Measurement Isn’t Necessarily Management

Posted on February 2, 2014 by John F. Dini

“You manage what you measure” is axiomatic in business ownership. “Employees respect what you inspect.” Understanding performance and productivity by comparing it against past performance, industry norms or internal benchmarks is useful, but measuring something doesn’t mean that you are managing it.

As a basketball fan, I’ve been fascinated by the rise of metadata analysis in the NBA. last year a few teams subjected all their game film to computerized dissection. This year all teams are doing it. Measurements of a player’s performance have grown far beyond points, rebounds and assists.

Game films are now broken down  to calculate the speed with which a player brings the ball up the court, how many times he made a pass that led to a pass counted as an assist, how often an opponent penetrated inside and decided not to take a shot because of the defender in front of him, the number of defensive assignments missed, and scores of other indicators that were traditionally characterized as intangibles.

satisfactory performanceDoes converting intangible factors into statistics make them actionable? I guess there are some coaching opportunities, as with the missed defensive assignments, but other seem to be data collection for its own sake. Passed up interior shots, for instance. How many factors did the offensive player consider in his split second of decision making? Did he see an open man? Was a better play developing? Did the defensive player have help? Was the shooter typically comfortable with that spot on the floor?

You can’t coach an employee based on numbers that may or may not indicate a performance issue. Statisticians are fond of saying that congruence doesn’t indicate causality. Just because event B happens after action A does not necessarily mean that the action created the event.

In business, the danger of over-measuring is the temptation to act on specious information. Regional magazines are fond of publishing “best doctor” lists; but measuring outcomes isn’t necessarily an accurate approach. As one cardio-thoracic surgeon in New York pointed out, his practice was focused on taking patients referred by other surgeons who felt a specific surgery was too difficult to handle themselves. Not surprisingly, they all scored well above him in the number of successful outcomes, and he was far down the list of “best” in his field.

Measuring the percentage of leads closed by a salesperson is clearly a worthwhile exercise. Trying to refine that by weighing the initial quality of leads, tenure in the position, or lag time for submitting sales reports doesn’t product actionable data. It just builds potential excuses for not closing sales.

In my most recent book, Hunting in a Farmer’s World (link below), I argue against entrepreneurs trying to run their businesses strictly by the numbers. A few Key Performance Indicators or Flash Reports are usually sufficient to make major decisions. The numbers you review regularly should tell you if something isn’t going well. They are not supposed to tell you exactly what the fix is. Too much reliance on a boatload of data will cause you to discount your instincts. With Hunters, instincts are more important than statistics.

My new book, Hunting in a Farmer’s World: Celebrating the Mind of an  Entrepreneur, is now available in paperback, hardcover and Kindle. It is an ownership book, not a management book. Please click on the link above to see what business owners think of it.

Posted in Entrepreneurship | Tagged , , , | 4 Comments

4 Responses to Measurement Isn’t Necessarily Management

  1. David Basri says:
    February 2, 2014 at 11:30 am

    I would agree that putting too much credence into deep numbers analysis is counter-productive. Mark Twain’s quote that, “There are three kinds of lies. Lies, damned lies and statistics.”, comes to mind.

    However, over time analytics can indicate trends in employees. One who consistently performs below other employees in whatever KPIs are being measured, needs remedial action. Trends can indicate employees who have a propensity for too much, or too little, risk. And so on. . . .

    While it is no substitute for management, experience or intuition, there is a role for analytics.

    David Basri
    http://www.pointent.com

    Reply
  2. Todd says:
    February 7, 2014 at 4:35 pm

    You assertion that “you manage what you measure” maybe accurate in the extreme of over measuring and producing an avalanche of data that hide the reality of a situation but “you can’t manage what you don’t measure” seems to be a bigger problem with small businesses.

    Reply
  3. Joel Fay says:
    February 15, 2014 at 8:39 am

    Yes. The quantitative stuff that’s easy to measure is often not the important qualitative stuff to measure.

    When you measure something in your business…you’ll probably get the behavior you expect, and then some…

    • Is the measurement of “sales time with customer” getting higher sales? Lower sales? Or, more sales of easier-to-sell stuff?
    • Is the measurement of “customer service time,” driving faster service, or more errors and irritated customers?
    • Is the measurement of ancillary sales creating an erosion of the core brand?
    • Is the measurement of errors, increasing the inspection costs of a process?
    • Is the measurement of an already low “bad debt” cost driving policies hurting customer relations?

