Solomon CFO Solutions Blog

Act on Lead Measures

It’s now the second quarter of the year. How are you doing on achieving your goals for the year?  If you’re like many business owners, you probably got too busy on the day-to-day operations to even get started. But since there’s more than one-half the year left maybe it’s time to take a different approach.

Many owners have Key Performance Indicators that monitor the health of their business. The goals they’ve set are something like, increase sales by 10% by the end of the year. If all that’s being monitored is weekly or monthly sales, that’s like looking in the rear view mirror to see where you’re headed. What’s needed are measurements that are leading, not lagging.

In the book, The 4 Disciplines of Execution, the authors define lead measures as “the measures of the activities most connected to achieving the goal.”  As the authors discuss, the easiest way to think of it is in terms of a weight loss goal such as I’d like to go from 190 lbs. to 180 lbs. in three months.  Measuring one’s weight is a lagging indicator, but measuring daily exercise and calorie counts are leading indicators. In others words, if you can meet the daily goals for exercise and calorie intake, you’ll likely lose weight.

For many goals, it’s difficult to determine which activities or behavior will have the biggest impact on the goal.  To determine the leading measures for a goal, they suggest letting the team develop their own activities and find a way to measure them.  The authors suggest that the lead measures must be both predictive, something that leads to the goal, and influenceable, something the team can influence.

Three examples of good lead measures may include

  • To increase sales, the number of sales calls per day or week
  • To reduce worksite accidents, compliance to safety measures
  • To increase retail sales, the number of out-of-stocks

Sometime the activities are difficult to measure. In that case, just making a checklist or worksheet for the team to mark when they complied with the activity is sufficient to influence activities.

Business owners have so many issues to deal with each day. In order to move the business forward, focusing on only one or two wildly important goals and having the team act on the lead measures that leverage their activities will result in much greater likelihood of reaching goals and improving the business.

I am a contributing author to the Evansville Business Journal. This was recently published.

Beat the Whirlwind; Focus on One Wildly Important Goal

Ask an owner how they are doing, most will respond busy.  Busy running the business, watching cash flow, employee challenges, finding new customers – busy with their day job.  On top of the day job, the business will have five to ten goals for the year.  Is it possible to do all this?

In the book, The 4 Disciplines of Execution, the authors call our day job the whirlwind which is “the massive amount of energy that’s necessary to just to keep your operation going on a day-to-day basis.”  So, how does an owner accomplish goals and improve the business while the whirlwind is pulling them away?  By focusing on only one or two goals and making those the top priority for the entrepreneur and the employees of the company.

Many of us like to think we are good at multi-tasking. However, the authors state “that human beings are genetically hardwired to do one thing at a time with excellence.”  Just looking at the auto accidents in the past five years shows an increase each year principally due to distracted driving.

When Steve Jobs returned to Apple in the late 1990’s, one of things he found was a number of variations of products being sold. The company began a laser like focus on reducing the number of products by 70% which allowed it to grow rapidly by having a few, best in class products. Today, Apple still only sells a handful of products yet has annual revenues over $200 billion.

Entrepreneurs must have a laser like focus on only one, or at most two, “wildly important goals” or as the authors call it the “WIG”.  Focusing on one WIG allows the laser like focus necessary to accomplish it with excellence, all while spending the majority of time on sustaining the whirlwind.  To determine the WIG, the authors suggest asking, “If every area of our operation remained at its current level of performance, what is the one area where change would have the greatest impact?”  Involve the team to help answer this question and get a broader perspective of challenges in the business.

By focusing on only one wildly important goal, an owner and team can focus, work with excellence to improve the business.

I am a contributing author to the Evansville Business Journal. This article was recently published.

Must be a Team Player

Most job descriptions include the phrase “Must be a team player.” Yet, many owners complain that their employees don’t work well together and aren’t team players. Benefits of teamwork include greater productivity, better sharing of ideas, employees feeling part of the family, and less drama in the workplace. So, what makes a person a team player and how does one determine that during the hiring process?

In his book, “The Ideal Team Player”, Patrick Lencioni states that a team player has three key virtues. These virtues are humble, hungry and smart. He continues, “What makes humble, hungry and smart powerful and unique is not the individual attributes but rather the required combination of all three.”

Lencioni believes “that humility is the single greatest and most indispensable attribute of being a team player.” He describes humility as lacking an excessive ego or concern for status. Humble people praise the contributions of others and don’t seek attention for themselves.

