I’ve been pleasantly surprised that I continue to get many calls for consulting help in these tougher economic times. A lot of the calls in the past 12 months have started out like this: “My sales are down, I haven’t been able to cut expenses as quickly as revenues have dropped and I’m starting to show red ink on the bottom line. What should I do?”
My first inclination is to tell them, “Start doing now all those things you should have been doing when times were good.”
Generally, I begin by asking a series of questions to learn more and then try to spell out a plan to get the business back on a profitable footing. Many of the areas that were ignored in the good times, and now in these tougher times, revolve around good human resource management. Let’s take a look at some of the things that you should be concentrating on in these more challenging times.
Reviewing your Team
First, people are the biggest expense item on the profit and loss statement. The average total expense of all of your people costs (payroll, taxes, benefits, etc.) is probably close to 60 percent of your total expenses. That includes the owner.
If your total people costs are higher than 60 percent, you have a problem. If they are less than 55 percent, you may be under compensating your team.
With sales and profit revenues shrinking, this is the perfect time to evaluate all of your employees to maximize their effectiveness – and to eliminate the weakest one(s).
Your challenge as a business owner/manager is to always be culling out the weakest people and working hard to strengthen everyone else.
Unfortunately, most owners/managers are slow to respond to downturns in business. Everyone assumes that things will bottom out soon and start getting better. But waiting for the hole to get deeper only makes it harder to dig out of it. Review your team today. Identify your weakest link and, if you can’t strengthen it, cut it out of there!
Being the Best
For years I have stated in this column that there are five important things you should try to do better than anyone else in the area of Human Resource Management. Learn to do these five things the best and you will enhance your opportunity of being the best.
Hire the Best. Take time in the hiring process to find the very best candidates possible. In these tough times, there are good people looking for work. Have a good system to review all of the resumés and applications. Be a great interviewer. Have one or two other people at your business interview the candidates as well. Then compare notes.
Check references carefully. Put the terms and conditions in writing (not a contract – but a letter of understanding).
Train the Best. By this I don’t just mean on-the-job training. You should have a formal, written training program in place. It should begin day one – and never end. The program should include product knowledge, policies and procedures, computer and all technology instruction, design and pricing and the all-important selling skills if the employee is a design/sales consultant.
Too many owners/managers ignore this important area. Yours is a selling business, so you need to be sure you teach selling skills. Would you not agree that nothing happens until the sale is made? You spend a lot of time, money and energy teaching design skills – start spending as much on teaching selling skills.
Communicate the Best. There are all kinds of ways to communicate with your employees. The bulk of communication is probably face to face, one on one. This is good – but it’s not enough. I suggest that you have all of the following means of improving how you communicate with your employees.
- Detailed written job descriptions for each employee. Everyone deserves to know what’s expected of them in performing their jobs.
- Detailed, well-documented job performance evaluations. At least once a year, sit down with each employee and review what they do well and then cover areas where you believe they can improve. Everyone deserves (and wants to know) how they are performing in their job. It is the owner/manager’s responsibility to be a good coach and mentor and the job performance evaluations are by far one of the best means of accomplishing this.
- Written policy and procedures manual. This tool spells out everything about how the business is operated. It ensures that everything is done in a fair, firm and consistent manner.
- Written list of company best practices. A list of best practices gets all of the employees walking and talking to the same beat once again, ensuring consistency in how the business is run. This could be included in the policy and procedures manual.
Motivate the Best. This unto itself is an art and skill. Learning how to get your employees to do things because they want to do them is critical, particularly in tough times. Motivating them can mean everything from saying “thanks for a job well done” to offering them an afternoon off, a free dinner, pay increases and everything in between. Get online or go to your favorite bookstore to find thousands of ideas to motivate staff. You have an obligation to keep smiles on the faces of your employees. This is important all of the time, but especially in tough times!
Compensating the best. I submit that if you do each of the previously listed four things the best – and then back that up with a great compensation program – you will not only attract the best people, you’ll keep them.
And yes, if you pay a bit more, you should expect to receive a bit more…in the way of productivity, attitude, teamwork, etc. Establish realistic, achievable goals for sales, margins, closing rations, mistakes, etc. In these bumpy economic times, there may need to be some adjustment to a few of these items. Give each salesperson a monthly report card. It’s true that “you get what you pay for,” so why not pay more, expect more and get more?
Managing your Business
In addition to these very important issues, there are a number of things you should be doing in the area of general business management that will help you weather the current tougher economic conditions – and will also make yours a better run business as we return to better financial times. Here are a few suggestions:
- Develop a three- to five-year business plan.
- Do an annual budget.
- Generate accurate/detailed monthly profit and loss statements.
- Write a detailed annual marketing plan.
- Do detailed job costing.
Yes, operating a successful kitchen and bath business is hard enough in the best of times…and gets even more difficult when times are tough. What a wonderful opportunity you have to put any/all of the above suggestions to work for you. Don’t wait – be the very best you can be – starting now!