Tuesday, August 30, 2011

Sustainability is the Key to Success

There are three key areas that most business owner under-value when it comes to driving sustainability in their business. It is safe to say that many small business owners never even think about sustainability in relationship to operational issues. But, sustainability is the key to success.

Three areas that a lack of sustainability will kill a business


Many managers think that high turnover is an issue of bad hiring practices. Generally, that is not always true. High turnover is attributed more to mismanagement after they are hired than making a bad decision during the hiring process. What does high turnover cost you?

Your employee never achieves optimum productivity. The longer someone does something the more productive they become doing it. They stop thinking about what they need to do next and start thinking about how to do it better. When they leave, you lose that productivity. You also lose some of your productivity as you go through the hiring process to replace them and the training and mentoring process to make the new employee productive. During the hiring process you are down two employees not just one.

Here is another important point to remember. People do business with people they like and trust. When there is no continuity in your customer facing employees this customer/client-employee bond either doesn’t mature or becomes broken. The emotional tie between your customers and your business is weakened. Referral business is the cheapest and most profitable lead generation any company can have. A lack of continuity can adversely affect referrals.

So what can you do from a management perspective to keep employees? First, understand that motivators and demotivators are not linked. The elimination of a demotivator does necessarily motivate. Providing a motivation does not always overcome a demotivating characteristic. You can give a person a promotion with more responsibility, which they crave, and they will still leave you because they don’t like the corporate culture. Removing excessive overtime might remove a demotivator, but it won’t motivate anyone to work harder. Understand what works and what doesn’t work. Create motivators while removing demotivators. Don’t assume that work is called work because it is work. Life can be better than that.

Everyone is different; learn what works for each one of them. People are not robots that need to be treated uniformly. Don’t let the lawyers convince you that everyone should be treated like a clone. Be fair with everyone, but create programs that reward people in ways that are unique to their needs. This takes knowing them, not a pleasant task for some managers. This also takes time to build programs that are more flexible. This might require too much thinking for some people.

Lead Generation

The second area that businesses waste a lot of time and money because of a lack of sustainability is lead generation. In this world of multiple electronic channels, which many seem nebulous at best, there is a tendency to try anything once. It takes time to fine-tune a new lead generation process. Owners need to take the time to fully understand the details of what they are trying to achieve before they start. They need to fine-turn their idea of a prospect. They need to fine-tune their idea of an offering. They may even have to fine-tune their perception of the buying process. Marketing is changing. People don’t buy the same way they did before. They have access to much more information. They have less geographic constraints to whom they do business with.

Plan on going through several iterations before you see results. Using a start-stop approach will only burn cash, confuse your employees and produce limited results as best. I don’t know how many times I have heard an owner say “We tried that and it didn’t work for us.” Did they have a plan for sustainability before they started, or were they just hoping to find something that might work?

Cash is King

Spend money only when you know, or reasonably expect, it will make money. Everything you do must have a tangible return on investment. Even branding strategies must have a payback somewhere out there, or why do it? Track what you spend against what you get back. The only way to sustain a program is if it generates as much income as expense. Otherwise, it will die a slow death as the cash runs out. Don’t throw money at something just to see if it might work. There is no such thing as discretionary income to a business, it’s all critical to the operation. You can’t bet money you can afford to lose, there isn’t any.

The key is to fully fund a program before you implement. Most businesses plan on using cash created by the program to fund the program. That is a recipe for disaster. Use the cash generated by the program to fund another program. Then you will see growth.

Think about sustainability. Think about how you will use what you are planning to do it replenish the resources you use to accomplish it. Ideally, it should pay you back more than what you use.

No comments: