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Running A Successful Turnaround: Final Thoughts

mikelally — Thu, 12 Aug 2010 11:29:34 +0000

I have been working on a series of posts detailing my thoughts on how I would fix or turn around a business operation. We’ve talked about financials, how to get a handle on your customers and understanding youremployees in an effort to get them more engaged, and finally, we talked about processes.

When you walk into a situation that requires immediate improvements, you have to start the triage process almost immediately. Michael Watkins will tell you to wait 30 days of your first 90 days. I’m not sure I have ever been afforded that kind of time.

I like to get my hands around data quickly. If the data I want isn’t currently being collected, the first step is to begin the process of pulling it together. This is always coupled by what the military folks are calling HUMINT. Human Intelligence. Talk to everyone. Make sure you are getting the raw feed so to speak. Make sure it isn’t filtered by management.

You need both facts and data and the human take on things. You can make data support your assumptions. By the way, try not to have assumptions. Try to begin with an open mind. Let the stories unfold.

I like the term “Key Performance Indicators” or KPIs. I want to see

Financial KPIs:
Revenue
Operations Costs
Profit
Contribution Margin
DSO. Days Sales Outstanding.

I also would want to see the standard balance sheet/cash flow reports. But I am trying to take this from a purely operational point of view. You may not have access to the big picture. You can only control your own environment.

I want to see financials reported by customer. I want to see them reported by team. You will gain knowledge from those two views. We want to know our most profitable customers (not necessarily the customers bringing in the most revenue). I want to know who is COSTING us money. Because we may want to fire them. Gently, of course.

Customer KPIs

I know. I originally said 6 questions. Its 7. Those questions are:

1. Courtesy of the Whomever You Interact With Most Frequently (support person, billing, customer service, field service, delivery person, sales person, account manager, CEO)

2. Skills and Knowledge of Whomever You Interact With Most Frequently

3. Quality of the Resolution

4. Timeliness of the Resolution

5. Overall Experience

6. Additional Feedback – open ended feedback

7. Net Promoter Score. “Would you refer us to someone else?”

Day 1 – every customer gets these questions. Then quarterly. Sometimes monthly. Track results.

Employee KPIs
Two sets of feedback here. Sit down with everyone. One on one. Ask them 3 questions:

What are we doing well?
What are we doing poorly?
If you could fix one thing right now, what would it be?

When you have a good percentage of the people interviewed. Start listing action plans on things we are going to fix. FOLLOW THROUGH. Seriously, if you don’t follow through, just stop reading. Go play Farmville.

The second piece is more formal – quantitative. Employee Satisfaction Surveys. Everyone can groan now. Again…short and simple. 5 questions and a section for feedback. NOT ANONYMOUS. I hate anonymous.

1. In the past seven days, have I received recognition or praise for doing good work?
2. Are my coworkers committed to doing quality work?
3. Do I have a best friend at work?
4. In the past 6 months, has someone at work talked to me about my progress?
5. This past year, have I had the opportunities at work to learn and grow?

Process KPIs/Production

You have to roll up your sleeves and understand what is happening in your operation. Your KPIs will vary here – each team will have a different set of productivity measurements. Sales will have contacts converting to leads and leads converting to sales. Support will have first call closure (number of times a customer has to re-contact you on the same issue). Every unit should be tracking their local version of the company focused numbers: Revenue, Profit, Contribution Margin, ESat, CSat, DSO.

I just watched a show that follows the New York Jets (football) around through Training Camp. The first episode starts out with the head coach, Rex Ryan, listing the teams goals for the season. WIN MORE GAMES THAN ANYONE ELSE. The defense’s goals for the year: WIN MORE GAMES THAN ANYONE ELSE. The special team’s goals for the season: you guessed it. I love the singular KPI. The One Number.

Another handy tool I forgot to mention in the process post is a SWOT analysis. You may even want to bring in someone from the outside to facilitate this activity. I’ve found that bias can certainly creep in. You can steer the analysis to support your theories. Facts and data people. Facts and data.

