Questions for Managers

The risks you can insure against are only some of the risks you face. Some risks are bad, but many are good: taking smart risks is smart business. In fact, taking risks is business. And what you don’t know can kill you.

1. How will our biggest risks grow or shrink over the next three years?

Some people won’t make a single list of all their risks, because it’d make them crawl under their beds and never come out. A risk is a combination of the probability something will happen and the magnitude of the result. We don’t insure against asteroid strikes, though getting hit by one is pretty decisive. Hiring someone, launching a new website, upgrading technology and moving into a new building are typical risks with fairly well-known characteristics. But innovation, by definition, brings unknown risks, so extra thought is needed.

Tip: Make a list of all your risks and then assess the probability the worst (or best) will happen and then estimate the magnitude of that outcome. Making a “risk summit” an annual event is probably wise. Invite your insurance agent, attorney, banker and someone from your trade or professional association.

2. How should we insure, share, avoid or accept our risks?

Just because you face a risk doesn’t mean you have to do anything about it. Accepting a risk is one good way to deal with it. Hospitals are learning that by promptly admitting mistakes to their patients that their risk of lawsuit actually declined significantly. Sometimes the legal solution is not the best.

Tip: Take your list of risks and then add columns (Insure, Accept, Share, Minimize, etc.) to prompt ideas for dealing with it. You’ll sleep a lot better having slogged your way through this.

3. What new risks should we take?

Try to think of new risks as experiments. As Jimmy Buffett said, “the world’s too big to understand,” so see if you can try a new idea without risking too much, either good or bad, and being clear about what you want to learn.

Tip: It sounds odd, but a good way to launch a creative conversation about new risks is to ask, “What would be the dumbest thing we could do?” It’s amazing how close the dumbest thing is to the smartest thing. Another stimulating question is, “What are some things our competitors are doing that we should do too?”

Courage

Leadership means taking risks that work more often than they don’t—and recovering gracefully from risks that fail. No one will follow a leader without courage. So saddle up.

What’s your killer sales management question? Please comment below.

Who can afford to miss even a small sale in 2010? Customers on whom you’ve had a lock for years will now have a long line of your competitors streaming out their front door.

1. How could our CRM system help nurture relationships and close sales?

Getting a CRM system to produce results is a big task: setup, training, mining, reporting, etc.  Resistance by sales staff can be high: hoarding information, protecting relationships, complaining about the time needed. Terry Siebert, a sales expert with Dale Carnegie says, “Managing the sales pipeline takes real diplomatic skills.  Whoever’s wearing the sales manager’s hat needs to balance the unique style and personality of each sales staff with the corporate need to make the numbers go up.”   Having current business and personal information about each customer and prospect is the only way to provide great service.

Tip: So, how to get acceptance of a CRM?  Emphasize you want to drive sales and commissions up.  Use numbers and visuals to generate the competitive spirit.  A diagram of the sales pipeline (leads, presentations, proposals, contracts, repeat sales) makes a great visual.

2. What else can we do to keep our sales team informed, focused and effective?

You mean, besides money?  Lots of praise.  Create a modest bonus system for keeping CRM accounts current. Like everyone else, make them see and feel that they’re part of something big, new and better.  So, have a cool business plan:  sales people also want to be part of something big. Don’t think you can motivate highly independent people unless you keep everyone focused on success.

Tip:  Take all the marketing material used over the last 12 months and pin it up on a wall.  You might realize why customers don’t quite get your message.

3. How might our pricing have to change?

Well, how’s your competitive intelligence?  Knowing what competitors charge can be tough—but it’s necessary.  This leads to the most basic idea in business: “What’s our margin on each sale?”  Very few businesses really know.  Sales people want to offer discounts and concessions to close a sale, and if you you’re not confident what’s profitable, you’ll find yourselves working hard…making nothing.

Tip:  Getting an outsider to do some cost accounting:  you need the rigor and objectivity to get the right answer to this HUGE question.

What’s your killer sales management question?  Please comment below.

Money isn’t really about money.  Another great irony of management and planning is that questions about money, questions that seem quantifiable and objective are really and profoundly subjective.  These three questions will take you to deep, dark places.

1. What are the owners’ goals for personal wealth, charity and reinvestment?

Business plans can fail before they start because the owners are unclear about what money means to them.  And if you’re in a family business where no one’s clear about money, well, you might as well go hide under the bed now.

