Monday, July 18, 2011

Before you can find an answer, you have to know the question.

I had an interesting conversation the other day. I have a colleague who is a consultant, and he does some volunteer work with SCORE, an organization that provides mentoring and other services to small business owners. Recently a client asked if he knew anything about salesforce, and he asked if she was referring to the web-based CRM tool, or to something else. Since he answered her question with another question she concluded that he would not be able to answer her question.  That was an unfortunate assumption because my colleague probably did know the answer. As the conversation progressed, my friend continued to trying to figure out whether the questioner wanted to know about the software, CRM in general, or if she had some other specific questions. She was not sure. All she knew is that she wanted to know about salesforce.
This sort of miscommunication is not uncommon. In the accounting field, clients often want help with their “QuickBooks.” The difficult thing for people trying to help clients with questions about QuickBooks is that the questions do not address the real problem or problems. Is the problem that the books are not set up in a way that reflects the business? Are they too complex? Is there a specific question about how to bill clients or how to pay vendors? Is payroll a problem? Is there an issue with inventory? Without knowing what the client means when he or she says, “Can you help me with QuickBooks?” it is simply not possible to help. If it is a question about how to prepare an invoice or record a payment, then the answer may be short and simple.  If the client has a lot of questions, the most satisfactory response might be to suggest a couple of hours of training or a formal class.

At one time in my life, I worked in financial services. The common client question in that industry was something along the lines of, “Can you help me with my investments?” There is no single answer to the question because it is not specific. I had no idea if the client wanted help setting up a savings program, understanding investments, planning for retirement, or figuring out a way to pay for a child’s college in 15 years. There were plenty of times that the client wanted help with everything I just mentioned and more.

The common element in each of these examples is that the questioner does not know what to ask, and it reduces the likelihood that he or she will find an answer. The solution to this problem depends on whether you are asking or answering.

If you are the person asking the question, take the time to think through what you want to know. If your question is very broad, break it into pieces. In the last example, from financial services, you are much more likely to find useful answers to your questions if you are specific. If you see a financial planner or investment advisor, taking the time to narrow your focus will help the person addressing your concerns tailor a response to your needs. If you really do need help with “everything,” or you do not know enough to be specific, then you can frame your question that way.  If you have a lot of questions, make a list.

When you ask a question and the person you ask responds with more questions, do not assume that he or she is trying to avoid your question. It is more likely that he or she is trying to understand your question, or if the question contains many parts, is trying to understand your priorities and objectives.

If you are responding to a question, and the question is unclear, then your first goal should be to help the client clarify what he or she wants to know. If the client really does want an overview, then you should be able to establish that fairly quickly. If he or she has more specific concerns, then you may need to ask questions that will enable you to discern those concerns.  

Sunday, June 12, 2011

Business lessons from a paper route: Managing growth

When I became a paperboy, I had between 30 and 40 customers on my route. That was a manageable number. I usually could put all of my papers in my bag or in my bicycle’s baskets. When the weather was good and the papers were small, I could finish my route in under an hour. Bigger papers required several trips, and on the days when the papers were larger, the route took longer. When the weather was bad, the route did not take longer, but it seemed longer.

One of the things I learned fairly quickly as a paperboy was that my income was limited by the number of papers that I delivered. I did my best to get the papers to customers on time and delivered where they wanted them. Paying attention to whether the paper went on the porch or behind the screen door or under the mat made a big difference in how big a tip customers added when I collected. However, I was still limited. It did not take me long to figure out how to make more money. I had to grow.

Now that I know something about business, I know that the two main ways to grow a business are:
  • Organic growth
  • Acquisition
Then I knew that my options were to hustle for new customers or to take over another route. I knew that some of the older paperboys had 70 or 80 or more customers. I was already busy selling subscriptions to new customers. I started planning how to get a new route. Paperboy turnover was fairly high, so I knew that I would get an opportunity.

As luck would have it, the next available route was the one adjacent to mine. I would be able to add 30 or so customers simply by agreeing to add them to my route. I had just learned my first lesson in growing a business. Acquisition is faster than organic growth. Unfortunately, that was not my only lesson in growth. I was about to learn about capacity, customer management, and ultimately failure.

As it turns out, one of the reasons that the older paperboys had larger routes is that they were bigger and stronger. They could carry more papers, and they could travel longer distances with heavier loads. Once I added extra customers, I could rarely finish the route without making two trips, and it often took me three. I was rarely able to finish the route in less than two hours. It took me so long to deliver the paper when I was collecting payments each week that I had to separate my collections into two days.