    Measurement of stuff in your business can be good. Just be careful about what you measure, and how it’s implemented. Be sure to ask…

    • What’s the goal?
    • How much will it cost to measure it?
    • How will it help the customer and the sale?
    • And, what will be the unintended consequences?

    Reply
    • John F. Dini says:
      February 15, 2014 at 8:45 am

      Excellent response, Joel. Measuring the impact of measuring is a sensible first step. Too often we put in “controls” without sufficient thought to whether we will be controlling the right thing.

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

Employee “Rights” in the Workplace

Posted on January 26, 2014 by John F. Dini

The 14th Amendment to the Constitution of the United States, the “Due Process” amendment, is one of the most-litigated sections of that document. It is also the only one that specifically abrogates rights, broadly removing the right to vote or hold national office to those guilty of “participation in rebellion, or other crime.”

The due process language is better known for conveying rights to citizens. The key language in Section 1 is “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property…”

That language has been the basis of landmark Supreme Court decisions from Brown vs. Board of Education (1954 – the right for students of any race to have equal access to any public school), to Roe vs. Wade (1973 – legalizing abortion as part of a woman’s right to privacy), to Bush vs. Gore (2000 – requiring standardized vote counting between districts).

Roe vs. Wade was a landmark in constitutional law not only because of the decision on abortion, but also because the decision specifically enumerated  the “right to privacy.” I am not taking a position on the wisdom of the decision, that is too volatile for my concept of a business column. The modern approach to enshrining new rights, however, begins there.

Justice Byron R. White wrote a dissenting opinion on the decision. He said: “I find nothing in the language or history of the Constitution to support the Court’s judgment. The Court simply fashions and announces a new constitutional right…”

Since 1973, the concept of “rights” not specifically enumerated in the Constitution has become commonly accepted. The right to equal access for the handicapped is one example. The passage of the Affordable Care Act, while not specifically justified by constitutional argument, is based on the presumed right of people to access decent health care. Individuals routinely claim the right to be respected, even from strangers who have no basis for deciding.

Employee rights wordsEmployees have assumed a number of rights in the workplace over the last forty years. They have become so commonplace that few employers would dream of challenging them. How many typical employment policies from just a few years ago have become laughable today?

Rules against the use of company telephones for personal calls have been eradicated with BYOD (Bring Your Own Device). Except for secure worksites I doubt anyone can imagine a business that successfully prohibits employees from personal communications during working hours.

A mandatory physician note to justify any routine absence seems pretty heavy-handed today. We accept the employee’s right to personally determine whether he or she feels well enough to work.

Workers have the right to a safe workplace. That seems logical, and few would argue it, but it didn’t exist forty years ago. I tell younger owners stories of the jobs I did (before OSHA) that they think should have landed my ex-employers in jail for the obvious physical dangers involved.

Employees’ have the right to a workplace free of harassment or discrimination. Watching a few episodes of Mad Men illustrates the pre-EEOC environment fairly well.

There are many others. The right to do work that is meaningful and enjoyable. The right to use company technology to maintain personal networks. (Yes, still being argued in many businesses, but they are losing.) The right to recognition for doing a job well. The right to clear warnings and remedial plans before being terminated.

Small business owners justifiably complain about the increasing costs of compliance with employee rights in the workplace, but most of what we accept as a requirement of being a good employer today isn’t mandated by government rules. It’s driven by competition. What kind of employees would you have if your business was unsafe, uncaring and unreasonable?

My new book, Hunting in a Farmer’s World: Celebrating the Mind of an  Entrepreneur, is now available in paperback, hardcover and Kindle. It is an ownership book, not a management book. Please click on the link above to see what business owners think of it.

Posted in Leadership, Management | Tagged , , , , , , | Leave a comment

Leave a Reply

Your email address will not be published. Required fields are marked *

The Tyranny of The Bad Customer

Posted on January 19, 2014 by John F. Dini

“The customer is always right,” or at least that’s what most business owners profess to their employees. We post it for all to see. “Customer satisfaction is job one.” “Our boss is the customer.” The most important person in our business is…you!”

But we all know it isn’t true. Sometimes a customer is unreasonable, dishonest, or simply just wrong. A small manufacturer we work with recently had one of his top five customers call with a request. “I’ve collected a bunch of your stuff over the last two years that we broke, or our customer broke and returned, or that we ordered but just didn’t sell. I’m going to pack it all up badly and send it back. You can make a claim to UPS for shipping damages, and give me replacement product for free.”

