Most of the times, start ups are heads down, focused on what they need to do to keep afloat and make it to that next milestone.  Every so often its good to come up for air and take stock of how you are doing compared to your competition, and your industry in general.  One way to do this is to review your numbers, er ratios.  Sometimes just looking at the numbers themselves is overwhelming and they may not provide any context.  Ratios are a good way to get some context -not only for how you company is doing on its own but comparing it to industry averages.  A bit of research should provide you some good ratios to use as benchmarks. [Yahoo Finance is a good place to start.] If you are working with a banker or other investor they may offer some that they use.  Chances are they are measuring you against these averages so you should know how you are doing against these numbers.

Here’s a list of common ratios, that you as a business owner should be familiar with:

One point to remember is that this is a snapshot look at a company – and it too is can be missing some context.  All these ratios could change depending on the timing of cash flowing in or out; these ratios are not static.

Liquidity Ratios

current ratio – determines of a company has enough resources to pay its debts over the next year.  current ratio = current assets/current liability.  An acceptable ratio is generally 2:1 (the firm has twice the assets as debt).  As with everything exceptions exist – if you have a product that turns over faster than expenses are due, than a lower ratio is acceptable.

acid test ratio (AKA quick test, liquid ratio) – this number shows a firms ability to retire its current liability.  A good general ratio would be 1:1, but again this varies by industry, so it is important to understand what to measure against.   This number is (cash and cash equivalent + marketable securities + accounts receivable)/current liabilities

cash ratio – measures the ratio of  cash and cash equivalents against current liabilities.  This ratio is the most conservative of the ratios as it is a way to show how capable the company is of paying its debts without relying on the sale of inventory or receipt of accounts receivables.

cash conversion cycle (CCC) – Measures how long a firm will be short of cash if it elects to increase its investment in resources to expand customer sales

Profitability Ratios

profit margin analysis – determines what portion of the sales contributes to the income of a company and is the net income/revenue, or put another way its.  A low profit margin may indicate a pricing strategy

effective tax rate -alerts management to the tax rate the company faces (Income Tax Expenses/Pre-Tax Income).  This number most likely will not be the final number, due to various accounting factors, but it is a good indicator

return on assets ROA – measures a company’s profitability as a percentage of its total assets (net income/total assets ) x 100.  Also called return on investment.  Again, when these calculations are made has an impact.  Some businesses are cyclical so their ratios can fluctuate dramatically.

return on equity (ROE) – measures the rate of return on the ownership interest (shareholder’s equity) – This ratio is (net income after tax/shareholder equity)

return on capital employed (ROCE) – indicates the efficiency and profitability of a company’s capital investment.  The ratio is: EBIT/(total assets – current liabilities)

Debt Ratios

Debt-Equity Ratio (D/E) may also be called risk, gearing or leverage – indicates the relative portion of shareholder’s equity and debt used to finance a company’s assets.  The ratio is liability/equity

Capitalization Ratio – shows the proportion of the company’s debt to total capital.  Its a good way to peek at a company’s solvency.

Interest Coverage Ratio – indicates how well a company can meet its interest payment obligations.  The ratio is (EBIT/Interest Expense). If the number is less than 1, that means trouble, conversely if it is too high than is the company missing opportunities to invest through leverage?

Cash Flow to Debt Ratio – looks at the company’s operating cash flow to determine if it has the ability to cover its debt.  Care must be taken to understand what debt: short term, long term, or both.  Like all the ratios, there are nuances that must be understood for this ratio to have meaning and value.  A look at multiple ratios accounting for the different types of debt might be in order.

Operations Performance Ratios

Fixed Asset Turnover (FAT) – this ratio tells how well a company uses its fixed assets to generate sales.  A high ratio is generally better as it shows that a company does not have as much money tied up in fixed assets for revenue.  FAT = sales/ave net fixed assets

Sales/Revenue per Employee – show the average revenue generated per employee, and indicates how efficient a company uses its employees.  Growing and start up companies will show lower ratios, but industry averages will help determine the targets.  A good read on this topic, and here’s another.  CNN Money magazine even does a comparison.

Operating Cycle - This number is the average time from purchasing inventory to receiving payment.  The sam caveat applies, every industry is different, and all circumstances are different so its important to understand what factors drive your number.

