Author Archives: hippotential

How Successful Businesses Maintain Organizational Morale

 

 

Organizational morale builds quality products (and services). Employees who are well-paid, well-trained, and appreciated work harder than those who are merely trying to earn a living. Giving employees more and more responsibility as they develop skills and gain experience makes them feel wanted and valuable. training employees to do their jobs expertly teaches them the value of quality performance. Finally, rewarding an employee for continuing contributions to company profitability reinforces the company’s goals, mission, and objectives.

Some of the benefits to organizational morale include the following:

  • Employees are willing to work longer hours to ensure that a job is done correctly.
  • Customer service and sales are carried out with positive attitudes. As the company makes more money from these quick and repeat sales, the business can afford to hire the cream of the crop in employees. The appearance to anyone outside the operation is that of a well-oiled machine.
  • Rather than fending off mercenary plots and complaints all day long, management can plan for upcoming projects, ensuring the best use of employees’  talents.
  • Striving and bitter rivalries are easily ended when all employees are treated impartially and fairly.
  • Quality control is much easier to enforce with a group of hard-working, motivated workers than with uncaring employees who are simply filling a slot.

Training

Truly effective training and development programs make good employees out of average employees, and great employees out of good ones. When an employer takes the time and effort to teach employees how to perform their jobs better, employees usually respond with increased effort on the job.  Bonds between management and employees are created as an employee gains a greater sense of self worth. The employee begins to feel that his or her contribution to the overall business matters and is important.

Responsibility

Employees in successful companies have two types of responsibility–to their peers and to their bosses. Each is important to a smooth-running company. However, responsibility can prove an albatross around the neck of the employee who lacks the corresponding authority to make decisions. Good employers will therefore not only be creative in assigning work to employees, but also in providing the best possible environment for them–including adequate authority where appropriate–to help them succeed. Reporting to management helps employees feel they must do a good job and that someone is around who can help them if the going gets rough. Being accountable to peers in addition to bosses teaches employees to respect one another’s work and to learn how to work together to reach common goals.

Motivation and Reward

Bonus and incentive compensation programs are the rewards of excellent employee performance. Rather than threatening to discipline or even dismiss a problem employee, it is often better to motivate employees through encouragement. Fear of failing will not lead to successful work attitudes and performance–it will only lead to ultimate failure. On the other hand, building up an employee’s confidence has proven much more effective than criticism in raising performance levels. 

Once an employee has performed at or beyond the established level, successful management teams find a way to reward the employee. Not rewarding someone who has done everything requested and more makes the employee wonder a.) whether he/she has indeed done a good job, b.) whether the supervisor is a good enough manager to recognize the employee’s contributions, and c.) whether a “change of scenery” may be preferable. However, bonuses and incentives must reflect current and projected financial performance. A company experiencing financial loss must have a flexible plan to adjust employee compensation as necessary. 

A successful company becomes a self-perpetuating entity–the more successful it becomes, the more successful it can become. Executive teams who maintain high organizational morale and plan for growth will create positive cash flow from efficient operations. While your business may not be in a position to always do what larger businesses do, remember to run your organization in a professional manner any you will meet with greater success!

 

So, you want to be a lawyer?

Our daughter just started at Campbell Law in Raleigh, NC. Even though the case reading load is tough, she loves it! She’s not worried about a job when she gets out because she’s had great internships before she started. Additionally, since my consulting firm advises law firms, we feel good about her chances of working for a boutique group when she gets out.

Boomer Entrepreneurs Can’t Retire

It depends on what one means by “retire.” Stepping back is possible for many if they and their advisors can empower capable lieutenants. It’s important to differentiate between “owner” and “manager” in the second generation of leadership, as the boomerpreneur may choose to keep the business as an asset to be included in estate planning.

drdianehamilton's avatarDr. Diane Hamilton's Blog

One of the things entrepreneurs plan for is the time that they will eventually sell their company.  Currently many older business owners have found it difficult to reap the anticipated rewards of retirement. As the author of the Entrepreneur Exit Strategies for your Business pointed out, “it’s not enough to build a business worth a fortune; you have to make sure you have an exit strategy, a way to get the money back out.” If businesses were once very successful, the economy may have impacted their current worth.  Even with what may once have been considered a strong exit strategy, plans may have been affected by the economic downturn.

Boomers trying to sell their businesses are receiving offers that are not enough to finance their retirement.  In the Wall Street Journal article The Economy Stole My Retirement, it noted that one small business owner expected to sell for $2…

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Revenue, Cost & Capital in Your Business

Positive cash flow is desirable for everyone in business. It is achieved universally through generating substantial revenues, controlling costs, and structuring capital wisely. Some tips and techniques are shared below:

Generating Revenue

Successful businesses excel at making sales. You know the saying, “the rich get richer?” Well,the corollary is that those who have revenues get more revenues as a factor of customers wanting to be associated with a successful brand. One thought you should consider is to go after markets that are less susceptible to the uncertainties of interest rates and the economy. If you were a homebuilder (you’d be an industry famous for tracking closely with the economy), you would be wise, for example to pursue both upper-income retirees and “move-up” families. These two demographic groups tend to be less affected by economic turns  and have demonstrated a time-tested pattern of purchasing homes in most any economy. Knowing the segments of your market well enough to follow suit and service the buyers with money to spend will position your company to operate for maximum profitability.

