Ask Score: Managing in Tough Times; What To Do - That is the Question
Managing in Tough Times
What To Do - That is the Question
by Richard Walton
Over the past year tough times have been visited upon many small businesses. Surging energy costs, declining sales volume, decreasing profitability and increased competition have all combined to create an environment of tough times. Managers are faced daily with questions of what to do by way of adaptive efforts to deal with a vastly changed business situation. In this short paper, we will try to provide effective answers to this question.
(CENTER)What to Do
Focus Effort Upon Simultaneous
Profit Maintenance and Improvement(END)
What To Do involves the use of the four key managerial skills, Marketing, Process Control, Finance and Innovation. It also involves the use of one key administrative skill, which is the use of 'Appreciative Inquiry'. Here are the steps:
First, Calculate the Individual Profitability of Every Item You Make or Sell
This can be done using Breakeven Point Analytics on a whole system basis. The summary of individual items at selling price minus cost per unit multiplied by the number of units sold will show which items are the most profitable.
Second, Use Marketing/ Sales Efforts to Promote the Most Profitable Items
This can be done by developing a revenue budget by individual product and using this budget to manage daily Marketing and Sales efforts in the field, through sales promotion and advertising, and with telephone/email/direct mail and web methods to reach and sell customers and prospects.
Third, Use Production Management Skills to Reduce Manufacturing Costs
This can be very effectively done via a system of 'ratio budgeting', by which manufacturing costs are measured and managed through controlling the relationship of cost to revenue for each item. This system is then applied to preliminary cost estimating, and daily production management statistics. It can provide a blueprint for concentration and improvement of those costs, which are depressing organization profitability.
Fourth, Focus Attention on Creative Innovation to Stimulate Creativity
Innovation is not just for the Research and Product Development people. It can and should occur at every level in the organization. A system of 'Appreciative Inquiry' can be used to create an organization wide culture made up of a new spirit of creativity and enthusiasm among all employees and managers.
Fifth, Use Monitoring Skills to Set Result and Effort Targets in All Areas
Managers often overlook the fact that performance targets require effort and it is that the effort must be measured as well as the results. The only way management can really affect results is through the management of effort, which requires managers to provide guidance, training and coaching for all employees within an atmosphere of continuous improvement. There should be a constant search for the best relationship of effort to results, measured continuously against the target of baseline plus improvement.
These five steps should be undertaken simultaneously, not in succession. It is only by a 'full court press' of coordinated system wide effort can real results be obtained.
Richard Walton, Counselor for SCORE, and President, Enterprise Resource Management Associates, Inc., of Hagerstown, Maryland. Cell phone: 301-462-9850, email: email@example.com.