Once a company has gone public there’s a host of other ratios to consider such as price/earnings ratio; price/earnings to growth ratio, dividend to payout ratio but I’ll leave that as a topic for another day.  Also, remember that these ratios are tools, just tools that can help management make decisions.  Understanding what they say is important, as is understanding how your company differs agains your industry norms and those of your competitors.  If you do not understand them or how to develop them for your business, consultants like myself can help.  If you have a finance person on staff, chances are they already have these numbers prepared, and they should walk you through what these ratios mean for your company.

Keep in mind, this list is not inclusive; dozens of ratios exist, and some might be more relevant to your business.  The goal of this post was to get you thinking about the power of ratios as a tool.

I saw this great post on the blog called Conversation Agent – “7 Keys to Social Branding”.  The post struck me because I thought it full of common sense.  Not everyone understands or appreciates social branding or social media, but what the author, Tamsen McMahon, talks about is helping the customer understand your company, and this could be taken more personally – understanding you.  By providing a consistent message, your client or customer gains a level of comfort as they know what to expect.  You stick out for them as result.  The key message here is that it doesn’t matter what you think your message is, its what your clients think it is.  So, take a look at this excellent overview.

Despite lip-service to two-way communication, branding has often been a one-way effort: we decided what we wanted people to think about our companies and designed marketing and communications that made that happen.  Or so we hoped.  But a brand is the collective impression people gain not only from you and your marketing efforts, but from all of their interactions with you—and the interactions others have as well (newly amplified through social media).  That means we need to look at the process of branding in different way: through a social lens.

Yes, we still need to understand our competitive landscape, our customers, and ourselves. We still need to develop a common set of messages, reinforced visually. We still need to design, sustain, and retool our efforts so who we are and what we stand for remains clear—and compelling—to our customers. But each step now has new implications.

To make our branding efforts truly interactive—truly social—we need to incorporate seven key concepts: insight, identity, resonance, clarity, coherence, relevance, and leverage.

Insight “Know who you are, and what that means.”

All good branding starts with research. Traditionally, that meant looking at the internal and external landscape to determine a company-centric view of the organization and what it stands for.  That’s no longer enough. You have to listen to what your customers are saying, too. You have to understand not only what you think you are, but what they think you are and can be, as well as why they really care.  For it’s that combination—what you think AND what they think—that determines your new, social reality.

Identity “Be who you are, become what you want to be.”

Your brand foundation—who you are and want to be as both a company and a brand—is as unique as a fingerprint. What your company exists to do, its main areas of endeavor, and its core values and attributes all combine to create an identity that’s yours alone.  Branding is, of course, the process of articulating that identity in ways people see, understand, and, most importantly, care about enough to pay for. But social media doesn’t allow for the smoke and mirrors. There’s nowhere to hide if what you say doesn’t match up with what actually is.  Knowing yourself, warts and all, gives you not only a strong foundation on which to build your social branding efforts, it leaves you prepared to have the bright light of social media shine on you.

Resonance “Know whom you serve, and why they care.”

Your brand is a chord, made of many different notes. Like sound, your brand (and the communications and interactions that create it) is what carries over time and distance, resonating with some people and not with others.  But your customers aren’t one note. They’re not a gender, or a demographic, or a salary. They’re people. We can’t just turn on the marketing speakers and wait for customers to come.  Social branding means discovering how your customers perceive your brand as part of their brand. It means looking at why they use your products, and how, and then tuning what you do to resonate more strongly.

Clarity “Speak your messages in their language.”

Everyone in this social space is talking at once, and your brand has to rise above the noise. How? By being as clear as a bell, much like a knife striking a glass can be heard throughout a room.  Your message—the encapsulation of who you are, for whom, and why people should care—has to be short… and shareable. Since your message has to survive distribution by people whose choice of words is not controlled by you, including those fans you’re working so hard to resonate with, social branding focuses on boiling down who you are to an “irreducible core.”  How that core is described can, and should, change depending on the audience. Your board speaks a different language about you than do your employees or your customers. That’s why clarity in social branding comes from concept, not content.

Coherence “Look the part, be the part.”

