Procreactive. Several years ago I
trademarked the word. I created it to differentiate the two types of action
that I teach in my Time Management and Territory Management seminars.
Experience tells me the primary force separating successful from unsuccessful
people is action. Successful people
act; unsuccessful people don’t.
Does your job description sound
something like this? “Chief
Executive Officer, Chief Operations Officer, Chief Marketing Officer, Chief
Finance Officer, Chief Human Resources Officer” and (unofficially at least)
“chief cook and bottle-washer?” In
recent columns, I’ve focused on all of these roles but today I want you to
think specifically about your responsibilities as Chief Finance Officer.
The father of business consulting,
Peter Drucker, is credited with debunking decades of mistaken ideas while
unearthing the true purpose of business. Although that was half a century ago,
many flooring retailers have yet to understand and apply it. Drucker concluded:
“The purpose of business is to create and keep a customer.” To further explain
this, he presents a basic economic situation: a consumer wants or needs a
product or service. He has no source for it, or only a source that is too
expensive in terms of labor, time, or money. When a consumer locates a business
that can fill the demand at a reasonable cost,
that business has “created” a customer.
The consumer doesn’t need to be sold. He will demand the product (or
service) from the business.
Bottom-line: By satisfying the consumer’s need, the business has
“created a customer” even if the consumer was simply looking for an economic
source.
The other day I read a news story about “an
elaborate, decade-long scheme to steal more than $4 million from Building 19
stores.” The scam, which started in 1996, allegedly involved fictitious
purchase orders and phony invoices for rugs. Authorities say a buyer, a
warehouse employee and even a few outside suppliers were in on it. After an
in-depth investigation by Massachusetts State Police and the state’s Attorney
General’s Office, five people have been indicted. One who has so far pleaded
guilty got three years probation, a $5,000 fine and 150 hours of community
service. Think about this and ask yourself: Could an employee steal millions
from me?
In the June issue of NFT, my
colleague Warren Tyler outlined five ways you can increase sales now. His fifth
was: “Ask for the order.” From years of
watching salespeople in the floor covering business, Warren and I share one
constant frustration: Many (otherwise good) sales pitches fail simply because
the salesperson did not ask for the order.
We hear so much talk about retailers embracing technology, Fortune Magazine may have summed it up best: “If you want to outdistance your competitors… you have to embrace technology as powerfully as you can. Use it as a weapon!” But what type of technology? There are, after all, two kinds: table-stakes for staying in business, and smart-bets for beating competitors. Fortune’s editors are assuming that every company is equipped with enough basic IT (information technology) to keep it in the game. They are encouraging the smart bets that will help you outdistance competitors. As it stands, basic IT is what you need to survive but it won’t help your company thrive! I hope that is not news to you.
In
two previous articles, I described how the primary objectives of flooring
dealers actually compete against each other: Sales compete against
Profitability, and Short-term Earnings compete against Long-term Earnings. If you’ve followed me, you’ve calculated
your company’s batting averages for these two sets of competing objectives over
the past five years, and you’ve identified which set is hurting your company.
You’ve finished Steps One and Two and now you’re ready for Step Three. This is where you learn how you can prevent
your objectives from competing against each other. You can start letting them
work together. This way, they both improve at once.
Last
month, we looked at an eye-opening study involving 1000 companies. It
demonstrated that the four primary objectives most business owners have
actually compete against each other. When the study’s authors arranged the four
objectives into two pairings, they realized that the first objective, sales
growth, competes against the second, profitability. At the same time the third
objective, short-term earnings, bumps up against long-term earnings. It’s like
a perpetual tug-of-war, progress on one side coming at the other side’s
expense.
You and I know that retailing is
very complex. We get mired in this complexity when we begin to believe all we
have to do is follow a few simple steps. We want better margins, lower costs
and increased sales. But successful retailing is far more complex than that.
Amidst this complexity, flooring retailers typically share four common goals:
to increase (1) sales, (2) profit-margin this year, (3) “economic profit”
(earnings) this year, and (4) “economic profit” in the long-run. Nearly all of
us manage these common objectives well enough to stay in business, but few of
us ever achieve our potential. I believe I’ve found a process you can apply to
achieve your potential.
Have you ever SWOTed your company? SWOT is the
most powerful technique I know to discover a company’s under-appreciated Strengths and hidden Weaknesses, and to
recognize its external Opportunities and Threats. (Hence the term, “SWOT”.)