Wednesday, July 20, 2011

Still an Analogue World

As much as I use PowerPoint and Excel to make a point, I still think it is a good idea to know how to use a paper napkin or a white board. There is something almost magical in that kind of performance because it is personal, almost intimate, especially when you are dealing with professional sales people. If you are too cool to draw a picture, there are a lot of people you are going to miss. Lest we forget, for many people it is still an analogue world.

One of my clients was a digitally inclined auto dealer who employed 10 to 14 sales people. Automotive sales forces are of a variable nature because they tend to have a 30% attrition rate. It’s not for everyone. The client faced two major problems in sales. Basically, he hated his sales people and they hated him in return. It was a digital divide. The other problem was pricing. The client discounted vehicles below break-even and posted them on the Internet. Sales did not know about it but their computer savvy customers did.

The client invested in ten furnished computer cubicles with really nice big monitors, whiz-bang phones, and the super-duper training seminars that were included. His sales force grudgingly endured the latter and pretty much ignored the former, except for outbreaks of pornography watching and chat-room chatting. The client could not understand why “his guys” did not use the great tools he had given them. When they did use them, he said, “They’re like a bunch of monkeys with typewriters.” He told them that.

It didn’t help that the client had been through a Dale Carnegie sales training program. His framed certificate of training made him conclude that that he was a great salesperson. Unfortunately, he sucked air as a sales person. He genuinely lacked people skills. He did not know how to listen to prospects. That made him impatient with them. Nor could he understand how people refused to follow his robotic and raced through presentations. It did not help that the client told his sales people that they didn’t know what they were doing, which he did.

One thing that self-described great sales people like auto dealers have in common is that they are marks. They are called “lay-downs.” They will buy anything. They have no sales resistance. Because they are such great sales people, they overcome their own objections. They are especially vulnerable to the bane of all professional sales people existence called “Susie Sales Girl,” who is the willowy well-heeled blond who sells sales seminars, full-page color newspaper ads, websites, bus advertising that forgets to include the dealership phone number on a 30 vehicle fleet, novelty pens, and enough balloons and helium for the Macy’s Parade. When they sell computer hardware and software, clients can’t write a check quickly enough.

Dealers are not the only people who get sold hardware and software. Many business owners buy into the idea that software by itself can solve everything, or at least that it should. It is the using of the software, along with everything that implies that can be problematic after the sale. The biggest after sale problems are technical support and user training. Support and training are rarely onetime events but tend to be treated as if they were. However, when such a tool as a complex computer application cannot be used, the hardware might as well be a boat anchor. Except for sailors who just bought a new boat, no one wants to admit they bought a boat anchor for their business.

My client had purchased 10 boat anchors as well as a jumbo monitor for the conference room, where he routinely put his sales crew to sleep with PowerPoint presentations and webinars. That created a hate-hate relationship enhanced by technology.

Organization integrity was the management issue in this case. As an owner, the client had assumed to position of General Manager and Sales Manager. He employed a Service Manager, Finance Manager, Parts Manager, an Office Manager, a Personnel Manager and a Facilities Manager. But in those positions they had no one to report to because the owner was so busy in his area of least competence. So those managers were more or less on their own. The organizations’ lines of communication atrophied and business suffered as a result.

To correct this situation required me taking on the position as General Manager myself until a new GM could be selected and hired. Next came the tasks of appointing a Sales Manager and establishing a balanced management organization with a routine reporting and communication process. By establishing an organization structure that put a management buffer between department managers and ownership, it became easier to coordinate department functions to take care of the business.

I am not suggesting that it was easy. Routines had to be changed and there was a sort of smiling resistance. Everybody wanted to keep doing what they had been doing, such as the owner meddling with customers and sales people and department heads running their own shows. By the end of 13 weeks of regime change, the operation began its recovery.

About the sales department and the boat anchors, that issue was to get the sales people to see what was in it for them to use the tools that the business owner had purchased. As I explained almost daily to the client, his guys were good sales people. They were analogue people who were skilled at listening to customers and overcoming objections as if it was a game. All they needed was a product to sell, a pen to write with and a piece of paper to write on. What they needed to believe was that there was value in learning to make the “Internet machines,” as they called them, help them with their sales work – prospecting, following up and tracking results.

To do that required me putting a white board in my office so that my department managers and I could draw on them. It did not require telling them what I was doing as much as just doing it and getting them used to doing it. Together, we used the analogue tool to hash out what we wanted the digital tool to do for them. With time the managers began to own their Excel spreadsheets and use them in their reporting, as opposed to shoving programs down their proverbial throats. It also helped to supplant the jumbo screen with a jumbo white board and to make sales meetings more interactive. I replaced emitted light with reflected light. No one got sleepy.