Your visual identity, the visual representation of all your brand is, is a symbol that carries the weight of a thousand words. It’s a combination of elements you can own (your name, logo, tagline, etc.) as well as elements you come to own through focused and repeated use (things like fonts, colors, or approach to imagery). UPS, for instance, doesn’t “own” the color brown, but at least in the shipping business, they do.

But the very meaning of “visual identity” has evolved, becoming both more dynamic and more customized to your and your constituents’ needs (Google changes its logo almost every day…). Yet this “mass customization” of appearance still has to make sense to your customers, and reinforce their individual impressions of you.

Think of the story where several blind men man touch a different part of an elephant… and totally disagree about what animal they touched. Your customers aren’t blind. And you’re not in a dark room—quite the opposite. No matter which part of your brand they touch, your customers need to understand that it all adds up to you.

Relevance “Put it together, and put it to work.”

Branding takes a lot of planning, and so does social media. Once upon a time there were only a few channels, so planning was easy: use the available channels, and pump your message out.  But now there are as many channels as people who interact with you (and, potentially, if not planned well, as many impressions of your brand). So planning your social branding efforts includes not only traditional channels, but also new and emerging ones, as well as planning how to structure your non-marketing operations (procurement, delivery, customer service, etc.) to ensure you’re supporting your brand there, too.  What matters now is mattering where it matters to be. And that likely looks very different than it did even three years ago.

Leverage “Own your brand, and keep it healthy.”

Your most important ally in social branding is… your own company. Social branding doesn’t exist in one department, it involves the entire organization—because everyone in your company contributes to the experience your customers have and the impression of your brand that develops as a result.  If our own people don’t support brand, your customers never will, it’s a simple as that. But if they do, well, that’s where the magic lies. That’s why building your brand from the grassroots up (not boardroom down), is so important—it helps ensure that your social branding efforts are credible… and sustainable.

Social branding’s goal is to make every employee, from top to bottom, a brand ambassador. It empowers your customers the same way.  The more connected people feel to you, and the more included they are in the stewardship of your brand, the more powerfully they can leverage their networks on behalf of yours.  Evolution “This is a process, not an event.”  People change, tastes change, tools change. Social branding is—has to be—an iterative process, a cycle that happens over and over again: understanding through to action… and back again.  While these seven elements are key now, it’s likely they, too, will change over time, in direct response to the marketplace it serves.  That is, after all, what social branding is all about.

Delegate or dump?  Sometimes its hard to distinguish the two.  Often managers delegate the work they like the least as opposed to strategically assigning it.  In doing so, they’ve dumped the problems on others and walked away – its human nature after all, to avoid doing things we dislike.  But risks exist with simply passing along work without follow through or understanding of what is involved: loosing control of quality and potentially much more.  Here’s what I see as the problem.  Delegation requires some thought before execution and many managers fail to do it, they treat the task more like a hot potato and quickly pass it off and forget about it, until a problem arises that is. First what exactly is delegation:

delegate |ˈdeləˌgāt|verb [ trans.]

entrust (a task or responsibility) to another person, typically one who is less senior than oneself : he delegates routine tasks | the power delegated to him must never be misused.• [ trans. ] send or authorize (someone) to do something as a representative : Edward was delegated to meet new arrivals.

entrust |enˈtrəst|verb [ trans.]

assign the responsibility for doing something to (someone) : I’ve been entrusted with the task of getting him safely back.• put (something) into someone’s care or protection : you persuade people to entrust their savings to you.

No where in this definition is “giving up responsibility”.  I never let any of my managers use the excuse “but I gave it to Joe to do”.  They were all reminded that they were ultimately responsible for the work delivered.  Just because someone is given responsibility for the day to day tasks, does not mean the manager can wipe their hands of it, if that was the case, that middle management layer would not be required. Delegate with Purpose – Align tasks with motivators I recently attended a team building meeting where we reviewed our 5 Dynamics assessment that showed where we found our our energy.  They broke a workstream from inception to completion into 5 areas, that flowed from one to the other:

explore → excite → examine → execute → evaluate

Explore: The stage is where new ideas and perceptions are made  - big picture stuff.

Excite: This stage takes new ideas and builds excitement about them -think team building, marketing.

Examine: This stage  focuses on how the idea can effectively integrate with existing budgets, time tables, and company standards.  Think accountants – in fact the finance folks in our group were off the charts here in terms of energy.  Excel spreadsheets play a big part here.

