Karen: This is PKF Texas Entrepreneur’s Playbook, I’m Karen Love, Host and co-founder and today I’m with Andy Ray, a Principle in our Entrepreneur Advisory Services team. Welcome back to the Playbook Andy.

Andy: Thank you.

Karen: I’m so glad that you’re here because I hear a lot – you talk about impact but not only impact, radical impact.

Andy: That’s right.

Karen: What is that?

Andy: Radical impact is creating sustainable results that matter to a business and that is primarily accomplished in mid-market companies through middle managers. It’s a great time to be a middle manager in mid-markets because the field is wide open for impact creation, especially radical impact creation.

Karen: Wow, now I’m impressed. What I want to know is how do you help middle managers create that radical impact?

Andy: Well the first thing you have to do is you have to help them create time because they’re so busy working in their business that they don’t have a lot of time to work on their business.

Karen: I can use that time.

Andy: So you’ve got to be really cognizant of the time that you’re working on radical impact. And the main two things – the main two skills that they need to learn and that we help them develop is developing good strategic tools so that you decide what to work on; that’s where all the impact’s going to come from in that decision right there. And then the second piece is execution skills; how you actually deliver that result that matters and sustain it because without sustainability it’s not radical impact.

Karen: Well that’s impressive and I’m ready to execute right now. So thank you for being with us and explaining it and I look forward to having you back.

Andy: Thank you.

Karen: This has been another thought leader production brought to you by PKF Texas Entrepreneur’s Playbook so tune in next week for another chapter.

 

Byron: Hi my name is Byron Herbert, and this is another Tool Time update brought to you by your friends at PKF Texas and the Entrepreneur’s Playbook. Today what I want to talk to you about is using a balanced score care in your business, and why you would want to use it. A balanced score card is just that, it’s balanced in that you can’t take performance from one area to offset another. To be a high performance organization there’s certain areas you need to perform well all the time, and so we’re going to talk about that, and what we do to build a balanced score card.

First we want to look at what a high-performance organization does. A high-performance organization in your industry, there’s a lot of information out there. We can find that. We can get that for you, and we want to compare ourselves not to the average, but for the high-performance organizations. So in this example I’ve given you, we’re looking a sales growth, gross profit, net profit, accounts receivable turnover, accounts payable turnover, and inventory turnover. So in our example, we’re looking at the 12 month rolling average for a company. So regardless of the month, we’re looking at the prior 12 months performance.

So we say sale’s growth. In our example here, a high-performance organization is operating at 5 percent growth ever year. Our organization is at 4.5 percent sales growth. Not bad, so we’re not going to be too worried about that one. Gross profit, a high-performance organization that’s operating at 30 percent, we’re operating at 28 percent. That’s okay too. Net profit, high-performance organization 10 percent, we’re at 8 percent. Again, we’re not worried about that. Our accounts receivable turnover, high-performance organization is running 45 days, we’re running 60 days. That’s 15 days over the high-performance organization. Fifteen days sales in your organization could be a lot of money you could drop to the bottom line in cash flow if you can improve that accounts receivable turn over. So we want to look at that. We’re going to track that, and maybe implement some policies to get that accounts receivable turnover down.

Accounts payable turnover, a high-performance organization did 50 days, we’re running 40 days, and so again we’re paying our bills a little quick, and maybe helping us on cash flow if we can extend that out another 10 days. So we’re going to look at that. We’re going to highlight that in red, and we’re going to look at it. Our inventory turnover, high-performance organizations in our industry are at four times, we’re at two times. So we’re not turning over our inventory quite as much. We’re building up inventory, which you’re probably using debt to do, and so that’s an area that we want to look at as well. We want to get our turnovers up to that four times, and get out cash flowing line.

So again, a balanced score card, comparing yourself to a high-performance organization using a 12 month rolling average, and highlighting in those areas where you’re not performing like your peers in high-performance organizations. This is Byron Herbert. This has been a Tool Time update brought to you by your friends at PKF Texas and the Entrepreneur’s Playbook.

