Want a Low-Budget, High-Feature Shop Floor Information Network?

How would you like a hand-held, in-plant information network for almost no investment?  What if all your managers, line supervisors and maintenance techs each had a hand-held device, networked to key performance indicators, production dashboards, maintenance manuals, "how-to" videos, email and text?   

A Chief Executive Boards International member has a network like that, using mobile terminals that cost $100 or less.  What are they using?   Old iPhones (either 3, 4 or an iPod touch will also work).   Not on a cellular network, but on their own secure, in-plant Wi-Fi network.  

To do this, you must have a Wi-Fi network and individual iCloud accounts set up for all users of this type of system. iCloud accounts are free to set up and there's no cost to use all the services. With an iCloud account and an Apple device you can text message, email, share calendars, share reminders, share pictures and videos or tele-conference with another user anywhere and any time. Again, at no monthly subscription expense. 

You can share pictures and movies with any number of employees.  For example, you can video machine repairs or tooling changeovers or anything that you may want to share with employees or groups of employees like all shifts in the maintenance department.  Or you can remotely troubleshoot a piece of equipment with support from another employee who is either at home or anywhere else outside the plant at any time of the day.  An outgoing shift can leave email or text messages to alert the next shift of a problem.  

Worried about Facebook, personal email or other surfing abuses?   It's a special-purpose network so you can lock it down pretty tightly, using site blocking features in the wireless router itself or a low-end security appliance. 

The company doing this is the Wilson Bohannan padlock company, founded in 1860.   They've been making "Locks since Lincoln".  They're not old-fashioned, though.  They've continued to automate their production and have now taken a leap into shop floor information networks with a very clever, cost-effective use of recycled equipment.  

If you have some clever in-plant information network implementations, click "Comments" below and share them with others.     

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Terry Weaver

CEO

Chief Executive Boards International
http://www.chiefexecutiveboards.com/

TerryWeaver@ChiefExecutiveBoards.com

6 Essentials in Your Company's Heirarchy of Needs

Your company has 6 essential needs that are critical for success, in hierarchical order (one must be met before the next, and so forth). People have similar needs, as proposed by Abraham Maslow in his 1943 paper "A Theory of Human Motivation".

Let's first examine Maslow's view of human needs:

• Physiological needs -- Basic requirements for survival
• Safety needs -- Security, and confidence in the future
• Love/Belonging needs -- A sense of belonging and acceptance by others -- you are not alone
• Esteem needs -- Self-respect and the respect of others -- "I count for something"
• Self-Actualization needs -- Opportunity to achieve your full potential of creativity, contribution and influence

These needs are indeed hierachical -- the lower level needs are the prerequisites for the higher.  People who don't feel safe and don't feel they belong to a society are incapable of achieving either self-respect or self-actualization.

Companies have needs, as well. Interestingly, I believe those are also hierarchical.  Here's a model for your consideration:

Let's look at those needs from the bottom up:

• Operations -- The day-to-day running of the company. Getting orders, manufacturing, delivering services, billing, collecting. Ordinary stuff every company has to do to make money - but you have to do them well. 
• Stewardship -- Doing the right thing with the money. Reinvesting in fixed assets and working capital. Returning some distributions to owners/investors. Ensuring the collectability of Accounts Receivable.
• Strategy -- Plans to take the company to greater strength, market share, profitability and customer satisfaction
• Sustainability -- Plans for what happens to the company following the current owner/CEO's tenure. Will the company be sustainable when the current leadership has moved on?
• Shareholder Value -- Growing the value of the business for current and future shareholders.  More current earnings, more future value if sold or passed on to heirs. 
• CEO (Owner) Satisfaction -- At the end of the day, a happy CEO is a happy company. A surprising number of CEOs are not satisfied with their businesses. I believe that's generally because the hierarchical needs below this level haven't been met -- there's something wrong with Operations, Strategy, Sustainability, etc.

Have a look at the diagram below, and run a quick checklist on your company. How are you doing against the company's hierarchy of needs? What do you need to fix to achieve more satisfaction as a CEO?

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Terry Weaver

CEO

Chief Executive Boards International
http://www.chiefexecutiveboards.com/

TerryWeaver@ChiefExecutiveBoards.com

Total Cash Conversion Cycle Time

We were talking about time compression in a recent Chief Executive Boards International meeting, and a member gave a big-picture view of compressing cycle time when he described his idea of Total Cash Conversion Cycle Time. Briefly, cycle time is the entire duration (elapsed days) that it takes to complete a business process. Not the actual "do" time or process time, which may be in minutes or hours, but the total duration of the process from beginning to end.

