Operations is the heart and soul of your business… It’s WHAT you do. Some companies succeed while others fail doing the same thing. Why?
I want to dig into the topic of operations for your small business and help you understand how you can be the one company in your industry that flourishes while others are left scratching their heads.
If you want to watch a video of this exact same topic, go here: https://youtu.be/_F4EBBY7TkI
(Core Energy™ is a registered trademark of iPEC and all Core Energy™ concepts described in this blog post are derived from iPEC’s Core Energy Coaching™ program.)
There are eight critical mechanical components of business. There are seven levels of core energy. I’m creating a series of posts called Business Mechanics & Mindset. You can read about these topics in more detail in my book entitled, “Business Mechanics & Mindset: How Your Thoughts Create or Sabotage Your Business Success”. Today’s post is the first of this series entitled Core Energy™ Operations.
Before I go too far, I have created another post that you may want to read before you read this one. It is entitled “What is Core Energy?”. It explains the seven levels of Core Energy™ in detail that will be mentioned in this series.
As I’ve already mentioned, Operations is WHAT you do as a business. If you’re an engineering firm, operations is the engineering work that you do, the designs you create, the drawings that you produce, the work oversight you perform when your designs are being constructed. If you’re a restaurant, operations is your food supply, food preparation, cooking, dishwashing, serving, and bar tending. If you’re a small manufacturer, operations is your factory production. If you’re an HVAC company, it’s the work your technicians do at your customer’s site, the equipment you purchase and install, and all the supplies you need to complete that work. From an accounting perspective, operations is anything that you count as direct costs.
While every industry defines the act of operations differently, there are seven common foundational components will be addressed in this post: 1) delegation, 2) systems, 3) resources, 4) customer feedback, 5) gross margin or efficiency, 6) convenience; and 7) compliance. Today’s post will explain how your Core Energy™ reacts with each one of these critical components.
Delegation allows you to promote people to leadership positions and let go of your involvement in directly serving customers. If you can’t create a strong method of delegating, your company will be limited in its ability to grow without you working yourself to death.
Let’s do a “climbing the ladder” exercise. This is where you illustrate a specific issue at each rung of the Core Energy™ ladder to become aware of what level of energy is at play and which level of energy you believe is most appropriate for you.
Level 1 – Victim: “Why bother giving tasks to others? They will always fail.”
Level 2 – Conflict: “Why don’t you idiots understand what I’m trying to teach you?”
Level 3 – Acceptance: “New people can learn on their own. If they don’t know something, they’ll ask questions.”
Level 4 – Compassion: “I get jazzed when my people get it. It’s about them…not me.”
Level 5 – Opportunity: “By training my people, we’re able to deliver better service more efficiently. It’s my job as a leader to get the work of 10 people out of my team of six.”
Level 6 – Synergy: “By empowering my people to do critical tasks, they gain confidence and help build a strong team.”
Level 7 – Total Awareness: “I want to surround myself with people who are smarter than me.”
If you’re like most business leaders, you will identify with each one of these levels at one time or another. You may think that your level is dependent on the performance of your people. It is the opposite. When it comes to delegating tasks or asking one of your managers to delegate tasks, ask them to pick a specific level before they ever talk with the people who work for them. Then ask them to pick a level. You will be pleasantly surprised by the results.
Systems & Processes
Systems and processes are vital to efficiently creating and recreating reliable quality in your products and services. If your processes are well-documented, you will be able to grow your business without needed an excessive amount of oral instruction.
Here’s a quick climbing the ladder exercise for Systems & Processes:
Level 1 – Victim: “Systems are too confining. Plus, no one ever follows them anyway.”
Level 2 – Conflict: “These systems were written by someone else. I’ll do it my way.”
Level 3 – Acceptance: “We have systems for a few critical things, but it’s a waste of time to create processes for everything we do.”
Level 4 – Compassion: “How can I create systems that include only steps that benefit our customers?”
Level 5 – Opportunity: “By creating and following systems, we reduce the amount of time we spend on the job and create repeatable quality for our customers.”
Level 6 – Synergy: “We will improve our processes each month to ensure our systems are addressing all the needs of our customers.”
Level 7 – Total Awareness: “Systems are for others. I intuitively know what to do and will blaze my own trail.”