That customer was just plain dishonest. (The manufacturer declined the opportunity, although it took some agonizing before he made the decision.)

In another recent case, the customer was simply unreasonable. He called to express his dissatisfaction. The business owner first offered to remake his product, then to replace it with another, then to refund all the customer’s money. The customer refused any solution, but promised to take to the online rating sites to tell everyone how unhappy he was.

Common wisdom says that a satisfied customer will tell five people about his experience, while an unhappy customer will tell twenty. The numbers vary, but the point is people with a gripe are much more motivated to let others know about it. In the Internet, the number of people who may see that complaint is infinite.

What if the gripe isn’t valid? A recent court decision said that Yelp! should reveal the identities of anonymous detractors, since the owner of one business being slammed by 7 people (all using pseudonyms) couldn’t even tell if they were really his customers. Yelp! is appealing the decision, based upon a First Amendment protection of free and anonymous speech.

cyberbullyOne survey showed that businesses could expect a 4-star Yelp! rating to result in 9% less new business compared to 5-star competitors. This and other studies showing the importance of online presence cause may retailers I know to live in fear. They check Yelp!, UrbanSpoon, AngiesList, TripAdvisor, or other rating sites constantly, terrified that one unhappy buyer (whom they might not know about and can’t identify), will torpedo their cherished score.

My book on selling small companies, 11 Things You Absolutely Need to Know About Selling Your Business, has generally good ratings on Amazon. Seventy-five percent of the reviewers give it five stars, the rest giving four with one exception. He gave it two stars almost three years ago, and said he was being charitable (yeah…thanks). What makes me nuts is that his review always seems to come up first, and some people check it as helpful. I have no defense or ability to respond.

Anecdotally, competitors are using consumer feedback sites to damage reputations, customers are threatening to go to the web if their demands aren’t met, and some businesses are posting raves about their own company to inflate ratings. Yet, “I know it’s true because I read it on the Internet” still seems to be the standard for many consumers’ verification.

Have you been subjected to a rating site bully? Please share your story.

My new book, Hunting in a Farmer’s World: Celebrating the Mind of an  Entrepreneur, is now available on Amazon in paperback, hardcover and Kindle. It is an ownership book, not a management book. Illustrated with the stories of real entrepreneurs who faced challenges that apply to us all, it recognizes why small business owners are different from those who work for them.

Posted in Entrepreneurship, Marketing and Sales | Tagged , , , , , , | 1 Comment

One Response to The Tyranny of The Bad Customer

  1. Douglas J. Shumway says:
    January 27, 2014 at 5:59 pm

    This is a great article and absolutely accurate! I represent a number of small to medium business owners and have owned businesses for many years and I find the credibility associated with online ratings to be quite shocking. As the owner of a law firm I continually stress about having a client get angry about a result in court one day and write a nasty online review the next, especially on a site that doesn’t allow users to delete reviews.

    I have one client in particular that has had to reinvent and re-brand his business a few times because of online reviews and another client that was the victim of a consumer complaint site and is spending thousands of dollars trying to resolve the claims, most of which are wholly unfounded. Yet another client had the ex-husband of a girl he went on a few dates with post that he was a pedophile and claim that his business utilized fraudulent practices and was being investigated. Sadly, those posts will probably never come down because no one wants to spend thousands of dollars suing someone who will fight a silly fight and declare bankruptcy at the end of it all. Unfortunately for one of my client’s ex-employees, he is willing to spend any amount of money to get her to remove comments she made online after he fired her.

    I would be surprised if employees or employers have analyzed the potential liability associated with posts and responses, or really any content they put online about another person. It is my opinion that most businesses should have new-employee trainings about this topic so as to avoid future problems.

    Business owners certainly do not often consider the impact online reviews can have on the sale of their businesses. Buyers can decrease the purchase price substantially if they have to fight bad reviews because getting enough good reviews to offset one bad review is time consuming and costly. Whether or not the review actually impacts the business is irrelevant in negotiations because a seller can’t really prove otherwise.

    Something new that is happening in the law is the use of reps and warranties associated with goodwill and how future reviews impact present covenants. We will be seeing a lot of litigation in the future over poorly written or understood reps and warranties in purchase agreements.

    Great article John!

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

Employee Retention: From Thirty Years to Two

Posted on January 12, 2014 by John F. Dini

The United States has never been known for permanent employment. The flexibility of our job market, the ability of employers to hire the employees need and fire those they don’t, has always been considered by economists to be a core attribute of our competitiveness in global markets.

