Tag Archives: metrics

PMP Up Your Client Development

If you are a lawyer or CPA–or know one–chances are high that you are very familiar with the age-old pattern of billable professionals doing the work that is on their desks, then wondering why not enough new work is coming into the firm. Or, the enlightened professional  realizes that, while work is still coming in, the client quality is not what would be preferred. In order to have a book of business that is challenging, rewarding, and constant requires time consistently invested in client development. Client development, while generally discussed as a firm-wide initiative, is a very individualized effort when most successful.

When I am advising my professional services clients, I automatically ask whether the partners, managers, associates, consultants, architects, engineers, etc have developed a personal marketing plan (PMP). The PMP is the foundation of client development. Principally, a well-executed PMP allows the practitioner to develop a clientele that is fulfilling to serve, makes work interesting, and motivating through increased compensation.

Your PMP Components:

  1.  Definition of success, backed up with objectives and tactics
  2.  Well-articulated target market with strategies to create market share
  3.  Thought leadership plan to build credibility and referability
  4. Client retention process

Conduct Personal Due Diligence

Tracy Crevar Warren always asks her clients to begin the PMP process by first taking stock of where they are currently. She finds that many are already engaging in a number of successful practice-growth initiatives without being aware of it. By asking the questions below, she helps CPAs think about their baseline.

  • Do you have a clear focus for your practice? 
  • What does success look like? 
  • What do you want to be known for in the industry? 
  • What gaps can you fill in the industry?

Having answered these questions to your satisfaction, you may then begin the planning process. Success is relative to the individual, but its definition should answer the question, “if we were sitting here three (or five) years from now, what would need to have happened for you to feel successful?” Being able to envision a favorable outcome fuels the creative process of putting together strategies and tactics to arrive at the desired destination. Set goals that are SMART — Specific, Measurable, Achievable, Realistic and Time-sensitive.

The PMP must, at its core, define your target market. Think about the characteristics of your best clients. How can you get more new clients similar to them?  Who else is going after your prospects? How are they doing client development, and how can they be beaten? Crevar recommends storytelling to demonstrate your competitive advantages. 

People will be more likely to select you instead of the competition if you seem more credible. Thought leadership is established through cultivating the respect of your peers, clients and prospects by sharing knowledge. Whether your sharing is done through writing, public speaking, or service, it is important that you have a way to differentiate yourself from the competition by being the one whose values and knowledge resonate the strongest with the target audience. If no one has heard of you, that won’t happen.

A focus on client service, evidenced by specifics in how you make sure you are providing value, is the best way to retain clients. Retention means you don’t have to secure as many new clients each year to replace those who churned because they did not feel valued. Educational workshops, personal visits for which you bill no time, taking an interest in the personal and community lives of clients are all ways to demonstrate your care.

Plan, But Do!

Simply writing down what you intend to do is only a first step. The follow-through is your trump card that will allow you to win market share and enjoy greater personal and professional success.

 

Due Diligence Lip Service

“Culture isn’t just one aspect of the game. It is the game.”                          

 –   Lou Gerstner, former IBM chairman & CEO

Pritchett conducted a study of 135 executives from public and private companies and found that, on a 10 point scale, cultural due diligence rated a mean importance factor of  7.45. Privately held companies and private equity firms generally rated the importance higher than public companies. Yet, the same population rated their organizations’ success in blending cultures as only a 5.62. What does this mean? Have you ever heard the phrase “lip service?” It is one thing to acknowledge the importance, but something altogether difference to act in a way that supports that belief.

The study authors go on to note that, while culture is perceived as a key factor in merger success, there is not a consistent approach to measuring effectiveness, let alone the components that comprise it. Slightly less than half (49%) of organizations make an effort to measure. Privately held mid-cap companies and private equity companies set the pace in this arena. Non-profits and publicly-held large cap companies make far less effort to measure effectiveness post-merger or acquisition. 

Given, again, the relatively high value placed on the importance of culture to integrating two companies, it is dismaying that culture is not normally a part of the due diligence process. Of the executives surveyed, 4% say their teams ask specific questions about culture during vetting. Similarly, only 5% attempt to assess compatibility through some standardized means, with less than half of those administered by an objective outsider.  

It was observed that, when assessment is attempted, it tends towards subjective intuitions rather than a strategic metric. Furthermore, HR is excluded from the cultural discussion 94% of the time. On a high note, organizations that consider themselves savvy with regards to cultural due diligence perform assessments 70% of the time. 

While the results for pre-merger analysis and process are not good, those for post-merger are dismal by comparison. Only 21% of organizations surveyed have an established, repeatable process that is used consistently to facilitate seamless blending of organizations. 