Even the owner succumbed to something as simple and analogue as me writing on a cocktail napkin to demonstrate the difference between mark-up and gross margin pricing. I succeeded in showing him that MSRP (Manufacture Suggested Retail Price) was not a markup but a margin above the break-even point. All of the overhead costs involved in selling a vehicle, including the helium and balloons, were absorbed plus adding a gross margin. When I showed him how a mark-up price of a vehicle over invoice left money on the table, I got his attention. When he saw that discounting a price below his break-even cost him money, he picked up the napkin and put it in his pocket. The next day he showed me a pricing spreadsheet he created from the napkin. He still has it.

If there is a moral to this story, it is that how you get your message across is not important. Getting the message across is. The sales people took ownership of their workstations to increase their personal sales and quit resenting sitting in front of a monitor. The dealership quit leaving money on the table by pricing and discounting correctly. People developed new routines for a new General Manager to oversee. Whether or not those folks lived happily ever after I cannot say. What I can say is that software does not solve everything. People do. It is just that sometimes you have to draw a picture with them.

Article first published as Draw a Picture: It's Still an Analogue World on Blogcritics.

Sunday, July 10, 2011

Family Advisor and Business Savior

If you tell someone that you are a college professor, you get asked, “What do you teach?” If you tell someone you are a management consultant, you get asked, “What do you do?” In my consulting practice I organize small companies as the person they call in to get rid of former best friends, spouses or family members from the operation. [Specialty: getting Pops to retire early.] Here are three case examples. 
The wife was in tears as her husband told me that their $17M a year international wholesaling company was tearing their marriage apart. She had been working as a registered nurse until a thieving employee, who the couple had regarded as part of the family, was arrested and charged with embezzlement. Now the woman in tears revealed that the arrested party had been the company bookkeeper and that she, the tearful one, had left the nursing profession to take the embezzlers place. The marital problems began about the same time, two years earlier, and the discussion of divorce had begun.
The owner’s son would not look me in the eye as his father explained how everything had been running along just fine in his $8M a year filling station franchises, one at each end of the town. The son had closed his own profitable motor cycle repair business to come into the family company and try to get the operation back into the black from red hole that was swallowing the family alive. The son took me aside later and confessed that he didn't know how much longer they could stay open that the banks were calling every day for loan payments. As to paying for consulting services to help save them, he didn’t know how the invoices could be paid.
The client’s wife and business partner in the $14M a year lumber company asked me if I was in law enforcement, as I walked through the office to step outside for a minute break. When I asked her why she thought that, she noted that I would ask a casual question each time we met and each time the questions seemed unrelated, but she was certain that they were related. Later, when the computer with the company books crashed, she retrieved a computer from home that had a copy of the books. Asked why she had been paying vendors from the client’s personal account, she mentioned the IRS lien on the business that had not been previously revealed.
These three cases are diverse but have elements in common that are typical of small multi-million dollar businesses. They all involve family members in some capacity or another. They are all on the brink of foreclosure, bankruptcy or collapse. They involve businesses that generate strong cash flow but produce a negative profit. In other words, they were all doing just fine and making money when they were million dollar companies and home life was good. Getting bigger was not better.
Incidentally, the three examples I have chosen are all from the pre-recession economy.
I have no objection to family members working for a company so long as the integrity of the business organization is uncompromised. To determine integrity I mean honestly answering some questions that need to be asked. Do working family members have job descriptions? Are they competent in their company position? Are they properly supervised? Do they conform to all company policies and procedures? Is their compensation appropriate?
These are the same questions that should be answered for any company employee, by the way. Look at it like this, Boss’s Spouse is not a job description. Being a business owner is not the same as being a competent business manager. Being a family member does not ensure proper supervision. Non-conformity to policy and procedure is what other employees look for, such as anything that appears to be special treatment. Working in a business without compensation is as bad a plan as being paid more than a non-family member would be paid.
A $100K a year salary for a $30K position looks like theft to employees. Not being paid for a $30K position is a terrible compensation plan and a false economy that is inconsistent with competent management.
The first case required solving the work-family boundary issues that created the marital problems. The second case required reorganizing the company and changing its management. The third case required law enforcement intervention. It is all part of being a family advisor and business savior. That is what consultants are.

Article first published as Family Advisor and Business Savior on Blogcritics.