Infocusselling’s Blog

December 15, 2009

To Save Cut Out Instead of Cutting Down

Filed under: ACTUM Group — Educated and Aware @ 12:36 am
Tags: , , ,

The end of the year brings new hope amid sometimes tough decisions. Owners and managers this time of year take a hard look at the financial health of their company and I get some interesting and difficult questions. One of most painful questions from those not hitting profit numbers is, “How deeply do I cut payroll?” The answer, while not easy, is straightforward.

The choice when looking at payroll is save the company or save an employee–you can’t do both. As an owner or manager, your responsibility is to make a return on investment which means maintaining the overall health of the company.

Too many managers and owners ignore the reality that revenue is not matching outflow. They look at financial statements with rose colored glasses and unrealistic optimism. Instead of doing what is necessary, they do what is easy. Instead of cutting out payroll, they cut it down by reducing a few hours here and there and ask employees to work harder and faster. The problem is morale takes a hit and every hour the whole team works, they are painfully aware of reduced hours, they don’t work harder, no one is happy, productivity wanes, and then deeper problems arise requiring deeper changes.

A better solution is to objectively identify the jobs you need, fill them objectively with your most valuable and profitable employees, make a clear and decisive cut out of unaffordable expenses, and then work with a team which is happy with their current situation and future opportunity. Deferring a payroll cut or creating jobs around people prolongs the problem and increases the risk that the problem will not be solvable in the future.

Does this sound cold and harsh during the holiday season? A company is a for profit enterprise with the purpose of making a profit. (For an expert opinion, read Milton Friedman’s seminal 1970 article, The Social Responsibility of Business is to Increase Its Profits.) No company can survive without profit and our government counts on corporate taxes (including Sub-S ownership taxation) to fund growing budgets.

Is this a strange message of coldly cutting costs in what is normally a growth and expansion newsletter? Not at all. As we have seen here in the racing capital of the world, you can’t win if you aren’t running at the end. If you want to grow in the future, you have to be around. Implementing the right changes today allows the possibility of future success.

If you are unfamiliar with the laws of employment, you may be well served by contacting a good HR consultant like C&S Consulting or Resources Offered Immediately regarding laws surrounding termination. In short, Indiana is employment at will meaning you can do what is necessary to save the company without unreasonable interference.

Yes it is very unfortunate for that one employee, but your role is to save the company so it can provide for shareholders and as a result employee families in the future. Saving the company is a greater good than saving one employee today which leads to company failure tomorrow.

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January 5, 2009

Superheroes and Perceived Expertise

Recently we talked about superheroes having arch enemies that consume the majority of their time and attention. Who is your arch enemy? What is in the way or between you and wild financial success?

When you identify one major roadblock or one major enemy between you and unbridled financial success, you can focus all of your attention on that roadblock or enemy.  It sounds simple and it really is. Success is not about being the smartest person in the world. Success is about being known as the most effective person at solving one specific need or problem better than anyone else. In fact, Jerry Garcia said it well. “It is not enough to be the best at what you do, you must be perceived as the only one who does what you do.”

Thirty-six years ago my mom met Dr. King. Dr. King was known as the best nephrologist in Indianapolis. Dr. Leroy King I am sure he knew a few things about arthritis and cancer and viruses, but his specialty—what he was known for—was nephrology. His expertise is what drew my mom to him. She didn’t care that he understood migraines or high blood pressure or hang nails. She went to him because he was the expert in nephrology. Nothing else mattered—she knew his focus and was willing to pay the price for that focused expertise because of her need.

Do you have people flocking to your business because of your narrow area of perceived expertise? Do people seek you out because you can solve their problem better than anyone else? Have you spent the time and energy in one area to become known as the expert in solving one burning issue or one need or one problem better than anyone else? Can you solve one problem better than anyone else? If not, then that might be part of your problem. Would you hire #2 if you could work with #1? But more important than reality, is perception. If you are perceived as #1, that perception becomes reality for your prospects.

At this time of year, the most important part of strategic planning is to know where you will sell next year, and to focus all of your attention on being become known as the expert in that field. The smaller the field, the better and more profitable, as the most profitable specialists are always those with the narrowest field and the highest level of perceived expertise in that narrow field of need. There is too much to know in the world today to be a world class expert in a wide range of fields. My mom never asked Dr. King about cost or about how to solve other medical issues.  She sought out and paid Dr. King bills because he was the expert in nephrology and she had a very specific need for that very specific expertise.

Put in your plan now how to become perceived as a world class expert in a narrow field—and you will make world class income from a shorter list of prospects and clients who are suffering from on the one problem you are perceived to be best person solve.

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