Information, process and value footprint are the cornerstones of sustainable, profitable growth. I addressed Information in my last blog.
In this blog, I look at Process.
Without effective processes, even the best profit-mapping information will not be converted to action. Here are some process tips.
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Regularity and discipline. It is imperative that a company create a set of processes that are regular and disciplined, with clear accountability for results. These processes span strategy, market planning, account planning, product management and supplier management. In my experience, the best combination is monthly planning and results tracking at the local level (e.g. account planning), and quarterly planning and results tracking at high levels (e.g. strategy, supplier management).
If possible, tie these processes into the company’s natural cadence of planning and control (e.g. profit mapping becomes the core of the planning and budgeting cycle).
Wade in. All too often, companies spend inordinate amounts of time developing information, very little time developing core processes to convert the information into results, and almost no time on training and organizational development. This is a big mistake.
Again, in my experience, the training and implementation process works best in four steps.
First, create custom workshops for the top managers. The objective is to expose them to the information and to help them create the processes to convert the information into results. Here, we have found that the best results come from a combination of teaching cases, custom cases that we write on the company’s own business units, and planning sessions. The custom cases are crucial, as they give teams of the company’s top managers actual hands-on experience in working with profit maps and planning processes.
Second, develop pilot processes. Here, try a few alternative ways to work with the profit maps in formal processes. I suggest using a few great managers and effective sales reps to try things in separate efforts; the same holds with other functional areas like supplier management. It is important to have a few independent initiatives going, so you can see what works, and ultimately develop a combination of the best practices.
Third, create a way to scale the process. Even the best process needs to be changed in order to operate at scale, especially when less capable individuals are involved. Do this over several months in a purposeful way.
Fourth, work the processes into the company’s DNA and muscle memory. It takes time to perfect the implementation and to make the processes a way of life. Without this, the company will fall back on comfortable old practices, even if much less effective.
My old family recipe for wading in is: 6/6/1 – six months for steps one and two, six months for step three, and one year for step 4.
Compensation. If you continue to compensate your sales reps on revenues and gross margin, and they “work their pay plan,” it is obvious that you won’t maximize your profitable growth. Your sales reps need to be carefully trained, and the compensation has to be modified as they develop the new understanding and skills. Compensation is a very sensitive and complex topic, but I suggest that a bonus overlay works well in the first year.
In parallel, we focus strongly on training the trainers (especially the sales managers and their counterparts). Here the relevant metaphor is to school excellence: it the principal of a school is great, the school will be great; but if the principal is mediocre, the school will underperform almost regardless of how talented the teachers are.
In my next blog, I’ll look at Value Footprint.
Jonathan Byrnes is a senior lecturer at MIT and author of the recent book, Islands of Profit in a Sea of Red Ink. He is president of Jonathan Byrnes & Co., a consulting company with which he has advised over 50 major companies, medical institutions and industry associations. Contact him at [email protected].