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Business Plans and New Year’s Resolutions

Posted on December 30, 2012 by John F. Dini

For the last week or so, the regular denizens of my local gym have been “preparing” for the onslaught of Resolutioners, as we call them. Those are the folks that show up every year right after the holidays, determined to make the coming twelve months healthier than the last twelve.

Small business owners frequently do the same with their business plans at this time of year. They look at their previous year’s results, and determine that the coming year will be better. Every small business survey will show a high percentage of entrepreneurs who predict that the next year will be more successful. Like the Resolutioners, the real question is what will they do to make that happen?

Specific

Those who limit their objectives to good intentions are the first to disappear from the gym. They merely made a “resolution” to lose weight and exercise more (by far the most popular resolutions). Like owners who vow to sell more and spend less, their resolve has faded by the end of January. The Resolutioners decide they could just eat less to lose weight and not have to exercise. The business owners might start making excuses about spending decisions. Having determined to reduce expenses, they then decide that not cutting is the new magical formula to added sales. It seems easier, but it doesn’t accomplish the objective.

Measurable

A New Year’s resolution with a measurable target, say to lose 20 pounds, is a bit stickier than just “lose weight,” but not by much.”Increase profits by 10%” sounds more businesslike than “make more money,” but by itself is just as insubstantial. Those folks are gone by Valentine’s Day, give or take a week depending on the harshness of the winter weather.

Accountable

Some of the new gym arrivals come with a friend, a workout buddy to help keep them on track. For these, the odds of success are multiplied greatly. For a business owner, accountability needs to be more than just to yourself. A business coach, peer group, or even announcing the goals to employees and reviewing them regularly can be a big help. Even so, many will drift away as the year wears on.

Resourced

I originally tried to get my workout in the morning at the cost of sleep. Unfortunately, I’m one of those folks who needs seven hours each night or face more than my usual cognitive dissonance. I finally learned that going to bed at 10:00 was a prerequisite to getting up at 5:00 and functioning well. Trying to achieve your business goals by merely working harder (or its fallacious cousin, working “smarter”) is pointless. That is, unless you can point to how you’ve been slacking or working stupid in the past. If you can’t, then you will have to allocate real resources to the results you seek.

Timed

A year is too long a time period for practical goal setting. How many times have you said “I can’t believe 2012 went so fast?” How many times did you say that about 2011, 2010, 2009 and on and on? You need to have more frequent milestones. I recommend monthly targets for operational goals, and quarterly metrics for tactical objectives.

By March, most of the Resolutioners will be gone, and we can get back to our normal workout routines. Every year, however, a few of them stick it out and transition from being the “new guys” to one of the “old guys.” Eventually we will learn their names, and accept them into the brotherhood of those who have proven to be tenacious and disciplined enough to change their lifestyles permanently.

The same thing happens in business. There is a brotherhood or sisterhood of business owners who plan carefully, and who make the effort to stick to the plan’s execution. Outsiders call them the wealthy.

Posted in Entrepreneurship | Tagged business ownership, business planning, business strategy, entrepreneurship, small business, small business advice | 1 Comment

One Response to Business Plans and New Year’s Resolutions

Stan McBroom says:

December 31, 2012 at 9:09 am

How true, with no measurement and someone to hold you accountable you will be back to your old ways in no time.

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2013 Planning:
Try Starting with “Who”

Posted on December 23, 2012 by John F. Dini

For many years, I’ve begun each annum with my clients by helping them answer the Seven Questions, some simple keys to basic planning for the year. This year the questions have been picked up by my friend Jim Blasingame at the Small Business Advocate, with his column reprinted in the Memphis Commercial Appeal, and are scheduled as a feature in January’s Tips From the Top, the national newsletter of The Alternative Board®.

With our clients, I’ve begun to incorporate the Seven Questions into a one-page (actually one-sheet, since it is on two sides) form that considers a number of additional factors. One of the items, and perhaps the most important after SMART Goals in planning, is a functional organizational chart.

Many small companies fail to achieve their goals because they lack sufficient quality in human resources. Simply put, they don’t have the horsepower to get them to the objective. Goals are fine, but if they depend entirely on the owner to accomplish, then their probability of successful implementation decreases dramatically.

Our functional organizational chart doesn’t focus on the operational role or job description of the employees. Rather, it asks the owner to look at the level of decision making, autonomy and responsibility of each member of his or her team. There are five levels.

Owners: In some companies partners or other shareholders bear some of the responsibility for implementation. Owners can be presumed (most of the time) to have aligned interests in making the company successful. In a good partnership, each owner can depend on the others to handle some aspect of the business entirely.

Independent Decision Makers: These are employees who run some segment of the business, or perhaps all day-to-day operations, without having to ask permission for their actions. They can dramatically impact profitability with their decisions, and have the authority to create or change processes. Every company should have at least a Second In Command (SIC) who answers only to the owner, and is compensated based on success. If you have more than one Independent Decision Maker you have a much better chance of growing the business. If you have none, finding or developing one should be your top priority.

Dependent Decision Makers: These are the middle managers and supervisors, who make decisions that affect profitability, but do so in a structured environment. They can’t make up new systems without running them past those to whom they answer, but they can determine the proper course of action within their area and prescribed processes.