But today, the shoe is on the other foot. The Greatest Generation, those who fought in World War II, were the last group to seek lifetime security with one employer. The last of the Silent Generation (1925-1945) have moved into retirement, and the Boomers are beginning to follow them in droves. Today’s workforce expects regular advancement and career opportunities, but those are no longer guarantees of long-term loyalty to their employers.

Generation X is moving into management and executive roles. Advancement for competent GenXers is almost guaranteed, since there is only one of them for every retiring Boomer. The Millennials (1980-2000), are currently one-third of all active workers, and by 2020 will comprise half of the employees in the country.

Any business owner has learned to look at resumes in a new light. Those who are still seeking long (5 years or more) tenure in employment histories are probably hiring older workers. A typical 30 year-old’s application today may list a half dozen prior positions. If they are talented, their previous terminations were likely voluntary as they moved into jobs that paid more, or had some feature that they found interesting.

But the positions we fill, both white and blue collar, have become more complex, require more training, and thus have a longer payback period for training costs. Technology makes  jobs more demanding. Machine operators don’t just push a button or tighten a nut. They are expected to comprehend tolerances and quality measures. Administrative workers can’t get by on typing skills alone. They use software and telecommunications in a variety of overlapping ways.

multitaskingAn assistant handles my schedule. Ten years ago that meant telephoning and asking a client, or their assistant, to coordinate an open date. Now she communicates with each client according to their preferences. Some still want to be called at the office. Others prefer contact via their mobile phone, email or text message. Calendar requests must consider the type of scheduling software they use. Some are multi-modal, preferring an initial email inquiry, with dates and times confirmed by electronic meeting requests and reminders via text message.

When it takes a year to reach a level of efficiency in a job, how do you invest in an employee whom you only can expect to stick around for two or three years? The jobs can’t be dumbed down; we need smart folks to handle them. The Great Recession, which made a steady position a bit more attractive, is over. Talented workers can be expected to resume their migratory employment styles.

Small employers are stuck in a paradigm that doesn’t match the market. There is no point in dangling a promise of steady employment when our prospects aren’t attracted by that carrot. Just as technology has flipped the information curve in sales (see my friend Jim Blasingame’s The Age of the Customer), the ability to seek, apply for and even interview for a new job online (perhaps even from your office) is changing the dynamics of recruiting and retention.

What do you do to recoup your investment in training? Have you accelerated ramp-up times or changed your training regimen? Are you adjusting your expectations for employee longevity? Do you still come in every day with the fantasy that all your employees will be there forever?

Picture Credit

My new book, Hunting in a Farmer’s World: Celebrating the Mind of an  Entrepreneur, is now available on Amazon in paperback, hardcover and Kindle. It is an ownership book, not a management book, and is illustrated with the stories of real entrepreneurs who faced challenges that apply to us all.

 

 

Posted in Management | Tagged , , , , , , | 2 Comments

2 Responses to Employee Retention: From Thirty Years to Two

  1. cathy locke says:
    January 12, 2014 at 11:48 am

    John,
    Thanks for the article, I am a “baby boomer” and agree totally! I was laid off after 6.5 years and after a year of being a ” you are too qualified for the position”, I decided to do something I could enjoy, and taught myself how to become a wholesale/retail Chocolatier! I have 4 years in the “business” and am finally growing and have learned a lot the hard way and I am more unique and happy. I do have 2 part time assistants that I feel will work,learn,grow with my company…but nothing is permanent so each day is a new door that I can open and enjoy the challenge. Thanks again!
    Cathy

    Reply
  2. Zbig Skiba says:
    January 24, 2014 at 5:13 pm

    Good blog, John. Per studies, money is well down the list of reasons for employee retention. If I’m not mistaken the employees relationship with their direct manager is #1, followed by other factors such as company culture, ability to learn, their passion for the company mission, etc. So retention boils down to doing some tough work around making your workplace an appealing place to come every day, rather a place to dread. That’s not as easy as it sounds, for a small business person who focuses on meeting his payroll.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

2014 Outlook: Are We There Yet?

Posted on January 5, 2014 by John F. Dini

fdr inaugural“The only thing we have to fear is fear itself.” Franklin Roosevelt’s inaugural address on March 4, 1933 was an early recognition of the power of consumer confidence in bolstering our economy. In 1933 The US GDP was falling to about $57 billion, the low point of the Great Depression and about three-tenths of one percent of today’s economy. Unemployment would hit 25% that year. Roosevelt recognized that people had to believe that things would get better before it could actually happen.

