Adding Value as a Performance Indicator

While most traditional ways focus on actual performance against expectations or against established goals to rate employee performance, here is a different perspective.

Entrepreneurs should put employees into three categories – those who add direct value to your business, those that are neutral or add indirect value, and those that reduce company value.

Pay special attention to the first category by training and motivating them so that they continue to add value. Have a strong retention program for these individuals so that they don’t leave your organizations.

Deal immediately with people who reduce the value of your company. These are the bad apples that need to be removed from the company as soon as possible.

The people who are neutral as far as their contribution to company value need to be either moved to the category of employees that add value by training, or red-circled if they are providing a support function to the first category of employees. If there is a chance that they would reduce the value to your company, they need to be transitioned out.

Rating employee performance based on impact on company value and dealing with them appropriately will go a long way in building the value of your company.

Ravi Patel

www.patelCFOservices.com

Coaching Employees

“A good coach will make his players see what they can be rather than what they are.” – Ara Parasheghian

Like good coaches, Entrepreneurs have to find the potential in their employees. When hiring, don’t merely evaluate the current skills and experience of the applicant. Rather, determine what the person could become with proper mentoring and training.

Given right coaching, raw talent could be molded to perform at a high level in any organization. The problem for Entrepreneurs is that they mostly focus on short-term needs and do not have a long-term vision for human resource acquisition and management.

When a sculptor views a stone, he/she is evaluating whether it could be transformed into a thing of beauty. Similarly a land developer sees beyond the empty expanse of land and has a vision of what a housing community or golf course it could become.

Entrepreneurial leaders have a great vision of what their idea or product could become. They need to use a similar vision towards their employees and see their potential rather than settle for what they are right now.

Do the Right Things!

Ravi Patel

www.patelCFOservices.com

What Drives Your Revenues?

Almost everyone has heard the cliché that in order to help a hungry man for the longer term one teaches him how to fish rather than giving him fish.

Similarly, for Entrepreneurs to be successful they should not only focus on increasing revenues, but should more importantly also understand what drives those revenues. Then, improve the processes that deliver those revenues.

Entrepreneurs might be able to increase revenues in the short-term by doing it themselves. Without knowing what drives revenues it might indeed be short term. In order for revenues to continue growing for the longer term and through other people, they need to establish and keep on improving the processes that generates such sales.

In order to do so, they first need to understand the processes, improve them as necessary and then ensure they are repeatable with no lapse in quality. Documenting the procedures, training the people and monitoring compliance are necessary to implement robust revenue-generation processes.

Do the Right Things!

Ravi Patel

www.patelCFOservices.com

Confusion Kills Excellent Business Processes

While travelling recently, we stopped at a food establishment in the airport.  This chain had an established process of ordering and delivery of food items. However, this process was neither intuitive nor well-posted for patrons to understand, creating confusion and frustration.

There is a lesson for Entrepreneurs. As you focus on reviewing and improving business processes, do not forget that such processes have to be well understood by the users. There should be a strong emphasis on effective communication of the established processes.

For external users of your business processes, such as clients and vendors, lack of proper communication could negate the effectiveness of your procedures regardless of their excellence. Periodic follow-up with these users as to their understanding and feedback on the process would create an opportunity for refinements.

For internal users, communication combined with training is absolutely necessary. Developing a business process, no matter how good it is, will be effective only if your employees understand it.

Develop, improve, effectively communicate and fully train the users about each business process, otherwise confusion will kill your processes.

Ravi Patel

www.patelCFOservices.com

Informational Lunches

H9ving lunches outside office premises to meet and discuss issues with clients, vendors or other business associates is common for Entrepreneurs.

Entrepreneurs, have you considered having regular informational lunches in-house to communicate with employees? Periodic lunches with employees on an informal basis where employees bring their own lunch and sit around a table to discuss business issues may be beneficial.

You might even want to have a speaker share information on general informational topics or have focused presentations on technical subjects. Limit such sessions to no more than 20-25 minutes.

Periodic, informal yet informational lunches with employees may serve as a powerful communication medium for Entrepreneurs.

Ravi Patel

www.patelCFOservices.com

Analyzing the Cash Flow Cycle

When is the last time you have analyzed the cash flow cycle in your business?

Understanding the cash flow cycle is crucial to working capital and cash management. It is important to determine when cash is generated and spent in the business and the duration of the cycle. What are the bottlenecks and what can you do to speed up the cycle?

Entrepreneurs interested in improving cash flow in their businesses need to first analyze the cash flow cycle.

If we can assist in the process, please contact us at Patel CFO Services (www.patelCFOservices.com)

Ravi Patel

www.patelCFOservices.com

Replicating Business Models and Processes

Entrepreneurs can achieve growth by replicating their successful business models to new markets. The success of famous franchises has been based on utilizing this growth principle. McDonald’s, Pizza Hut, Starbucks are just some examples of this approach.

In order to  replicate the business model, it is essential to standardize the business processes used in the model, perfect them, and then implement them in new locations. Efficient processes in all areas of business – financial, operations, marketing, human resources, and so on form the formula for successful replication and thereby growth.

Entrepreneurs desiring to grow their businesses may want to consider this approach.

Ravi Patel

www.patelCFOservices.com

Are you Managing your Open Workers Comp Cases?

Workers Comp insurance is quite a significant cost of doing business. Premiums keep on increasing, but you can do something about managing such costs.

Entrepreneurs should review all open workers comp cases and manage their favorable closure. Meeting with your broker and insurance carrier periodically and examining the status of each open case and developing a plan to get the employee back to work should be of prime importance. Mitigating or reducing the reserves established by the insurance carrier for open cases should be actively negotiated.

Open Workers Comp cases should be managed proactively. However, the best course of action is to establish an effective safety program and ensuring compliance with policies and procedures.

Ravi Patel

www.patelCFOservices.com

Days Payables Outstanding (DPO)

Similar to Days Sales Outstanding (DSO), a useful measurement for payables management is Days Payable Outstanding (DPO).

DPO is an indicator of how long the company is taking to pay its trade creditors. It is usually calculated by dividing Accounts Payable by Cost of Sales and multiplying it by the number of days. It can be tracked monthly or quarterly.

Entrepreneurs interested in cash management might want to supplement the DSO metric with DPO. Tracking these metrics reflects how well working capital components are being managed.

Ravi Patel

www.patelCFOservices.com

Adding Value to Business Processes

I have previously emphasized examining your business processes with a view to continuously improving them. This exercise makes your processes more efficient increasing productivity.

However, if your business process does not add value, how good is it? Having an efficient process is not useful for only its efficiency; the process should add value to your business operations and ultimately the bottom line of your company.

Entrepreneurs should instill in their company culture a philosophy of examining every process and task from a perspective of adding value and being efficient at it.

Ravi Patel

www.patelCFOservices.com