These problems with the route quickly became customer service problems. When I could deliver the paper in an hour, it was easy to deliver the paper on time. Once the delivery time crept up to two and three hours, the papers were late. Another thing that happened is that I began losing track of customers. It was easy to manage 30 or 40 customers. I had a simple card system, and since I saw each customer once a week when I collected, I could make notes about starting and stopping the paper or other requests. It was much more difficult to manage the process with 70 customers. I began learning ways to manage larger numbers of customers. Sadly, I did not do a very good job, so I also began learning how to work with unhappy customers.

Finally, I learned about failure. While I wanted to have a larger route so that I could earn more, I was not able to manage it. The result was unhappy customers. Unhappy customers meant fewer tips. Since tips were a large part of my income, I actually found myself working more than twice as hard and making just a little more money. The next thing to happen was that customers started complaining to the paper or canceling their subscriptions. In the end, I gave up most of my new customers, and it was not too very long before I gave up my paper route. (I started working a new route for a different paper, but that is another lesson.)

So what lessons about managing growth can a modern business person learn from a paperboy? The first is to have a clear understanding of your objectives and plan accordingly. What do you want to do? Do you want to grow slowly and steadily? Do you prefer rapid growth? Consider the two paths: Organic growth which builds an organization slowly or acquisition which can build an organization faster. I thought that acquiring an additional route would be faster and easier than growing by adding customers one at a time.

The next lesson is to understand capacity. Companies that grow organically generally increase their capacity as they increase the number of customers they serve. They may still be limited by capacity constraints, however. Companies that grow by acquisition should pay close attention to capacity. While they may think that systems are compatible, they may find that they have a larger customer base that they cannot serve because they are limited by their capacity.

Another lesson is to pay attention to logistics. While I was able to take over the route next to mine, part of the route was on the other side of a busy street. When I took over the new route, I had to figure out a way to make deliveries without crossing that street. I also had to figure out how to carry more papers over longer distances because my new customers were further away from the paper drop off.

What this means to you
If you are looking for ways to grow your business, take a moment to think about your objectives and how you might accomplish them. When you are planning, be sure to think about how you want to grow. Consider your capacity and logistics and how you might increase your capacity as you build your business.

It has been a long time since I was 14 and riding a bike with baskets full of newspapers or walking down the street with a canvas sack full of the day’s news. However, the more I learn about business the more I realize that I learned important lessons on that paper route. Who knows? Maybe the next time you hire someone to manage your business, instead of asking where they got their MBA, you should ask them about their paper route.

Saturday, June 4, 2011

Because there is more to life than just work: Vacations are good for you

I learned an important lesson early in my career. Mike, my sales manager, told me that vacations are important.  I did not believe him. It is counterintuitive that taking time off could increase your output and income. There are only so many hours in a day and the more of them that you use for work, the more successful you will be. That just makes sense doesn’t it?

Yes and no. All other things being equal, the more hours you work, the more you will produce. Checking your Facebook page when you should be working on a project will make you less productive. However, all other things are not equal, and production can be difficult to measure. I am a CPA, and in the simplest terms, I work (and bill) by time. Like many professionals, my productivity can be measured in terms of billable hours. Measuring my productivity becomes a little more complex when looking at the bigger picture. Consider the things that I do that are not billable. I study to keep abreast of changing regulations and to increase my knowledge. I take time to listen to my clients express their concerns in ways that may not relate directly to the work I do for them.  I am an active participant in my professional association. None of these things add to the bottom line. However, they do make me a better accountant, and they help me do a better job for my clients. In the long run, this will increase my value to my clients and to my firm.
What about vacations though? Can they improve productivity? If you take time off from work, will you actually be better at work? My sales manager thought so, and he was the kind of person that thought that a 60 hour work week was taking it easy.
In college, I raced bicycles. We rode our bikes every day, and we pushed ourselves. I was always tired. One of the people I rode with was an incredible athlete, and she was invited to the Olympic Training Center.  When she returned from the OTC, she shared her new training “secret.” It was simply that to be a better athlete, work harder. In order to work harder when you work, rest! We started taking rest days, and we began alternating hard riding days with easier days. The result was that I could ride faster and further.
This same concept applies to work. Time away from work gives you the opportunity to refresh your mind and body. It does not matter what you do for vacation. Whether you were sipping umbrella drinks on a beach, climbing a mountain, canoeing in the wilderness, visiting family, or simply staying home and hanging out around the house, when you return to work, it will seem easier, and you will be a better worker.
Does this seem too good to be true? Consider the French. With short work weeks and a lot of vacation, the French are often derided unproductive, and whenever the French economy slows, many people are quick to say that the French should work more. However, a 2004 report by the National Bureau of Economic Research pointed out:

Over the past 30 years, productivity growth has been higher in France than in the United States. Moreover, productivity levels are about the same between the two countries . . .  France's GDP per person stands at 71 percent of GDP per person in the United States, largely due to the French working two-thirds as many hours as their American counterparts.