I hope you have enjoyed this series of posts. It has been very interesting for me to go through this exercise. I am sure I will have reason to edit and modify as time marches on. Please discuss in the comments. Ask questions! I will be happy to take a shot at answering.

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Running A Successful Turnaround: Process Improvements

mikelally — Sun, 01 Aug 2010 12:25:13 +0000

I have been working on a series of posts detailing my thoughts on how I would fix or turn around a business operation. I would take a stab at a scenario an MBA candidate/intern threw at me. So far we have talked about financials, how to get a handle on your customers and understanding your employees in an effort to get them more engaged.

Today we will talk about processes. Specifically understanding your processes and then applying continuous improvement to those processes. For those just joining, our hypothetical situation is a manufacturing operation that is in need of being turned around.My background is service operations. I have spent a lot of time in call centers in the financial services, telecom, and BPO industries. I’ve run customer service, technical support, inbound and out sales operations – you name it, I have the t-shirt.

Along the way, I picked up a very large helping of quality process management. I’ve gone through an ISO certification (and passed). I’ve been through a New York State Governor’s Award application process (it’s the state level Malcom Baldridge and we came in second). I’ve embraced and almost implemented COPC standards (call center six sigma).

I want to know how long it takes us to produce the widgets. I want to know how long it takes to ship the widgets. And I want to understand how long it takes us to support the customers buying our widgets. The current quality fad is Lean. Fine. Whatever. It goes back to Drucker. Total Quality Management. Six Sigma. ISO. All essentially the same stuff. All result in a quality framework. We can get what we need without spending thousands upon thousands of dollars on a “quality initiative.”

Coming from the land of technical support – any time someone was working on ANYTHING, they needed to be in a support ticket. Assigned to a customer. With the clock running. The same principles apply to production. Where do we have defects? Where do we require re-work? How long does it take?

I want to see rolled up reporting, daily, weekly, monthly, etc. How many tickets, top 10 issues, AGING of tickets. The same principles apply to production. Where do we have defects? Where do we require re-work? How long does it take?

The big tool here is doing root cause analysis. And, really, that is what this whole series is about. Figuring out why your business is struggling and setting it on a better path. RCA is actually very simple, but you have to be honest and authentic. You have to eliminate assumptions. Assume nothing! And the best thing about RCA is that you can do it without doing math.

A great tool for identifying root cause is the 5 Whys. Get yourself a fishbone diagram. (there are templates for word and excel off that link.) And start working through each situation. Do it in groups. And I don’t mean groups of managers. Again – USE YOUR TEAM(s). Don’t do this around a big conference table with your managers. Go to the floor. Talk to the people DOING the work. Better yet, get a cross-functional team going. You will be amazed at what 3 people from different business units come up with.

You may have to do some brainstorming. Don’t roll your eyes at me! It works. Sometimes you have to help people shake the cobwebs off. Sometimes you have to help them make the transition from step by step process thinking to stepping back to a broader view. Get yourself a whiteboard and start drawing the mindmap of the brainstorming session. You will quickly get to cause and effect relationships.

So there you go. Get your non-manager people together. Give them some tools. And let them have at it. Don’t be afraid to use your fancy watch and do some simple time studies. If it takes you 20 minutes to enter an order while the customer is on the phone – you have a problem. If your widget making machine is down for an hour out of every 8 hour shift you probably have a problem. (I can’t say for sure, maybe that is normal.)

Next time, I will wrap this series up with some final thoughts. I hope this is proving beneficial. Please leave a comment or tweet this out into the internets!

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Running a Successful Turnaround: The Employee View

mikelally — Sun, 25 Jul 2010 20:05:50 +0000

Its all about ENGAGEMENT. TP is a huge fan of employee engagement. Go figure – so am I. An engaged employee is a productive one. I read an article recently (can’t find it) that said U.S. working population is 26% engaged, 55% not engaged and 19% actively disengaged. in your 40 person shop, 20+ could care. 8 of your people are actively trying to screw you up. Are you listening now?