This idea of a Total Cash Conversion Cycle Time is a big idea. There's a highly-technical accounting calculation called the Cash Conversion Cycle that takes into account the time between when you spend money and when you get it back. This is a bigger picture than that. What's the total number of elapsed days between the day you get an order and the day you get the cash?

Let's imagine the incremental pieces in your Total Cash Conversion Cycle Time:

Elapsed Days	Process
0	Order Received (by Sales or Order Entry)
	Order Entered
	All documentation received (specs, drawings, etc.)
	Release to Production received from customer (shop drawing approval, etc.)
	Tooling ordered, received and checked out or pulled from tool room
	Material Ordered or pulled from inventory
	Order released to production
	Manufacturing complete
	Shipped
	Billed
	Collected

Be honest -- print this page and write in the number of days you think elapse between the completion of each of these steps - the wait time plus the process time (add in other steps in your process that I omitted). Then go take a look and see how long it really takes. Follow the paperwork on an order through your business. Note how many days it sits still while nothing is happening to get you closer to collecting the money.

What if you just took one day out of each of those steps? Are there places where you could take 3 or 4 or 10 days out?   How much variability did you find?   Are there some types of orders where there's more time compression opportunity? 

If you find some big delays in your Cash Conversion Cycle Time and figure out how to fix them, please click Comments" below and share them with others.   By the way, you'll be surprised that when you reduce cycle time you'll also improve quality and reduce cost. 

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CEO

Chief Executive Boards International
http://www.chiefexecutiveboards.com/

TerryWeaver@ChiefExecutiveBoards.com

Take Some Chips off the Table

Yes, I've written about this before.  If you're a C Corporation, you have about 4 weeks to act at the lowest tax rates on dividends we're likely to see in our lifetimes.  If you're an S-Corp or an LLC, this is simply about self-preservation.
 
I've had multiple conversations with business owners lately who are having a record year and are sitting on piles of cash inside their businesses - one has over $1 million in cash inside his $8 million company.   That just sends chills down my spine. 
 
Why?  Because that money is just like chips on the poker table -- it's at risk every day.  What risk, you ask?  One stroke.  One beer truck.  One employee harassment suit.  One product liability suit.   That's how far most closely-held businesses are from extinction.  Would you want your surviving spouse to watch that pile of cash melt away while your estate is in the process of getting settled?  Wouldn't it be a whole lot better if that money was in your brokerage account?  
 
A good friend of mine and a CPA, Roger Clinkscales, explains it this way:   "Why did you set up your corporation (LLC, C-Corp, S-Corp) in the first place?  To put a firewall between your company and your personal assets, right?  So, why don't you use it?  Why don't you take the cash that's inside your company and distribute it to yourself, thereby taking it out of reach of creditors and judgments against your business?"   
 
Roger's right.  The next thing that comes up in this conversation is, "But I need that cash cushion for unexpected working capital needs."  Do you?  Why not "outsource" that problem?   Where?  To a bank, in the form of a line of credit.  Those guys are in the business of providing short term cash, and right now they're doing it at incredibly low interest rates. 
  
With a line of credit for a few hundred thousand dollars you have the flexibility you need to take that cash out of the business and then borrow for a few days here and there if you need some short term inventory or if a customer stretches you out a few weeks on payment.    
 
Think about it -- would you rather have $100,000 borrowed on your line of credit and $100,00 in your brokerage account, or neither?        


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TerryWeaver@ChiefExecutiveBoards.com

I'm from OSHA and I'm Here to Help You

A Chief Executive Boards International member learned something this month he wished he'd known before. Here's his story:

"For the first time in 45 years we have been hit by OSHA a couple of times in the last year and forced to pay a few tens of thousands of dollars in fines. Afterwards, they told us about this program and said if we had been working with them they would never have even have stopped by. http://www.osha.gov/dcsp/smallbusiness/consult.html

"We didn't know about this program and wonder if other businesses in CEBI are also not familiar with it."

Good information -- if you're looking for some "OSHA Repellent", invite their Onsite Consultation team to your facility. Here's a quote from their web page:

"On-site Consultation services are separate from enforcement and do not result in penalties or citations. Consultants from state agencies or universities work with employers to identify workplace hazards, provide advice on compliance with OSHA standards, and assist in establishing injury and illness prevention programs."

Thanks to our member for passing this idea along. Someone else is going to benefit from his bad experience.

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CEO

Chief Executive Boards International
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TerryWeaver@ChiefExecutiveBoards.com

What Have You Done for Me Lately?

