Adventures in Leardership

A boss who reacts before getting the facts  and thinking things through needs the leadership support and decision making training from  Winning@Business™ and a steering team.

Arcelor-Mittal Steel, feeling it was time for a shakeup, hired a new  CEO. The new boss was determined to rid the company of all slackers.  On a tour of the facilities, the CEO noticed a guy leaning against a  wall. The room was full of workers and he wanted to let them know that  he meant business. He asked the guy, “How much money do you make a week?”

A little surprised, the young man looked at him and said, “I make $400 a  week. Why?” The CEO said, “Wait right here.” He walked back to his  office, came back in two minutes, and handed the guy $1,600 in cash and  said, “Here’s four weeks’ pay. Now GET OUT and don’t come back.” Feeling pretty good about himself, the CEO looked around the room and  asked, “Does anyone want to tell me what that goof-ball did here?”

From across the room a voice said, “Pizza delivery guy from Domino’s.”*

Many people have considered the difference between leadership and management
critical to a business.  Leadership is important in keeping the business
headed in the right direction and focused on moving there. Things like
vision , strategy, and presence are all key aspects of leadership.  Leaders
deal with change and have an ability to stay focused amid a torrent of
distractions.

Management is about action.  Managers handle complexity and make a myriad of
decisions on a constant basis. They deal with things like budgets; plans;
organization charts with job descriptions; training; motivation and
follow-up to assure implementation.  Managers deal with complexity and keep
the ship moving forward through a complex and tumultuous environment.

Recognizing the difference between management and leadership and making sure
that your business has the processes and talent to achieve both are critical
to success.

“Turn turn turn, see whats become of me” was prophetically written by Simon and Garfunkel over 40 years ago.  I am not sure if they were thinking of retail at the time but truer words could not be sung.  Retail is based on buying goods and then selling them for more than you paid for them.  If you only do that one time you do not make much cash.  The more times you can sell your inventory, the more cash you make.  Every time you sell your inventory you have “turned” it one time.  The more times you turn your inventory, the more cash you put in your coffers.  Turn turn turn and see what will become of YOU!

Turn is the relationship between inventory and sales and determines the success a retailer has in generating cash.   Just like any measurement, to be useful the measurement must be applied at the right place to have meaning.  Although a general indicator of a store’s success can be indicated by overall turn, a much more useful application of turn occurs at the classification level.  Every class should have a targeted turn based on the store’s location and character, the type of inventory (staple, fashion, hard goods etc), the season and many other variables that are all part of an effective merchandise plan.  When a classification is turning too fast, it could likely indicate that sales are being lost due to lack of selection, sizes or depth. If a classification is turning too slowly, there is too much inventory due to overbuying, old goods or other reasons that are taking up cash, space and focus while not generating sales.  Unless you have the right target, you don’t know what is too fast or too slow!

The Formula

Turnover is calculated over a continual 12 month period of time.  It is 12 months of retail sales divided by the average retail inventory over a 12 month period.  A good estimate of  turn rate can be calculated by  taking the first of month inventory amount for 12 consecutive months plus the ending inventory at the end of the 12^th month and dividing this number by 13.  This will yield the average inventory amount.  Now divide the total sales for the same 12 month period by the average inventory amount to get the annual inventory turnover rate. In a seasonal business, annual turn is the best way to analyze turn.  We  also do a 12 month rolling average turn to get the most recent data but still including a year’s worth of data.

Why is Turnover rate Important?

The questions turn answers is whether you would like surplus inventory sitting on your racks or more cash in your bank account.  Too much inventory on the racks, ties up cash, yet not enough inventory results in lost sales.  Turn is the relationship between the inventory and the sales and when done at the class level, helps you find the right balance for your store.   Since turn generates cash, your challenge is to increase sales without increasing inventory. That is the goal of the science of merchandise planning! The secret lies within the art of sales forecasting for each classification. The skill lies in arriving at the right target turn rate for each classification in each store.  The results come from adhering to the right plan.

Simon and Garfunkel got it right. Turn is the key to your success.  Focus on it. Manage it. Plan for it. See what will become of you.

A boss creates fear, a leader confidence. A boss fixes blame, a leader corrects mistakes. A boss knows all, a leader asks questions. A boss makes work drudgery, a leader makes it interesting.”

Russell H. Ewing

The following article was written in 2001 after 9/11.  I updated some wording to reflect this last economic disaster but I was amazed how pertinent and meaningful the message is for surviving this latest economic disaster.

Déjà vu All Over Again

The events of September 11 underscored the globalization that has occurred in the world. The enemy strikes when we least expect it and then retreats, invisible until the next strike.