Oh…and those 8…they aren’t who you think.

I like a two phased approach coupled with a very strong helping of genchi genbutsu or MBWA (Management By Walking Around). Get yourself seen. Have breakfast with people. Have lunch. Fruit roll ups. Just do it. Then, the first step is to sit down with everyone and just talk. The second stage is to do a formal employee satisfaction survey. Depending on the size of the team, you may not get a chance to sit with everyone. But you can devote 30 minutes to each interview.

I love Capt. D. Mike Abrashoff (ret.), who wrote an EXCELLENT book on leadership -It’s Your Ship. (This is a great book for new leaders by the way.) Mike lays out a very simple plan in this book that has served me RIDICULOUSLY well over the years.

3 questions.

What are we doing well?
What are we doing poorly?
If you could fix one thing right now, what would it be?

Short and simple. The best part about this process is that once you have a decent sample size, you will know the top issues facing your team and you will have some pretty good ideas on how to fix them.

From a process perspective it is pretty easy. Gather everyone together and tell them you are going to meet with them individually. It is a great opportunity to introduce yourself to them and put them at ease. You don’t want to just start randomly calling people into your office. (Although – that tactic has its merits.)

From the long term approach – start conducting Employee Satisfaction Surveys. A long time ago I referred to a great set of questions that really get at Employee Engagement – the 12 Questions That Matter:

In hindsight, twelve questions seems like a bit much. Some of them are a bit redundant. Here are a solid 5 to get you started:

4. In the past seven days, have I received recognition or praise for doing good work?
9. Are my coworkers committed to doing quality work?
10. Do I have a best friend at work?
11. In the past 6 months, has someone at work talked to me about my progress?
12. This past year, have I had the opportunities at work to learn and grow?

Number 10 stays because there is a lot of research on the benefits of having a best friend at work.

5 questions and then leave room for feedback. And I hate anonymous surveys. They are pointless. Guess what though…if people aren’t comfortable filling our your employee survey and attaching their name – YOU HAVE A PROBLEM.

You are not going to get all your answers the first time you do one. But that is ok because you’re already doing the 3 Question meetings. Do the E-Sat quarterly. You could do them monthly if you like but quarterly has worked for me. You have to be consistent. The WORST thing you can do is drop this survey on your people and then not do another one. Actually, the worst thing you can do is conduct the survey and not follow up on the results.

You have to be very clear in communicating your intent. That is: you want to make things BETTER. Make YOURSELF accountable to action items created out of the survey. And do it publicly. You have to share the findings. You have to share the actions you plan to take to correct problem areas. You must be c-o-n-s-i-s-t-e-n-t. You must be patient. It takes a bit of time to build trust.

You could deploy this survey using the 5-scale or the 3-scale. In a 5-scale, you can look at Strongly Disagree-Disagree-Neutral-Agree-Disagree. Only the top two boxes matter. That is why I can say go with a 3-scale:
Disagree-Sometimes-Agree. And then only count the “agrees”. Just seems simplier and eliminates ambiguity.

Our next installment will talk about Processes and continuous improvement.

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Running a Successful Turnaround: The Customer View

mikelally — Sat, 17 Jul 2010 08:39:47 +0000

Last week, I started as series of posts detailing my thoughts on how I would fix or turn around a business operation. Inspired by a promising MBA student that is doing an internship with us, I thought I would take a stab at a scenario she threw at me. Last week-ish we talked about financials.

This week, let’s talk about getting a handle on your customers – specifically their level of satisfaction. A few years ago I linked and commented on a great approach to customer satisfaction (csat). The original article talked about the 5 csat questions you will ever need but it was service operation focused. I think the questions are still very relevant and can be used in almost any business.