 

Byron: Hi. This is Byron Hebert and this is another Tool Time Update brought to you by your friends at PKF Texas and the Entrepreneur’s Playbook. If you remember, we’ve been talking about the “Change Success” model. We went and talked, overall, about the beliefs and readiness capabilities of an organization to affect change. And, we talked about – the beliefs was 30% of that change; readiness 30 %, and capabilities 40%. Last week, I talked to you about “change readiness” and all the components that make up the “change readiness.” And, today, I want to talk to you about change – the capability of an organization to change – and their belief systems that need to be in place to affect positive change in your organization.

Let’s talk, first, about capabilities. This is where a company’s sustainable competitive advantage lies. This is the company’s ability to make a profit and, also, dynamic capabilities; their ability to improve the performance of the company and the profitability of a company. Personal capabilities; same thing. Capabilities of an individual to make a living and their dynamic capabilities to improve their living. And so, while these are important components – because it’s 40% of the change process – and, in fact, it’s a “non-starter” without these; these are, really, enablers is all it is. So, most organizations have focused, quite heavily, on their capabilities and that’s how they’ve gotten to the position they’re in now. But, these are things that we have to address in a change model.

Moving on to “beliefs.” Let’s talk about “beliefs.” So, that’s 30% of our change effectiveness. And, we’ve got three of those, there. So, we broke ’em down, evenly, to 10%, each. First, let’s talk about significant others. This is an area that, a lot of times, we fail to address; and that is, “How about the peoples’ significant others; that they live with or they work with, here, in the organization? Do they believe in the change that we’re trying to make? Do they support it?” And that’s an important component that we have to take into consideration.

What about our attitude towards change? “What’s the organization’s attitude towards change? Do we believe in it? Do we like it?” The change participants attitude towards the change; “What is their belief, there?” “Perceived difficulty;” again, 10% of our belief systems will lie in, “How difficult do we think it is to make this change in the organization; whatever it may be?” So, that wraps up all of these areas in the last three Tool Time Updates that we’ve given you on change readiness, change capability and change beliefs.

My name is Byron Hebert. This has been a Tool Time Update brought to you by your friends at PKF Texas and the Entrepreneur’s Playbook.

Hi, my name is Byron Hebert. And this is another Tool Time update brought to you by your friends at PKF Texas and the Entrepreneur’s Playbook. This week, I want to follow up on our Change Success Model that I started explaining to you last week. As I said last week, there’s three main components of a Change Readiness Model, and that is your readiness, your capability, and your beliefs in an organization. Readiness, 30% of the effective change. Capability, 40%, and beliefs are 30%. So I want to focus this time on change readiness. We talked about that being 30% of the overall change process, and that’s broken down into five critical areas.

So each one of those we weighed at 6% each to get to our 30% effectiveness.

Six percent is leadership support. How involved engaged is the leader in the change initiative, emotionally and operationally. Are they involved in the change?

The need for change. Do all change participants realize the need for this change, understand why it needs to change, and what we’re shooting for as our goal.

The WIIFM is “what’s in it for me?” That’s the third component of five. What’s in it for me? Have we addressed for each of the change participants what’s in it for them in this change initiative? It may be monetary, and it may be not be. Maybe in a better work environment, better equipment, whatever it may be.

Change process, do all the change participants understand and believe in the change process that we’ve adopted to get this success model?

And last is confidence. Individual confidence and organizationally, do we have the confidence to affect this change? Past performance may be an indication of a play into that. So that may be something we have to address.

So again, change readiness, 30% of the effective change model. Leadership support, need for change, what’s in it for me, change process, and confidence are the components that make up change readiness.

And we will be back next week for more change detail talking about capabilities and beliefs and we’ll go into more detail on those as well. This is Byron Hebert. This has been a Tool Time update brought to you by your friends at PKF Texas and the Entrepreneur’s Playbook.

