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You will succeed only if every team member in your company looks at the information and makes adjustments or decisions based on their KPIs weekly.
each employee has one Critical Number that aligns with the company’s Critical Number for the quarter, illustrating that there is a clear line of sight).
search for “Marshall Goldsmith peer coach” on the Web, and you’ll find a free document that further details the process.
At a minimum, have your metrics, goals, and plans up big and visible in a place where you host the various weekly meetings
The end goal is to keep the output from the Growth Tools top-of-mind, like the score of your favorite individual athlete or team.
read Chapter 11 on meetings in Managing Up: How to Forge an Effective Relationship With Those Above You, by Rosanne Badowski.
On the flip side, brain-wave scans show that we need to talk out our problems. When we speak, the prefrontal cortex of our brain — the source of executive and cognitive power — lights up like a Christmas tree. It’s this power that members of the Young Presidents’ Organization, Entrepreneurs’ Organization, Vistage, and other CEO organizations experience in their monthly forums (confidential meetings of eight to 10 leaders free to talk about anything). Ninety percent of the benefit is the chance members get to speak about the deeper challenges or bigger opportunities facing them.
Set the start of the daily huddle at an odd time, like 8:08 or 16:16. People are more likely to be on time than if you schedule the meeting on the quarter-hour or half-hour. And start the meeting on time, whether everyone is present or not. You don’t have a lot of time to waste, and it’s important to set that tone from the beginning. It’s also important to end on time, not letting the meeting run longer than 15 minutes, or people will drop the habit.
The general rule is to have more people in fewer meetings, rather than fewer people in more meetings.
Choose someone from your team to interface with a contact on the supplier’s team and walk through the same three agenda items listed below.
The Agenda — The agenda should be the same every day, and it’s just three items long, with five minutes maximum per item: 1. What’s up (in the next 24 hours)? 2. What are the daily metrics? (All companies should have some.) 3. Where are you stuck?
Avoid checking up on whether someone did something the previous day. Team members will start feeling like they are being micromanaged. In general, looking forward is great management; looking backward is micromanagement.
You don’t want to spend the weekly meeting poring over updates. Everyone should be well-informed via the daily huddles.
The idea of the weekly meeting is to keep everyone laser-focused on the #1 priority — and the big rocks supporting that mission.
We highly recommend that you adopt this best practice, dedicating several hours a week to get in the flow and work on the business, project by project, function by function. Then you’re finished except for a daily, 15-minute touch point.
Who, What, When (WWW). Take a couple of minutes to summarize “Who said they are going to do What, and When,” and email the notes to everyone.
Unless the senior team instills its DNA— namely, the knowledge and values required to make good decisions — in everyone from the middle managers on down, the top leaders will find themselves increasingly overwhelmed by the demands of a growing business.
one-day monthly management meeting that includes everyone who supervises or manages anyone in the business.
And the cash conversion cycle (CCC) is a key performance indicator (KPI) that measures how long it takes for a dollar spent on anything (rent, utilities, marketing, payroll, etc.) to make its way through your business and back into your pocket.
The Customer-Funded Business: Start, Finance, or Grow Your Company with Your Customers’ Cash.
Victoria Medvec (check out her powerful online “High Stakes Negotiation” course at scalingup.com),
For sources of cash other than loans or investors, we refer you to a Fortune Small Business article Verne wrote titled “Finding Money You Didn’t Know You Had”: http://tiny.cc/finding-money
Calculate your existing CCC in days.
Greg Crabtree’s highly readable book, Simple Numbers, Straight Talk, Big Profits! 4 Keys to Unlock Your Business Potential,
Crabtree calculates gross margin to be revenue minus all NONLABOR direct costs.
In essence, nonlabor direct costs, which are paid out of revenue, are simply pass-throughs. You definitely want to get them at the best price, but you usually cannot move the price enough to make up for any profit deficiency in your business model.
Instead of obsessing about revenue, shift the internal discussions to generating gross margin,
Gross margin doesn’t get enough respect. It’s bad enough that it’s stuck in the middle of the P&L and often gets glossed over. It’s actually THE most powerful indicator of an effective sales team, a differentiated strategy, and real growth.
There are two options to improve your gross margins. The first is to refine your strategy to maintain enough differentiation and uniqueness in your offering that you can hold your line on pricing (see “The 7 Strata of Strategy” chapter).
As a general rule, once your gross margin percentage gets below 40% you should relate profit to gross margin, so you can generate an apples-to-apples comparison with other industries.
With this adjustment in how profit percentage is defined (i.e., relative to gross margin vs. revenue, depending on industry) and with distortions eliminated, comparing businesses from different industries gets easier.
Instead of seeing labor costs as a percentage of something (revenue, gross margin, etc.), we want to view labor as something you can leverage. You just need to know the multiplier (e.g., for every $1 you spend on labor, you get $3 back).
The three segments of labor efficiency we want you to focus on are: • Direct labor efficiency: gross margin dollars divided by direct labor cost • Sales labor efficiency: contribution margin dollars divided by sales labor cost • Management labor efficiency: contribution margin dollars divided by management labor cost
For KPI
We want management to manage gross margins, direct labor performance, and sales. We want the sales team to grow our revenue.
For everyone else, we recommend getting profitable with the work you have, proving you can get to 15% profitability (based on our adjusted Simple Numbers), adding labor to knock profit back to 10%, and then growing to 15% again. Lather, rinse, and repeat.
Add one key role at a time. Get profitable with that executive before you add the next one or add support personnel.
Meeting your core capital target means having two months of operating expenses in cash,
The definition of two months of operating expenses includes all normal operating expenses on which you do not get terms. As a rule, the only costs you exclude will be your cost of goods sold, since businesses typically get terms of 30+ days.
Here is the often-overlooked nugget in all of this: If you run a business at 10% profit that has hit its core capital target, you now have a business that is producing a MINIMUM return on equity of 50% PER YEAR! Investors would kill for a rate of return of 20% year after year, and yours is running somewhere between 50% and 100% per year. This is the true secret of building wealth within a privately held business.
The famous DuPont Formula then takes this ratio and breaks it down into two components:
So that you can see how to make use of these tools, it’s helpful to understand the benefit to cash if either a 1% or a one-day change is made to each of these levers. We call this “The Power of One.”
Then complete a complimentary 4 Decisions Assessment and decide which of the four elements — People, Strategy, Execution, or Cash — to pursue first.
Go to Pages 108-109 to review the details of this crucial weekly “talk time” routine.
Choose a measurable goal that addresses some choke point in the business (something keeping you awake at night), and focus the entire company on achieving it in the next few weeks.
Pick a goal that’s challenging but doable, so the team tastes success quickly.
Plan your first quarterly or annual offsite.
Whatever you do, avoid doing everything all at once.