It is really 5 questions and a 6th which asks for verbal feedback. I also throw in another question – a net promoter score question. So really….7 questions. Here they are (in order of importance):

1. Courtesy of the Whomever You Interact With Most Frequently (support person, billing, customer service, field service, delivery person, sales person, account manager, CEO) – Your customer deserves and and expects to be treated in a courteous/professional manner. If you are scoring poorly here you need to make sure you have communicated the absolute importance of service and satisfied customers to your team. You may also need to specifically train customer service and customer experience skills.

2. Skills and Knowledge of Whomever You Interact With Most Frequently – While a courteous employee is nice, it won’t make a bit of difference if they can’t solve the customer’s issue. Your customers want confidence in the employee’s skills and knowledge to resolve the issue at hand. This is the best way to measure your team’s skill and knowledge level. Weaknesses here go back to the hiring and training process.

3. Quality of the Resolution – Again, courteous and knowledgeable employees are really nice to have, but they need to be actually addressing customer needs/questions/issues. Customers calling back for the same reasons over and over again is a customer that is going to churn on you.

4. Timeliness of the Resolution – Time is money! Fix your customer’s problem the first time they call. Two things happen if you don’t: you drive up your total cost per incident and you irritate your customer’s…see churn above. This is a process problem. Break it down step by step. No step is too small. Trouble lies in the handoffs.

5. Overall Experience – This is really the weighted average of the first 4. Keep in mind that customers will weigh each of the above differently. If you have a low score (bottom two boxes out of 5), CALL THAT CUSTOMER AND BEG THEM TO HELP YOU UNDERSTAND WHAT YOU CAN DO BETTER!

6. Additional Feedback – always, always, always allow your customer to give you open ended feedback. Let them vent. Not only will they tell you what is wrong (and right if you are lucky) they will tell you how to FIX IT.

Additionally, I have become a fan of the net promoter score. Net Promoter basically asks one simple question – “Would you refer us to someone else?” You take all the people that say yes and subtract all the people that say no and you end up with your score. It makes for a great measurable. And it is easy to create goals from it. If you’re NPS is 55 – set a goal to increase it to 60.

Ask these questions to your customers as soon as you get into your turnaround. Then do it quarterly. Track and compare results. If you have a lot of customers, you can outsource this task. If you have a manageable number of customers, keep it in house. If you have a handful of customers, you should be doing this yourself, on the phone or in person.

Each of the top 5 questions should get a scale of 1-5. 1 being completely off the rails broken and 5 being Superbowl win. I would label the boxes specific to each question. For example: Courtesy of the person would be a scale of Christian Bale/Mel Gibson to Miss Manners. Or you could let HR rule the world and do a scale of 1 to 5. If you do 1 to 10, then top two boxes are good. I like 1 -3 – easier to get through and eliminates ambiguity.

Ideally, every customer gets some kind of sponsor. Positive responses should get a follow up of thanks. Negative responses should get a follow up to work through the issues. It doesn’t even have to be an “executive” sponsor. In fact, you could kill two birds with one stone here….you can find out which of your employees are engaged too. (See next week’s installment.)

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Running a Succesful Turnaround: The Financials

mikelally — Fri, 09 Jul 2010 01:45:56 +0000

This week, let’s talk about financials. I am taking an operational view. Maybe a business unit, maybe a small company. In some scenarios, you may not get access to the financials. I like to focus on a few areas:

Revenue
Operating Costs
Profit
Contribution margin
Days Sales Outstanding (DSO)

Ultimately, I want to understand profitability by customer. I want to know who my most profitable customers are and I want to know who is killing me. Down the road, we will make decisions. Sometimes, customers need to get fired. Crazy. I know. But why would you do business with someone that is costing you money? Charge them more or get rid of them. Unless they are “strategic” – i.e. bringing you HORDES of profitable customers.

I don’t think anyone can be running pure COST CENTERS any more. Every unit should be finding a way to become a profit center. Either way, cost or profit center, you have to understand where the money is going. Detailed operating costs. I promise you there is waste. Find it. Create a bonus plan that rewards people for finding new ways of doing things. Make it so that it comes directly to you and not through a chain of command. Don’t let a middle manager feel threatened and stomp down a great idea.

