Jean on Problem Solving » performance measures

BP Franchisees: What They Should Have Known About Risk

Jean Houston Shore — Mon, 14 Jun 2010 15:10:13 +0000

It is no surprise that oil giant BP is facing tough times thanks to what many call gross mishandling of the oil spill. But as the small sign taped to a neighborhood AM/PM store’s gas pump points out, entrepreneurs are being hard hit too.

Convenience store franchises are big – and lucrative – business. You’ve got to have a great deal of capital to seriously consider owning a franchise. The AM/PM franchise requirements, for example, include the following:

Good credit record / credit history evidenced by prompt payment of all financial obligations
Total estimated investment: $2,583,616 – $6,661,716 (including estimated real estate costs)
Estimated liquid capital required $700,000 – $1,000,000

The BP franchise site suggests that convenience-store franchises are “available for ambitious and entrepreneurial individuals willing to assume the risks – and eager to reap the rewards – of owning their own business.” My guess is that the owner of my neighborhood BP franchise never considered that “oil rig disaster” and “gulf coast cleanup” were among the risks they had assumed.

You’re At Risk Too

You can’t be a great leader if you do not understand the environment in which you operate. Systematically identifying your risk of loss and then taking steps to mitigate the potential impacts should be job one for managers. A good manager might even find that there is too much risk to tolerate and that it’s time to move the business in another direction. If your organization employs a risk manager, he or she will have excellent knowledge to share with you.

To analyze your situation you can ask these questions:

What kinds of losses might occur? (Consider loss of property, loss of income, loss of personnel and losses due to being found liable in a court action.)
How likely is it that each of these losses will occur?
If these losses did occur, how severe would each one be?
What steps could we take to mitigate the impact this loss would have on us?

While the hastily created sign affixed to the pump puts some distance between the BP franchisee owner and the maligned corporation, there is more for this leader to do. He or she needs to survey the business environment and put comprehensive risk management strategies in place right away. A proactive response is best but with risk management activities, late is better than never.

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Jean Houston Shore works with organizations that want their people to work together better. She can be reached at 770-643-9724, by email at jean@thinkbusiness.com or through her website at www.working-together-better.com. Ask for your free copy of her book Working Together Better.

When Beef Prices Soar, Convince People to Eat Chicken

Jean Houston Shore — Thu, 20 May 2010 13:50:27 +0000

If you watch commercials with any interest at all, you’ll soon notice an absence of “Where’s The Beef?” spots from fast food chains. Perhaps the ads will tout the taste, convenience or even health benefits of non-beef choices. But mark my words; they going to attempt to influence you to abandon burgers for chicken tenders, ribs or sandwiches. The reason? Ground beef prices have risen by double-digit percentages since last year.

As a business leader you may also have some convincing to do. For example, healthcare costs were soaring even before healthcare reform and the true cost businesses like yours will bear remains to be seen. So, like the hamburger maker, the cost of at least one of your inputs is out of control. You’ve got to convince your employees or customers to do something differently if you are to remain profitable.

Input Price Management

Here is an input price management checklist:

1) List the various component parts of each of your company’s processes: Research and Development, Production, Sales, Service, Administration.

2) Now ask these questions about each component on that list: “What has changed about this input? If prices have risen, is this a temporary situation or a permanent one? What can be done to reduce this cost?”

3) If you have identified ways to rein in the costs or to hedge against future cost increases, move today, not tomorrow, to put those plans in place.

4) However, if you think the cost increases are likely permanent (like healthcare costs in my example) step backward in the process to figure out what decisions are being made by customers, employees or other stakeholders. For instance, Burger King knows that people are ordering Whoppers and that the cost of providing Whoppers is going up because of beef prices. Burger King can either try to raise Whopper prices (hard to do) or convince customers to order fish instead.

5) Brainstorm with your colleagues to find attractive alternatives you can promote. Use creativity and a variety of appeals to convince people to make choices that will be both pleasing to them and profitable for you.

Business owners know that you’ve got to watch input prices like a hawk. But when the price increases are permanent, watching them isn’t enough. To succeed you must throw the weight of your influence behind new patterns of behavior. Today’s lunch choice? Not beef.

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American Samoa, Tuna and Concentration of Risk

Jean Houston Shore — Thu, 13 May 2010 19:30:11 +0000

A quick look at recently released Gross Domestic Product (GDP) estimates from the Bureau of Economic Analysis (BEA) highlights a big problem for American Samoa; they’ve got all their eggs in one basket – er, can of tuna.