Customers rarely actually ask, "What Have You Done for Me Lately?" You better believe they think it, though. It's up to you to remind them, the more often and the more widely the better, of your value proposition and just how badly they need you. By more widely, I mean you need to have multiple relationships at each customer. A single point of contact (one who may be jealously guarding that position) can be a death sentence for your account if anything happens to or for that person -- a promotion, a demotion, a job change, etc.  More on why and how to Go Wide at every account.

I recently met with a management team that had just this problem. A large customer - well over half their revenue, with a single point of contact, jealously guarding that position. They never get credit for the things they do that the customer doesn't even see - diving catches they make just before the ball hits the ground, sometimes inflicted by the customer upon himself. Yet they get all kinds of complaints about small stuff. It's not only disappointing to not be appreciated by your customer, but it's also a very tenuous position to be in. A competitor can easily waltz into such a relationship and unseat you. You've been commoditized.

What to do? Try a "what have you done for me lately" report. Here's how that works. First, you have to start the data (anecdote) gathering. In a former life, I was in the electronic components business and we had this problem. Once a year, we negotiated with the 20 or so largest electronics manufacturers in the world (Motorola, HP, Nokia, Cisco, etc.) for pricing on millions of dollars worth of parts. It was the job of the guy on the other side of the table, the purchasing agent, to commoditize us - to assert that our parts, our service and our company were no better than our competitors, so it's just about the price.

We put a little application up on our Customer Service system so the Customer Service Reps (CSRs) could log each time they made a diving catch for a customer. Like when HP called and said they're 2 days away from a manufacturing line shutting down because they forgot to order parts. Their fault, yes, but they expected us to solve it for them. That part wasn't scheduled to run again in our factory for about 2 weeks. Our CSR got on the phone with 5 of our big stocking distributors, found a couple of reels of parts, and had them overnighted (our expense) to arrive just in time to avert the line shutdown. The CSR then opened the "What have you done for me lately" screen to enter the incident, including the customer name, CSR's name, date, customer rep's name, a description of the problem, what we did for them, plus a roundhouse estimate of the economic benefit to the customer. Production line downtime in an electronics plant is priced in tens to hundreds of thousands of dollars per hour. In an auto plant it's priced in fractions of or whole millions of dollars per hour.

Imagine the difference in our next negotiation, when the purchasing agent (buyers are liars) starts on that "You're just like everyone else" part of his script. Our guy says, "Well, could be, but let's take a look at some facts." He pulls out the "What have you done for me lately" report, just a query of our good deeds on that customer's account for a whole year. With, of course, a total of the estimated economic benefit.  Suddenly that "you're just a commodity" prop is gone. 

So, the first thing you do is set up a process and a discipline to capture what Jan Carlzon, then President and CEO of Scandinavian Airlines called Moments of Truth in his book by the same name. You can use a little database, Google Forms, or some other data capture platform that's accessible to everyone servicing the account.
The next thing you do is set the table. Create a venue and a reason where you can have an annual "performance review" of your company's work for a broad audience of people on the customer's team. Make an excuse, create a reason, whatever you have to do to "go wide" in communicating, at least once a year, with multiple contacts at that customer.

It's your job not only to perform admirably for your customers. It's also to be sure they perceive and appreciate that admirable performance. Don't ever assume the latter automatically results from the former -- it rarely does, in my experience. And, as always, Go Wide.

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Terry Weaver

CEO

Chief Executive Boards International
http://www.chiefexecutiveboards.com/

TerryWeaver@ChiefExecutiveBoards.com

4 Steps to Eliminate Process Failures

Things go wrong. You get upset. People get reprimanded. And then it happens all over again - either the same problem or a different problem. This comes up in CEBI meetings all the time. Why is that? 

You have business processes. I hope they're documented and people refer to them, at least occasionally. If that's not the case, you have a problem that we'll cover in another article.   

Even with documented business processes, something goes wrong. That's a business process failure. What separates great organizations from good organizations is their response to a business process failure. 

Many good organizations, after the reprimand, say something like, "Don't let that happen again." And then, of course it does. That's due to a lack of an important business process of its own -- the process of responding to a process failure. Here's a rough outline of what should happen in the case of a process failure:

1. It's documented -- there's actually a written report of what happened. This can be a simple template on a shared drive or knowledge base, and the process failure reports can be saved in a similar location.
        