That suggests that the French produce nearly three-quarters of the output of the US even though they only put in two-thirds of the work. Part of the difference is that the French assign a higher value to leisure while Americans assign a higher value to income.
Do you encourage your employees to take time off to refresh? Are you planning a vacation this year?

Wednesday, March 16, 2011

Business lessons from a paper route: Getting paid – a paperboy’s guide to Accounts Receivable and collections.

In an earlier post, I wrote about delivering papers and how I learned that getting the job done lead to happy customers. Getting the job done meant delivering the paper on time and in a readable condition. We did not realize it at the time, but we were actually running our own small businesses. Paperboys were responsible for delivering papers, for collecting from customers, and even for sales and marketing. Picking the paper bundles up at the train station, assembling the paper, and delivering it to doorsteps across town was only part of the job.

My paper route was my first experience with accounts receivable and collections. In my town, paperboys delivered the paper and personally collected from customers. The paper cost seventy five cents each week. A small percentage of customers only took the Sunday paper, and they paid a quarter. Thursday was collection day. I would sling the bag I used to carry papers over my shoulder and start my route in the usual manner. However on collection day I would ring the bell at each house and let the customer know that I was collecting for the week’s paper. I kept track of what each customer paid with a set of cards on a ring. Each card had the customer’s and any special delivery instructions in the middle, and a box for each week around the outside of the card. When the customer paid me, I marked the box.

Cash flow is one of the biggest problems facing small businesses, and one of the keys to managing cash flow is to do a better job of managing accounts receivable. Leita Hart, a CPA based in Austin, Texas who provides excellent training programs to businesses, to government agencies, and to other accountants has written a simple yet effective book on the topic of cash flow, The Four Principles of Happy Cash Flow. One of her principles is getting money in the door faster. If your eyes glaze over when you hear terms such as cash conversion cycle, you need to read her short book.

Some of the things I learned as a paperboy can help you manage your receivables. The first five items will help you improve your collections, the last item will help you improve the quality of your service and increase your sales.
  • Collect regularly
  • Collect on time
  • Expect timely payment
  • Do not let past due accounts linger
  • Tie collection to something that reminds what they are getting for their money
  • Take advantage of the customer contact
There is a reason that bills come every month. Regular billing is easier than ad hoc billing, and it creates an expectation in the mind of the customer. Customers are creatures of habit. Even with electronic banking, consumers typically set aside a certain time each week or month to pay bills. Small business customers behave in much the same way, and larger businesses that have employees or even departments set up to pay bills, also find it easier to manage bill payments by setting up a schedule. My paper route customers knew that I would be along every Thursday to collect, and they had the money waiting by the door for me.

Once you have a collection schedule, stick to it. Do not be late. When I missed my Thursday collection, my customers were confused. By Friday or Saturday, the money they had set by the door had gone to some other use.

Always expect to be paid, and expect to be paid on time. You have made an agreement to provide a good or service, and your customer has agreed to pay you something in return. Keep your side of the agreement, and be clear that you expect your customers to keep to the agreement. One of my first lessons as a paperboy was that if customers did not have change, or left their purse or wallet in the car, it was the beginning of a bad relationship. I learned not to walk away from the door until I was paid. There are several reasons that customers may not want to pay you. They may manage their cash flow by delaying payables. Similarly, they may not have the money to pay you. However, withholding payment could also be an indication of customer dissatisfaction. Whatever the reason, you need to figure it out and address it.

Don’t neglect late payments. Two things happen when customers do not pay on time. The first is that as the time between the purchase and the payment grows longer, customers stop associating the value they received with the payment you are asking them to give you. They become less and less likely to pay you. Another thing that happens, particularly if the bill continues to grow, is that the customer becomes very aware of the amount of money and begins to question the size of the bill. As a paperboy, it was easy to collect a buck and a half if I missed a week. It was much harder to collect $2.25 or $3.00 or more.