Hi my name is Byron Hebert, and this is another Tool Time update brought to you by your friends at PKF Texas, and the Entrepreneur’s Playbook. What I want to talk to you about today is a change success model, and the importance of having a good change success model in your business. Unfortunately, the statistics show us that only about 30% of change initiatives in companies succeed. That means 70% of them fail, cost a lot of money, cost a lot of heart ache, and also frustrations with companies that can’t seem to get over the change model to change success. So what we’ve done is come up with a successful change model that addresses all the elements that are needed to have an effective change in your business, and I’m going to go into greater detail in these in other Tool Time updates, but first I want to just talk to you about the three main components.

Change readiness, how ready is your company for change, and we can break that down further. What are the capabilities with your organization? That’s where your sustainable competitive advantage lies, and in other areas, but from an organizational and a personal standpoint, what are your capabilities in that organization? Then last, which we always have to address are the beliefs. Do you believe that your company is able to make these changes? Do people believe that they can make that change in your company?

So we’re going to go in much more details in this, but about 30% of the issue lies in readiness, 40% in capabilities, and 30% in beliefs. So a good change model can help you succeed in your organization, and help you get those change initiatives in that you need. We’ll be back next week to give you some more details in each one of these change areas to help you affect change positively in your organization. This is Byron Hebert, and this has been a Tool Time update brought to you by PKF Texas, and your friends at the Entrepreneur’s Playbook.

Byron: Hi, my name is Byron Hebert, and this is a quick Tool Time Update brought to you by PKF Texas and The Entrepreneur’s Playbook. What I want to talk to you today about is FMEA, Failure Mode Effect Analysis. And the purpose of this tool is to help you detect risk areas in your processes in your business, and then maybe if you can detect where the risk areas are you can do something to reduce those risks. So let’s talk about how we would use this tool.

Say, in a sales process you’re going to change your sales process, and what are some of the ways that you could fail in that? Look at what could go wrong. We’re looking at the downside. So maybe we lose customers. They’ll be several of them. You would want to write down all of them, all of them you can think of. What would the effect of that be? Well, sales down. Potentially, sales down unless you lose the right kind of customers that are not good margin customers, and that’s maybe what you want to do.

So in this we want to say what’s the severity of that? Well, let’s just say, for instance, that we’ve got some large customers. If we lose those large customers, the severity could be pretty high. It could be an eight out of ten. The occurrence of that, maybe the occurrence isn’t so much so we’ll give that a five. And would we be able to detect that? Well, the detection on that, we weight that. If it’s easy to detect, we’re going to give it a low number. If it’s hard to detect something, we would give it a higher number. We would probably easily detect that. So we’ll give that, say, a three.

So then we want to multiply these across, give you your RPN number, which is your Risk Priority Number. Okay? So eight times five is 40 times three would be 120. Anything over a hundred, I’m concerned about. I want to get that risk factor down to a hundred. So what could we do?

If they’re an eight, we want to get that maybe to a six. How could we do that? Well, if we’ve got one large customer, we probably want to diversify. Maybe we could get a contract in place with that large customer to secure our position with them for the next few years. So we start thinking of some ideas, some things that we could do to get this severity down.

The occurrence? Well, maybe if we’re working with several departments within that large organization the effect of that occurrence would go down. Get some ideas how we could reduce the occurrence maybe down to a four. Okay? And then the detection of it. If we did customer surveys, things like that, maybe we could get it down to a two.

So then we’ve got four times two is four times four, 48. We’ve gotten that down below a hundred. So Failure Mode Effect Analysis is a good tool for you to use to go through a process, any process within your business to detect risk and maybe reduce the probability of those risks having a negative effect on your business. FMEA, Failure Mode Effect Analysis.

Thank you. My name is Byron Hebert. This has been another quick Tool Time Update brought to you by PKF Texas and the Entrepreneur’s Playbook.