2. It's analyzed to its root cause. This is not a toss-off answer, like "Failed to follow the process." The Japanese say, "Ask WHY five times." For example:
   -  Order got shipped to the wrong customer
   -  Why?
   -  Jack wasn't here, and Jim did the shipping
   -  Why was that a problem?
   -  Jim doesn't know the shipping process
   -  Why?
   -  He hasn't been trained
   -  Why?
   -  He's not Jack's backup for shipping
   -  Who is?
   -  Actually, it was John, who quit last month, and we didn't train anyone else
   -  So what's the root cause of this problem?
   -  We don't have a clear-cut list of backup people for critical business processes like shipping
       
3. Once the real root cause is identified, then the important final step kicks in -- Corrective Action. The corrective action can take a lot of forms, such as:
   -  Creation of a checklist that doesn't exist
   -  Posting of a checklist that didn't get run in a place it's easy to find
   -  A process improvement to an established business process that broke
   -  Creation of a new business process to replace an informal handoff of knowledge
        
4. Implement and test the Corrective Action. Make sure it works, and make sure everyone who's supposed to be trained in the new process actually is. 

A business owner once said, "We don't seem to have a consequence for not following our business processes." I said, ""Why not make the consequence fit the misbehavior? The person who fails to follow a business process is required to do the process failure analysis and write up the corrective action."

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CEO

Chief Executive Boards International
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TerryWeaver@ChiefExecutiveBoards.com

Hard Work Stopped Paying Off - or Did it Ever?

  
President Obama recently said, "Long before the recession hit, hard work stopped paying off for too many people." That statement applies to business owners, as well, although not in the context the President intended. Fact is, hard work alone never "paid off" - for anyone.  

Working hard is a virtue. It's a survival tactic. It's not a strategy. It's something you have to do when your business (or life) strategies aren't working.

A Chief Executive Boards International member once said, "The real measure of the value of your business is how much time you can spend away from it."

Think about it. If the route to improving your business by, say, 20% is working harder, what do you do if that "works"? How do you get the next 20% increase? Work even harder? Visualize 2 or 3 or 5 more iterations of that. Sooner or later you run out of gas. You're burned out and depressed, perhaps divorced or, worse yet, you're disabled by a stroke or heart attack. Working harder is not a strategy -- it's a downward spiral to an eventual unraveling of the company, created by yourself.

Here are 8 Alternatives to Working Harder -- ways and places to get some better strategies that reduce, rather than increase the amount of work you have to do.

Think about it.

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CEO

Chief Executive Boards International
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TerryWeaver@ChiefExecutiveBoards.com

Big Banks Back in Small Business Market

  
In an amazing turnaround, at least one big bank (Chase) is back in the small business lending market. A Chief Executive Boards International member reported last week that he had secured a refinance on his building, described as a "blend and extend". They consolidated some other debt into the building mortgage, extened the term to a new 15-year amortization schedule at a competitive interest rate (5%) and charged fees around $500.

This is indeed good news, and a sea change in the banking market. For at least 2 years, small business has been welcome only at community banks - the big banks have been paralyzed.

So, if you need capital to expand your business and haven't shopped banks lately because you thought it was futile, it's a good time to put your package back together and go call on a half dozen or so bankers, both community banks and the big guys.

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CEO
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TerryWeaver@ChiefExecutiveBoards.com

 

Where Good Ideas Come From (Chance Favors the Connected Mind)

 

I am regularly amazed at the ideas Chief Executive Boards International members take away from a meeting. I recently heard an eloquent explanation for why that happens.  Specifically, why that happens for people who have external sources of "slow hunches", together with an active forum for the "collision of smaller hunches" which then incubate (subconsciously, mostly) and connect with other hunches (perhaps of other people). That's where fully-developed, great ideas come from. I see this happen all the time in CEBI meetings.  Have a look: 

It's little wonder CEBI members are more successful than their non-member peers.  They've chosen to put themselves regularly in a place where business owners can connect as each other's catalysts -- providing the missing piece -- so that, in Steven Johnson's words,  "Chance Favors the Connected Mind."

Do you have a Connected Mind, or are you trying to come up with good ideas all by yourself?  Chief Executive Boards International could be a great resource for you, as it has been for thousands of others.  

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CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

Robots Have Babies

 
"Robots have babies", one Chief Executive Boards International, member told another at a recent meeting. This was during a discussion where a member mentioned he had an employee unloading parts from one process and stacking them in a particular orientation for the next process. "What you need is a robot", said the member with a lot of experience replacing people with automation over the past several years. The objection, "I can't afford a robot" was met with "Yes, you probably can, when you figure that a robot 2 generations old could do that simple operation, and that there are people refurbishing those old robots and selling them for a fraction of what a new one costs."

The member with the parts-handling process looked like he'd been hit in the forehead with a 2x4. Another one of those ideas he would likely never have had on his own without the benefit of another business owner's experience. And then the automation-savvy member went on to say, "After you've watched that robot do that operation flawlessly for several thousand cycles with no benefits, no sick leave, no drama and no whining, you'll understand why robots have babies." I'm betting some robot refurbisher is in the process of getting an order.

