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2008 Issue 9
Learn The Lessons Of
Franchising Success
Listen Up
– Learning From Employee Suggestions
Avoid Budget Blowouts
Private Use Of Company
Computers Puts Your Business At Risk
 
Learn The Lessons Of Franchising Success
Franchising is possibly the most successful
business model ever invented. The survival rate
of franchises is far higher than that of
stand-alone businesses. Is it possible that
there is a lesson to be learned from the way in
which franchises operate that could be applied
to small independent businesses to improve their
profitability and likelihood of survival? The
answer is an emphatic YES. The fundamental
principle of good management that franchisers
have put to such good use is available to any
business owner – it’s SYSTEMATIZATION.
Think like a franchiser
The key to systematizing your business is to
think about it as if you were turning it into a
franchise. Entrepreneurs who set out to turn
their business into a franchisable operation
know that the core thing they need to get right
is to develop foolproof operating procedures.
The franchisor isn’t going to be there to watch
how each one of their agents prepares and cooks
the pizza or washes and grooms the family pet.
Central to franchising is the repeatable
production of a high quality product or service
experience for the customer without the
oversight of the franchise manager. The only way
a franchisor can guarantee that happens is to
train their agents to go through every process
in a systematic manner. If it’s preparing a
sandwich, then everything from the way to cut
the bread to how and when the condiments are
added is dictated and taught from a system
developed by the franchiser. The success of
individual franchise outlets is the best
advertisement for the soundness of this
approach.
Systematizing is the approach you need to take
with regard to every aspect of your business if
you want it to stand as solid as a franchise.
Start by focusing on one particular aspect of
your business. Think through the entire process
so it can be handled efficiently and
consistently by everyone who has to perform it.
Systematize the right things
Any process can be systematized but the place to
start is with those that deliver value to the
customer and to your business. A telephone
inquiry from a prospect, properly handled, can
result in an impressed customer and an order. So
systematizing telephone calls would involve
providing employees with a script that required
the phone to be answered without delay,
described how to introduce oneself, how to
handle likely inquires, how to take an order and
get all the relevant information first time, how
to deal with transfers to another person and how
to end the call courteously. Systematizing a
towing truck pick-up would cover not just the
mechanics of a safe hook-up but how to treat the
customer so that they are happy with the way
their automobile is being treated (no greasy
hand prints on it, provide a business card with
contact details and so on).
After you have thought each process through in
this way, write it down. Then work through any
problems or exceptions that you can think of and
write down a plan to deal with these situations
as well.
First things first
Systematizing may seem like a daunting job but
not every process needs to be done at once. The
key processes for your business are those that
touch on product quality and customer service
standards. Get those right first. Back office
routines that don’t directly touch on these such
as handling payroll, bookkeeping and marketing
can be considered later.
Some processes can be systematized simply by
buying a training package, for instance,
telephone technique. Others can be systematized
by creating templates, standardized forms and
checklists so all team members go about a task
in a consistent way. And some processes, such as
payroll, may be better off being outsourced to
ensure they are done in a systematic manner.
Write it down
Systematized processes don’t stay that way for
long unless they are documented. Set up a simple
operations manual. This will detail the tasks
that make up each of the key operations or
procedures of your business. The objective is to
write your manual as if it were going to be used
by a ‘franchisee’. It should explain an
operation in sufficient detail that an employee
could follow it unaided and get the right
result.
Franchises are successful for a very simple
reason – each one has identified a set of
customer winning practices and developed
operational methods for consistently replicating
them. Any business prepared to exert the
necessary discipline can benefit from
systematization in exactly the same way as
franchisers do. The payoff won’t only be in
terms of profit. Systematizing a business allows
it to run without requiring your constant
intervention or always answering employees'
questions about how things work. It can improve
your peace of mind as well as your bank balance To Top 
Listen Up –
Learning From Employee Suggestions
When an employee comes to you with a suggestion,
what is your usual reaction? If its along the
lines of “That’s never going to work”, “That’s
not your problem” or “We don’t have time
to think about that” – or any equally
negative response, then you could be missing out
on a great opportunity to pick up on ideas for
increasing productivity, cutting costs, or
improving working conditions.