The second virtue is hungry and Lencioni describes hungry people as those “always looking for more.” They look for additional responsibilities, better ways to do things and are self-motivated. It’s usually pretty easy to determine if current employees are hungry.

The third virtue is smart which he describes as referring to a person’s “common sense about people.” It’s about people that can read other people’s emotions and be aware of what’s happening around them. “Smart people just have good judgement and intuition around the subtleties of group dynamics and impact of their words and actions.”

One of those difficult challenges is determining if a person has these qualities before they are hired. Lencioni gives several tips about the hiring process. Don’t be generic when asking questions. Too many hiring decisions are based upon how the interviewer feels about the candidate without asking detailed questions regarding these virtues. Have several people interview the candidate and debrief each interviewer as the candidate proceeds through the process. Consider making interviews non-traditional, like offsite settings or done while running errands. Ask questions more than once and in different ways, especially when there is concern about an answer. Ask the candidate how others would describe them and look for what’s not being said.

In today’s business environment, teamwork is one of the essentials to having a successful business. By hiring people with these three virtues, the likelihood of success is greatly improved.

Local Owners Discuss Employee Engagement

According to a Gallup survey, 70% of U.S. workers are actively disengaged in their work and are not reaching their full potential. Gallup estimates that active disengagement costs the U.S $450 billion to $550 billion per year in lost productivity.

Recently, the Tri-State Manufacturers Alliance hosted an event to discuss employee engagement with four of the region’s successful employers discussing how they work to better engage their employees.  The presenters were Norm Bafunno, Toyota; Zach Bawel, Jasper Engines; Brandon Willis, Uniseal; and Matthew Nix, Nix Companies.  These employers range in size from 33 to over 5,000.  There were numerous activities taken by each company that met their specific culture.

For employee recognition, Matthew Nix stated that his team has a weekly safety meeting for all employees and the managers praise those who had an accomplishment the prior week.  The management team at Uniseal sends handwritten notes of congratulation to the employee’s home so the family can see what has been accomplished. 

Each company President discussed the importance of communicating with employees.  Brandon Willis stated, “We communicate daily with our employees and email is the last resort. Face first and phone second. This allows the team to get to know the leader.”  Norm Bafunno commented, “The leaders meet with small groups without an agenda. This allows employees to raise issues directly with leaders. Then we have to tackle issues head on, quickly and face-to-face.”  Matthew Nix added, “Communication must be intentional. We have to be able to discuss issues openly and quickly.”

Jasper Engines has a specific process for engaging new associates. Their Buds program assigns each new associate to a buddy who is not their supervisor.  They meet daily for the first two weeks and then weekly the following two weeks.  The Buds discuss family life, learn about continuous improvement as well as learn the Jasper Culture. “As a result of our continuous improvement program, over 17,000 ideas have been put forth with over 85% implemented in some fashion,” Zach Bawel stated.

There were numerous other ideas such as having fun outside work, gonging the bell for new sales, using cross functional teams to break down departmental barriers and so much more.

As Zach Bawel closed, “Don’t shoot for perfect ideas. Do something. If the first program doesn’t work, keep on trying.”  If, as an entrepreneur you want to have a productive, fun place to work, improve the engagement of your employees. 

I am a contributing writer to the Evansville Business Journal. This article was recently published.

Four Keys to Improving Cash Flow

Positive cash flow is the lifeblood of every business.  Without it, a business will fail. Is your business struggling with cash flow?  If so, let’s discuss some potential solutions.

First, take a proactive approach to cash management.  Take time to understand the cash cycle and why cash is insufficient to meet current needs.  While business owners frequently create annual budgets or sales forecasts, many fail to prepare a cash flow forecast.  Consider creating daily or weekly flash reports to measure the pulse of the business.

Second, improve operational processes to reduce time and expenses. One local owner shared that when the economy turned down in 2009, he easily cut overhead by 15%.  He wondered why he hadn’t done that in the past and now evaluates his overhead costs every year.

Third, recognize that the business needs to focus on generating cash, not just sales.  If inventory isn’t selling, get rid of it.  Cash today is far more important than cash in six months or a year. How long do customers take to pay?  Can you get a deposit or prepayment with each order for slow paying customers or long cycle projects?  One local company had a customer with over 200 locations. Each location paid its own bill and many were 60 or more days delinquent.  When the time for contract renewal came, in lieu of a price increase the customer agreed to pay by credit card on the 25th day each month.  The increase in cash was immediate and the accounting staff had time to focus on more productive activities.