Are you looking for ways to take repetitive, non-value-added activities and teach machines to do them rather than people?   It's probably something you need to be working on.  By the way, stop worrying about persistent national unemployment statistics. A huge number of those jobs aren't coming back because they've been eliminated by automation. Other companies have figured out how to do more with fewer people, mostly due to factory automation or IT systems. Those people won't be back to work until they've figured that out and retooled themselves to do something that can only be done by a human.

If you've figured out how to produce more output with fewer people, please click "comments' below and share your experience with others.

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CEO
Chief Executive Boards International
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TerryWeaver@ChiefExecutiveBoards.com

Excellent Customer Service Salvages a Customer

I had a customer service experience last month that was classic in its origin and exceptional in its execution. The exceptional part of this adventure was that a customer service representative (CSR) at my bank went 2-3 steps farther than expected to help me with a problem. Almost a textbook case of 7 Steps to Turn a Complaining Customer into a Raving Fan.

The classic part was that the problem started with lousy support from my bank's IT department. I had entered a funds transfer online and didn't see it come through for several days. I called the bank and left a voicemail after hours, which was returned by an exceptional CSR right away the next morning.

That's where the exceptional part started.  She listened to the problem, apologized (didn't even suggest it was my fault), asked me all the pertinent questions, and then promised to call back. In less than an hour, she did so, saying she had called the IT department and that they had a temporary problem with online banking, but they had a look and "saw it in there". She told me it would be processed overnight and in my account the next day.

That brings me back to the classic part -- the lousy service from the IT department. A proactive group, realizing they had a problem, would have combed their processing queues -- by hand, if necessary, looking for any transactions that might have gotten hung up. They decided instead to go back to drinking coffee, and simply wait until the affected customers noticed and called up.

So, it's CSR +2 and IT Department -1. Until the following day, when the same CSR called again to be sure I'd seen the transaction in my online account, which I had. Now it's CSR +3 and IT Department -1. Imagine how effective this gal could be if she selling, instead of cleaning up after a weak IT department!!

What struck me was that she did everything right -- as if she had read 7 Steps to Turn a Complaining Customer into a Raving Fan

Now, I'm not yet a raving fan of this bank, mostly because of their weak IT department. Their Customer Service (specifically 1 CSR), on the other hand, has gone a long way to head me back in that direction.

If you've seen Raving Fan quality customer complaint handling, either from a supplier or within your own company, please click "comments" below and share your experience with others. 

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CEO
Chief Executive Boards International
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TerryWeaver@ChiefExecutiveBoards.com

The Mandate from Hell -- New 1099 Requirements Buried in Health Bill

Are you strapped in? Oxygen mask at the ready?  

Nicknamed by several writers as "The Mandate from Hell", there's a provision buried in the Patient Protection and Affordable Care Act (PPACA) that staggers the imagination.  As Nancy Pelosi promised, "We'll have to pass this so you can find out what's in it."    

Well, we're finding out. This requirement, simply stated, is that as of January 1, 2012, all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year. Anything. Anywhere. Link to full CNN article....

Think of it. You'll need to collect (require) EIN's & mailing addresses from every vendor on your vendor list, including retailers, restaurants, hotels, etc. and send them a 1099. You'll need to know the difference between a franchise location (like many hotels) and a company-owned location. You'll need an EIN and a mailing address from every airline, as well as Orbitz, Travelocity, Hotwire and Priceline. Don't forget the phone company, UPS, FedX and the mechanic who works on the company vehicles.  

And, worse yet, everyone you sell to will be sending you W-9 forms asking for your EIN (you might as well post a W-9 with your EIN on your website), and then they'll each be sending you a little envelope about February 1st with your 1099. The post office will be out of the red.  And what in the world will you do with a wire basket full of 1099s?  

I don't even know what to suggest on this one, except perhaps to write your Senator or Representative who voted for this, thanking them for their brilliant plan for flushing out tax cheats (the argument for this abomination).  My concern is that it won't get the treatment it deserves -- full repeal -- but rather a morass of regulation writing exempting this and that from the requirement (which you'll need to sort out after it happens).

Good news:  Rep. Daniel Lungren (R-CA) has introduced legislation to repeal this requirement, H.R. 5141, the Small Business Paperwork Mandate Elimination Act. Perhaps in your letter to your Senator or Representative, you could urge passage of that act as proposed -- a 100% repeal.  