Too many managers simply dismiss ideas put up by
their employees without giving them proper
consideration. Yet employees are the people
closest to the action, be it on the production
line, in the admin office or on the floor
dealing with customers. They see and hear a lot
and are often led to think about, or even invent
for themselves, better ways of getting things
done. Better ways that can improve productivity,
morale, process efficiency and ultimately,
profits. It is important to openly encourage
employees to come forward with their suggestions
and to make them feel that they are a part of
the decision making process.
As with everything in business, the better the
planning you put into an initiative the more
value you get out of it. A poorly conceived,
hastily launched, undefined employee suggestion
program can backfire and achieve just the
opposite of encouraging ideas – it can turn
people off by creating bad feeling and making
them more cynical.
There are a number of channels you can create to
receive employee suggestions. Some will suit one
business more than another. Some businesses may
find they can use more than one approach. Most
basic is the suggestion box. These days a
suggestion box needn’t be a physical thing, it
can be an email address employees use to email
in their suggestions. The brainstorming session
is a more formal approach and involves a greater
commitment of time and money.
Tips for an effective employee suggestion system
- Set clear goals and guidelines for the suggestion program. If the program is publicized
as being about ideas that will achieve cost savings or about achieving a better level of
workplace safety then you have immediately screened for what you want to hear about. If the
program is totally open to any suggestion then point that out.
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Deal with suggestions quickly. Delay a decision more than a week and people will see the
suggestion box as a black hole.
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Acknowledge receipt of valid suggestions. Never reply to obscene or abusive suggestions. Your
best response to that sort of negativity is to not indulge the sender with a reply.
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Let the contributor know the result. If their idea got the thumbs down explain in detail why
you can’t use it. If the idea is worth implementing, tell the whole team so they can
see the process at work.
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Make the decision process transparent and fair – if the suggestion reviewer is the boss alone or
just the top managers, rejection may be taken as just another instance of management negativism.
- If the suggestion gets the thumbs up carry through the implementation. Nothing builds trust
and credibility faster than keeping a commitment.
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Tie implementation into a reward program but don’t reward for suggesting alone, reward only
acceptable suggestions. Otherwise you’ll spend a lot of money on rewarding ‘get a new coffee
making machine’ type suggestions. The program is about quality suggestions. Your rewards don’t
have to be of great monetary value. Common rewards include tickets to events, gift vouchers
and restaurant meals.
Employee suggestions have saved their company significant amounts of money. It was an
employee’s suggestion to build an elevator on the outside of the El Cortez Hotel in San Diego
rather than, as the engineers had suggested, cut a hole through each of the floors internally.
That saved engineering fees, cleanup costs and loss of income from having to close for the
duration. Smart managers understand the potential of employees to come up with good
ideas and encourage them to do so. You can too. But do it properly. People are easily
discouraged and the process can become the butt of jokes if not taken seriously by management
To Top
Avoid Budget Blowouts
A budget is an important management tool. Being
a projection of your income against your
expenses you can check it at any time to see how
well or how poorly your business is doing. The
value of a budget is in direct proportion to the
accuracy of the figures you use to create it.
Here are some precautions to take to keep your
budget figures accurate.
Use realistic projections
Since a budget is based on projections there’s
always an element of uncertainty involved in
estimating inputs. It pays to be conservative
regarding things such as sales forecasts. If
they turn out to be better than estimated,
that’s great and provides the opportunity to
distribute the extra advantageously. But if they
are worse than expected it means rethinking all
your plans to match the budget shortfall. If
your business provides a product or service for
which the demand varies by season (retail sales
over a holiday season, pool maintenance between
seasons and so on), then factor that into your
budget.
Don’t underestimate costs
Gasoline, travel, raw materials, rent… all
costs increase over time. A projection of costs
at current year value will result in budget
blowouts. It’s wiser to make a best estimate and
then increase it a little. If the actuals do end
up coming in under projection you will have
provided a little bit of ‘fat’ in the budget to
cover the odd unanticipated contingency. You
might even add a ‘miscellaneous’ line item to
the budget to handle those unknowns.
Question every expense
Preparing a budget provides the perfect
opportunity to consider what value for money you
are getting from the costs you are incurring. Is
it time to change the gasoline powered work
vehicle to a hybrid? Look at raw material
substitutes? Move to a VoIP phone service? Also
look for any expense items that could be
eliminated. A penny saved is a penny earned!