When you collect, you should always remind customers why they are paying you. When I was a paperboy, I gave the customer the paper when I asked for payment for the week. You can do the same thing by providing detail in your billing statements.

Take advantage of your contact with customers when you collect. If all you do is ask for money, then you are missing great opportunities to get feedback from your customers that you can use to improve the quality of your product. You are also missing opportunities to find out if your customers have other needs that you can address.

Whatever your business, you can improve your cash flow by improving your collections. Hopefully, these simple things I learned as a paperboy will give you some ideas about how you can improve collections in your business.

Friday, March 11, 2011

Business lessons from a paper route: Getting the job done and keeping the customers happy

I was a paperboy. I had about 35 customers in a suburban town in New Jersey. After school each day, I stopped by the train station where the truck from the Bergen Record dropped off bundles of papers for the five or six boys that delivered in my part of town. I would either load the papers into baskets on my bicycle, or I would carry them in a big canvas bag.

The papers had to be delivered in time before all of the fathers arrived home from their jobs in New York City so they could read the paper before dinner. That usually was not very difficult. School was out by 3:15. If I started my route by 4:00, I could finish by 5:00 on a good day. Saturday and Sunday papers had to be delivered by 8:00. The Sunday paper took longer because it was always delivered in several sections, and it took extra time to assemble the paper before we delivered it.

All of this was a great experience for a not yet teenage boy, especially when the papers were small and the weather was good. The US Postal Service may not have adopted the words inscribed on the New York post office, “Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds,” as a motto, but they surely applied to the paper boys in Glen Rock, NJ. The papers were not always very small either. Large papers were difficult because they took extra time to assemble and because paperboys had limited carrying capacity. Large papers frequently meant that a route that could be walked or biked in half an hour could take as long as an hour and a half or more because the carriers had to make several trips.

You should be getting the idea that there were days that it just was not fun to be a paperboy. It always seemed as if it rained or snowed on the days when the paper was the largest. Those were the days that as I walked in the door after finishing the route, hungry because I was later for dinner, my mother would say, “Mrs. C called, and the paper was wet,” or “The Mr. M called and wanted to know why his paper was late.” I did not realize it at the time, but this was an important lesson, and it was good experience for later in life. I might have been cold and wet and hungry because I was late, but that did not matter. The papers were also wet and late. My customers expected me to deliver their papers on time and in readable condition. The weather did not matter. The size of the paper did not matter. Nothing mattered except that the paper was delivered as promised.

I hope it does not sound as if I had unbearable customers. My customers were fabulous, and they liked having me as their paperboy. They were generous with tips when I collected, and when they saw me in town, they always had a kind word for me.

The lesson from the paper route was simple. When I began my route, I agreed to deliver papers. My customers, who paid me for my service, expected me to deliver. It was not always easy, but that was our agreement. If that lesson seems too simple consider how many times service providers don’t deliver. The idea that getting job done means happy customers was a big lesson for a young businessman. It was a lesson from my paper route that I remember today.

Tuesday, February 8, 2011

Reconsidering who is important

Have you ever thought about the people around you and the work they do? In the context of your own business, have you ever tried to evaluate the relative importance of different jobs?

There are all sorts of ways to measure employees’ worth. The easiest and most common way is by looking at position and salary. An organization chart is a good way to tell what a company values. Generally pay, power, and prestige increase as positions go from the bottom of the chart to the top. It makes sense that the people at the top of an organization chart are the most important. Or does it?

There is an entire theory of organizational dynamics that is based on informal chains of command. The idea is that regardless of the formal structure, people within organizations create their own structures. It is disconcerting how little correlation there is between some of the informal structures that researchers have found and formal hierarchical organization charts.

If the supervisors are not more important than the front line workers and the managers are not more important than the supervisors, and the division directors are not more important than the managers, then who is important? Is it the CEO? No. Here is a short list:
  • The person that seems to know everybody, remembers a lot of company history, and knows how things work,
  • The administrative assistant who knows how to find everything,
  • The assistant who prepares all of the agendas for important meetings, and
  • The receptionist or switchboard operator that knows everyone everybody.
If you have ever been in sales, you know this list. These are the same people you get to know when you are trying to develop a relationship with a key client. Their opinions matter, even if they do not have a title or a desk in the executive suite. You will not even get a chance to pitch your product to the ultimate buyer if you do not sell to these people first. I’ve often found it amusing to read job ads for sales people that demand experience selling to C-level executives. The ads should ask for the people skills to interact with the people in the lobby or at the desk outside the executive’s office door.