Welcome to 2014, where the economy is showing plenty of life signs, but no one seems to believe that things will get better. According to the NFIB, small business optimism continues to decline, and the Gallup consumer confidence index is stuck at the levels of Spring, 2009, when the stock market and housing were collapsing, banks were closing, and the U-6 unemployment (which includes people who give up looking for work, and those employed part-time only because they can’t find a full time job) hit 16%.

Readers regularly refer to my post “Planning for the Strategic Triple Threat” in January of 2009 for it’s accuracy in predicting a deep recession, a slow recovery and weak growth afterwards. It wasn’t particularly difficult to look at the statistics and figure out that we had a big problem that would take some time to fix. The weak growth part of the prognostication is now going into its fourth year, and there are a few more of the same in front of us.

Are small businesses and consumers merely beaten down by the past 5 years, or do they smell a problem that the government and media are trying to deny? There are plenty of arguments for both views.

Housing sales have recovered, but the foreclosure Realtors whom I talk to still suspect Freddie Mac and Fannie Mae of massive inventory hold-backs to shore up the market. Those two entities have gone from quasi-government lenders of last resort to an arm of the US Treasury and the entire mortgage market for the country. From a political viewpoint, they can mightily influence the housing numbers in any direction they choose.

The official rate Unemployment is 7%, still the highest in 20 years, with the U-6 at 13.2%. The 7% number excludes anyone who worked even one hour in the previous month. Over the last 12 months, about 25% of all “new” jobs were in retail and hospitality. So the way the US Bureau of Labor Statistics counts the U-3 (official) rate, two 20 hour-a-week employees equal double the employment of one full-time worker.

The stock market had a banner year, but some analysts are pointing to the effect of Quantitative Easing on corporate profits. Banks are getting almost-free money to lend at very low rates. Unfortunately, that cheap money doesn’t seem to be widely available for consumers or small business. One exception is Sallie Mae funded student loans, which are up 50% ( a half trillion dollars- almost the size of the whole government stimulus bill) since 2008. It appears that a lot of unemployed college students are living on money borrowed  from the government.

As I pointed out a few weeks ago, the retiring Boomers are spending less, and the Millennials aren’t consuming yet (unless they can buy stuff with student loans.) No consumer-led surge in the economy will come this year.

There is undeniably good news. The housing market has clearly stabilized, we are closer to energy independence than ever before, and China’s reduced appetite for commodities is relieving some of the price pressure on raw materials. Europe seems to have reconciled to the fact that at least one country will eventually default, and it probably won’t bring down the whole EU.

On the other hand, the President’s miserable approval rating (40%) shines only in comparison to Congress (19%). A weak budget compromise doesn’t portend a new era of cooperation in Washington. The impact of ending extended unemployment benefits, Obamacare taxes and “The Tapering” of QE3 (4? 5? whatever) remain to be seen, but will clearly not be contributing to economic growth.

Fear itself isn’t holding us back. The overriding issue is that we have become shockingly aware of how little we really know, or what it means. “The banks are sound.” “No one will be forced to give up their insurance.” “More people are employed than ever before.”  “Taxpayers will make a profit on their GM investment.” “The check is in the mail.”

We’ve always known that we don’t know what we don’t know. The problem has become that what we think we know, we now know may not be true. If you had no windows in your house, how would you dress for today’s weather? Yesterday it was 70 degrees in South Texas. Tonight it will be in the 20’s. If my only information about the weather was from someone who wanted to sell me a pair of shorts, I could be in big trouble when I go outside.We’ve come to realize that all of our economic information, whether from elected officials or mass media journalists, comes from someone who wants to sell us something.

No, we are not there yet. Growth will continue to be anemic overall in 2014, although the numbers will be skewed by areas of prosperity (read fossil fuels). A bigger issue is that we’ve become a nation of skeptics, and skeptics rarely plunge into risky activities with unbridled enthusiasm. They have to believe that things will get better. Right now, we don’t believe.

 

My new book, Hunting in a Farmer’s World: Celebrating the Mind of an  Entrepreneur, is now available on Amazon in paperback, hardcover and Kindle. It is an ownership book, not a management book, and is illustrated with the stories of real entrepreneurs who faced challenges that apply to us all.

Posted in Thoughts and Opinions | Tagged , , , , , , , , | Leave a comment

Leave a Reply

Your email address will not be published. Required fields are marked *