The broad findings of the study were:

  1. Culture should be a more strategic consideration in the merger process. It deserves far more weight in the initial targeting of potential acquisitions or merger partners.
  2. Due diligence should scrutinize cultural aspects of the deal with the same discipline given to financial and legal issues. This simply cannot be done via a traditional culture gap analysis or compatibility survey. 
  3. Culture integration should be driven from the CEO/President level. This initiative cannot be delegated effectively. The architecture of culture strategy, plus the critical first steps of execution, belong to the leader.
  4. Organizations should be more astute in crafting their merger communications relating to cultural issues. Both the substance and timing of these messages are crucial. Management needs to be fine-tuned in managing people’s expectations, all the while shaping workforce behavior in the desired cultural direction.

 

Use a Telescope, Binoculars, and a Magnifying Glass

A telescope, binoculars, and a magnifying glass…all are a form of optics that each help the eyes of the viewer to zoom in on something hard to see. What is the key differentiation between each? How large is the object you want to see, and how far off? If, for instance, one wanted to look at a molecule, a microscope would be preferred to any of the three, even over the magnifying glass. However, if the intricacies of a solar system were of interest, a magnifying glass would be of no real use. 

Whether your company is in start-up mode, or you are trying to re-energize it for growth, one must know what is sought after, how to view it through the right lens, study it, and develop a plan as to how to do it. Boldly, I would say that any company in existence needs to approach its goal setting and performance measurement using tools that are scaled to the need appropriately. Peter Cohan, in an article published for Inc. online yesterday, advances this argument persuasively. He argues that the mission, long-term goal (BHAG in the vernacular of Jim Collins in Good to Great), and short-term goals that feed the other two are matters of scope and perspective, but that all are necessary and important:

1. Mission:What is the enduring purpose of the venture?

To answer this, ask yourself what problem matters most to your venture and why you are willing to go years with little pay or sleep to solve it.

Charlie Javice is co-founder and CEO of PoverUp, a social network for university students to get involved in social enterprises. As Javice told me, “One of the reasons I started PoverUp was that in the summer of 2008, I volunteered in a border refugee village in Thailand. That’s where I realized that a little money (I bought 50 donuts for $1) could go a long way to helping poor people start businesses that would lift them out of poverty.”

2. Long-term goal:What will this company look like in five years?

The answer to this question is of primary importance to a start-up’s investors who want a return on their capital– by getting acquired or going public.

Evernote CEO, Phil Libin, told me in earlier this year after raising $70 million to add to storage service provider that his goal was to build a 100-year-old public company.  As Libin said, “I think that Evernote as a publicly traded company could be worth $10 billion, $100 billion or more.” He guessed that the IPO would happen in 2013, when Evernote got big enough, but he wanted the IPO not to disrupt Evernote’s strategy or how the company works.

3. Short-term goal: What frugal experiments must we make to reach our long-term goal?

If the mission and the long-term goal are the 1% of the inspiration needed to build a successful venture, the short-term goals are the 99% perspiration. Create a series of real options. I mean that you should make small, inexpensive bets–a win means that the venture can go on to the next short-term goal; a loss means a chance to learn what went wrong and do it better the next time.

BrewDog’s co-founder James Watt set five short-term goals at his craft beer maker’s outset:

  1. Find something to do after the co-founders quit their corporate jobs.
  2. Decide whether that should be crafting beer.
  3. Create buzz among influential beer bloggers.
  4. Get a distributor in the country where they had created buzz.
  5. Convince a bank to loan money to build a facility to satisfy customer demand.

Learn from these innovative business owners and go create your own “optics” for success. Develop the ability to simultaneously think about what execution matters today, what you want the organization to become in the next few years, and how the world could be improved by your contribution over a lifetime. Manage based on these guiding objectives and you will increase your likelihood of success manifold!

What Can EQ Do For You?

