Pay as much as possible to the smallest balance, when that’s paid off, roll that payment amount into the next smallest balance, then roll both those payment amounts into the next, etc.

7.    Waste erodes profit. Know the impact that it has on your bottom line. If you have a 10% profit margin, for every $1000 in wasted expenses, you have to generate $10,000 in additional sales just to break even. And if you are operating on a 5% profit margin you need $20,000.

8.    Set targets and ranges by P&L expense line. We like to display them similarly to the way blood work is displayed from the lab. It’s bolded and highlighted if it’s outside of range. This creates a smoke alarm. Sometimes, there are reasons for it. Other times, it’s a red flag that needs investigation and/or intervention.

9.    Go deeper with your customers. Identify your niche and dig as deep as you can. This is imperative to survive and thrive in a retracting economy. Just like trees in a storm, those that grow wide and shallow will be uprooted while those with deep roots will continue to stand.

10.    Connect to the customer. Talk to them, and not just to sell, service, or solve a problem. Use specific and disciplined dialogue: What can we do to make it easier for you to business with us? What can we do to create a better buying experience for you? What other problems do you have? It stands to reason that if you’re trying to create solutions you should talk to the people with the problem.

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By Richard L. Russakoff
rich@bottomlineconsultants.com
November 17, 2008

In February Starbucks reached the conclusion that the consistency and quality of their product/experience was slipping. As a result they made the decision to close all 7,100 stores throughout the world and hold a three-hour training session beginning at 5:30 local time. This reinforced Starbuck commitment to two of their guiding principle,
1. Everything Matters
2. Surprise and delight.
In July Starbucks announced their plan to close 5% of their U.S. stores and 75% of their Australian stores. These were locations and locales the company deemed to be unprofitable. They acted decisively and made one big move. They knew they would take heat from Wall Street and they did. Wall Street stated in essence, that Starbucks was no longer the fair-haired child who could do no wrong. Well in fact what they did was right. They were ahead of the curve regarding the economic meltdown. They made a sound business decision to cut their losses sooner rather than later.
They embraced an important Bottom Line Up rule, that when you control your money, you control your future.
At a time when being in a strong cash position is vital to every company, Starbucks is offering through Costco five $20 dollar gift cards for $80 dollars. The sales of these cards even at discounted rates and the fee to Costco will help strengthen Starbucks cash position. They certainly have the margins in their products to make the offer. Whatever success the promotion generations will be cash upfront sitting in the bank.
I believe these are three actions that Starbucks took that will continue to make them great.
Follow the lead of a great company focus on:
Revitalizing your staff to create a great customer experience
Eliminating unnecessary operations that are draining your cash
Creating ways to generate upfront cash
You too can follow a star to the bucks.

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Bottom Line Up Contsultants www.bottomlineupenterprises.com
November 16, 2008

Face reality as it is, not as it was or as you wish it to be, change before you have to, and allocate resources based upon return, not upon need; theses are the three overriding principles of strategic leadership that guided Jack Welch, the legendary former CEO of General Electric.

These principles serve as an essential blueprint for any company in the furniture industry to continue to grow in these changing times.

A strategic leader’s focus must be on building a team of competent managers to execute the leader’s vision. The strategic leader’s number one role is to clarify the company’s overall goals and clearly define and articulate its direction.

So how do you go about determining reality as Jack Welch defines it? It must start with an honest assessment of your company’s strengths and weaknesses tied to an awareness of changes in the marketplace. This should begin with a critical evaluation of where you are spending your time.

As a strategic planner and CEO Coach specializing in high-growth entrepreneurial companies, I have had the opportunity to work with a number of furniture manufacturers and importers. Most are so buried in day to day operations that they can’t see the big picture, causing their company to miss opportunities and, in some cases, to go from high-growth to going out of business. As the leader of a company, if you are spending the majority of your time involved in daily operations, making every key decision and buried in the details, you will never have the time or energy to see the forest for the trees.

By far the most successful company I have worked with in this industry is Four Hands, a furniture importer based in Austin, Texas. Four Hands has received many industry awards as well as national and local recognition as one of America’s fastest growing privately held companies. Their international client base includes many of the top 100 furniture retailers in the world.