You can see that systems and processes seem like a waste of time at lower levels. It’s important as the business leader that you decide which systems and processes you must document; and what tasks you should allow your employee’s creativity to reign supreme. If you get this wrong, you will create an atmosphere of “low level energy”. If you hire a creative person and tell them to follow a specific system, you’re asking for trouble. Likewise, if you hire a new person and let them try to figure it out for themselves, they will become discouraged.
Resources – Tools & Materials
To deliver quality to your customers, your employees must have the best tools and materials available in their industry. If you’re a graphic designer and don’t want to spring for Adobe Illustrator™, then your graphic designs will not be the best in your industry. You will either need to lower your prices for lower quality work, or invest in the best tools for high quality work.
Here’s a climbing the ladder exercise for Resources:
Level 1 – Victim: “We can’t afford to buy new tools.”
Level 2 – Conflict: “I’m good as long as I get quality tools. Others are on their own.”
Level 3 – Acceptance: “We need to get at least five years out of each tool before we consider replacing it.”
Level 4 – Compassion: “I will supply my employees with the best of everything.”
Level 5 – Opportunity: “I want to give my people the tools they need to be efficient and do high-quality work.”
Level 6 – Synergy: “I’ll actively keep an eye on what equipment is needed for our technicians.”
Level 7 – Total Awareness: “We just don’t need a lot of these tools to serve our customers.”
Resources is a deceiving topic. On one hand you don’t want to buy tools you don’t need that will drive up costs unnecessarily. On the other hand, you want to invest in tools that will make a genuine difference in your business. Much like the systems and processes item, there is a balance that will be the optimum balance for your company. Keep in mind that which ever thought you pick, your employees may be on a different level. They may believe that their poor performance is a result of not having the best tools. Be patient and listen and ensure that you’re not resisting their requests out of a lower-level energy on your part. Then, make the best decision for your company.
Customer satisfaction or customer feedback is the reaction your customers have to your product or service. If customers love what you do, they will want more and tell others about your amazing products and service. If they hate your products and services, you need to know it as soon as possible. If you ignore your customer’s opinions, you will not know how to improve your flaws or leverage your strengths.
Here’s a climbing the ladder exercise for Customer Feedback:
Level 1 – Victim: “Why spend the time asking our customers what they think? We won’t change how we do things anyway.”
Level 2 – Conflict: “Why ask customers if they’re satisfied? It’s us against them.”
Level 3 – Acceptance: “Eighty percent customer satisfaction is okay for a small business.”
Level 4 – Compassion: “I care about what my customers think about me…and will do whatever I can to get honest feedback so that we can improve our service.”
Level 5 – Opportunity: “I want to engage any customer who feels we can improve and take action to make our company better.”
Level 6 – Synergy: “We solicit feedback from our customers and achieve 95% customer satisfaction.”
Level 7 – Total Awareness: “I will pay attention to useful customer feedback to improve, and I will ignore emotional rants.”
Is the “customer always right?” Of course not. However, your customer’s perspective is always worth understanding. If you solicit customer feedback on a regular basis, you will understand the perspective of your business that matters the most. This feedback is not always in customer surveys or questionnaires. Let’s say that you’re a restaurant and have 100 items on your menu. However, there are fifty items that are never ordered. It may be a good idea for your restaurant to eliminate 50 items that are never ordered; and then eliminate another 20 items that are ordered so rarely that they are causing excess work by your kitchen and serving staff. If your company assumes they know what their customer needs, you are doomed for failure.
Gross Margin / Efficiency
For you to make money in a business, you must sell your products for more than you pay for those same products. The market typically sets the price of your products and services. It is up to your operations department to deliver those products and services as efficiently as possible to deliver the need gross margin to your company.
Here’s a climbing the ladder exercise for Gross Margin:
Level 1 – Victim: “I have no idea how my work impacts company profits.”
Level 2 – Conflict: “Those salespeople didn’t give me enough money to do the job. It’s their fault if we lose money.”
Level 3 – Acceptance: “We could probably be more efficient, but we’re doing okay.”
Level 4 – Compassion: “We will be as efficient as possible to keep our services affordable to customers.”
Level 5 – Opportunity: “I’m going to create a financial incentive system to pay my people based on how cost effectively they perform work for our clients along with a multiplier for customer satisfaction.”