Independent Implementors: These are the employees who act without ongoing supervision. They don’t have much flexibility in what they do, but have to be trusted to do it on their own. Salesmen, project managers, route drivers and foremen might all be examples of Independent Implementors.

Dependent Implementors: These are your first level, task based employees. They are expected to accomplish regular or routine work, according to documented systems and with regular supervision. For most of my clients, this level is filled in with job categories like “warehousemen” or “customer service representatives” instead of individual names.

Dividing your employees according to their autonomy can be a eye-opening experience. Some of my clients realize that the people just below them on the company organizational chart are actually two or even three levels down in decision making capability. Nominal SICs turn out to be dependent on the owner for ongoing guidance and support. That gap is a strong argument for why they are having difficulty in reaching their annual goals.

Posted in Management | Tagged Autonomy, business, business ownership, business planning, Decisions, employee performance, employees, Goals, leadership, management, Pointless, Setting Goals, small business advice, Smart Goals | 1 Comment

One Response to 2013 Planning:
Try Starting with “Who”

Clint says:

December 30, 2012 at 10:15 am

Thanks John…I’m mainly in the II category…Funny, when I discuss these kinds of things with others, they look at me like I’m analyzing way too much..I agree that these are important insights and that many Decision Makers don’t think this way…I’ll remember this breakdown and watch how companies use or not use it.

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2013: Planning for Uncertainty

Posted on December 16, 2012 by John F. Dini

Every conversation that I’ve had with business owners over the last several weeks has revolved around the challenge of planning to do business in a political and economic climate that defies normal planning conventions. The sequestration budgetary measures scheduled to go into effect on January 1, 2013, popularly termed by Ben Bernanke as the “Fiscal Cliff,” has people making moves that may be brilliant, or foolish, or may mean nothing at all.

One client has liquidated his portfolio. Others are standing pat. Some are advancing capital expenditures to take advantage of expanded section 179 credits, which will expire on the first of the year. Others are delaying such purchases, in the belief that deductions will be worth more if tax rates increase. Large corporations have borrowed billion of dollars at historically low rates in order to pay special dividends before the end of the year. Small corporations are stripping their equity out as distributions, and lending it back for working capital.

Small business confidence plunged following the elections, largely because nothing really changed in the battle between a White House focused on expanded entitlements, and a Congress that refuses to pay for them. Whether action is taken to forestall the Cliff, by no means a certainty, no one expects it to be a “Grand Bargain” that will stabilize the deficit and begin to reduce our national debt.

The Economist magazine, among others, calculates the impact of unmodified sequestration to be negative five percent of the Gross Domestic Product, or a recession some 40% more dramatic than the shrinkage in 2009.

What we really fear is that the leaders to whom we’ve entrusted the running of the country are insane. Does either party think that they would emerge unscathed after engineering a depression?

The United States is a grand experiment. We are just over 200 years old as a nation, and as a form of government. The right to vote was originally restricted by age, race, gender and property ownership. No one would regard such a limited franchise as a democracy today. None the less, Thomas Jefferson predicted 200 years ago that this experiment would only last until citizens discovered that they could vote themselves largess from the treasury. In California, where less than 150,000 out of 36,000,000 people pay half of all the state income taxes, did those 150,000 really have a voice in the referendum for higher tax rates?

One hundred years ago, in 1913, the states ratified the sixteenth amendment, which reads in its entirety : “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

This is not a diatribe against taxation. I don’t want to live in a country where the poor starve, or the sick lie begging on the sidewalk. I’ve been to some of those places, and I’m glad we are civilized enough to address social needs with tax dollars.

In order to generate those tax dollars, we have to run our businesses at a profit. The time we are wasting in trying to figure out what comes next isn’t helping anyone.

Posted in Entrepreneurship | Tagged Ayn Rand, business ownership, economy, entrepreneurship | Leave a comment

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Santa Boss: The Role of a Business Owner

Posted on December 9, 2012 by John F. Dini

Ebenezer Scrooge was visited by three ghosts, so it’s fitting that I tackle the issue of the holidays three times. We’ve discussed terminations close to the holidays, and the custom of dispensing year-end bonuses. But in the end Dicken’s Scrooge was enlightened by the ghosts, and began dispensing his wealth to the Cratchit family (especially Tiny Tim), in amounts disproportionate to the market value of father Bob the clerk’s position.

Most business owners are wealthier than their employees. It’s your business, and you have the right to enjoy the financial benefits of the risk, the work and the sacrifices you make (or made in the past) by taking the profits as your reward. Yet many of us feel a twinge of guilt when we hear of an employee struggling financially. We provide a livelihood for families, and we feel that responsibility every day. When an employee is unable to meet his or her obligations, there is a little internal voice that suggests we should be doing something about it.

I know owners who diligently avoid having employees visit their homes, because they fear being labeled as “rich.” Others host a holiday party at their house every year, and feel that they are sharing their success with the staff by letting them see the material results of their collective effort. There is no obvious difference in the attitude of the employees between the two . Most of those attending the home-based parties still think that their boss is fair and generous. Some of those who have never seen their boss’s house still assume that he is filthy rich.

