Catch ‘Em Doing Right!

April 30th, 2010

I’ve long talked about “catching employees doing right” as a vital day-in, day-out responsibility of a manager. I believe it can go a long ways towards a productive and supportive workplace, which is desperately needed in today’s business environment; however, it should be a priority ALWAYS. Just to clarify, I do NOT support burrying your head in the sand and ignoring behaviors that need to be corrected/ adjusted. It is also important to address these ASAP (waiting for the annual review is USELESS); however, it has proven effective to be on the continual lookout for employees who are “doing right”. Orient yourself to look for progress. You’ll be surprised with the results.

The reason I bring this topic up is that today I saw a Harvard Business Review article on this topic, and it shows that “success gets into your head – and changes it” whereas “failure has no impact”. If you want to change behaviors, catch ’em doing right.

Do you have to pay low wages to be successful?

April 30th, 2010

Actually it could be quite the opposite, so long as you are paying for performance. I recently was interviewed for an article on pay for performance systems, and so I’ll provide the link when it comes out. In the interim, I wanted to comment on a recent article in CFO magazine which touched on this subject.

Costco was referred to as the anit-Wal-Mart because it pays its employees more and offers more generous benefits – and it does quite well. According to their CFO, they have a different business model which is based on high volumes and caters to businesses and more-affluent customers. They’ve figured out an efficient way to pay their people more and still drive down expenses as a percent of sales.

If you think creatively, innovate and focus on what’s important to your business (which, in Costco’s case, they obviously consider their employees to be valuable assets), it’s my experience that you’ll be far more likely to succeed.

2010’s New Normal – Transportation

April 26th, 2010

Logistics and transportation companies were hit early and hard by the economic downturn. The American Association of Railroads estimates that the rail industry had assets worth $43 billion standing idle as of February 2010 – almost 30%. On the air freight side, about 15% of freighter capacity was removed from the market last year. The same situation is true for trucks and containerships. This excess capacity drove down profitability. Many companies went out of business but many of the ones that survive the recession will emerge leaner and wiser – in a “new normal” business environment.

In this new normal business environment, there are a few overriding themes: 1) leaner inventory management policies (to accelerate cash flow). 2) a renewed interest in SKU rationalization (to impact costs and efficiencies). 3) Increased flexibility and openness to new ideas. For example, it is becoming common to review the relative efficiency of different modes, the location of distribution centers and whether they are willing to wait a bit longer to pay less for deliveries.

I’ve seen these themes arising more and more freqeuntly with my clients. Undoubtedly, cash is king in today’s business environment. I’ve written several articles about these topics. For example, refer to my recent newsletter on inventory reduction/ accelerating cash flow: click here.

Unemployment in CA & the U.S. – What Can We Do?

April 21st, 2010

According to the UCLA Anderson Forecast, it is predicted that California employers will shed another 90,000 jobs this year and job growth will remain slow. Overall, it’s expected to remain around 12%. California is far worse than the national average (which hovers just below 10%); however, there is much to improve with both.

Oddly, even though Southern California has huge unemployment rates and has lost some large companies in the last several years, L.A. County remains the largest manufacturing center in the U.S. with 380,000 factory jobs. On the other hand, it only holds the #1 slot because longtime #2, Chicago’s Cook County has also seen half of its manufacturing jobs vanish over the last 20 years.

The losses in manufacturing have accelerated over the last two years as manufacturers have reduced production in line with reduced consumer demand. However, interestingly, not every major metropolitan county has been losing manufacturing jobs. Harris County, Texas (which includes Houston) has added 20,000 manufacturing jobs since 1990 and is closing in on the #2 position. Houston is much more cost competitive.

Thus, what should we do? We have to turn towards INNOVATION, which happens to be America’s foundation. I recently wrote an article for M World, the American Management Association’s magazine, titled “Accelerating Cash Flow through Supply Chain Innovation”. The spring issue of M World focused exclusively on innovation. According to Commerce Secretary Gary Locke, we must spend our time more productively by rediscovering the traits that have long made America’s economy the envy of the world. Scientific research. Innovation. New technology. Entrepreneurship and the new modes of commerce.
As Gary Locke’s says, “Despite our current problems, America still employs 70% of the world’s Nobel Prize winners and is home to three-quarters of the world’s top 40 universities.” In my opinion, we need to emphasize innovation in businesses and throughout the educational system. There’s no time to waste!

Risk – Emerging Topic?

April 19th, 2010

Today uncertain economic climate is driving greater focus on risk management.

According to Industry Week’s article, “Riskier Business”, signs indicate that CEOs will be taking greater notice of risk in the wake of the economic crisis. According to a PricewaterhouseCoopers’ latest annual CEO survey, fully 84% of respondents reported they anticipate making changes to the way they approach managing risk, with 41% indicating that those changes will be major ones.

Also according to the Industry Week article, a few pieces of advice are as follows: 1) Categorize your risk – strategic risks, big-picture operational risks, financial risks and compliance risks. 2) Assume greater uncertainty. 3) Mitigate credit risk.

I also recently addressed this topic in an article published in Project Times, “Project Risk – Should You Care”. In the article, I discuss three keys to success: 1) Identify what might go wrong. 2) Determine potential reasons. 3) Implement steps to mitigate risk. To read the article in full, click here.