A simple approach of looking at business. A manufacturer of a good or a provider of services breaking the organization into three categories, developing consistent performance measures and keeping the customer and consumer at the center of your thought by providing value is a simple approach.
Revenue Growers, Marketing, Sales, Business Development….., these functions focus on driving revenue through volume, value and pricing strategy. Developing a Sales Plan by customer, by item and positioning the company for profitability is an integral part of any organization. Being cognizant of finite inputs in some cases, competition and perceived value of reliability, ease of doing business, innovation and quality positions a company to attain the desired results of the Revenue Growers. Having an overall pricing strategy that best fits the value you are providing and that the customer is willing to pay is vital. Does your product or service provide more value than others competing in your space? Identify your position in the market place and price accordingly.
Cost Controllers, Manufacturing, Operations, Purchasing, Planning, Warehousing, Distribution….. all of the functions that look to bring efficiency to the operation by providing a good or service to the customer and consumer at the least total cost. Those functions in this area, look to improve yields, total cost of ownership and the least cost possible. By practicing good manufacturing, supply chain efficiency, preventative maintenance and return on invested capital, to name a few areas of cost control while delivering the quality and reliability your consumer and customer are accustomed to, truly positions the organization for profitability. Important element is not to degrade your product quality and service to where the consumer sees no value. It is important for the Cost Controllers to understand the marketing position and the pricing strategy of the product. Failure to do so can have the Revenue Growers and the Cost Controllers working at cross purposes.
Scorekeeper, Finance, Human Resources, Information Technology…. a few areas that do keep score. Finance developing with your senior leadership the performance measures that show where the organization is in the continuum of success. Human Resources to ensure that the organization is getting the proper return from the greatest asset, its people by providing a safe, quality and efficient work place. Information Technology providing the ability for the performance data to be captured, converted to meaningful information and provided in a form that is meaningful, daily, weekly, monthly and year to date. Finance, while a scorekeeper, must be proactive to get the information timely and accurately while leading the Revenue Generators and Cost Controllers to accomplish the desired results.
A baseball scorekeeper keeps the book. Tallies what the player does as far as hitting and keeps the book for both teams. When your team is in the field a good scorekeeper will alert the players as to where the batter hit the ball before. When your team is batting a good scorekeeper understands the inning, the efficiency of the batter coming up as well as the players not yet in the game. In certain situation’s a good baseball scorekeeper goes to the manager and offers suggestions for making a change. In business a good strong finance leader is that scorekeeper that does not simply write in the book, they are proactive and interject. That may seem obvious yet I have witnessed situations where both the finance leader was too passive, only report, and too aggressive where the organization avoided risk and missed opportunities for growth and were outperformed by the competition. Be careful not to stifle creativity on both the Revenue Grower and Cost Controller section.
Implementing a Sales, (Revenue Grower) Plan and Operations Plan (Cost Controllers) with meaningful, timely and accurate information provided by the Scorekeepers for Senior Leadership to make informative decisions supporting the definition of success and the strategic imperatives of the organization. This approach when applied fairly and meaningfully builds a flexible and yet process driven organization. A strong leader armed with timely and accurate information, consistent performance measures and leadership that is competent in Revenue Growers, Cost Controllers and Scorekeeping is equipped to make the necessary decision to drive success.
This approach on the surface may appear to be one of functional silos. Nothing could be further from the truth. A realistic sales and operations plan, is a road map for the organization to best utilize the assets and facilitate an improved order to cash management system. When accuracy abounds in the sales forecast and changes are made as they occur and looking forward based upon customer intelligence, the assets under the cost controllers become more efficiently utilized. This bridging of a realistic and factual sales plan to the assets of the organization is paramount to success. Take for instance finished goods inventory in the case of a manufacturer. An accurate forecast allows for the resources to be utilized to produce the correct product by customer and avoids excess inventory build. In the case of a service provider an accurate forecast allows for resources to be deployed to the most needed area to satisfy a customer on time. When all functional areas become aware of the Sales and Operations Plan and its accuracy, reliability and trust is built allowing the entire organization to work in concert.
Utilizing accurate and meaningful data into information that is trusted and expectations and accountabilities are built and applied fairly then the employees begin to see trust being built. Key Performance Indicators become established and all work to attain such indicators. All know that the organization and often their own performance is judged and rewarded based upon attainment of the Key Performance Indicators.
In today’s environment of working remotely, having the proper dashboard to ensure the organization is progressing toward success is crucial. Building functional depth and cross functional working environment allows for confidence within the organization to build as well as confidence with customers and consumers that a product or service with reliability and quality is offered. Suppliers and providers become more trusting as they see reliable payable cycles, building trust and placing your organization in a good position to work on innovation and uninterrupted supply.
As we embark on a new year let’s build reliability into all we do to lead to improved long-term relationships with suppliers, customers and employees, driven on the expectation of improved profitability and improved customer satisfaction.