Category Archives: Applied Management

Focus for Success

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Focus for Success

“Vilfredo Pareto was an Italian economist who in 1906 observed that 80% of the land in Italy was owned by 20% population. He further developed his theory noting that 20% of the pea pods in his garden contained 80% of his peas”

Do you hear today people say “Things are not what they used to be” and “Years ago there were more opportunities”?

Do you really think this is the case?

I would venture that the real issue is that today we face too many opportunities and we have too little focus. We get busier and busier and seem to achieve less and less, fighting bushfires rather than preventing them in the first place.

The reasons for this are many.

Often we place our attention on things ‘we enjoy doing’ rather than what we should be doing. We are in our comfort zone. For example, a manager meets with the people they like or get on with, avoiding dealing with those who are difficult or are problematic. A sales person calls on those clients and prospective clients who are close by or are easy to deal with. We are all guilty of doing this.

Have your heard of the Pareto Principle? This is often called the 80/20 rule where:

80% of sales come from 20% of our customers

20% of our customers give us 80% of our problems

20% of our customers demand 80% of our valuable time

80% of sales come from 20% of our products

Time, expertise and money are a limited resources.

Therefore it is important to try and apply Pareto’s Principle in our business and work life to get the best return. I once worked for a transport company who identified a market niche and specialised in this niche. They were extremely focussed on staying in this niche and were not tempted to expand outside this niche. The company had less than 6 customers, the profitability was many multiples of the industry average and was eventually sold for an exceptional profit.

What was the lesson?

I think it is obvious. Identify the areas that give you the greatest return for your time and resources and do not be distracted by other issues. Focus on what is important and not what you like doing. This requires discipline and is more easily said than done.

Here are some practical applications:

To reduce costs, identify which 20% of your customers are using 80% of the resources. With those who are not top profit generators, charge them for the resources they consume.

To maximise personal productivity, realise that 80% of your time is spent on the many trivial activities. Analyse and identify which activities produce the most value to your company. Then focus and concentrate on the vital few (20%). With the ‘left overs’ delegate or discontinue doing them.

To increase profits, focus your attention on the vital few customers (top 20%). Identify and rank your customers in order of profits. Then focus your sales activities on them. The 80/20 Rule predicts that 20% of the customers generate 80% of the revenues, and 20% yield 80% of the profits, however these two groups are not necessarily the same 20%.

If you wish to use the Pareto Principle to your advantage, the first step is to get started. Put your ideas down on paper – do not think too hard about it as you may become distracted. Once down on paper you can then work through your list and prioritise. A great tool to use is the 4 Segments diagram below…………. it makes decision making so much easier.

 

Achieve

Do you want it?

If YES then achieve it.

Preserve

Do you have it and want it?

If YES then keep it.

Avoid

Do you want it?

If NO, then avoid it?

Eliminate

Do you have it and don’t want it?

If YES, then eliminate it.

Now it’s up to you…………..

Beware the Operations hero…

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Beware the Operations hero…

Effective leadership is putting first things first. Effective management is discipline in carrying it out.

Stephen R Covey

Did you hear about the transport operations manager who worked all night to get the freight loaded  on the trucks and out on time? Or the warehouse manager who worked all weekend to relocate stock in the warehouse to make it more efficient?

If you were running these companies, what would you do?

(a) recognise them in the company newsletter

(b) promote them; or,

(c) reprimand them?

As  managers and business owners, most of us  would probably choose (a) or (b) wouldn’t we?

But is it really the right thing to do?

I recall working for a major transport company  many years ago. The company was characterised by a ‘can do’ culture where anything would be done to get the load out – in particular working long hours for at least 6 days per week. The operations managers like our examples above were treated as heroes. They embodied the values prized by the organisation – tough, persistent, and long hours of work. These managers were celebrated and promoted.

However, when you probed the situations in greater depth, it was clear that the real underlying problem was that these operations heroes had not been doing a good job of managing their day-to-day activities, in particular planning and training. In other words, the more mundane tasks were often not recognised. If these tasks had been done the crisis would have been prevented. However, by celebrating the ‘heroic’ actions, the company’s top management was telling the organisation that it was okay to not do the quiet, unobserved day-to-day work, as long as they responded forcefully to the problems that inevitably resulted. The quiet achievers were not recognised (nor rewarded).

The message was –  crisis response is more important than crisis prevention.

The transport company was subsequently taken over as it struggled to  provide the required returns to its shareholders. The top management left. Subsequently a new management team was installed that reorganised operations. The new top managers understood the importance of crisis prevention, and developed a new focus on planning, both daily and in the long term. One of the biggest problems was that the middle and upper-middle managers who were in place had been promoted for managing a crisis not for their management skills. They were not skilled in crisis prevention, and importantly, their personalities were more suited to the action-oriented crisis response than the more systematic and analytical process of crisis prevention. They soon followed top management out of the company.

We also see this in sales. When a major customer has a problem, the alarm sounds and everyone rushes to fix the problem. The sales manager is celebrated as a hero as they have saved the account and maintained the relationship.  Picture the leader on a white stallion leading his troops in a cavalry charge – noise action and recognition. By contrast, the sales reps who are skilled at maintaining and slowly growing major accounts often remain in the shadows, unappreciated and unrecognised.

In effective companies, sales leaders understand the process of quiet, steady account development. This involves mapping a customer’s buying process, understanding how to increase a customer’s profitability, and seamlessly involving operations managers with their customer counterparts to reduce the costs for both customer and supplier. This is a long, steady process, but it creates customer relationships with high sustainability, profitability and growth.

The question is: who is the real sales hero? The second question is:  are the operations managers – the ones who quietly drive major sales increases and cost reductions – the real operations heroes?

In my experience, most of these “heroes” are skilled at managing a crisis that was avoidable. Often their companies were suffering problems that should not have occurred in the first place due to poor management and systems. The real heroes in an organisation are those managers who have the wisdom and insight to develop systematic information, processes, and behavioural drivers that enable their managers and staff to coordinate their activities  to achieve more together. The result is that their management teams form effective coordinative processes and develop a culture of profitability. Effective leaders are not those on the white charger but the opposite. They are not dramatic, romantic, heroic or exciting – just very effective.

Like teaching, one of the truisms of management is that you get what you expect. If you celebrate the mythical operations and sales heroes, you will get mediocre performance and continual crises punctuated by occasional ‘heroic’ displays. A good manager must have the foresight to systematically create the conditions that enable your managers to improve performance and prevent crises thus creating a great business.

As a manager you have a choice…………