Fourth, evaluate the company’s pricing strategy.  How does it compare with the competition in the marketplace? Are there products where the company can implement “dynamic pricing” where prices change frequently with changes in supply and demand? The airline industry has been using this strategy for years. Have you evaluated the profitability of your major customers to see if changes need to be made? Some businesses evaluate their customers by both gross margins as well as difficulty to do business with. The more challenging customers are charged a premium since it takes more staff time to manage the relationship.

Cash flow is critical to the success of any business. Once these steps are taken, the owner will know the pulse of the cash flow and be equipped to take proactive steps towards improvement. 

Dying a Slow Death by Meetings?

According to a survey prepared by, employees admit to squandering away nearly 25% of available working time with web-based social media and surfing, boring meetings, socializing, and ‘spacing out.’  If, as leaders in our organizations we can find ways to cut the typical employee’s wasted time in half as well as our own, what kind of impact would it have on the business in terms of productivity, competitiveness and job satisfaction?

One of the leading causes of wasted time, confusion, and poor execution is with long, unproductive or inappropriate meetings. Here are some thoughts to make meetings more productive.

First, are there meetings you or some of your staff don’t really need to attend?  The primary reason for attending unnecessary meetings is a leader’s unwillingness or inability to release responsibility and control to qualified staff members.  To determine the appropriateness ask, “Why do I have to be in this meeting?”  “Why is that important?” Ask this one 5 times.  Then determine to stop attending unnecessary meetings.

Secondly, are the meetings properly planned and conducted?  If not, be sure before scheduling any meeting to be clear on its purpose by communicating specific objectives for the gathering. Also set a specific amount of time for the meeting and begin and start on time. Assign roles and responsibilities such as time keeper, minutes taker, etc.

Finally, be sure to never leave a meeting without first communicating an action summary that lists ideas generated, all follow-up responsibilities, and subsequent meeting plans. 

One great resource worth reading and using is Patrick Lencioni’s book, Death by Meeting.  In his book he recommends four meeting types.  A Daily Check-In lasting five to ten minutes to review administrative issues.  A Weekly Staff meeting lasting 45 to 90 minutes to discuss tactical issues.  Adhoc Topical meetings which may last two to four hours covering strategic issues. And Quarterly Off-Site Reviews lasting one to two days to focus on the big picture developmental issues facing the business. By scheduling, planning and conducting meetings properly, leaders and staff can be better prepared helping meetings become far more productive.

If you want to get more time in you and your staff’s day, evaluate the impact and time spent in meetings. Then take action to improve the process to gain better productivity, competitiveness and job satisfaction.  

I am a contributing author to the Evansville Business Journal.  This article was recently published.

Improve your business using Key Performance Indicators

Improving a business is difficult. An owner may want to improve the business by increasing sales, increasing customer satisfaction, producing products faster, reducing production costs, improving product quality, or any number of areas.  One component of process improvement is measurement using Key Performance Indicators, or KPIs.

While there are hundreds of KPIs that can be created, focus on a few for each area of the business for effective management. KPIs can be measured over different time periods, such as daily, weekly or monthly.  KPIs are also either backward looking reporting actual results or are forward looking helping predict future results. Examples of KPIs to impact sales are daily sales orders, sales dollars per employee, backlog, average sales per order, and customer retention rate. To improve productivity consider weekly production per hour worked, percent of billable time over total time, on-time completion percent, or reportable incidents per 1,000 hours. For human resources evaluate turnover and absenteeism rates.  Use return on assets and gross profit percentages to evaluate company results.

The first step to implementing an effective KPI is to analyze each particular area of the business to determine which processes need improving. The KPI should provide insight into the process and help meet strategic plans and goals. 

Secondly, set targets for each KPI to move the business towards it goals. Like any goal, these should stretch the business or department but be attainable.

Third, create a reporting structure so results can be easily measured. Results for each reporting period should be shared as soon as possible after each period, such as reporting daily results each day. In addition, create visual reports or dashboards so everyone can tell at a glance the progress being made.  Use graphs and charts to showing current performance, past performance, and the target.

Finally, develop different rewards for team and company success. Rewards can be as simple as having treats for hitting weekly sales or shipment targets, quarterly employee lunches for exceeding safety goals, or more complex like an individual sales bonus tied to increasing sales and gross profit dollars. 

Noted leadership trainer John E. Jones said: “What gets measured gets done. What gets measured and fed back gets done well. What gets rewarded gets repeated.”  Improve your results by implementing a system to measure KPIs, keep the team informed, and reward them for a job well done.  

I am a contributing author to the Evansville Business Journal. This article was recently published.