Execute: This stage is where task oriented focus comes into play – its executing on the ideas developed in the explore phase.

Evaluate: This is where the team reviews the stages – lessons learned. No one scores high in every area.  Even without taking the test, I knew I felt stronger in certain stages and tended to spend more time in those areas.  I also realized that everyone is different.  Not everyone feels the same way, and if, through communication, people can focus on the areas that appeal to them most (Happy solution:  Spending a lot of time staring at an Excel spreadsheet saps my energy.  Imagine my delight when my colleague, a finance guy, said that was something he enjoyed.  We knew who was going to perform the project data analysis – and we were both happy.)  My point with this rather long winded explanation is that instead of simply passing of undesirable projects, ascertaining if there’s a fit based on skills and preferences as this will most likely lead to improved performance.

Do Not Loose Control

My second caveat with delegating is to loose any knowledge of the critical underpinnings of your business – like cash.  A businessman I know, hates dealing with the accounts receivable and accounts payable.  Understandably he would rather focus on the portion of the business he is good at, so he hired a clerk to take care of that.  Funnily enough he developed cash flow issues.  As it turns out, the clerk was skimming money; hundreds of thousands of dollars.  He turned over his entire accounting to another individual and rarely followed up – generally only if there was a complaint from a contractor who was not getting paid.  Along with the daily tasks he gave up his responsibility – something a manager cannot afford.

Suggestions for Good Delegation

• Clearly define the task – Tell the employee what to do, not how to do it.  To me this crosses the line to micromanagement.  Besides, that employee may have a better method than you envisioned.
• Regular follow up – Make sure that both the manager and employee remain aligned with the goals and changing targets.  It never fails, a manager learns new information pertinent to the task in senior level meetings, and she fails to alert the employee to the revised expectations; regular communication should avoid this pitfall.
• Delegate with purpose – If possible assign tasks according to people’s strengths so that the individual is motivated to do a good job
• Avoid delegating what you do not know –  A manager should know her weaknesses – spend time with the employee performing the tasks and ask questions to understand how they arrived at that solution.  Chances are that as the manager was originally charged with the task they will have to explain the results to the next management level.
• Peform a lessons learned – even if everything went well.  This is a great opportunity to understand what about the manager’s communication style is working and what can be improved.  Often assumptions were made that can be clarified for the next task.
• Start small – With new employees, start small until both sides understand the working style of the other, set expectations at the beginning: provide a clear list of deliverables, milestones, resources.  Mangers should consider that employees may not have the same awareness of resources as they do.  This situation is particularly true with the increased number of contract workers.
• Set expectations – Managers should explain what they would like to happen should problems arise i.e an email, a meeting – how should issues be raised.  What happens in an emergency?  Better to have a plan than find out what does happen the hard way.

I ‘ve walked by this sign more times than I can count and I finally had to take a picture.  I know from talking to the manager’s that their desire is, understandably, to sign clients to a one year membership.  However, they do not have too many takers – most clients are selecting the six month option.  I wonder why?  Businesses need to remember that its not what they think their message says that counts, its what their clients think that counts.

Looking over the SBA’s report on the “State of Entrepreneurism in the United States” it occurred to me that their criteria may not necessarily be what an entrepreneur considers as their information is funneled.  However taking a step back and gaining a broader view of the options available can make a difference.  I thought this report had merit, and added these ideas to consider when planning your business.  The link to the entire report is at the bottom.

State Rankings on Personal Income Tax Rates – Personal income tax affects individual economic decisions on the cost of working, saving, investing and risk taking.  Given that 90 % of businesses files taxes as individuals (sole proprietorship, partnerships, and S-Corps) and so pay personal income tax rather than corporate income taxes and consequently this tax has a very real impact on the business.

State Rankings on Individual Capital Gains Tax Rates – As capital is critical to start ups, taxes on raising capital has an immediate affect and influences risk taking.  The higher this tax, the more restrained the risk taking of the start up.

State Rankings of Corporate Income Tax Rates – This tax hits companies on their bottom line

State Rankings of  Corporate Capital Gains Tax Rates – high taxes in this area reduces the ROI, and tempers risk taking.