In a recent meeting of one of my groups in The Alternative Board® a member posed the question; “Why do you try to grow your business?” Not one person answered “To make more money.” They want to offer opportunities to employees, serve customers, and in some cases build a legacy for the future. Once we have satisfied our lifestyle needs, few business owners are driven merely by numbers in a bank account.

Owning a business is a privilege, because none of us would be successful without a decent modicum of luck. It is also a trust. We all carry the burden of knowing that our employees depend on us to make the best decisions, and to anticipate the things that might risk a secure future for them and their families.

We don’t serve that trust by dispensing charity, or by paying a few workers beyond their market value, and thus leaving less for the others. We serve it by watching expenses carefully, by monitoring managers’ decisions that could put jobs at risk, and by offering opportunities for people who want to do better. Our businesses are our most powerful tools to better the lives of others. In the long run, spreading the profits around has far less impact than using them to grow new jobs and new opportunities.

I thought I’d seen every feature film version of “A Christmas Carol.” I know the Reginald Owen, Alastair Sim, Michael Caine (Muppet), George C. Scott, Patrick Stewart, Bill Murray and Mr. Magoo versions. (It seems upon researching that I missed a recent Jim Carrey rendition.) They differ only slightly, but as I recall in one or two of those Scrooge’s climactic change of heart includes offering Bob Cratchit a partnership.

That is the appropriate role of a business owner. Using your company to give teaching and experience to people so that they can better themselves is the best present anyone could provide. It is one that lasts a lifetime.

Posted in Entrepreneurship, Leadership, Management | Tagged Ayn Rand, business ownership, employees, entrepreneurship, leadership, small business advice | 2 Comments

2 Responses to Santa Boss: The Role of a Business Owner

Clint Moar says:

December 9, 2012 at 7:55 pm

Thanks John…
I’ve never owned a business that supported employees so this is an interesting topic…to be honest, I’ve never worked for a co. that paid a wage/salary that I really felt I’d deserved…the very few times that I did get a “bonus”, I felt it was just balancing out what I’d already worked for/supplied…
You’re right, offering a “piece” of the business would mean much more.
Clint.

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Cheryl S. says:

December 11, 2012 at 12:55 am

I agree with Clint’s comment about how bonuses are perceived. If your bonus in a privately held business is setup on a profit-sharing basis after an owner-established flat amount, then that is what you have been diligently focused on the entire *prior* year, despite the owner controlling those numbers in the end. Bonus potential is discussed prior to the period for which you are working towards it, so I agree that they are very much a ‘balancing out’ of work provided that met or exceeded the documented criteria. Anything new after the labor year in question would be a simple breach, wouldn’t it?

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Year End Bonuses: Incentive or Entitlement?

Posted on December 2, 2012 by John F. Dini

It’s time for our annual discussion of the Holiday bonus.I pine for the days of my spiritual ancestor Ebenezer, who was offended at the expectation that he would pay Cratchit a whole day’s wages without receiving any work in return. One year I tried telling my staff to “make sure that you are in all the earlier the next day.” (It didn’t work.)

Today, the expectation of employees is that they will not only be paid for the day, but that there should be something more to show that they are really appreciated. That might be a monetary gift, or as is the custom in many small businesses, the “year-end bonus.”

Year end bonuses may theoretically be tied to profits, but since the year really hasn’t ended, they are often just subjective gifts. Owners give themselves some vague justification (the employees don’t need one) such as “We’ve had a good year” or, if cash flow is tight, “We’ve had a tough year.” They then consider seniority, or salary, or what the employee got last year, or the phase of the moon or some other specious excuse for measurement that has almost nothing to do with actual performance metrics, and they attach a dollar number to it.

From the employees’ perspective, the year-end bonus comes in two flavors. 1) More than I got last year, or 2) less than I got last year.

Knowing that, many bosses sit with last year’s table of bonuses, determining whether each should be increased or decreased, and by what percentage in comparison to others. They labor in the incredible belief that this single figure will serve as a performance review, reinforcement for good performers, warnings to those on the fence, recognition for (recent) past achievements, organizational bonding, retention incentive, cultural reinforcement, and a giant leap towards goodwill for all mankind.

Then the owner complains for two weeks that no one said “thank you.” Why should they? No one is sure if what they got was good or bad. They don’t know how they were measured, or whether they were at the top or bottom of the totem pole. No employee wants to look like an idiot by thanking the boss for what might have been a warning.

The holidays are a time for giving gifts. A gift is a token of your esteem for someone. It isn’t supposed to be determined by performance. It isn’t supposed to be calculated as just a little bit nicer or just a little bit smaller than the gift you gave to the next person. It isn’t supposed to be a major part of their family’s income.

Incentive or entitlement? The correct answer is “neither.” If you give out bonuses for performance, or really allocate a portion of profits for the employees, do it after the holidays. Keep the spirit of the season separate from incentives by giving gifts. They should be modest, and fairly even across the board. Make sure you call them gifts. When people know that they’ve received a present, they are more likely to say “thank you.”