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CEO
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The Barbecue Index -- an Obscure Economic Indicator That's Improving

A little-known economic indicator, the Barbecue Index further confirms the ongoing strength of the recovery from the 2008-2009 recession. Long regarded as "comfort food", even barbecue restaurants suffered precipitous declines in business after the Lehman Brothers debacle of September 2008.

Steve Francis, owner of Pinkie's Barbecue in Hermosa Beach, CA confirmed this week that the economy is indeed on the mend. "January 2010 was our best month ever", according to Steve, the speaker at a meeting of The Rotary Club of Hermosa Beach that I attended this week. Steve and his story have so much in common with members of Chief Executive Boards International, I just had to tell it here.

Steve opened Pinkie's in May 2008, after a failed attempt at "retirement", following the sale of another restaurant business. "I just got bored", he said, and upon finding a failing restaurant for sale, he created Pinkie's from scratch, based on an idea that's been rattling around in his head for years. "With the other business sold, I finally had time to put it together", Steve said. So he renovated the space, got his menu and branding together, and opened Pinkie's in just 21 days. Two months later, he was breaking even.

Then, in the wake of the Lehman Brothers collapse in September 2008, "The world as we knew it changed", says Steve. He had to lay off his managers and go back into the kitchen to conserve cash. "In January and February of 2009, people were just shell shocked", Steve said. Consumer spending in Hermosa Beach, where median home prices topped $1 million in 2006, was not just off -- it was comatose. At least as measured by the Barbecue Index.

Steve's on top of his numbers. As a result, he managed to finish 2009 with only a slight operating loss -- most of it suffered in the first quarter. December was a slow month, as well, resulting from both Christmas and New Year's falling on weekends, the busiest time in his business. We're working on a seasonal adjustment factor for the Barbecue Index.

So he, like myself, is pleased that business is roaring back in 2010. It will take awhile for broad economic statistics to continue to catch up, and for operators like Steve to get confident enough to bring back one or two of those managers he had to lay off. As that happens, the next leg of this recovery will kick in. If you're betting against continuing economic recovery, think again. The Barbecue Index would suggest otherwise. Business owners' attitudes took an about-face in January 2010. It appears most people are looking at 2010 as a "do-over", and that will add fuel to the recovery, as well.

By the way, if you're in Hermosa Beach over lunch or dinnertime, do be sure and stop at Pinkie's Barbecue for a great meal. Ask for Steve -- except on Thursdays, now that he's back to playing golf.

PS: If you're looking for updates on the Barbecue Index, you'll find them only here -- http://www.chiefexecutiveblog.com/

What's your view of the current economy? Click "Comment" below to share it with others.

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CEO
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7 Steps to Turn a Complaining Customer into a Raving Fan

Most organizations hate handling customer complaints, partially because they're not very good at it. In fact, customer complaints are an opportunity to do either of two things -- convince the customer that his complaint is justified, and that you're even worse at what you do than he already thought, or turn the customer into a raving fan. Unfortunately, poor training and human nature conspire so you rarely accomplish the latter.

This conversation surfaced in a meeting of Chief Executive Boards International members where we were talking about vendors of which we're raving fans. One member said, "You'll never believe what happened the last time I called one of our vendors about a problem -- I felt so important." Wow -- a complaining customer felt important. Then she explained how that happened -- including 7 critical steps for turning a customer complaint into a good customer experience.

1. Listen -- Humans have the ability to think, listen and talk -- but only 1 at a time. Most people, when first receiving a complaint call, are spending none of their time listening and all of their time thinking about what they're going to say next. Pay really close attention to what the customer says, and he'll tell you what needs to happen to make him happy.
   
   
2. Apologize -- Whether it's your fault or not, apologize. Most people who have been married very long know how to do this. Even if it's entirely the customer's fault, you can still apologize for the fact he's had a problem.
   
   
3. Let him you know you believe him -- You'll catch a complaining customer completely off-guard if you acknowledge the fact that they had a problem -- even if you're just acknowledging that they believe they had a problem.
   
   
4. Let him know you'll work it out -- You're not saying you're opening the company's checkbook to them -- just say,"I'm sure we can work this out to your satisfaction."
   
   
5. Ask a lot of questions -- Open ended questions are the best. "When did you discover the problem?" "What happened then?" "What have you tried?" "What can we do to help?" Again, taking an active interest in the problem and in a real solution path totally disarms most complaining customers. Make sure you have all the facts, and give the customer every opportunity to vent everything he's saved up before dialing the phone.
   
   
6. Outline the next steps -- If you can fix the problem right away to the customer's satisfaction, tell them how you'll do so. If it requires some lead time, be honest about how long it will take. And, if you need to, what other resources or analysis will be required to make sure the problem gets solved for good.
   
