By Anne C. Graham, AME Director Canada -British Columbia and author of Profit In Plain Sight, creator of the P.R.O.F.I+T Roadmap, and mentor behind ProfitU
Being people centric often suggests that you must put people above profit. These 20 questions for manufacturers will help you see that they go hand-in- hand, and that you don’t have to choose – in fact, you can have more of both simultaneously!
Here’s why it matters
Leaders of financially struggling companies rarely have the time or budget to get out of the weeds and become people centric. They don’t have the budget to fund the training, development, and rewards that are essential components of a people centric organization. Without people who are fully competent and engaged in creating value for customers, there’s no point of differentiation. Competitive advantage comes down to price, and that’s never a profitable strategy. Jobs and even the very survival of the company are at risk. There’s a better way.
Here’s how it works
Profit is the applause you receive for the value your customers receive from… you guessed it… your people. Because your people are the ones who develop creative solutions to customer problems, produce quality goods that are right the first time, and make it right immediately when problems or questions invariably crop up. After all, customers are people too! So… would you rather have scattered applause? Or a standing ovation?
Here’s the gap
The problem is that while companies often develop people centric plans and objectives, they rarely develop profit plans. And no, I don’t mean the conventional P&L! The P&L is not a plan, it’s a good intention – X amount of revenue, Y amount of expenses, and Z of profit. As soon as revenues come in under budget or costs come in over budget, profit is reduced to simply being leftovers, despite everyone’s hard work. The “plan” then becomes getting sales at all costs (which often does more harm than good to the bottom line) or slashing costs (many of which, like training and professional development, are at the cornerstone of being people centric and thus are actually investments, not costs!). Sound familiar? My manufacturing clients close the gap with a Proactive Profit Plan – take the quiz below and see how you rate!
Are you people centric AND as profitable as you should be?
1. We have a system and set of practices in place to take profit first and make expenses the leftovers.
2. We have a proactive Profit Plan that consistently increases our profits year over year, not just a reactive P&L.
3. We have systems and tools in place to evaluate customer profitability beyond the gross margin level.
4. We practice open-book management, trusting our employees with company financial data so that they can be part of the solution.
5. Overall, someone at the leadership level meets with a client at least once a week, to bring the voice of the customer into the company.
6. We understand what profit-impacting behaviors need to change internally and have an ongoing change process in place to measure improvement.
7. We understand what profit-impacting behaviors on the part of our customers need to change, and have an ongoing change process in place to measure improvement.
8. Each person on our team – sales, service, operations, shop floor, etc. makes a commitment each week to one small step they can take that will increase value to the customer or create an enhanced customer experience, without adding cost.
9. Every one of our employees knows how they impact profitability, and have the knowledge and skills to behave like owners when making decisions that impact profit.
10. We have a client retention strategy that differentiates us from our competitors.
11. We have specific strategies beyond conventional sales calls to increase share of wallet profitably, in key accounts.
12. We have an ongoing process in place to manage unprofitable accounts, without simply firing them.
13. We have an active set of tools and processes to regain lost clients.
14. We have a systematic approach to reactivate inactive clients.
15. We have developed an ideal client profile beyond conventional demographics and psychographics, based on identifiable, profitable behaviors and its built into our sales pre-qualification process, so that we never attract clients who will become unprofitable due to their bad behaviors.
16. We have an ongoing process to leverage customer insights to help identify and eliminate costs beyond the shop floor that shouldn’t even be in our business, and we are extremely good at it.
17. We understand exactly how to price for value and rarely leave money on the table.
18. We have a safe and effective way of testing market reaction to price increases.
19. We consistently launch successful innovations into our marketspace that differentiate us and are difficult for competitors to copy.
20. We have profit-sharing or something similar in place with all of our employees so that they share in the applause we receive from our customers.
Score your company
You have work to do on your people-centric practices AND your profitability. Your audience may be generating some polite applause, but its not enthusiastic. You need to rethink “the show.”
You’ve got some scattered applause happening, from your customers and your employees. Your next step is to tweak the show to get more bang for your buck.
I’m hearing some loud, enthusiastic clapping! Now, get ‘em on their feet!
Get on the path to being people centric AND profitable. Go ahead, engage your employees. Engage your customers. The building blocks above help you do both when you involve everyone in being part of the solution.
Email questions or comments are always welcome!