In order to ensure alignment throughout the organization, Brett Hatton, the company’s CEO and founder, holds strategic retreats on a quarterly and annual basis with his management team. At these sessions the agenda always includes:

· A review of their budget
· Financial results
· Projections by each department

In addition, each department head also reports on whether they have met the objectives established since the last strategic session. This exercise helps them clearly identify the achievements and disappointments of the preceding quarter or year.

This leads to what I consider the most important part of the agenda which is to identify the company’s brutal facts. What drives this is a SWOT analysis. By systematically assessing the company’s strengths, weaknesses, opportunities and threats, they determine their brutal facts, and create the focus for the upcoming quarter.

The term brutal facts was introduced to the business community in Jim Collin’s classic book, Good to Great. It is considered by many business owners and experts, to be the most important and indispensable business book written in the past two decades. It is a MUST read for any business owner.

One of the major themes of Collin’s book is that “you absolutely cannot make a series of good decisions without first confronting the brutal facts.” His research for the book clearly demonstrated that great companies continually refined their path to greatness by acting on the brutal facts of reality. In 1999, while experiencing spectacular growth, Four Hands identified three brutal facts that demanded action. Continued growth along with the ability to meet the capacity of demand would require:

· More Inventory
· More People
· More Capital

The Company decided to take a hard look at is business model, which was the traditional model for furniture importers and wholesalers at their stage of growth. Hatton concluded that without a drastic change in the model, they were on a course that required a significant cash infusion without an appreciable return on investment. In addition, he did not see increased profit margins to justify the risk, work and effort.

Four Hands did not have the necessary infrastructure or cash to continue to bring inventory from the country of origin into its warehouse in Austin, unpack it, hold inventory while it was waiting for other merchandise to complete an order, put orders together, repack and ship small ($250 to $1000) purchase orders.

As a result of their soul searching, Hatton and his management team decided to turn their business model upside down. A major decision was made to raise the price for minimum orders. In addition, the company began targeting its sales and marketing efforts to the top 100 furniture retailers who were appropriate candidates for the company’s designs.

After considerable number-crunching, Four Hands determined that it could make higher margins and offer outstanding savings to their targeted customer profile through a container-direct program. Under this program clients could buy a broad selection of merchandise that could be shipped directly from the country of origin to a client’s warehouse or distribution center.

This minimized the amount of merchandise Four Hands had to stock and stabilized the number of the people necessary for receiving, shipping and handling in Austin. In order to accomplish this, additional systems and training was required on virtually every front. Customers needed to understand the benefits of the program and how it enabled them to achieve enhanced margins, greater profitability and the ability to offer special events and sales when containers landed.

Before that could happen, the sales team needed to buy into the program and be comfortable explaining these benefits to their customers. It was equally important for them to become comfortable saying no to current and prospective customers who could not meet the new minimums. The program’s success also demanded new tracking systems.

Facing the brutal facts for Four Hands at their stage of growth in 1999 enabled them to simplify their business model at a critical time. By focusing on implementing their new model, Four Hands continued to grow and prosper and did not fall victim to the inevitable cash demands of their old model.

Four Hand’s brutal facts at the beginning of 2001 were as brutal as the company ever faced. A major threat emerged when it appeared likely that India, Four Hands primary manufacturing source, and Pakistan, two nuclear powers, were on the brink of war.

To further emphasize the potential for disaster, a member of the Four Hands management team was in Rajasthan during a nuclear test by India designed to get Pakistan’s attention, though miles away, he felt the ground shake beneath him as the nuclear test began. Whether it got Pakistan’s attention or not, it codified a major brutal fact for Four Hands; India at war would certainly impact on whether carpenters would be drafted, factories would remain open and the country would be able to ship from its ports. Even a short halt to production could cripple cash flow, and a longer one could force clients to fill their floor with merchandise from other manufacturers.
Four Hands assessed their brutal facts and broke them down into three numbers.

1, 2, 3:
One country producing about 70% of the company’s product line

Two customers generating over 50% of revenues
Three manufacturers producing the majority of their product line Hatton took immediate action. He attended trade shows throughout the world in order to identify new sources, manufacturers and product lines from other countries. He also greatly enhanced sales and marketing efforts. The goal was to go deeper with greater penetration into current and targeted accounts. The results of Hatton identifying, and more importantly acting, on these brutal facts led to a stronger, more exciting and more diverse product line and company.