For those of you who are listening in on the radio and would like to see the graphic form of this tool being demonstrated, you can go to TheBusinessmakers.com and look for the videos under Entrepreneur’s Playbook.

Byron: Hi, my name is Byron Hebert, and this is another Tool Time update brought to you by PKF Texas and The Entrepreneur’s Playbook.

What I want to talk to you about today is a business excellence model that was developed actually by the European Foundation for Quality Management back in the ’60s as a way to reward companies that were performing well. And what they found was that there are certain enablers in your business that help you perform well. One of them being leadership. The right people. The right strategy. Partners, and processes. And they actually weighted those in order of importance in order to process and leadership and people have a significant role in your ability that enables you to run your business effectively.

So then if you have these enablers in place, that drives your results, which are your people results, customer results, society results, good corporate citizenship, and your key performance indicators, as in your sales, profitability, cash flow and things like that.

So how you can use this model in your business is to rate yourself right now in terms of your enablers. If out of 100 how important is leadership, how well are you at leadership? How good is your company right now, or do you need to develop a leadership team or a leadership training? So maybe you’re an eighty there and you want to get to 100, you’ve got a twenty gap, and you start working on how you can effectively move the dial from eighty to 100 by training, or making an emphasis on rewarding those who show leadership. Things like that.

As far as your people, do you have the right people in the organization? On a scale of ninety, if it was ninety, where are you? Eighty-five is pretty good. Maybe you’re at a sixty, and you’ve got a thirty gap there that you need to fill and start getting some ideas of how you can get the right people in your organization.

So again, this is a business excellent model. The enablers are your leadership people, strategy, partnership and processes, and with that you’ll get the results that you can measure in your people, customers, society, and key performance indicators.

Again, my name is Byron Hebert. This has been a quick Tool Time update brought to you by PKF Texas and The Entrepreneur’s Playbook.

For those of you listening in on the radio and would like to see the graphic form of this tool being demonstrated, you can go to TheBusinessmakers.com and look for the videos under Entrepreneur’s Playbook.

Byron: Hi, my name is Byron Hebert and this is another Tool Time update brought to you by PKF and the Entrepreneurs Playbook. What I want to talk to you about today is a eight week project team. With many of the mine shop tools, if you’ve been watching these videos, you see we have a way to come up with great ideas. But what we really need after that is to have a project team implement those ideas. Good ideas are no good without some implementation.

And so an eight week project team is a good way to keep a team focused. It doesn’t take too long to get the project done, but then again, it doesn’t drag on for months at a time.

Week one, you want to project brief. Make sure we understand the problem, we framed it correctly. Second week ___ analysis. Where is the company now with this particular issue? Let’s just say it’s sales. We’re at 4 million in sales with a 30 percent margin. Here are our customers. Here’s a breakdown of that. So we want to know where we are now with this issue. Where we want to be. Maybe by the end of the year, next 18 months we want to be at 5 million in sales with a 35 percent profit margin.

We analyze the data in week four. We start drafting the plan in week five. And you may say that seems early to be drafting a plan, but later we’re in week seven and eight we’re gonna selling our plan. It does no good to go through all this work if you can’t sell it effectively. We start developing solutions, start looking for other ideas that we may have missed when we draft the plan. And in week seven we design the presentation. We may go to the CEO with our program and say, here’s where we are, can you give us some feedback? And start pre-selling our plan.

By week eight we’re doing a dry run. Now imagine if every eight weeks you were fixing an issue in your business. How much better your business would be, how much more profitable and effective your business would be by the end of the year. Again, my name’s Byron Hebert. This has been a 90 second Tool Time Update brought to you by PKF Texas and the Entrepreneurs Playbook.

For those of you that are listening in on the radio and would like to see the graphic form of this tool being demonstrated, you can go to thebusinessmakers.com and look for the videos under Entrepreneurs Playbook.