Whether your executive team is trying to evaluate cultural fit, develop a post-merger integration strategy, or simply run a business, emotional intelligence is the key to decision making.  Some proof of the benefits of superior emotional intelligence:

1. The US Air Force used the EQ-I to select recruiters (the Air Force’s front-line HR
personnel) and found that the most successful recruiters scored significantly higher in
the emotional intelligence competencies of Assertiveness, Empathy, Happiness, and
Emotional Self Awareness. The Air Force also found that by using emotional
intelligence to select recruiters, they increased their ability to predict successful
recruiters by nearly three-fold. The immediate gain was a saving of $3 million
annually. These gains resulted in the Government Accounting Office submitting a
report to Congress, which led to a request that the Secretary of Defense order all
branches of the armed forces to adopt this procedure in recruitment and selection.
(The GAO report is titled, “Military Recruiting: The Department of Defense Could
Improve Its Recruiter Selection and Incentive Systems,” and it was submitted to
Congress January 30, 1998. Richard Handley and Reuven Bar-On provided this
information.)
2. Experienced partners in a multinational consulting firm were assessed on the EI
competencies plus three others. Partners who scored above the median on 9 or more
of the 20 competencies delivered $1.2 million more profit from their accounts than
did other partners – a 139 percent incremental gain (Boyatzis, 1999).
3. An analysis of more than 300 top-level executives from fifteen global companies
showed that six emotional competencies distinguished stars from the average:
Influence, Team Leadership, Organizational Awareness, self-confidence,
Achievement Drive, and Leadership (Spencer, L. M., Jr., 1997).
4. In jobs of medium complexity (sales clerks, mechanics), a top performer is 12 times
more productive than those at the bottom and 85 percent more productive than an
average performer. In the most complex jobs (insurance salespeople, account
managers), a top performer is 127 percent more productive than an average performer
(Hunter, Schmidt, & Judiesch, 1990). Competency research in over 200 companies
and organizations worldwide suggests that about one-third of this difference is due to
technical skill and cognitive ability while two-thirds is due to emotional competence
(Goleman, 1998). (In top leadership positions, over four-fifths of the difference is
due to emotional competence.)
5. At L’Oreal, sales agents selected on the basis of certain emotional competencies
significantly outsold salespeople selected using the company’s old selection
procedure. On an annual basis, salespeople selected on the basis of emotional
competence sold $91,370 more than other salespeople did, for a net revenue increase
of $2,558,360. Salespeople selected on the basis of emotional competence also had
63% less turnover during the first year than those selected in the typical way (Spencer
& Spencer, 1993; Spencer, McClelland, & Kelner, 1997).
6. In a national insurance company, insurance sales agents who were weak in emotional
competencies such as self-confidence, initiative, and empathy sold policies with an
average premium of $54,000. Those who were very strong in at least 5 of 8 key
emotional competencies sold policies worth $114,000 (Hay/McBer Research and
Innovation Group, 1997).
7. In a large beverage firm, using standard methods to hire division presidents, 50% left
within two years, mostly because of poor performance. When they started selecting
based on emotional competencies such as initiative, self-confidence, and leadership,
only 6% left in two years. Furthermore, the executives selected based on emotional
competence were far more likely to perform in the top third based on salary bonuses
for performance of the divisions they led: 87% were in the top third. In addition,
division leaders with these competencies outperformed their targets by 15 to 20
percent. Those who lacked them under-performed by almost 20% (McClelland,
1999).
8. Research by the Center for Creative Leadership has found that the primary causes of
derailment in executives involve deficits in emotional competence. The three primary
ones are difficulty in handling change, not being able to work well in a team, and
poor interpersonal relations.
9. After supervisors in a manufacturing plant received training in emotional
competencies such as how to listen better and help employees resolve problems on
their own, lost-time accidents were reduced by 50 percent, formal grievances were
reduced from an average of 15 per year to 3 per year, and the plant exceeded
productivity goals by $250,000 (Pesuric & Byham, 1996). In another manufacturing
plant where supervisors received similar training, production increased 17 percent.
There was no such increase in production for a group of matched supervisors who
were not trained (Porras & Anderson, 1981).
10. One of the foundations of emotional competence — accurate self-assessment — was
associated with superior performance among several hundred managers from 12
different organizations (Boyatzis, 1982).
11. Another emotional competence, the ability to handle stress, was linked to success as a
store manager in a retail chain. The most successful store managers were those best
able to handle stress. Success was based on net profits, sales per square foot, sales
per employee, and per dollar inventory investment (Lusch & Serpkeuci, 1990).
12. Optimism is another emotional competence that leads to increased productivity. New
salesmen at Met Life who scored high on a test of “learned optimism” sold 37 percent
more life insurance in their first two years than pessimists (Seligman, 1990).
13. A study of 130 executives found that how well people handled their own emotions
determined how much people around them preferred to deal with them (Walter V.
Clarke Associates, 1997).
14. For sales reps at a computer company, those hired based on their emotional
competence were 90% more likely to finish their training than those hired on other
criteria (Hay/McBer Research and Innovation Group, 1997).
15. At a national furniture retailer, sales people hired based on emotional competence had
half the dropout rate during their first year (Hay/McBer Research and Innovation
Group, 1997).
16. For 515 senior executives analyzed by the search firm Egon Zehnder International,
those who were primarily strong in emotional intelligence were more likely to
succeed than those who were strongest in either relevant previous experience or IQ.
In other words, emotional intelligence was a better predictor of success than either
relevant previous experience or high IQ. More specifically, the executive was high in
emotional intelligence in 74 percent of the successes and only in 24 percent of the
failures. The study included executives in Latin America, Germany, and Japan, and
the results were almost identical in all three cultures.
17. The following description of a “star” performer reveals how several emotional
competencies (noted in italics) were critical in his success: Michael Iem worked at
Tandem Computers. Shortly after joining the company as a junior staff analyst, he
became aware of the market trend away from mainframe computers to networks that
linked workstations and personal computers (Service Orientation). Iem realized that
unless Tandem responded to the trend, its products would become obsolete (Initiative
and Innovation). He had to convince Tandem’s managers that their old emphasis on
mainframes was no longer appropriate (Influence) and then develop a system using
new technology (Leadership, Change Catalyst). He spent four years showing off his
new system to customers and company sales personnel before the new network
applications were fully accepted (Self-confidence, Self-Control, Achievement Drive)
(from Richman, L. S., “How to get ahead in America,” Fortune, May 16, 1994, pp.
46-54).
18. Financial advisors at American Express whose managers completed the Emotional
Competence training program were compared to an equal number whose managers
had not. During the year following training, the advisors of trained managers grew
their businesses by 18.1% compared to 16.2% for those whose managers were
untrained.
19. The most successful debt collectors in a large collection agency had an average goal
attainment of 163 percent over a three-month period. They were compared with a
group of collectors who achieved an average of only 80 percent over the same time
period. The most successful collectors scored significantly higher in the emotional
intelligence competencies of self-actualization, independence, and optimism. (Selfactualization
refers to a well-developed, inner knowledge of one’s own goals and a
sense of pride in one’s work.) (Bachman et al., 2000).