Many businesses are faced with the same globalization effects in the Great Recession of 2009 . Retailers, manufacturers, construction moguls, Wall Street Wonks and professionals operated  businesses assuming that they were insulated from the effects of what happens elsewhere in the world and their business success would go on forever. Then comes the sudden attack when the world turns upside down. You feel victimized and vulnerable because everything you built is now threatened and none of it was your fault.

The United States and the world essentially shut down while we stabilized the situation, recovered from the disaster and developed a new strategy going forward. You need to take a similar approach as the economy enters recession, people lose jobs and spendable income ends up in savings accounts instead of new goods or  services. It will not be business as usual which means that you need to:

§  Stabilize the situation: Work with existing customers to assure they are committed to your business.  Customers you counted on before are reassessing their own situation.

§  Recover from the disaster:  Develop SWAT teams to find new ways to generate sales and reduce expenses. Even though the disaster was not your fault, don’t sit back assuming YOUR recovery is not within your control!

§  Develop a new Strategy: Reassess your markets, products, people and growth. Develop new objectives and direction for the company if that is required. Down size if necessary. Diversify if warranted. Study the situation and figure out how the environment has changed and refocus efforts, energy and assets to achieve greater success.

Sometimes survival is the first step to success but survival is never an end in itself. This country learned a lot in the hours and days after the attacks. Those lessons need to be understood in our personal lives for our security and in our business lives for our well being. We are in control if we take control. We have learned about teamwork, commitment and unity. The organization is going to change if it is to survive. Don’t act like a victim. Our future lies in our resolve, resilience and productivity.

“Sometimes I get the feeling the whole world is against me, but deep down I know that can’t be true. Some of the smaller countries are neutral.”     Robert Orben

Many owners confuse delegation with empowerment while they actually are quite different. When delegation precedes empowerment, you have set up the employee to fail. Winning@Business™ shows you the right way to proceed!

Alan Roseman’s (Los Angeles, CA) Detroit area client TWC Surf and Sport has been getting great press. Owner Tim Shepard was featured in articles in DetroitNews.com and in freep.com (powered by the Detroit Free Press). TWC, originally an acronym for “The Windsurf Company”, has grown to offer sports items that can be enjoyed during every season. TWC, which is known for its knowledgeable staff, has recently moved to an 8,000 square foot location.

When a company is open to change and accepts the help that is available to it, a picture of disaster can become quite different. The first step is to identify the underlying problems and develop solutions and actions plans to correct the problems. A strategy is developed for operations and cash management and it is made clear to everyone in the company. Many times actions are taken to make the company more lean and competitive before outsiders force the moves. Things change quickly!! All old habits and procedures are questioned and leaders emerge. When there is direction and planning, creditors, vendors and banks tend to have more faith in the future of the company. The key to the successful management of a crisis is that an outside influence is needed. No one inside the company can have comparable perspective, independence and emotional detachment to see the path to success clearly.

Character is like a tree and reputation like its shadow. The shadow is what we think of it; the tree is the real thing.” — Abraham Lincoln

No, Management One® has not turned to advising the political hopefuls on the campaign trail.
This article pertains to you, your business and how you run it.

I recently read a survey done by a colleague, Nikki Weiss, that captured the mood which exists in many organizations today. She queried staff members about the management of their organization.

Nikki related, “While many said they liked their immediate manager and other managers in the firm, they reported that, in general, all managers are too busy doing other things (selling, administrating, reading reports) and do not take the act of managing (developing people) seriously. The surprising and encouraging note in the survey was that the survey respondents craved a culture of accountability, in which managers who proclaim their commitments to standards of excellence and vision statements follow through on their pledges.”

This survey is interesting because it mirrors what I have seen in countless organizations. The staff craves a management process which they perceive as fair, committed, organized and demanding. This is opposite to the perception that the owners and managers have of their own people. The staff wants the managers and leaders to spend more time coaching, teaching and nurturing their performance rather than rushing in to do the job for them.

I have broken down the success of business people into 3 broad needs:

• Make the right decisions –
  • Leadership
• Get the decisions implemented –
  • Management
• Implement the decisions –

• Work

Of course there are many pieces and parts to implementing a good leadership, management and work program in a company but most people in independent business have a vast number of areas where improvements at all levels will yield great results.

Are you nurturing and teaching others to make the right decisions? Too often the managers feel they must do too much themselves and step all over the people who should be getting the work done.

Are you empowering others to do more and even make some mistakes? When managers let the workers do their job, motivation, commitment, innovation, fun and results improve!