Level 6 – Synergy: “We will ensure our average gross margin is 50%.”
Level 7 – Total Awareness: “While I’m aware that efficiency is a need, it is not my focus.”
As the business leader understand what gross margins you must earn in order to run a profitable business. If you are exceeding this gross margin amount, you need to dig deeper to understand if your improved efficiency is coming from increased productivity from your staff or cutting corners on quality. If your staff is delivering higher productivity than normal, consider bonus programs or pay increases to reward them. If your operations department is delivering poor quality work for short term benefit, do what it takes to get your quality back to where it needs to be.
In an era where you can get an Amazon package sitting on your front porch within a day of your online order, modern-day consumers have grown accustomed to convenience. If your business isn’t as responsive as humanly possible, you will lose customers to your competitors.
Here’s a climbing the ladder exercise for Convenience:
Level 1 – Victim: “They’ll get it when they get it. What’s the rush?”
Level 2 – Conflict: “You can have it soon, or you can have it good, but you cannot have both.”
Level 3 – Acceptance: “We miss a few deadlines, but we’re doing our best.”
Level 4 – Compassion: “I will look for ways to reduce the effort of our customer.”
Level 5 – Opportunity: “Making it easy for customers to work with us is a great opportunity to differentiate ourselves in the marketplace.”
Level 6 – Synergy: “We’ll under-promise and over-deliver on customer deadlines.”
Level 7 – Total Awareness: “We will constantly invent new ways to make it easier for our customers to buy what we sell.”
You will have to evaluate how important “convenience” is in your industry. A good starting point is to become aware of how your competition is serving their customers. This is the minimum convenience you must be offering your customers. If you live on the lower energy levels, you will minimize the value of convenience. If you live on the upper energy levels, you may over-invest in convenience for your customer segment. Know your customers and what they want, and you’ll win at the convenience game.
In a healthy free-market, privately owned businesses strive to provide value and innovation to the marketplace, while the government provides regulation and oversight. If you’re a general contractor, you must understand the International Building Code or the Uniform Building Code, depending on where you live. If you fail to follow these codes, you may have to invest in demolishing and reconstructing.
Here’s a climbing the ladder exercise for Compliance:
Level 1 – Victim: “These regulations are killing my business.”
Level 2 – Conflict: “Those rules are stupid. Let’s ignore them until we get caught.”
Level 3 – Acceptance: “Everyone in our industry has the same regulations we do.”
Level 4 – Compassion: “I understand how regulations help keep consumers and the public safe in our industry.”
Level 5 – Opportunity: “By clearly understanding regulations, we are able to gain opportunities where our competition sees obstacles.”
Level 6 – Synergy: “Regulations are part of a healthy free-market system.”
Level 7 – Total Awareness: “The laws are there for a reason, and we will follow them. If we see a bad one, we’ll educate lawmakers on how they can make needed improvements.”
It’s important to be aware of the regulations in your industry and follow them. This has been difficult for me as a business owner and engineer. There are many building codes that are outdated. For instance, buildings require a fixed ventilation rate of outside air per person for the maximum amount of people who will occupy a space. Ventilation is the amount of outside air you must vent into a building. If it’s cold outside, you must heat this cold air to accommodate the ventilation requirements. I was fully aware of this code, but when it was possible to sense the amount of ventilation needed through CO2 sensors that could automatically detect the amount of people in the building, I felt this code should be ignored. Instead of fully ignoring the code, I would education my clients on the purpose of the code; and then offer to either follow the rule or have my client waive this code. Most would waive the code after understanding it’s purpose. Thankfully, the code has been changed to accommodate the new technology. Had I not understood the purpose of the code and why it was written, I would not have been able to come up with the alternatives that I did. Please understand the regulations that exist in your industry.
Wow! That was a much longer blog post than I had intended. While the distinctions between each energy level seem subtle, I guarantee that they will be the difference between your operations department flourishing or failing. I hope that you now better understand how Core Energy™ works with the operations of your business. I hope that you can also recognize the thoughts and feelings in our climbing-the-ladder exercises that occur at the various levels in each component of operations so that you can act/react in a way that best serves you and your business.
If you’d like to learn more about how I coach my business owner clients with Core Energy Coaching™, please visit my website at www.mmbizcoach.com.