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A free monthly newsletter about improving your
people, processes, sales and marketing, financial
performance…and other interesting stuff

October 2012

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The Relationship Between Productivity and Performance Measures

One of the areas that sharpen employees productivity is agreeing on clearly defined performance measures. I find there is often a hazy understanding on the part of a staff person of what is expected of them. Performance measures will bring crystal clear clarity for both business owner/manager and the employee. 

What is a performance measure?

Simply put, a  performance measure is an outcome that is measurable derived from the tasks the team member is responsible for.  These outcomes allow both manager and employee to know that they are meeting the requirements of the job. Frequent performance reviews certainly have their place while performance measures on the other hand, can help shorten this frequency to let you know that the particular job is being done according to your expectations and the requirement of the company as a whole. 

Many of the job descriptions I see often communicate a list of responsibilities. I like to use the following layout

Title of the position
Purpose of the position
Particular roles they will fulfil
Corresponding responsibilities to those roles 
Measures of performance in relation to the responsibilities
Approximate percentage of time to fulfil each role. 

Here is a brief example demonstrating the difference between a role, responsibility and related performance measure.

Budget and Cash flow forecasting
Review information and reports received from relevant personnel within your division to ensure actuals against budget, along with cash flow forecasts are accurate and up to date at all times
Performance Measures
Weekly cash flow report along with actuals against budget report to be emailed to the director by 5pm every Friday

This is a very brief and basic example but you get the picture. If you as the director are receiving these reports as outlined on the original position description, you know at least, that your team member is fulfilling this responsibility. 

Managers and business owners complain about their peoples lack of diligence and often this is merited BUT, when we have clear measures in place, it is a simple matter of taking the signed position description to the employee and saying 'we agreed on this, you signed it, it's not happening'. Much easier to work through it objectively when it's a signed document than the more subjective approach often taken.

For a position description containing the above elements click here

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 Financial Performance
Smoothing Out the Bumps : Cashflow

Good financial management is telling your money where to go, not wondering where it went.

Predicting the highs and lows of cash available at any given time is essential to any business.  A cashflow forecast provides much needed insight into the flow of cash (or the lack thereof) you are likely to experience over a given period of time. Many companies purely review their profit and loss reports on a weekly or monthly basis (some not even this frequently) and as long as there is money in the bank and the P&L shows a profit they are happy. P&L's are retrospective whereas cashflow forecasts are future focused and essentially a prediction of events likely to occur.

Normally covering the year ahead, the forecast can be broken down into quarters, months, weeks and even days (particularly when cashflow is tight).  The forecast should identify the amount and source of all income and expenditure passing through your accounts complete with an opening and closing balance. 

It is important to be realistic with your predicted income and expenditure and it can be helpful to use figures from the previous 12 month period, with any expected additional elements included. 

Some benefits
  • Assists in planning expenditure
  • Allows you to see where there are anticipated shortfalls. This in turn provides time to reduce costs, shift creditor payments and get on the front foot to retrieve debtors. It also provides an increase in sales focus to ensure negatives turn to positives from top line revenues.
  • Banks often require a cashflow forecast when you are trying to borrow funds or simply for the reviews they perform on your current business loans. Having accurate forecasts helps provide the banker with increased confidence, both in your ability to repay the loan and your ability to manage the finances of the business.
Case Study
I was employed as the General Manager for a company some years back and little did I know when I signed on the dotted line that I was in for a very steep learning curve. Soon after I started cash dried up (and it wasn't because of my wage I assure you). For approximately 12 months I managed cashflow and creditors on a daily basis running the forecasts as I mentioned above. It was one of the key things that saved the company. The owner of the company later had this to say..."In that time he guided and managed the day to day accounts of the company and helped bring the business out of a very deep and serious financial hole to ride a wave of success for another 3 years."
Whether rapid growth, decline or plateau, tight and consistent management of finances is essential, . 

A cashflow forecast is available for free here.