Here’s a trick question:  What’s the difference between what you need to earn and what you want to earn?  Here’s the trick answer:  either charity or greed.  To find answers you can live with you’ll need to dig deep into your upbringing, religious issues and differences of opinions with your spouse.  Don’t even think about setting financial goals for your business unless you’re clear about the financial goals for your life.

2. How do we balance short- and long-term expectations for overall ROA?

Let’s say you and your spouse are the 65-year-old founders of a successful business, planning to retire next year.  Your three kids (and two of their spouses) are managers; your eldest is prepped to be successor.   But over the next ten years your building needs expansion and a $1,000,000 piece of equipment needs replacement. You’re the boss today, but are these really your decisions?  It’s not a financial decision first, it’s a moral one.  Sorry.

Service firms suffer from the inter-generational hand-off, too, even if they’re not related by blood.  It’s common for the founding partners of a law firm to retire at the same time their clients do, leaving their firm without the key accounts.  Oops.

What do you care if your business survives you?  Why should you make another sacrifice, just at the end of your career?  Because what you’ve created will be important to people other than you.  Even if you’re the 100% owner, that doesn’t mean you’re ethically free to let it roll off a cliff.  Lots of people get hurt when you make unwise long-term investments.  The challenge is to be able to look bravely twenty years into the future.

But you don’t need to be facing retirement to be facing conflict over short- and long-term investments.  Scott Mosley, an expert in how business and personal wealth intersect, says, “Risk comes in many shapes and forms.  What seems risky to you may seem riskless to the rest of your management team.  Defining clear and common definitions of risk across your business and your personal assets is a great place to begin when thinking about money.”

3. How could we more actively help our employees protect their financial health?

No need to recite the dreary statistics about American savings habits.  But this problem hurts employers because staff can either be panicked into jumping ship for fifty cents an hour or, conversely, they can be too complacent, passing up opportunities they could earn from hard work and good ideas.  For all our talk, many Americans simply don’t understand money.

Money is all in your head

I was a mediocre Economics student, but I remember this definition:  “Money is a store of value.”  In other words, money, however you get it, is a kind of stockpile of your hard work, creativity and sacrifices.  It represents your life.  Now wrap your head around that.

What’s your killer question about your money? Please comment below.

Truman explained his nickname “Give ‘em hell Harry” with “I don’t give them hell; I just tell them the truth and they think it’s hell.”

The hardest questions, because it’s easy to take the answers personally, are about how you’re really seen by your customers and what it takes to keep them.

1. How are we perceived in each of our markets?

• It’s a big mistake to assume you will stay in one market forever, or that it never changes.  You need to examine every year just what your markets are: by service/product family, geography, price points, customer type, even what industry you’re in.  Yes, it’s hard.
• Market research is the answer and most people hate it.  Full-blown analysis is costly, but some basic techniques (if done right) work well: informal discussions with customers and short, regular surveys.  The key is being spot on with the questions, their phrasing and sequence.
• We’re all human, and we remember the nice things people say, and discount the criticisms—even the ones we ask for.

2. How will our geographic markets shift over the next 3 years?

• While some businesses aren’t too location sensitive, this is always an important question.
• Sound easy?  No.  Once again, it’s human nature to remember the customers we like, or the ones who are a big pain.  This distorts our mental map; all businesses should have a real map of their customers.  Not just ZIP codes, but “push pins” of each customer, perhaps colored by size, type, and product or service family.  A good map will raise even more really useful questions about where to sell, how to market, and how you’re positioned against competitors.  Check out Mappoint 2010.
• You should also pin a competitor matrix to your wall, a high-level analysis of your top three competitors, with three columns:  Basic Facts, What Makes Them Better, and What Makes Us Better.  Have some friendly customers help you.  Then think about where you’re vulnerable–and where they’re vulnerable–geographically.

3. What percentage of revenue should we spend on marketing?

• Just what is marketing?  David Williams of Broadbent & Williams has a simple definition:  “Marketing is all that you do to create opportunities to sell.”  This includes PR, social media, advertising, website maintenance, direct mail, etc.  Having a budget as part of your annual marketing calendar will show you the cost/benefits and synergies.
• What are your competitors spending?  Because it’s hard to know the ROI on a website or ad, you need some other way to calibrate your marketing spending.  If your trade group doesn’t have benchmarks, try to find them from a similar industry.
• Don’t assume a) your marketing never needs to change, b) word of mouth will carry you toward your goals, or c) just because you can’t measure it, marketing really isn’t that important.  And that’s the hell of it.

Challenge your managers with these questions and see where they take you.

What’s your killer question about brand and market position?  Please comment below.