Factor in cash flow
Incorrectly projecting cash flow will turn the
best budget into a fiasco. In virtually every
transaction there is a lag time between the
finalization of the deal and actual cash
collection. This time lag has to be built in
when preparing a budget – you may expect to sell
goods to a certain value in Month X but that
doesn’t mean the value of those sales will be in
your bank account in Month X. This doesn’t
present a problem if the budget allows for it.
When it's not factored in you can run into
serious cash flow problems through spending
money you don't yet have.
Allow for your tax liability
Don't forget your likely obligations to the
taxation department. Sales income will
ultimately be depleted by sales tax, various
other state and federal taxes and employee
withholdings. Fail to account for these and you
run the risk of budgeting for future projects
that you aren’t going to be able to afford.
Keep the figures current
Budget preparation isn’t a once a year
operation. Things change – the price of gasoline
soars, sales are a lot better than expected.
Budget lines need to be revised to reflect these
events. The point of budgeting is to be able to
compare actuals against projections to see how
the business is going. If the actuals aren’t
actuals you’ll be making decisions based on
false assumptions.
It’s easy to let the budget become just another
document gathering dust on the shelf. Plugging
in the new figures each month, considering how
actuals are tracking against projections and
what that means in terms of what you need to do
takes a lot of self discipline. But if you don’t
do it, you’ve not only wasted the time and
effort you put into creating the budget, you
open the path to fiscal irresponsibility and
wasted opportunities as off-the-cuff purchase
decisions send expenses out of control while
unexpected income sits in a bank account when it
could be put to use to improve operations.
To Top
Private Use Of Company Computers Puts Your
Business At Risk
As the use of computers becomes more built in to
business operations employees naturally spend an
increasing proportion of their time working at
them. Working? Really? With temptations such as
chat, streaming video, blogs, social networking
and myriad other interesting sites (weather,
maps, pornography, music, games, gambling,
shopping, sports) it’s no wonder that surveys
such as Websense’s annual Web@Work study reveal
a depressing incidence of non-work related Web
surfing by employees.
And it’s depressing not just because of the loss
in productivity due to the amount of time wasted
on such activities. These private activities,
because they take place at the workplace using
work computers, can entangle the business in
legal prosecution cases related to their illegal
use. Classic cases of work computer abuse
include the employee who managed an eBay store
from work selling his company’s inventory and
another who set up the company server to run his
gambling site. Downloading sexist materials and
sharing them among workmates or sending them on
to outsiders puts the business at risk of a
sexual harassment charge. There are technical
issues too – non-business internet use can soak
up bandwidth slowing the company network server
and open up computer records to infection by
malware, trojans and viruses.
Managing the risks that arise from non-business
use of business computers is a challenging task.
It needs to be addressed on a number of fronts.
Policy:
Develop a formal policy outlining what is
considered acceptable use of computers and the
internet. This sort of policy is usually
referred to as an internet Acceptable Use Policy
(AUP). AUPs can include any provisions for
private use of company computers, for example,
if an employee on lunch or coffee break can send
private emails or surf approved sites. The AUP
must drive home three key ground rules:
- Computers are company property
- They are for company business – either exclusively or with specific provisos for private use
- The company reserves the right to monitor the use of its computers and inspect all files on them
Education:
The first step in an education program involves
making sure that every employee receives a copy
of the AUP and understands its provisions. They
should also be asked to sign off on having read
and understood it. Outside of that, employees
need to be sensitized to the risks they expose
themselves and their business to, particularly
the legal penalties that can result from
computer abuse. Workshops, team meetings and
articles in the company newsletter are good ways
to keep people aware.
Performance management:
an AUP is of no value if it isn’t backed with
specific actions that will be taken against an
offending employee. These will range in severity
commensurate with the type and degree of
computer abuse from written warnings all the way
up to termination.
Internet monitoring and control:
powerful monitoring software that can track and
report ‘sites visited’ is available. There is a
natural reluctance to use this solution as a
matter of course even though it is part of the
AUP. Questions arise about violation of privacy
and the detrimental effects on morale of
‘spying’ on employees. Nevertheless, this sort
of software should be installed even if not
deployed – or deployed only randomly for the
sake of establishing if the AUP is being adhered
to within the business. Filtering software can
be used to prevent employees from accessing
sites, software and other connections that may
violate the company’s AUP and endanger its
networks and systems. To Top
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