State Rankings of State and Local Property Taxes – amount of tax affects both personal and commercial property.

State Rankings of State and Local Sales, Gross Receipts and Excise Taxes - high consumption based taxes can redirect purchases and may serve as disincentives to economic activity.  Also gross receipt taxes present problems because unlike other consumption based taxes they are largely hidden from public view so are easier to stealthily  increase.

State Rankings of Adjusted Unemployment Taxes – High unemployment taxes increase the wage burden on entrepreneurs and businesses.  The cost of labor increases relative to capital.

State Rankings of Number of Health Insurance Mandates – This potential cost is another disincentive to starting up in a high cost state.

State Rankings of Electric Utility Costs - High costs can be significant and can influence the location of a business that has heavy utility needs.

State Rankings of Workers’ Compensation Benefits Per $100 of Covered Wages - High costs here  have an added burden on labor intense businesses.  Companies will gravitate to states or locals with less of a burden here.

State Rankings of Crime Rate - If  local governments are unable to protect businesses and private property, this situation will be a disincentive for companies and they will move to a safer location.

State Rankings of the Number of Government Employees - Looks at efficiency of money spent by taxes.  A  large number of state employees points to a greater number of people performing jobs less efficiently than they could be employed by private firms.

State Rankings of State Gas Taxes - An added cost to business and private individuals that may have a substantial impact.

Rankings of State and Local Government Five-Year Spending Trends – This criteria is an attempt to determine what direction the state and local government is headed in terms of taxes.  Will they be raising taxes to finance their upcoming projects?

State Rankings of Highway Cost Effectiveness - a look at how well the roads are maintained in a location.  Poor roads can have an impact on business, and not just in terms of more frequent trips to the auto shop, although that said, some businesses may actually find a poor score here attractive.

Other factors:

How aggressive does the state use their power of eminent domain – how protected is the business or home should the state perceive better opportunities by confiscating the business?

How does the state handle internet taxes?  If much of your business involves selling goods over the internet, this sort of tax may have a big impact.

Does your state have “Right to Work” laws?  Generally, this means employees are not required to become labor members or pay dues, allowing for a more dynamic and flexible workforce which increases both productivity and efficiency.

The full SBA report can be seen here.  if you’ve never considered these factors in planning your business, they bear more than a passing glance as any one factor can significantly impact your company’s bottom line.  I urge you to read the report in full and have a better understanding of how location selection can really impact your business.

I’ve seen this scenario, and it drives me bonkers.

Two people pitch their ideas to insert appropriate decision maker: upper management, venture capitalists, city council, and if you could put them on mute and study the ideas objectively you would see that one is clearly superior.   The problem is that on more than one occasion, the better idea belonged to the less effective, or persuasive public speaker.  But, as you might imagine, when it came time to select the winner, the better speaker won – not the better idea.

I wonder how many superior solutions never saw the light because their merits could not be identified. I’ve worked with a lot of engineers and scientists in my time, and I could tell you that they were absolutely brilliant at what they did, but when it came to public speaking, audience members were tempted to half their IQ simply by listening to them try to articulate their ideas, especially when they needed to modify the language, i.e. layman’s terms.  Their presentations looked heartrendingly painful.  From my perspective, both parties (the audience and the speak) can improve the odds that the best result will win.

The Speaker

Chances are that this idea is something that excited you enough to put extra effort into developing it.  However, to ensure the success generally requires buy-in from outside sources.  Try not to waste all the hard work you put into the project, do not short change the delivery of your message.  The unfortunate reality is that convincing others that you have a good idea is probably the most critical and difficult task of the entire process.

Please:

Don’t get frustrated and do not assume your audience immediately grasps the significance of what you are offering – make a case.  [They're not slow, they just do not have the situational awareness that you do.]

Appreciate that your audience has limited time, so keep your presentation simple and on point Know your weaknesses regarding speaking – especially if you are not a native speaker

Practice, practice, practice that delivery – take advantage of your coworkers and have them listen and critique your pitch, attend ToastMasters

Recognize that your audience might not be the final decision makers, make it easy for them to sell your idea.  Tell them what they need to know to make it attractive to others- do not make them dig for this information.