When you see GDP figures for the US states the breakdowns are predictable. We depend mightily on consumer spending (about 60% of the pie) and the other components, private investment, government spending and the net of imports and exports, don’t vary all that widely. Those that follow such things know that fluctuations in oil prices or housing can affect our numbers as can major changes in imports or exports.

But we do not depend on tuna.

The Problem in American Samoa

Not so a few thousand miles from here. American Samoa has a population of only about 68 thousand people. The tuna canning industry is the largest private employer in the territory and the entire economy depends directly or indirectly on how many cans of tuna the US buys. American Samoa imports, cans and exports about $500 million dollars of tuna to the US in a good year. This is a huge per person concentration of risk.

Assessing Your Risk Concentration

Your company signs up for similar volatility if you depend too heavily on one customer, one product line or even one distribution channel. Here are some questions to ask your management team:

To what extent do we spend a significant portion of our time, money or effort focused on a single customer or group of customers? What has changed in the business environment of those customers? Are there new regulations or technologies that might mean our customers will not be able to buy from us as they have in the past?
To what extent are we tied to a single distribution channel? What has changed or is changing about that method of distribution? Are we being forced to take certain costs out of the equation? Are new players emerging?
To what extent are we relying on a single source of supply for the various component parts of what we sell? What other options do we have if that supplier is no longer able to perform well?

The seven American Samoan islands are dispersed over more than 150 miles of water and the territory has a culture all its own. Still, basic risk management principles from business will probably come in handy as its leaders seek to provide an improving quality of life for its inhabitants. You too should size up your company’s risk concentrations . . . before things start smelly too fishy.

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Jean Houston Shore works with organizations that want their people to work together better. She can be reached at 770-643-9724, by email at jean@thinkbusiness.com or through her website at www.working-together-better.com.Ask for your free copy of her book Working Together Better.

Should You Work with Friends – Part 2

Jean Houston Shore — Sun, 02 May 2010 20:45:20 +0000

Here are some other reasons you may want to think twice about hiring your friend.

It May Not Be Fair To Your Friend

Your friend deserves the best chance at workplace success, just like you do. By accepting a job with some level of personal entanglement, he has complicated his life too. Not only will others wonder if he got the job on his own merit, he’ll have a harder time proving himself to the team. He’ll wonder if his coworkers are candid in his presence, since people might clam up if they think their comments will quickly reach your ears. This keeps him from fully participating in the work team and may keep him from getting the information he needs to be successful. One kind of information he will likely miss is truthful feedback about his performance, because team members only give honest feedback to one another when they feel safe. His friendship with you may threaten their safety.

Its Hard to Be Objective

And anyway, how objective can you really be about this person? You have insider information about him that can’t help but cloud your judgment. Depending on the mistake you make this might work for him or it could work against him. For example, if you know that he struggles to maintain his diet and exercise resolutions, you might unfairly consider his workplace follow-through suspect; this is being unnecessarily tough on him. Or since you know just how tough his childhood was you might give him the benefit of the doubt way too often; this is being too lenient and not holding him accountable. Other employee’s motivation will drop if they perceive that the friend/employee plays under a different set of rules. Your lack of objectivity can become a real problem if you are comparing his performance to that of his peers, recommending him for a special assignment or doling out pay raises. There’s also the question of whether he will be willing and able to receive performance feedback from you and whether you will be willing and able to receive performance feedback from him. It could be difficult for both of you.

Relationship Limits Precedents

There’s plenty of precedent for limiting personal relationships in the workplace. The military has a long tradition of limiting relationships between officers and enlisted personnel, something they call anti-fraternization. In investigating whether a relationship between two persons has violated military policy, several factors are considered. If the relationships “compromises the chain of command, results in the appearance of partiality or otherwise undermines good order, discipline, authority or morale” those involved may be punished.

Many corporations, too, have anti-fraternization policies which strictly limit relationships with competitors, thus avoiding even the appearance of impropriety. Others prohibit dating or cohabiting between employees. However, legal provisions of the National Labor Relations Act (NLRA) guarantee employees to right to self-organize and discuss terms and conditions of employment so anti-fraternization policies go too far if they severely restrict employee friendships outside of work.

In our court system, judges are expected to recuse themselves (to disqualify themselves from presiding over a proceeding) if they have a conflict of interest or a personal involvement in the matter. The judge reviews the general facts of the case and determines whether or not he or she can truly be impartial, declining to rule if not objective.