Contribution Margin is a KPI I also like to examine. Simply put, it is total product price less its variable costs. This really gets at the profitability by customer KPI. You can break this number down many different ways. By customer. By product. By team. It helps drill down into potential trouble spots.

Then, there is DSO. This one has always amazed me. I have been in several operations where payments from customers have lapsed to 90+ days. 120+ days. How is that possible? It happens. One goal is to start closing the gap on DSO. If your standard terms are net 30. Your cash flow is being affected. Plus the conversation required with your customer is worth it for a couple of reasons. First, it is a good to talk to your customers. Second, if they are really late, maybe they have a business problem you might be able to fix.

What is costing us money? Where are we profitable? These are the two big questions that I seek answers to in a turnaround situation. Next steps are to figure out ways to align costs and customers better. Can you charge customers more for the products/services delivered? Can you cut costs? Are there process inefficiencies (more on that later)?

I avoided the obvious cash flow and balance sheet pieces. There are plenty of better places to get that information. I am taking an operational – line management – view. My goal is to show how I would pull apart an operation, dissect it, and then build it back up for greatness.

Next time, we will talk about the Employee Side KPIs. (I will try to do better on timing. This was a holiday week for me. Things got a little nutty.)

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Running A Successful Turnaround: An Overview

mikelally — Wed, 30 Jun 2010 10:01:53 +0000

This continues our series on how to run a successful turnaround – or – The Mike Lally Way. Maybe we’ll just call this RAST. Running A Successful Turnaround. The Mike Lally Way is just way too lame. Today, I will take a holistic, high-level view and in future posts, I will look at each element in more detail.

Walking into any turnaround situation, I immediately set out to acquire data supported by human information (or intel). You cannot just look at data on a page. A) the data will lie to you. It will beguile you. It will tell you that you are smarter than you think. B) You need to get out in front of your people anyway. Let’s start with data.

I want to see the following Key Performance Indicators (KPIs):

Financial KPIs:
Revenue
Operations Costs
Profit
Contribution Margin
DSO. Days Sales Outstanding.

I want these numbers broken out by customer and/or by team. Definitely by customer. I want to know our most profitable customers (not necessarily the customers bringing in the most revenue). I want to know who is COSTING us money.

Customer KPIs
Customer Satisfaction – every main customer contact (assuming we have one) gets a very short 5+1 questions survey. The plus 1 question is the Net Promoter question. Then we start doing this quarterly, same questions. We track results.

Employee KPIs
Employee Satisfaction. Monthly. Simple questions. I will share them.

I will also interview everyone. Three simple questions. If the operation is very large where this isn’t feasible, I would push the interview down the chain of command and get summary reporting created.

Process KPIs/Production
Simple time studies will do. I want to know how long it takes us to produce the widgets. I want to know how long it takes to ship the widgets. And I want to understand how long it takes us to support the customers buying our widgets.

I come from the land of technical support. Any time someone was working on ANYTHING, they needed to be in a support ticket. Assigned to a customer. With the clock running. I want to see rolled up reporting, daily, weekly, monthly, etc. How many tickets, top 10 issues, AGING of tickets.

The same principles apply to production. Where do we have defects? Where do we require re-work? How long does it take?

Over the next days/weeks, I will dive into each of these elements/KPIs.

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Case Study

mikelally — Sun, 27 Jun 2010 13:07:58 +0000

We have an intern working with us. She is getting her MBA. She still has that new car smell on her. By that I mean – she hasn’t become bitter and jaded. She is still full of the possibility that most business problems are easy to fix. If only we applied ourselves. She’s taken to quizzing me. The classic battle of education versus experience.

She challenged me the other day with a problem they had studied. I thought it would make for interesting reading. The problem was a struggling manufacturing operation. The problem is pitched as one of production. But I will give the ending away. It really is a quality problem.

So – over the next few posts, I will lay out the Mike Lally Method. We will talk operations, sales, a little finance, and HR (shudder) with a good dose of management and leadership thrown in.