Audience

Recognize that not every speaker is created equal – focus on content and not delivery

Remember that nervousness about public speaking does not necessarily equate to lack of knowledge on the topic

Recognize that most people can improve their public speaking with practice.

Explore opening a Toast Masters group or its equivalent for your company/team.

Be objective and not subjective

In searching for ways to improve the odds of getting the best solution, I always tell my teams when we get pitched ideas to concentrate on the facts and not be swayed by non material issues.  I hate wondering if I got this widget because it was superior, or because someone was a better marketer – Beta versus VHS comes to mind.

How many of you start the day with over 300 new emails in your inbox and know more will follow?  How many find this method of communication productive?   If you do, I am not one of you – I’d much rather be getting my hands dirty tackling the issues.  For the bulk of those emails, I am courtesy copied so supposedly I have no need to respond – yet being courtesy copied requires me to invest time and energy in exploring whether I do need to intercede.  I also confess to getting grumpy trying to follow the briar patch of emails on a subject to determine the crux of the problem – people respond and bring up different topics, issues and create different threads, so what may have started as a courtesy rarely feels like it at the end.  Plus the rather depressing feeling of just seeing all those emails and not knowing what level of effort is required, or how I might have to reshuffle my day to accommodate the new requests and information.

So many misunderstands and problems can be tied to communications, or rather the lack there of.  One easy way to mitigate potential misunderstanding is to have an established communications plan.  I know what you are thinking, “why would I want to add a level of complexity to the mix?”  Done correctly, this plan makes it easy for everyone by:

• Reduce the volume of email that appear in in-boxes from people trying to CYA, or just blindly cover anyone who might have been remotely connected with the project.  Instead, only people on the distribution list are mandatory, others may get included as required at the discretion of the immediate recipients, but with no expectation of receiving reports more frequently unless the communications plan is modified.
• Insure consistent communication through staff changes.  If someone is sick or leaves, whoever takes over need only look at the communication plan to know who needs what information.
• Insure that team understands who is responsible for what information, and any associated deadlines or requirements – if they have questions they know who to approach.
• Control access to sensitive documents such as some HR and financial reports.
• Create a repository to collect documents and make sure they are able to be retrieved and stored both for future use and to meet contractual requirements.

It is also a useful tool to understand and agree on the communication requirements with the client.  Until we spelled out the reports requested in a communications plan, one client did not appreciate that much of what he asked for was redundant and too time consuming given the value he expected to receive.  We renegotiated to give him what he really wanted and reduced our work load at the same time.

A communication plan allow the team to consider how to handle document retention:

• Who is responsible for reports – who creates them, who distributes them, and who has ultimate approval before they go out?
• What is the frequency of the reports?
• Who is the audience?
• What documents are retained and for how long? Where will the documents be stored?
• Are there contractual or legal requirements for retention that need to be considered?

Communications plans can be as formal or as informal as you want them to be; they provide a useful starting place so that team members can refer to the plan and understand what sort of communications deliverables are required (some may even be contractual) so you want to capture these critical communications.  The following sample is just a starter and very simplistic – its project focused but easily adaptable to other situations.

Sample of a simple communications plan

NOTE:  Use job titles not names as people move around and by not using names you do not update the document as frequently

Some advantages to developing a communications plan include:

1. Requiring the planners to think about how they will save and store their data
2. Makes the planners consider what is included in the reports instead of trying to develop them ad hoc; reducing potential redundancy and the rush to gather the information when it is needed instead of already having the report

For startups, much of this correspondence is required as back up when outside investors are poking under the hood so having it accessible is key. For all companies, in this litigious age, knowing where these documents are filed, and how they are filed says a lot of time and money. A lesson driven home to me when I was responsible for network construction. I was served papers that my company was being sued as a woman had walked into one of our construction signs and broken her arm. The city’s records showed we were the only contractor working in the area. I went to my engineerings, and as I required them to keep daily logs we quickly found where we had applied for the permit and the date we set up construction at the place the woman said the accident occurred. We were there, but six days after the date this woman claimed her arm was broken. Those daily logs were all I needed to avoid a bigger mess.  Consequently, a communications plan is something I always consider at the onset of a work engagement.

