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My
father-in-law, a retired Air Force Colonel whose major ailment
at 91 is acute irascibility, had difficulty sleeping and was
examined by an intern at least 60 years his junior. The intern
asked if he ever ground his teeth at night. When the colonel
said "No," the intern responded, "Now, how do
you know you don't?" My father-in-law looked directly at
him and said, crustily, "Because I don't have teeth at
night, sonny."
Most of us, hoping to avoid
my father-in-law's excuse, make regular trips to the dentist,
usually twice a year. In addition to the regular cleanings, we
often get an annual x-ray to make sure nothing is going on
that isn't readily apparent to the hygienist.
As important as regular
dental appointments seem to most of us, it is curious that a
regular checkup of our businesses doesn't have the same
priority. Too frequently, I have seen a troubled company in or
near bankruptcy whose warning signs were visible for months or
years prior to then without management recognizing them.
It is too simplistic to say
management failed. In many ways, the management team was
committed and experienced. They had implemented initiatives to
map their processes meant to improve their performance and had
embraced all the latest tools such as Lean and Six Sigma to
run their businesses. Yet, despite that, the business one day
found itself uncompetitive and losing money, with management
at a loss as to why.
However, an annual check up
might have revealed a couple of subtle problems that, had they
been addressed early enough, would not have grown into the
bigger obstacles they became. For example, for a while sales
were growing and profitability was up. However, by looking
more closely, management might have determined that sales were
up because the market itself had grown but their market share
was actually down. Profitability was up because of a number of
price increases that offset some fairly significant cost
increases. Meanwhile, customers were increasingly disgruntled
about the price increases and poor service and were testing
competitors to find a suitable alternative. As it turned out,
once the customers were satisfied with an alternative, they
abandoned the company virtually overnight. Because their costs
were too high, it was difficult for management to respond by
lowering prices.
Another example might
include rising inventory. Those of you in the steel industry
recently experienced the rapid rise in steel costs. Many of
you fell into two camps: those who could/would pass on the
steel price increases and those who couldn't/wouldn't.
However, it seemed like the bigger concern was whether or not
you could get steel from your suppliers. The fear of not being
able to supply the customers with what they wanted led many of
you to overstock steel products, committing significant
capital in inventory that subsequently started losing value as
prices started to decline. Those of you who added surcharges
to your estimates for steel price increases are being
pressured to remove those surcharges. Unfortunately, some of
you were making your only profit as a result of the
surcharges. Your costs are too high and you've got too much of
your capital tied up in inventory.
While these are two fairly
clear examples, there are others less obvious. It's why it is
so important to get an annual checkup that will demonstrate
clearly where you are in relation to where you need to be
based on current issues and challenges.
Ask yourself important
questions. Some might include:
1. What is your competitive
position? What are the factors that determine your success? Is
your differentiation still valid or have you been
commoditized?
2. What are the key
strategic challenges affecting your sustainability? Have you
created sustainable improvements?
3. How do your stated
objectives address the issues found in questions 1 and 2?
4. How do you modify
objectives and action plans if circumstances dictate it?
5. What are your customers
saying? Are you building loyalty? How do you determine
customer satisfaction?
6. Are you basing the
organization's direction on fact or conjecture?
7. Is your performance
measurement system current with business needs?
8. Do your work systems
capitalize on the diverse ideas, cultures, and thinking of
your employees?
9. Are you motivating your
employees to utilize their potential in a focused, synergistic
way?
10. Are you maximizing your
value creation capability?
Asking the questions is the
easy part. Answering them truthfully can be difficult.
However, it might make the difference between success and
failure.
Just as dental health needs
to be monitored, so do businesses, markets and competitors.
More than ever you need to know three things: Am I doing what
I said I would do? Am I getting the results I hoped for? Can
the results be sustained in the future?
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