   One vendor of whom I'm a raving fan, American Express, has a fascinating way of handling problem calls, usually in 1 pass, even though another person or department may be required. They say "I'm going to get the _____ department on the line and they'll take over from here." Then you find yourself in a 3-way "handoff" call, where the first Amex operator introduces you to the second, makes sure he understands why you're calling, and then excuses himself from the call.
   
   Bank of America, on the other hand, sometimes offers to transfer your call elsewhere, during which 50% of the time your call is lost and the other 50% of the time you end up talking to the wrong person. Other times they just give you another 800 number ("you're in the wrong department" -- like it's your fault) and you're on your own through another voicemail purgatory.
   
   
7. Let them know you'll be following up on the problem with whomever needs to take the next steps. And then do it.

Reading through this formula, you might say "that makes a lot of sense", but precious few companies do anything like this. Why? Because they're populated by humans, and several millenia of conditioning turn on the "flight" or "fight" response to a complaint call -- they get defensive. And they start doing further damage.

Note in the above, nowhere does it say, "Tell the customer what he did wrong or who else's fault it was at your company (of course, it's not yours)." When you call Bank of America about a nuisance service charge that's not supposed to be on your account, they usually say "the computer does that sometimes." It's 2009 and they think you'll believe that computers just "do that sometimes"?? Actually, what they think is you won't notice, and you'll just pay the nuisance fee.

The key to this strategy is training -- it's not instinctive. You'll need to train your staff to walk through a customer complaint call "by the numbers", rather than rely on their own instincts, which will usually fail the average person.

If you have similar experiences where your complaint call turned into a good experience, please click "Comment" below and share them with us. If your company has an especially effective customer complaint management process, please click "Comment" and share that, as well.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

Who's Getting the Most Return from Your 401(k) Plan?

Who is getting the most return from your 401(k) plan --your participants or your plan fiduciary? Hidden fees are killing a surprising number of small companies' 401(k) returns -- by a haircut of 3% or more in annual fund performance. If your 401(k) plan is more than a few years old, or if your fiduciary is a bank or insurance company, your plan participants (including yourself) are probably paying huge hidden fees, resulting in below-par investment results.

Here's a CEBI Alert on how to find and fix that problem.....

As a business owner, you have a short window to make plan changes before your 2010 plan year starts. Most 401(k) plans operate on a calendar year basis. Changes in plan provisions or Safe Harbor elections need to be made at least 30 days before the plan year begins. You have some time to adjust your 401(k) strategy for 2010, but not a whole lot.

While you may have looked at Safe Harbor provisions before (which allow you and other highly-compensated people to max out your 401(k) contributions), you'll want to have a look at some ideas you might consider.....

Let us know what you find in reviewing your 401(k) plan. Please click Comments below and share your observations.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

Process Mapping -- an Admin Process Improvement Strategy

Administrative processes have not only a sequence, but also a physical route through your business, as noted by a Chief Executive Boards International member during a recent meeting. He made those comments during a discussion on how much you can learn about your company by just stopping on occasion to look around.

He said he had been in the office for most of a day (unusual for him) and saw the person who scans documents into their electronic records system leave her desk and walk most of the way across the office to scan one of those documents. Then she did it again -- and again and again.

He finally stopped her and said, "Do you think it would work better if the scanner was on your desk instead of all the way across the office?" "Gee", she said, "Do you think we could move it?"

This seems like a simple, almost trivial observation, but it's not. I was taught this lesson years ago by Bob Gariepy, a GE-Trained guy who was once my VP of Manufacturing. Bob went into a poorly-performing plant and noticed that there was constant traffic in the aisleways, moving parts from one process to the next. A clever process analyst, he got a floor plan of the factory and had an engineer trace the physical movement of all the parts that went into a couple of products, then measure and add up all the distance traveled. For one product, it was almost seven thousand feet!

He then set about building manufacturing cells for high-volume products, putting all the necessary machines in a u-shaped cell where you could literally see the parts coming in on side and finished products in the boxes coming back out the other. One of the additional amazing benefits of manufacturing cells is the reduction of quality and rework problems. If you have a quality problem somewhere in a cell, you usually have only perhaps 8 or 10 total units in process, rather than a suddenly-discovered basket of 100 or 1000 defective parts that came from somewhere else in the factory. You stop, walk up the line, and find out what the problem is and what it will take to correct it before making dozens, hundreds or thousands of defective products.

If you apply this idea to your administrative processes, you'll find the same thing -- errors are caught more quickly, and items that would have slipped through the crack or gotten lost in a basket are out in plain sight for the next person in the workflow to notice.