Over the years, Four Hands has confronted many other brutal facts that required difficult decisions and action. They included:

· Finding a way to make the Austin warehouse more profitable or eliminate it
· The need for real-time financial data and analysis
· Discarding a software system the company had invested heavily in for a new, user-friendly system
· Teaching and utilizing a methodology that has enabled the company to meet the daily, weekly, and monthly challenges of communications in an international organization

Companies rarely falter because they lack information. Most of the companies I have worked with in the furniture industry had virtually identical access to good information. The key to identifying brutal facts lies not in better information, but in turning information into information that cannot be ignored.

At each critical stage of growth, Four Hands has reinvented itself. The company realized early on that what took them to one level of growth would not take them to the next. A company’s mantra should be to “face the danger” every day and deal with those dangers first. Great leaders, strategic leaders, FACE THE DANGER. They realize that only through a thorough examination and assessment of the brutal facts are they capable of making the right decisions. Regardless of how successful a company has been in their past, ignoring today’s’ or the futures’ brutal facts will lead to disastrous results.

In the words of Jim Collins, “breakthrough results come about by a series of good decisions, diligently executed and accumulated one on top of another. On the really big choices, companies must often throw all of its resources into the task of converting its entire system.”

Strategic leaders are comfortable accepting ambiguity and uncertainty and understand that they will never have all the information they would like to make decisions. A rapidly changing world deals ruthlessly with those that don’t change. Strategic leaders don’t fix the past they create the future. Reiterating Jack Welch, “they face reality as it is, not as they would like it to be”.

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Richard L. Russakoff rich@bottomlineconsultants.com
November 17, 2008

My goal is to share with you and encourage you to implement an approach to management that will, over time, make managing people one of your favorite and most rewarding challenges and skills as a business owner.

In his book, The Official Guide to Success, Tom Hopkins states that unless you are willing to delegate, you can’t create much. The most successful business owners I have worked worth over the years have mastered the art of both delegating and managing people.

By learning how to successfully delegate large amounts of authority and responsibilities, they have gained invaluable time to focus on their own most productive and highest return talents.

Many business owners tell me that they would love to let go and delegate, but when ever they do, they are disappointed by the performance of their personnel, as well as by alack of follow through and intelligent decision making on the part of the people they leave in charge.

I believe there are two Great Management Principals to success. They are:

1. You get more of the behaviors you reward; and
2. What gets measured, gets done.

My goal is to share with you and encourage you to implement an approach to management that will, over time, make managing people one of your favorite and most rewarding challenges and skills as a business owner.

In addition, it will increase the level of performance you can expect from the people who are fortunate enough to be part of your organization. And, yes, you will be able to delegate and sleep soundly.

Establish a “Can Do” Culture
The primary purpose of a business is to achieve results. Our focus as managers must be to reward the results we want. Ichak Adizes writes in Corporate Lifecycles, “Management theory is preoccupied with management by results, by objectives. My focus is on management for results, for objectives and by process.” If you follow the approach I am recommending, you will get the results that meet your objectives by following and ultimately embracing the process.

Many managers and/or business owners fall into the trap of playing a “cop” as “the best way” to eliminate nonproductive or even counterproductive behavior. I have found that it is much more effective to be a “coach” to your employees. The best way to accomplish this is to identify and reward the behaviors that you do want, while encouraging your staff to aspire to even higher levels of performance. As a coach, you
want to “catch ‘em doing something good” and let them know how much you appreciate their good work.

Psychologists have found that positive reinforcement is by far the strongest method of achieving and maintaining positive behavior change. Punishment tends to breed paranoia and bad morale in the workplace, while negative reinforcement and lack of attention–to either good or bad performance–tell employees that the manager places a very low value on them and their performance.

This principal of positive reinforcement is what makes coaching work, and it is the reason that you get more of the behaviors you reward.

Good behavior is too precious to be taken for granted. As coaches, we want our employees to be positively clear on the results we want and the behaviors that produce them.

Establishing clear, measurable goals helps people see and appreciate their success. What gets measured not only gets done, but measurement also lets us see results in “black and white,” and, more importantly, how successful our results really are.

The first step is to identify the very best (or ideal) characteristics of employees in a given position. I have put together two charts that list all of the characteristics identified. These charts can serve as a means of establishing clear criteria on which to measure the current performance standard of each employee.

In order to ensure they are clear, it is important that we define or “benchmark” each one of these characteristics.

