- +++ S P E C I A L R E P O R T +++
"Using a System (not necessarily a computer)"
By Joe Dweck
4 September 2003
In this report, I've completely skipped over the
search, angst, and decision criteria that you will go through in any
computer system selection. It doesn't matter whether the system is for
Accounts receivable, Point Of Sale, manufacturing, wholesaling or banking.
In fact, I am not even considering the installation of a system. The fact
is, that many companies are running very well with the worst systems
imaginable, and others are cannot function using "the best" system available
or recommended for them. The point is that business people need information
to run their businesses. That need for information must be met , whether you
have a computer or not.
Part of the issue is that most business people strive for automation,
thinking that any technological installation will result in a competitive
advantage. The truth is that you do need to know what is going on in your
business. In essence- don't wait for a system, or anything else to get the
information that you need about your business. Find ways of getting the
information, or of controlling the problem with secondary means. So let's
get to that;
I will assume that you are always 'hondling" for the lowest cost of goods
and services and pinching every penny, shutting lights, lowering thermostat
settings, re-using paper clips etc. In my years at a large retail chain we
couldn't control the cost of goods, it was set by the manufacturer. We could
not arbitrarily define our selling price because of competition and the
profile that we wanted to present. We couldn't control the rent or
utilities, they were not in our hands either. I realized that the only
expense that we could save was payroll.
So, I instituted reporting that compared payroll to sales in all of our
stores. I even automated the process where the payroll company dropped off a
magnetic tape of the payroll data with all of the paychecks every 2 weeks
and matched up to the deposit information that we collected for each store
every day. However, before the automation we did the report manually, as we
do now in my smaller company.
That report was poured over by every executive and supervisor as soon as it
was printed. In fact, the bi-weekly meetings were scheduled for the report's
printing. Every store's payroll percentage was examined, function by
function. That is, cashiers X%, managers Y%, stock people Z%. If a store
came in too high, there was much discussion - and hell to pay. If we
couldn't run a store with less help, we got creative and made crews that
would go from store to store to put away goods, or assistant managers that
were shared. We probably had the lowest payroll to sales ratio in the
industry, we made the most profit and in the highest cost, most competitive
market in the country.
We also always examined this years sales versus last years. We could see
trending. We do this today too, examining department sales every week. Now
that we have gone national, we examine by account, by territory and by
salesperson.
Accounts receivable was (and is) a large issue that also requires rapt
attention. We watch our receivables like hawks. We use a combination of
Quickbooks and Excel spreadsheets to monitor our accounts. My clerk runs the
reports a few days ahead of schedule and makes the calls that are obvious. I
get the report at the beginning of the month and review with her the calls
that were made. If there is a problem brewing, I make the call, then get a
lawyer right away if I don't get the promised response. Our receivables are
about $24 million per year. We have about 20 days receivables outstanding at
any point in time and our write-offs for debt are 0%. Even the largest
accounts (multi billion dollar national health plans) know us by reputation
and will not delay sending our checks. They don't want to get our annoying
calls. There are services that exist that will do the same thing - that is
make collection phone calls BEFORE the invoices are due. The tactic is very,
very effective for getting all the money that is due you and on time.
I also believe that the searching for this data every week has a ripple
effect.It makes everyone in the organization more responsible and thinking
every day. They know that they are responsible for giving correct
information and the constant examination keeps the bar high for everyone.
These tactics were also recently laid out in Rudy Guiliani's book
"Leadership". In his quest to rein in the greatest, most ungovernable city
in the world, he did the same thing. He started meetings at each agency to
look at statistics. It didn't matter if it was the Police who looked at
calls to 911 or arrests per week, or an emergency call center's record of
calls handled per minute, or Sanitation's record of how many tons of trash
picked up by how many men. Everything was examined. That is the message in
his book about management. Examine everything, measure everything.
As a small example, Guiliani took this city from 2,200 murders per year to
the current rate of about 500. New York didn't get a new population of
honorable, law abiding people in that period, but we did get bi-weekly
Police "CompStat" reviews with all precinct Captains (read as "managers") to
monitor how law enforcement was doing and to get criminals off the streets.
Now we have the safest city in the world. I don't know about your business,
but mine looks pretty simple when compared to controlling and securing the
lives of 8 million people, not to mention the building of midtown, reducing
corruption etc.
Your business might have comparisons of sales, days of receivables, output
per employee per day, or numbers of pencils compared to packages of computer
paper. The key is to start watching those items, others items will naturally
come in as new reports are added. Use your employees and your meetings to
work together to try solutions, and then try other solutions.
I began this report with a red-herring about "systems". The "system" is to
be ever vigilant for everything. As a manager or owner, you have to find a
way to measure and improve your business. Do not be restrained by not having
a computer, or for that matter for having a computer that doesn't provide
the information that you really need.
Joe Dweck