Regardless of the nature of your business, take a look at this -- see if you can map the distance things travel in your business process. You'll be amazed -- as that distance stretches out, a lot of things degrade -- quality, productivity and throughput time are the usual victims. Consider moving things or people around to reduce travel distance of documents, information and products.

If you've done some process mapping and achieved some interesting results, please click Comments below and share those experiences with others.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

Get a Good Deal on a Lease -- Act Now

A Chief Executive Boards International member asked his fellow members for some cost-reduction ideas to save his business from a severe cash crunch. In the next breath, he mentioned his lease was up for renewal within the next year. It happens that this member is in a specialized business in a specialized building in a severely depressed local economy.

The members unanimously advised him to run, not walk, to the landlord, requesting several things:

1. An immediate rent abatement, or rollback -- perhaps to or below the original base rent (before escalators) of the current lease.


2. A renegotiated renewal at an even lower lease rate -- asking also for an option to terminate in the case of sale, liquidation, or bankruptcy


3. At least 2 months' rent at $0, commencing with the start of the new lease

The members' rationale was straightforward. First, you don't get what you really need without asking. And, secondly, the lessee (CEBI member) is holding all the cards in this deal. It's highly unlikely the landlord could find a replacement tenant any time soon, and he probably knows that. The peace of mind that the lease is even renewed at all should be worth something in rent reduction. And, finally, the lessee knows that the landlord owns the building free and clear -- he's not in his own cash crunch trying to meet debt service demands of a mortgage holder.

Tough times call for tough actions. Have a look at your own lease, and if you see a renewal in the future perhaps now is the time to renegotiate that. You'll never have more bargaining power. Here's a recent article from Inc. Magazine with a multi-part strategy for getting your rent reduced: http://www.inc.com/magazine/20090501/how-to-get-a-good-deal-on-a-lease.html This article makes the important point that you probably don't want to go this one on your own, and further that a good real estate Attorney might be more help than a Commercial Broker.

If you've had some success in reducing your lease expenses, please click "Comments" below and share that experience with others.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

Theft and Embezzlement -- Another Interesting Case

I'm constantly amazed at the amount of employee theft and embezzlement that persists in American companies, large and small. And also amazed at the fact that most business owners and CEOs are convinced "It's not happening here."

Another of those stories surfaced recently in our local market (Upstate South Carolina). In that scheme, a man operating three local businesses (apparently fronts pretending to be trucking, warehousing, etc.) was charged with mail fraud and money laundering that took place over a 6-year period. The amount of the fraud? Four Million Dollars! Like many, this was an imaginative scheme.

The victim was a $20 million Oregon-based company owned by a private equity group. The scheme was built around falsified freight invoices, charging for freight that was never hauled. You might suspect an "insider" accomplice in such a scheme -- surely somebody would notice all that freight cost and ask some questions, wouldn't he? From news accounts, it sounds as if the person approving and forwarding those invoices was a contract employee of the scammed company, located in yet another state! Apparently he invented the scam, and the recently-charged local guy just helped step it up by providing even more fake invoices (for a 50% cut).

Simple deal -- one guy produces invoices. Another, as a work-at-home contract employee, approves and submits them as legitimate and the company pays them. The guy generating the fake invoices was apparently also very good at fielding questions about those invoices from "real" company employees. Considering the 2700 miles between company headquarters and the perpetrators, one can assume nobody drove past the "freight terminal" and realized there were no trucks.

I believe such stories include great lessons for business owners, such as members of Chief Executive Boards International. They're tipoffs to things we should be watching in our own businesses every day, and pitfalls we don't have to suffer if we learn from the misfortunes of others.

If you have a tale of an imaginative embezzlement, fraud or employee theft scheme, please click "Comments" below and share it with us.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

What I Learned at the CEBI Fall Summit

As you know, this blog highlights ideas and lessons that come out of both local and national meetings of Chief Executive Boards International. We just returned from our Fall Summit in Richmond, VA, and we continue to get great feedback about the Summit from our members.

One of our members, author of The Small Business Savings Plan, regularly recaps the list of ideas, observations and suggestions he takes home from a Summit. That recap is at: http://www.chiefexecutiveboards.com/briefings/briefing081.htm

If you're wondering "Could a group of other business owners actually help improve my business?", the answer is yes. Our members give their Chief Executive Boards International experience great credit for their business and personal success. If you haven't discovered this simple, powerful resource, you're missing something.

If you find Tim's notes useful, please click on "Comment" below and let us know.
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Terry Weaver


CEO
Chief Executive Boards Internationalhttp://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com