Successful executive teams know that targeting buyers with focused offerings is key to penetrating your ideal market. Regardless your market dynamics, the goal is to increase volume. With higher volumes come higher velocity cash flows. This increased velocity creates the favorable setting for financing terms that suit your financial model. Yet, it is clear that profit margins must be maintained else increased velocity exacerbate losses.

Controlling Costs

The focus of controlling costs is to optimize expenses as investments–not eliminate them! Cost management evaluates not only the amplitude of the individual expense, but its impact on organizational performance. While the general principle is to control the growth of costs, there are strategic advantages to be gained from choosing to incur the right expense for the right reason at the right time. Another major shortcoming in the financial management of many companies is the effort to wring cost out of processes and retain all of the benefit of the exercise in the hands of a greedy few. Passing along savings to customers is a great way to build a customer base advocacy. Not all of the profits, mind you, …but enough to become even more competitive.

If your organization does not have a process to monitor and eliminate waste, it needs one! Sharing items like technology, administrative labor, equipment, and offices/desks is “low hanging fruit” in this area. Most resources do not need to be dedicated to one person or department because they cannot be utilized enough to justify the additional expense. Look at ways to speed up the delivery of your product/service to market–scheduling and workflow management process improvements drive profits to the bottom line quickly, as well as freeing up needed cash flow.

Monitor invoices–make sure that payments are for things ordered  and received by specification and terms. Evaluate reporting systems. Dashboard feedback on expenses, margins, and cash activity help executives manage rather than being managed.

Structuring Capital

Get a god fix on the financial capital structure of your business and how it compares to competitors. Doing so will drive planning relative to debt capacity, valuation, growth, and many other categories. Taking the approach that debt is always a short-term tool and is to be repaid as soon as possible will increase a company’s capacity to take on debt when absolutely necessary. Think through cash reserves and how they speak loudly to others as to your management acumen and company viability.

When preparing pro-forma projections of anticipated cash flows, make sure that worst case scenarios are considered. Money on deposit is a precious commodity and those who have it are in a position of strength. Having products or services in development that can be brought to market quickly is an asset for those well-capitalized, a liability for those who are not.  Your unique debt to equity ratio should be stronger than your industry–and should reflect the commitment of the executive team to run the business according to thoughtful metrics and attention to details.

How Successful Businesses Create Positive Cash Flow

Successful companies generate positive cash flow through efficient operations and effective marketing. Generating revenue is not like raising funds for a charity–people will not offer you money simply because they agree with what you do. Businesses succeed when they are able to convince buyers that their products/services are superior to and of greater value than the offerings of other providers. Controlling costs is critical; make provisions for unavoidable cost variances and eliminate waste in areas where  costs–or at least overruns–can be avoided. Planning for adequate capital structure is also essential; debt-laden companies cannot achieve the same level of success as companies with enough equity. Being able to bring in sufficient revenues and preventing large amounts from being paid out will lead to positive cash flow.

Effective companies generate positive cash flow consistently. The business is streamlined continually to  narrowly defined core acutely focused on making sales, controlling costs, and structuring capital. Creating and maintaining positive cash flows is a continual goal of any business, and an ongoing reality in profitable ones. The exercise of staying profitable and successful requires more discipline than many executive teams are willing to enforce in their operations. For example, moving inventory in a timely manner is puzzle to many businesses that make products.; however, those who develop a formula for success in this area are well on their way to positive cash flows. Controlling costs, though, is not synonymous with eliminating costs. Eliminating costs in an arbitrary fashion can kill momentum and limit financial flexibility. Capital is a useful tool if its effects are controlled, and businesses able to avoid large debt loads are more consistently profitable.

While positive cash flow may seem like a lofty ideal to some teams, the investment and financial communities consider cash flow a distinguishing barometer of business stability. Companies with favorable cash flows can secure more favorable financing terms and receive more concessions from vendors and subcontract organizations. For example, businesses with positive cash flows can negotiate higher discounts when they are able to pay invoices early. Additionally, they can prepay materials and buy in volume for even steeper discounts. An enterprise that consistently demonstrates that it can cover more than its cost of doing business (as evidenced by positive net income) will rack up profits and retained earnings year after year and attract more customers, since buyers often feel that profitable companies are more likely to survive and meet their needs for the long run. Therefore, positive cash flow should be the goal of every employee in the business. 

One of the most important things to remember when incurring financial obligations that affect your cash flow is to stay within acceptable industry ratios. Most industries have trade organizations that publish benchmarking data to help representative companies do a better job of analyzing how they compare with norms. The analysis should not become an end unto itself, however. Use the data to have productive conversations with your CPA, banker, and investors. Unless you want a very short day in the sun, avoid reliance on debt. To remain financially competitive, choose capital financing sources wisely and do not burden your operations and marketing teams with a weight too heavy to bear.