By Sandy Cody
Is your for profit or not for profit business in trouble?
Declining revenues, loss of customers or clients, increasing costs, low employee morale, and slow response times in providing a product or a service, are but a few examples. Not one of the above examples is mutually exclusive from the others. They are all interrelated to some degree.
In Search of the Quick Fix
Do you know why your business is in trouble? Just as the nature of a problem can vary, so can the reason(s) for a problem: a changing economy, changing customer needs or wants, poor management, poor quality control, poor budget control, breach of contracts, or inadequate infrastructure.
The one constant is that the problem did not happen overnight, and neither will a solution. A quick fix is a rarity.
A second constant in most cases is the identification, by business management, of a single cause for the problem. Rarely is that the case, unless the problem is clearly the CEO spending monies the Company does not have on a new beach-side condominium in the Bahamas. The “single cause” theory may be the most obvious or most irritating, but it is usually symptomatic of some broader-based and more deeply rooted problem or set of problems.
Recognizing the Problem
Obviously, the first step in dealing with a problem is the recognition that there is a problem or at least the belief that a problem exists. That usually comes from the business owner, or senior manager, or sometimes an employee somewhere in the process.
Accompanying this recognition, often, is the attitude that the problem can be fixed from within. Sometimes this is possible, if the problem is one dimensional and very clear, like, selling the beach-side condo in the Bahamas and dumping the CEO. Normally, the management and line staff lack the time, or the skills, or the unbiased approach needed to deal effectively with the situation. But these deficiencies do not always prevent an attempt to correct the situation from within. Unfortunately, the solutions are too often a set of band-aids that will pop-off in short order.
Getting an Objective Diagnosis
Just as often, the business owner, or CEO will engage an outside consultant to deal with the problem. That is where Draker Cody comes in. It is a basic way of providing a fresh, unbiased look at the business. What we bring to the job is experience, not just the experience that is measured in years, but experience that is multi-dimensional based upon dealing with a wide range of issues and problems with different sized businesses. We know what is at stake; we understand the complexities of the issues faced by business and we provide pragmatic solutions. We know how to listen; we know how to communicate, and we are believable. This latter is of the utmost importance.
Defining Why Your Business is in Trouble
With the hiring of the consultant, the second step is to clearly define the problem, its length, width, and depth. That means taking the issue at hand and working both forward and backward from it. We need to understand the business and that means understanding the processes or operations involved in producing a product or delivering a product or service. We also need to understand the administrative overhead that is involved (insurances, financial controls, rents, etc.).
We employ a process of “differentiation and integration”; that is; we breakdown the operation(s) into its component parts and we examine each component in detail (who is doing it, how it is being done, and why it is being done) and how it relates to the other components in the process. The pieces may be modified, steps in the process reorganized, or other changes may be mandated by the analyses. All the pieces are put back together (integrated) to produce a new and different whole that works better than the original. This is done with the help of management and employees. This is their business; they must be part of the solution; they must buy into it.
This process of “differentiation and integration” is initiated and implemented with the use of four basic questions: what is going on here (existing operations)?; how did this situation come to be (a look at why the process is as it is)?; what tends to be going here ( what is happening now and what is likely to happen some time down the road if the existing operation continues as is)?; and, what ought to be going on (how do we act to change the operation and its relationship to other operations to produce the desired effect)?.
Implementing the Solution
Producing an implementation plan with timing and cost components is a key ingredient. The implementation may have to be phased because of cost or technological needs. The plan has to fit the Company.
What we focused on thus far is treating the whole body, not just one organ. This holistic approach is certainly the preferred method of dealing with a business in trouble. It produces the best, most long-lasting benefits. But, what do you do with a business or other organization that does not have the financial wherewithal to deal with the whole situation?
You take it in phases or pieces, however, do not skimp on the analysis. As mentioned above, in order to find a “cure” one must evaluate the symptoms (lost revenue, out of control expenses, inefficient processes, obsolete technology or products), disclose the diagnosis (processes, values, goals, procedures that cause the symptoms ), design the intervention (cure) and lastly, proceed.
Short and Long Term Solutions
The implementation is the only step a struggling company should consider a phase in process. Implementation begs the question “what needs to happen immediately versus what interventions are needed for the long haul.
For instance, the analysis clearly reveals expenses and revenue are out of line. Therefore, immediate intervention is needed to reduce expenses. We urge companies not to look at the obvious like cutting staff or reducing wages and benefits, instead look for hidden expenses such as review all general liability insurances, leasing costs, telephone, long distance, or cellular phone services. Ask tough questions or EVERYONE, which positions (not people) need cellular phones, who, what and where are long distance calls made, can e-mail replace some long distance, can we raise deductibles on some of the insurance plans, would there is a cost savings and more control if we became self-insured instead of buying policies, are we offering benefits the employees want or what the company thought they should have? Do not underestimate the employees, they have ideas, they see waste and inequity, sometimes they will consider other reductions in lieu of staff reductions. Staff reductions can cost more than they save.
We recently worked with a small not for profit organization that had not reviewed general liability insurances in several years. They were still carrying insurances which supported a staff of 16 (now three), rental costs 20% higher than other tenants for a smaller space, antiquated communication systems and fees, renegotiations saw savings in the hundreds of dollars per month. Hundreds you say, a mere drop in the bucket, you are right, but a savings is a savings, a couple hundred in waste translated into marketing dollars. You see, a brief survey showed the community had not heard from this company in several months, most customers thought they had closed!
No matter what the size of the organization or if it is in trouble or not, it is prudent to exam costs that routinely are taken for granted, the invoices come in and we pay…take time to go out for bid, review the policies, ask for alternative plans ask colleagues what, where and how they purchase those reoccurring services and products.
Taking Corrective Action
If your business is in trouble, developing a corrective action implementation plan saves money. Use the business and strategic plans not only as financial management tools but as the foundation for the corrective action implementation plan. Then use all three to measure the results of the corrective action.
If your business is in trouble, using an outside expert to evaluate what you see as symptoms the makes the same sense as having a physician or a person of the church assist you in the health of you or your family. As a rule, we do not diagnose or treat ourselves, why do we do it to our companies?
Sandy Cody, president of Draker Cody, Inc., has more than 30 years of management and human resources experience and holds a Masters Degree in Management with a focus on Human Resource Management and Organizational Development.