-Cary Cherniss, Ph.D., Rutgers University

What role does emotional intelligence (EQ) play in your organization’s management? How can it become more integral?

American Restaurants Struggle to Stay Alive

Back in the late 1980s, the Turnaround Management Association was birthed out of a research project conducted at the Kenan Institute of Private Enterprise at the University of North Carolina at Chapel Hill. As the lead researcher, I had the opportunity to personally pull together a bibliography of articles about businesses whose travails were significant enough to hit the national headlines in various business publications. From the research, we published a monograph and wrote articles about best practices that appeared in 46 national business periodicals in our first 18 months of existence as a trade association. As I and other involved with the Association moved on to other pursuits, TMA moved off campus, starting gaining momentum in chapter development, and now enjoys international members as well as domestic. One of the publications of TMA is the Journal of Corporate Renewal. The Journal‘s lead article for May discusses the struggle of restaurants in the United States to remain profitable.

Some interesting facts from the National Restaurant Association are cited:

  • Restaurants account for 4% of GDP
  • 10% of the U.S. workforce is employed in the restaurant industry
  • 50% of adults have worked in a restaurant
  • one-third of all workers had their first job in a restaurant
  • 48% of the average household’s food budget goes to restaurants (vs. 25% fifty years ago)

The bankruptcy filings of a number of restaurant chains since the recession began in 2008 is but one indicator of a model that is teetering on the brink of survival. The photo above is taken from a Food Network show entitled Restaurant Impossible, wherein Robert Irvine turns a restaurant around in 48 hours. The menu is revised, customer service issues are addressed, $10,000 of strategic remodeling is performed, the revenue and costs are examined for opportunity, and the restaurant owner is challenged to run the business at a profit going forward.

Macro trends in the recent few years towards buying more groceries or becoming value-conscious have definitely affected the top and bottom lines of many restaurant owners. Franchises, which account for about half of the restaurant revenues produced nationwide, have really taken it on the chin. Franchisees who own one or only a few stores have inadequate access to capital these days. Another big factor is the conflict of interest in most franchise agreements that are based on sales volume. The franchisor can implement discounting programs to increase traffic and sales volume, but the franchisee has less and less profit as a result of the agreements.

What can be done? Turnaround experts recommend a process of performing store-level profitability analysis, followed by benchmarking against peer stores. These analyses can highlight purchasing/inventory issues, training issues that are evidenced by waste, and theft/shrinkage that depletes the operator’s assets needed to produce a return.

There are many good consultants who can help a restaurant owner sort through the challenges and create a plan for growth and renewal.