But maybe you just want to try to make it work anyway. How to do that follows in Part 3 of Should You Work with Friends.

–Jean

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ASTD Publishes Jean’s Work

Jean Houston Shore — Thu, 09 Jul 2009 21:50:29 +0000

June 2009 brought about the publication of Jean’s work on how trainers can understand and use statistics more effectively. Big thanks to editor Justin Brusino who was invaluable in helping this come about.

Interested in statistics? Contact us and we will send you a copy free of charge.

The Great Race and Business Measures

Jean Houston Shore — Sat, 10 Jan 2009 03:50:35 +0000

Did you know scientists have almost perfected cars that can drive themselves? What an exciting advance that will be when it finally happens. Think elders who no longer have to turn in their licenses as vision fades. Think fewer accidents caused by drivers trying to eat, shave or talk on the cell phone. Think no more drunk driving. A government-sponsored contest called The Great Robot Race prompted tech experts from all over to attempt what once seemed impossible. But how could a vehicle make all the complex decisions needed to navigate unfamiliar terrain? Specifically, how could a machine see?

Here’s how it’s done. First, lasers, cameras and radar units work together to graph the area. Then complex software analyzes the millions of data points and instantaneously directs the vehicle’s steering and speed. It turns out that robotic vehicles drive safely using the same thing you should be using to drive your business – measures.

Though it might be lower-tech, your organization’s measures scorecard should be something everyone follows carefully. (It will take more than just the basic reports from your accounting system.) While cost and revenue measures are certainly part of what you’ll follow, you should also track quality, satisfaction and time and/or resource efficiency. The scorecard should reflect the performance characteristics of a wide range of stakeholders including customers, suppliers, employees and shareholders or owners.

Here are some typical measures that companies track:

Total cost per employee (including benefits and taxes)
Customer satisfaction
Number of new customers
Employee turnover
Revenue per customer
Revenue per employee
Time to market for new products
Time to project completion for installations
Number of level 1 calls completed per service consultant

Though specialized vehicles are almost ready to drive themselves, most businesses haven’t gotten that far. To keep your organization on the right road, focus on a well-rounded set of business and customer measures. With the right course corrections, your team will have a chance of winning its great race.

Crisis Management: Are You Causing Your People to Freak Out?

Jean Houston Shore — Wed, 05 Mar 2008 00:41:37 +0000

It’s true that during crises people become real. Some corporate managers, recognizing this, have habitually practiced “crisis creation” during staff meetings, hoping to improve performance.

Here’s how it typically goes. At the weekly staff meeting, a worried-looking leader flings a management report across the table before stating in strained tones the team’s lack of progress toward a certain measure. Explaining that if the team members don’t buckle down to get the numbers up (or the deadline met) she’s not sure what could happen, the manager telegraphs her worries, real or imagined, to the bigger group. As the meeting concludes, staff members whisper about the revelation and all focus on their tasks and work harder – temporarily.

But it’s a cheap trick – and one that eventually backfires.

Fear as a motivation technique is short-lived at best. If a leader’s crisis management technique is simply to let unfiltered pressure pass onto her employees, her style could be getting in the team’s way. If your workplace is characterized by weekly discussions of the “crisis du jour,” your employees will quickly become numb to it. And numb employees aren’t motivated. An important part of the manager’s role is to create an environment where the team members can work successfully. You are supposed to get them the resources, time, space and breathing room they need to do their jobs.

So, next time you are tempted to simply pass down the latest in corporate hand-wringing, consider whether a different approach to the situation would serve your team members’ health, safety and effectiveness better. You don’t have to tell everything you know and sometimes you shouldn’t.

Remember, it’s your job to give them room to do theirs.

Jean Houston Shore on How to Solve Business Problems

Jean Houston Shore — Fri, 29 Feb 2008 12:52:59 +0000

In over twenty years of working with clients in various industries, I’ve seen some of the same problems pop up over and over. This blog will allow me to share some of those problems (and their potential solutions) with a wider audience. Feel free to comment here, whether you agree or disagree with my conclusions.Some of the topics I expect to cover are:

Leadership (When Leaders Fail to Lead)
Coping Skills (How Those Who Fail To Cope Affect All of Us)
Feedback (The Magic of Making Teams Work)
Performance Measures (Why Measuring the Right Things May Not Be Easy)
Motivation (How to Engage Employees So They Are Productive and Happy)
Reward and Recognition (How Handling These Things Poorly Wastes Everyone’s Time)

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