From experience, I can tell you that creating this plan rarely results in getting it right the first time.  Its not that the initial plan is wrong, but that people need to adjust, and patience is required as they settle into their roles.  Some people want to be copied on every document “just in case” and it takes a while to ween them from this crazy desire.  I want to caveat that the intent is not necessarily restrict access to documents, although that may be an object – certain HR or financial reports come to mind.  A central repository can be created that the group can access if they want to follow up on a report.  The intent is to limit the tsunami of data that hits people and allow them to concentrate on what they need to perform and not be side tracked by other issues.  I can also tell you having a communication plan is a life saver.  Yes, its straight out of project management, but it is a tool that gets results on many levels.

Everywhere you look, signs are bombarding you with information that you must interpret, determine if it applies to you.  Does it apply now, or in the future?  Are you required to act, or is the transfer of knowledge all that is required?   I could draw a process map, because sometimes life gets complicated.

Behaviors need to be modified to comply with regulations

Or sometimes the transfer of information is all that’s required.

Here’s a sign, I’ll hope you take to hear.  May the New Year be filled with peace and joy for you and your loved ones.

Happy New Year.

When I say shades of grey, I’m focused on employee experience and expertise; often acquired after years of work, hence the shades of grey.  I first came to the Bay Area right at the height of the dot com boom and stayed to experience most of the bust.  One thing that struck me, at the time, was the strong desire to hire only younger professionals, as they were the only ones that “got it”.  I’ll let history speak for itself. Don’t get me wrong, new and fresh employees bring new and fresh ideas, and are vital to the success of the organization, but I argue that there is an unwritten formula that may be used that is just plain wrong.   More experience  = higher salary + less productivity.  The thinking that those wily veterans have done their time, and are just collecting a fat paycheck.  There is no factor in that equation that addresses the experience they bring to the table. I see a similar trend emerging with this economy.  Not so much old v. young, but  short term v. long term employees.  The new trend, given the economy will be contract employees filling in for companies handling their demand peaks and valley.  All well and good, but look at what is lost: Company Culture – Life Blood

• Knowledge of and creation of company culture
• Knowledge of company mission
• Knowledge of how this project fits in with the bigger picture
• Loyalty to the company
• Ability to plan for succession

Time, Money, and Quality

• Awareness of existing resources in the organization
• Knowledge of how to “work the system” in the company to get work done
• Knowledge of what worked and did not work in the past
• Knowlege of how this work ties into the bigger picture for the company
• Openness in communicating problems, less of a “yes” man situation

To me what is lost carries a price tag not worth the premium to keep experienced people employed in an organization.  Managers must weigh the long term impact, as much of a strategy decisions against short term cost cutting measures.  Sometimes, the decisions are already made given the availability of funds, but if there is an opportunity to look at the long term impact of loosing loosing seasoned employees, those companies will likely come out ahead. When I first started my career, I was the green manager, and I had my share of friction managing men that had 30+ years of experience on me [at the time I was the only female manager and one of only a handful of female employees in the company - which had its own set of issues].  I will always be grateful for that exposure.  Once those fellows realized that I was there to do my job, and support them, as I considered them the functional experts, we developed a tremendous, cohesive working relationship.  They called me on a few decisions, telling me why they did not think they were the best solution for that situation.  They were right, they had seen those decisions before, and knew where those results might lead.  (A lot of knowledgeable people exist in the workforce, but it is those with the experience that can make the cause and effect connections that are really using the knowledge.  That sort of ability can only be acquired through experience, and yes it comes at a premium.)  I had, to my ever lasting gratitude, what I’ll call some pain-free education; I learned from someone else’s mistakes, and I really did, because at the end I could see where those less fortunate results could have led.  I could not have had those opportunities without some experienced employees who had seen similar situations before and knew to avoid the traps.  They had loyalty to the company, and as a result a vested interest that went beyond a paycheck in its success.  I doubt I would have had the same story if I contract employees working for me. When someone works for a company, knows there is some permanence rather than a temporary assignment, a sense of loyalty exists that is otherwise absent in temporary employees.  When someone with experience sticks around and seen issues and opportunities and feels part of the organization they are not afraid to speak up – they take more ownership.  If an organization is full of temporary workers, fear of loosing their paycheck and having to find another gig, causes them to weigh the possible negative side effects of speaking up – I call them the “yes” people, who while not oblivious to what is going on around them, have an aversion to sticking their head out to identify problems.  They rarely voice opinions or ideas they feel are out of sync with management – too much of this thinking or action is a detriment to the organization. When I come upon a new situation, I may not have encountered it before, I have a better chance at success given my experiences; I plan and execute better, and I believe I am far more effective than now  - a trend I do not think will diminish.  I know I am not alone.  Companies need a collective where they capture experience and expertise to improve, otherwise what is to prevent them from repeating the same mistakes, as the situation is always new.  To me the perfect analogy is a company claiming 40 years of expertise.  Is that a few people with 10+ years experience each or 40 fresh contractors just starting out.  Who really has the expertise?