If you have ever been a customer, then you know how important the last person on the list can be. Receptionists and switchboard operators are the first people that the public meets. Interestingly, companies that will spend huge amounts on web sites and advertising will often become very tightfisted when it comes time to hire administrative assistants, receptionists and switchboard operators. It occurs to me that companies send a not so subtle message to their customers when they don’t allocate resources to the people that customers contact most frequently. A good example of this is the trend toward outsourcing customer service. Instead of recognizing the competitive advantage of high quality customer service, many companies outsource this function to save money. The predictable result when customers interact with disinterested, poorly trained people without authority is that customers become unhappy. The same thing happens when companies replace the receptionist in the lobby with a security kiosk and a contracted security person. Do you really think your customers and vendors would rather check in with a bored security guard putting in the hours on a 12-hour shift than a knowledgeable and personable receptionist? Was it really a good idea to replace the switchboard operator with an electronic system that frustrates customers?

I think a good case can be made that some of the most important people in a company are the ones near the bottom of the organization chart. Whatever your business, you need to put knowledgeable, well-trained, and personable people in front of your customers. You also need the people within the organization that know the organization’s history and ways of doing things, and you need the people that seem to know everybody. If you think of your business as if it were a car, then these employees are like the tread on the tires that keep the car on the road and the oil and grease that keep everything moving without friction.

Maybe it is time to reconsider who is really important in your company. The next time you walk past the receptionist in the lobby consider that you may be walking past the most important person in your company (unless you have outsourced the job). Stop and say hello.

Saturday, February 5, 2011

Excellent Customer Service

I’ve been an examiner for a fairly well known quality award, the Texas Award for Performance Excellence by the Quality Texas Foundation.  It is a Texas version of the Malcolm Baldrige National Quality Award. I also worked for a dozen years in the planning and research group for a major professional association. I’ve had a lot of experience trying to understand quality and what it means to deliver excellent customer service. I have decided that the thing that makes the “best in class” better than everybody else is the willingness to go beyond the expected.

I received an interesting letter in the mail today. It was from Ellis and Salazar, the body shop that repaired my car last year after I ran into a deer while driving home from work. I was not sure what to expect when I saw the letter in the mailbox. The letter turned out to be a reminder that the warranty period was about to expire. They were writing to ask me to go over my car thoroughly and to make sure that I was still satisfied with the work that they had done, and they were asking me to bring the car in if there were any unresolved issues. That was a surprise.

If you have ever been in a car accident of any type, then you know that getting a car repaired is not a pleasant experience. It starts bad, and it gets worse. You probably have heard the stories. Finding something to drive while your car is in the shop is a hassle. The shop is not able to do the work for what the insurance company will pay. It takes longer than promised. The paint does not match. The new windows leak. The list goes on and on.

I picked Ellis and Salazar because they were on my insurer’s list and because they had done satisfactory work for people I know. As I write this, there are 16 reviews on and they have a good rating. That is probably a difficult accomplishment because most customers at a repair shop of any kind are already not happy with their situations. Taking a car to a body shop is not nearly as much fun as going to an ice cream shop. It is a challenge to provide customer value in this type of situation. It does not take much to push an already unhappy person into the category of very unhappy customer.

So what’s with the letter? I vaguely remember something about a warranty. I think it is probably going beyond what body shop customers expect to write a letter encouraging them to go over their cars and look for problems. Most people probably want to forget their accident and everything that went along with it. That includes the warranty. If something comes loose or the paint peels, most people figure that is just part of the game. This sort of follow up is not common. When I shop for goods or services, I expect things to work and for services to be performed as promised. I consider these things to be the minimum that a business should do.

Unfortunately, most businesses seem to be happy with the minimum. Maybe their customers don’t care. I do care, and I do business with firms that don’t do the minimum. Ellis and Salazar finished the job when they said they would, and my Prius looked like new. I expected that. Now a year later, they have taken the time to check on me. I did not expect that. I hope I never need body work done on a car again, but if I do, then I will take my car to Ellis and Salazar.

So what is the point? Am I simply writing an endorsement for a body shop? No. I’m trying to illustrate that excellent customer service is as simple as doing the expected and then just a little more. It does not even have to cost much. The reminder letter I received cost less than a dollar to mail, and it is probably done automatically. Even so, it made me feel important as a customer. That is willingness to go the extra step, and that is excellent customer service.