For example, we identified “creativity” as an important characteristic of a front room employee. Measuring creativity can be extremely subjective, and coaching it is an even greater challenge. The good news is once you define what you mean by creativity, over time it can be identified, taught, and encouraged.

A front room staff member can improve his or her creativity by experience, not just native ability. I asked a frame shop owner to describe the behaviors he’s seen in his most creative people, and he shared the following:

First, they have the communication skills to understand what a client is trying to achieve, and then add to that their own ideas, which have been learned from past experience (ideas that would apply to the situation at hand). This effort results in something even more exciting than what the client could ever have imagined on his or her own.

* They show a willingness to try new ideas and expand on them.
* He recommends that you give each front room person an assignment to be creative and let them “go to town on it. Give someone a chance to show their skills and show their stuff.”
*

Go through the many characteristics on each sheet and do two things:

* As there are too many characteristics on the initial lists to really focus on all of them, determine the key characteristics that you would use to measure and reward your staff.
* Determine a list of the characteristics you feel are most important, with your description of each, for a specific job in your business.

Now let’s talk about how to use the forms and become a coach.

* Explain to each employee, on an individual basis, your definition of each characteristic.
* Then ask them to measure their opinion of their performance level in each category on a scale of 1-10, with ten being the highest. Their measurements should reflect how they compare with the consistently “best” performers. If they think they are the best in a category, they should give themselves a “10.”
* Ask them to be as honest as possible.
* You should rate them as well.
* Ask other key employees/peers who work with them to also rate them using the same criteria. (Use your discretion to weed out any peer ratings with obvious bias.)
* The purpose of you and your staff’s evaluations is to give a total perspective of the various perceptions of their performance, skills, and attitude levels at the time of the review.
* In most cases, you will find that people will be far more critical of themselves in their reviews than you or their peers will be. If not, the other reviews will serve as a reality check.
* If their self-reviews are realistic, then our focus should be on the role of coach, asking them how we can help them improve in each of these areas.
* Offer to provide them whatever resources you can to assist in their improvement in each category.
* Praise them for what they are doing well and ask them to make a commitment to improve in areas where they are weak.
* Your goal should be to inspire, encourage, and create opportunities for your staff to grow. Make sure they understand that you are committed to helping them stretch and grow as people.

I believe these reviews should occur at least once a month initially. The problem with annual reviews is that a year is far too long to wait to tell someone where they stand. We all want to know where we stand every day.

This approach enables you to establish a completely different type of relationship with employees. It requires you to think of yourself as a mentor and to reward continuous improvement with encouragement and strokes. That, along with knowing where employees stand, is what is known as “psychic income.” Studies have shown that psychic income is far more valuable and motivating to employees than cash. Your additional reward programs should be based on their continuous improvement and the results of their actions.

Being a coach also involves providing the right rewards for your employees and taking a sincere interest in them, both on and off the job. A coach recognizes that “life happens” outside the work environment and is there for his or her people when they have problems.

For example, a CEO in South Dakota has a fund put aside to help employees who develop financial difficulties caused by illness or other tragedies. This genuine show of concern touches and motivates all of their employees. The employees know they are seen as being much more than just a part of the bottom line. A genuine personal interest in people builds the bonds of trust necessary for good teamwork. This is the one key characteristic of every successful manager I’ve worked
with.

In his book, The Greatest Management Principle, Michael LeBoeuf, Ph.D.,
recommends the following:

Your own behavior is the best way to teach people what you expect from them. You must walk your talk and lead by example in order to engender respect and loyalty in your staff. As Henry Gibson said, “A thousand words will not leave as deep an impression as one deed.”

* Don’t overlook complimenting the quiet, dependable people in your organization who demonstrate their commitment to your business by:
* Being rarely, if ever, absent.
* Working well under pressure.
* Being willing to give a second effort whenever the team needs it.
* Being able to be trusted to work just as hard in your (or in others’) absence.
* Consistently turning out high quality work on time.
* Helping others to do their jobs better.
* Producing more answers than problems.
* Regularly striving to improve their work.
* Fostering cooperation.
* Building morale.
* Good coaches expect their people to do what is required of them, and they hold them accountable for their behavior. Chronic complainers without legitimate grounds should be ignored (not reinforced). Don’t waste your time with game players.
* Focus your behavior on expecting and rewarding the behavior you want from others.

Conclusion
Coaching is an ongoing process, and with a little practice and patience, the techniques outlined above will become an easy, valuable part of your employee management process.