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Efficient Process 

Systems : Getting procedures from the manual to the shop floor

It is one thing to have nice looking procedure manuals lining your bookshelf accompanied by beautifully framed policy statements on your reception wall do we get them implemented from the shelf to the floor. Here's a few ideas.

  • Ensure that the person responsible for the particular process has the relevant procedures on hand either in hard copy or...
  • Develop a company intranet that makes them readily available in electronic format to all employees
  • Create videos, again available on the intranet for visual explanation on how to fulfil a particular procedure
  • Upon initial implementation and for ongoing reviews that procedures are being followed, having team members use the procedure document as a checklist to indicate they have fulfilled each step can give you a good indication that things are flowing as they should. Obviously honesty by the team member is the key in this process. Also having an area on the document for the person to note what isn't working or could be done better can be a good idea for further tweaks to the process.
  • Ensure management are responsible for the oversight and execution of the procedures with these responsibilities and corresponding performance measures documented in their position descriptions
  • Employ or assign a 'process champion'. See case study below
  • Measurements. Relate the performance of particular processes and procedures to your Key Performance Indicators. An example might be that one indicator is the time taken from a quote request to a proposal/quotation being sent to the customer. If you know that by following the stages of the process involved with the corresponding procedures for each stage, the time frame will be 3 days. If it blows out beyond this, the KPI record will alert you to this, enabling management to more quickly rectify the issue and also to find where the flow is breaking down
Case Study
A professional firms significant bottom line results, in a very short period of time, came primarily from focusing on their process efficiencies. One of the smart things they implemented was the appointment of a 'process champion'. Someone that was already on staff and that exhibited high attention to detail. One of their responsibilities was to ensure that the processes and procedures in place were actually implemented. They worked with the relevant team members in ensuring process was being followed, making the necessary tweaks and changes when the flow of process became obstructed. They then recorded the corresponding results onto the KPI chart for weekly evaluation with management. Their work typically followed this pattern:
  1. evaluate and measure 
  2. establish improvement goal
  3. make necessary changes to current processes, flow etc
  4. record and evaluate outcomes
  5. start at number 1 again

For related resources to do with this topic click here

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The Cellar Notes

Have you ever experienced a moment in life where everything seemed to stand still? This was one of those experiences.

Last summer I visited some vineyards in the Margaret River region of Western Australia. One of them was a stand out - Leeuwin Estate. 

I tasted through the list (I seem to like most wine that is made) and it was when I got to the Chardonnay that the world stopped. It wasn't because I drank the whole bottle (though I could easily have attempted it), but it was the particular wine. The Art Series Chardonnay. Priced at around the $90 mark, this wine consistently scores in the mid to high nineties out of one hundred. I've consumed lots of Chardonnay but this one blew me away. Known as the 'white grange of Australia', when you are celebrating your next special occasion (or even if you're not), give it a go. I doubt you'll be disappointed. And if you need help to drink it, I will make myself available!

On The Lighter Side

I mentioned to a client that I had recently become a grandfather at the ripe old age of 47. She then told me she was 41 and just had news that her daughter was expecting. As we compared notes she asked me, "so what's your granddaughters name?" [LONG SILENCE] 
I couldn't for the life of me, remember her name and at that stage she was already three months old. It came to me after about ten minutes. 

In case your wondering, her name is Mindee Kay. She's gorgeous and if you'd like to see a photo with my son and daughter-in-law you can click here.

In This Issue:
Ray Hodge is the Director of Ignite Business Consulting. He speaks and consults to businesses & organisations, a notable event being the Department of the Australian Prime Minister and Cabinet.

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"I have worked with Ray for the last 12 months to review the business processes and then monitor on a monthly basis. Ray’s ability to look at a micro level and then shift to a “helicopter” view is exceptional and been invaluable to me as a business owner. He is generous with his time and experience which regardless of whether you are small or large enterprise Ignite Business Consulting is an absolute necessity."
Joanne Brooks - Talent 2

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