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Ken Keller: Three roadblocks to business improvement

Brain Food For Business Owners

Posted: October 28, 2012 2:00 a.m.
Updated: October 28, 2012 2:00 a.m.

A few weeks ago, I wrote about Ted the employee and his “entitlement” attitude at work. I pointed out that his owner was enabling Ted and all the other employees at the company because the owner failed to share information that would improve the condition of the business.

One of the roadblocks for an underperforming company is that it lacks a scoreboard for the whole team. Without this visual information, updated regularly, everyone except the owner is in the dark.

The scoreboard states “here’s where we are and here’s where we need to be.” It takes maybe five seconds to see where the gap is and to identify what needs to happen to close the gap.

I can’t imagine a player of any sport not being able to see what the scoreboard is, from any place on the field or even from the stands.

Is your team playing to win? If so, let it know the score. Otherwise, it will just continue to scrimmage, with the end result of nothing more than bragging rights.

A second roadblock is the owner’s preoccupation with fixed overhead when the real point of focus should be on improving gross margin.

I worked for an owner who went around sniffing the air in certain departments, announcing to all within the sound of his voice, “Smell the overhead around here.”

It was not only vulgar it was never the issue in his company.

What this guy failed to understand is that every penny improvement in gross margin, either through increased revenue, reduction of cash discounts or decreasing the cost of goods sold, would fall right to the bottom line.

Maybe you can’t raise prices, and you can’t reduce cash discounts. But most companies can reduce cost of goods sold if they put time and attention to it. Doing so requires a change of mindset.

I know that finding cheaper ways to deliver a product or a service isn’t the most appealing thing to do for some owners — it doesn’t give them a rush like landing a new big client. It isn’t sexy. But it is important. It is probably easier to do, and it won’t take anywhere near as long as the sales cycle of landing a new client.

When Bob Crandall was CEO of American Airlines, he was on a quest to improve margins. By eliminating the three black olives that apparently few people were eating in the salads served, it is alleged the company saved around $700,000 a year without anyone noticing. People fly for transportation, not for the food.

Have you looked at just about any bottle of water lately? The bottle is thinner, the label is not as tall and the cap is shorter. These small changes add up to millions of dollars in savings. No one notices. People buy the bottle for the water.

The third roadblock is the failure to inspect. The old adage of “inspect what you expect” has gone out the window. Because of their isolation from clients, vendors, and most of all, employees, owners are often surprised and then angry when they hear something went wrong in their own company. How is this possible?

Owners make far too many assumptions about the people on the payroll. The first is that people on the payroll care as much as they do. Second, that those same people understand, have been trained and execute to high standards of quality service. Third, every employee follows through.

Eliminating these three roadblocks isn’t pretty, but they are necessary. The good news is that you can get your employees involved in all of them and it won’t cost any money. But I will guarantee it will make you some.

Ken Keller is CEO of STAR Business Consulting Inc., a company that works with companies interested in growing top line revenue. He can be reached at Keller’s column reflects his own views and not necessarily those of The Signal.


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