Project management is a discipline that offers a lot of value outside of managing “projects”.  Many managers fail to see its advantages, claiming “I don’t have a project, I manage a department and its not finite”, or “project management is all about process and its too time consuming and resource intensive”.

To the first point, I bet they do – have projects that is.  Without fail, those skeptical managers have annual budgets, and to get those budgets approved, certain goals X, Y and Z were identified to be accomplished in that year – that’s a project. People up and down the chain of command can be stumped on the definition of a project, and how it relates to their work.  Here’s my definition: A project is finite; it’s definable, meaning you know what the goals are and you know what resources are available.  So here is their project, in a year they will achieve X, Y, and Z with the existing staff and resources identified in the budget submittal.

Their work has the same constraints as a project: funding, time and quality.  If one constraint changes, its impact is felt in the remaining two.  If you cut cost, yet the scope remains the same, you cut quality.  If you extend time, resource costs increase as people have to work longer than expected on the project.

Regarding the second argument that project management is all about process, sure more rigor is imposed, but that’s the point, but if this discipline is implemented properly, results can be measured, and lessons learned.  I’ve have too many conversations with management that had bad encounters with  ”project management”  and are understandably frustrated because the rigor imposed more closely resembled a straight jacket.  They  had reports with metrics they could not use because the data contained there in was worthless in their decision making, and their engineers were grumbling that they spent more time gathering data for the reports than doing real work.  This is not project management, good project management does not impede work, but improve performance and results.

I worked at a division of a company that determined their annual budget in head count against estimated hours for proposed activities, and determined they could accomplish x number of activities a year.  The problem was they never meet their target and at the end of each year still had a hefty backlog of work from the previous year, so activities intended for the prior year were shifted to the list for the following year.  I can imagine presenting the results was an uncomfortable task for the section head especially given this scenario took place repeatedly.  One problem that became obvious was that because the budget exercise stripped the hours from the proposed activities, the hours were thought of as a big pool to pull from as needed for other activities, and consequently activities that had not got approved crept into the workstream.  To eradicate this problem, we implemented some simple project management controls:

• Formalized project management of the individual activities, treating them like projects.
• Treated the entire departments work load like a finite project with a duration of one year and a fixed annual budget to work with.
• Identified resources by functional type, no longer was a generic bucket of hours sufficient.
• Created a schedule of the proposed activities over the course of the year .  We overlayed this schedule with resources by job function, now bottle necks based on functional skill sets were easily visible and work leveled to account for limitations.
• Reviewed new activities with an investment review board (IRB) for approval and understand that if this work is added, another activities would be tabled or deferred.
• Reviewed changes to the individual project/activity scope.

By implementing these changes we gained:

• Insight into were in the delivery resource gaps and surplus existed.
• Understanding where the demand was generated.
• Insight into estimating practices captured data on what was really required to perform work, and improved estimates going forward.
• Understanding of how we were doing against targets.
• Knowledge that preliminary activity estimates were really weak and should be “placeholders” only.
• Knowledge that a considerable about of “gold plating” was going on – project management speak for scope creep to continually improve the product beyond what was originally agreed to.
• Recognition that the project management controls put in place worked!

We made a concerted effort to make these changes as non-onerous as possible.  We sought improvements which we handily achieved, and I think more importantly secured consensus from all the stakeholders.  I say “we”, because for these changes to succeed everyone had to participate.  Everyone was aware of what was happening and why; open and consistent communication is key to success with these changes.  The attractiveness of this approach is that we created a nice foundation for future efforts.  As the department expanded more rigor might be desired, and with a good foundation its easier to try those changes.