The Talmud says that believers never question and cynics never believe anything. Give this approach a chance, and you will become a believer.

Begin the process by creating time to let your employees know what they are doing well and to encourage them to do even better.

Pointing out errors that need correction is an essential part of management, but give criticism by praising the worker and criticizing the work. You can begin criticism by praising some of the person’s good points to avoid putting the person on the defensive from the start. After your praise, shift the focus to what needs to go right or to preventing things from going wrong in the future. (In order for this style to be most effective, however, praise must not always be followed by criticism or your staff will always be waiting for the other shoe to drop!)

Recently, a client I work with called her office while she was on vacation and was told second hand that a project she had asked to be completed on the Monday she left was not actually finished until Friday. She was furious and ready to leave her vacation a day early in order to confront the situation. When she called me and asked for my advice, I told her four things:

* Finish her vacation and enjoy her time off.
* Find out all the facts of the situation before she criticized the person in question.
* Identify 10 things this person did right while she was away.
* Remember that she is a coach, not a cop. Rather than punishing the person, it turned out to be far more positive–and effective–for my client to take advantage of what she discovered to be a simple mistake in judgement. She turned it into a learning experience so that the employee could learn and grow, while not being afraid to make future decisions while the owner is away. This is how the delegation process works best. An important caveat is to clearly define the behaviors you want, preferably in terms that can be measured. This will be the subject of a subsequent article.

Good luck, and good coaching!

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Mary Goodman
December 18, 2008
Our world has changed. It’s no longer business as usual.
The economic meltdown is rocking our world and will destroy us if we don’t react responsibly.

I believe that “we ain’t seen nothin’ yet!” In 1930, a full year after ‘Black Tuesday’ and the start of the Great Depression, unemployment was at 8.7%. It wasn’t until 1933 that it hit 24.9%. I’m not predicting that is where we are headed, only pointing out that economic waves take time to hit the opposite shore.

Where we can draw a comparison is that the Great Depression happened because people bought into companies with NO UNDERLYING VALUE. The dot-com bust happened because people bought into companies with NO UNDERLYING VALUE. The residential real estate crisis happened because people bought into properties with NOT ENOUGH UNDERLYING VALUE. The mortgage market collapsed as dramatically as the Twin Towers because banks bought and sold mortgages with NO UNDERLYING VALUE. Then investors created Derivatives that seduced investors into buying all of this garbage with NO UNDERLYING VALUE. We are starting to see hedge funds on their knees. It is frightening to think that the Madoff Ponzi scheme may be more an exemplar than an anomaly. What will be next? What trap doors lie ahead?

To make matters worse, our government has injected us with heroin by printing more money. Give the addict more dope and there’s no problem – right? Wrong: You can’t have a strong economy with a weak dollar.

Does anyone really know what happened to the seven hundred billion dollars?

We have become addicted to debt and, like all drugs, the high is immediately gratifying and fundamentally destructive. We have become bloated, fat, complacent and greedy.

It will become worse before getting better – that’s for sure. We are being thrown back into the primordial ocean. Who among us will grow legs and what shape will they take?

Babylon, Mesopotamia, Maya, and the Roman Empire – It’s not hard to see history repeating itself. The stages of civilization are the same. They are:

Stage 1: Cooperation – We depend on each other to survive.
Stage 2: Competition – We depend on each other to challenge us to become better.
Stage 3: Corruption – The end justifies the means.
Stage 4: Collapse – The end really didn’t justify the means.

I think we are seeing the collapse phase. We are being thrown into the evolutionary quagmire, swimming in chaos and crisis. Many businesses will drown in either arrogance or fear.

Even those that survive will be affected. They will crawl out of this weakened and nee help. In the emerging economic ecosystem, we will re-enter the cooperation stage.

It’s survival of the fittest. It always has been and it always will be. With every cycle of adversity, there is opportunity. We evolve by solving problems. We can no longer expect to survive by solving our problems at the expense or disregard of others. Those who will thrive will do so by creating solutions that benefit their stockholders, suppliers, employees, customers, and their communities.

The fittest won’t be the biggest or baddest. They won’t even be the strongest or the stealthiest. They will, simply and humbly, be those companies that offer UNDERLYING VALUE. They will be committed to cooperation, providing value for each of the stakeholder groups.

Giving and receiving is the same: Not giving and taking.

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