Direction Magazine David A. Duryee January-February 2015
The Ten Biggest Things Moving CEOs Get Wrong
David A. Duryee
In my long association with the moving business, I have seen the following 10 leadership deficiencies crop up over and over again. It is human nature to put off unpleasant things, and if you are a second or third generation CEO it is likely that you are mimicking some behavior traits from your predecessor, which may or may not be the ideal way to manage a successful company.
At best, managing a moving business is challenging, but improving on these 10 items is going to go a long way towards making things easier, more fun, and your business more profitable.
1. Procrastinating on poor performance.
This is by far the biggest single shortcoming that I see. Marginal or poor performing employees are tolerated, sometimes for years, before action is finally taken. These employees are likely friends, and maybe even predate your involvement in the company. Worse, they may be family members. Five percent of your employees consistently exceed your expectations, 90 percent perform as expected, and five percent consistently under-perform that which is required of the position. Weed them out. Now. Do it no matter how nice they are, how long they've been with you, how old they are or who they are related to. If you’re worried about being called an unfeeling monster, don’t. The rest of your employees will say “What took you so long?” They resent doing their job well while others are allowed to slack off.
2. Procrastinating over cutting expenses.
When profits decline or losses occur the first inclination is to increase leads, improve closing ratios and sell more. “Times may be tough, but they are going to get better” is the plaintive cry. This is “Plan A” and it almost never works. Unfortunately, there is rarely a “Plan B.” When profits decline, go to Plan B and cut expenses immediately. I have yet to see a company (even a profitable and well-run company) that could not cut at least 10 percent of its overhead without much effort. Look at every dollar you are spending and make sure you absolutely have to spend it. If not, cut it. Don’t rely on Plan A.
3. Failure to understand and track Cash Flow.
Almost no one gets this right. You have Operating Cash Flow and Financing Cash Flow and it behooves you to know and understand exactly what make up these Cash Flow types and what the Cash Flow dynamics are in your business. When cash gets tight, the first inclination is to sell more and work a little harder. Unfortunately, this may be just the opposite of what you need to do. A lack of understanding of Cash Flow is virtually universal and usually has bad consequences. You can see your profits but where is your cash? You need to know where to look for it.
4. Failure to Plan.
Probably no more than five percent of all moving companies take the time to lay out a plan for the coming year. Your annual plan should include strategic objectives as well as a projected Income Statement, Balance Sheet, Cash Flow and financial ratios. I suspect that this failure to plan is primarily due to a lack of knowledge about how to do it. Or perhaps you feel that you are not really big enough to need a plan. There are plenty of resources available to assist you in how to establish a plan, and the smaller you are the more important it is. The bottom line is - fail to plan, plan to fail.
5. Failure to communicate.
If you think that you are a good communicator, answer the following questions. Do you make a point to thank at least one of your employees every day for the work they do? Do you have a formal program for recognizing important anniversaries or occasions of your employees? Do all of your employees receive at least an annual formal performance review? Do you have a formal procedure for soliciting your employee’s feelings about their workplace? Do you have a formal orientation and training program for all new hires? Have you discussed a career path with all of your employees? Do you have at least a monthly company-wide staff meeting that covers important topics and describes how the company is doing? If your answer is no to one or more of these questions, you have some work to do on your communications.
6. Inability to properly analyze your financial statements.
For most CEOs, financial statement analysis begins with looking at the revenue generated for the period and ends with looking at the amount of the net profit. This myopic focus on the “numbers” may or may not produce anything meaningful and may, in fact, lead you to the wrong conclusion. You need to know what “financial relationships” to calculate and what they measure. What you make in net profit is not as important as what it is in relationship to something else. Important ratios include the Current Ratio, which measures liquidity and working capital. It is Current Assets divided by Current Liabilities and you should shoot for at least 2.00. One measurement of profitability is the Operating Profit Margin, which is Operating Profit divided by Revenue. A standard for this ratio is 9 percent. Without working capital and sufficient profitability you are unlikely to be successful. Learn the 12 key financial ratios, calculate them every month and make sure your leadership team understands them as well.
7. Failure to diversify.
“Granddad started the company in ought nine as a mover of household goods, and that’s what we do.” “We can’t get into office moves because we don’t know how to do that.” The result of this type of thinking is that the company digs itself a big hole by April, makes money for four months, then loses most of it in the fourth quarter. A strategic emphasis on diversification would cure this of course, but that is unlikely to happen because granddad would not approve.
8. Failure to share important information.
“Our information is strictly secret. If the employees ever found out how much we make, they would all want a raise.” Maybe so, but in 35-plus years of observation I have found that the most successful companies are the ones who share the most. This is true without exception. Those of you who are devoted to secrecy are unlikely to be swayed by my observations, and those of you who share pretty much all financial information already know the benefits of doing so. For the rest of you, I urge you to read a book entitled “The Great Game of Business” by Jack Stack for enlightening information on this topic. The bottom line is––share and succeed.
9. Failure to focus.
Successful business owners have a laser beam focus on goals and objectives and measure them constantly. All key managers are knowledgeable about what needs to happen and are held accountable for results, or else. This is good leadership, and good employees expect to be held accountable. If you are not holding weekly meetings with your leadership team to discuss progress on important goals, you should be. What gets measured gets managed, and what gets managed gets fixed. This is not complicated.
10. Failure to be consistent.
Successful companies have core values and they are consistently followed. This acts as a stabilizing force without which the internal workings of a company can be easily disrupted when faced with challenges. Consistency of purpose provides a firmness of character and allows a company to successfully meet the difficult decisions that will inevitably occur in the ordinary course of business. As important as this is, I have yet to walk into a company and have the employees know and understand the core values. Post yours in the foyer, in the lunchroom, in the conference room and in the warehouse. Cover this in staff meetings. Make sure your employees know what you stand for and how they are expected to conduct themselves.
So there you have it. The 10 biggest things CEOs get wrong. Rate yourself from one to 10 on each of these. If you don’t score 100, keep working until you do. Your company will be a lot more successful and you will have a lot more fun.