Paul Svendsen

(Editorial comment from Paul: One of the good things about doing lots of business appraisals is you get to see what works in business, and what doesn’t. Businesses that “have it together” and get good long-term results have a culture that brings out the best in the organization. Enjoy this article by Jim Lee, a good friend. Paul)

Over twenty years ago, a Harvard Business School study measured the impact that a positive work culture had on organizational growth and performance. The results, after observing over two hundred organizations for twelve years, were sobering and dispelled any myth that culture was not a “hard” business issue. Work cultures with well defined, living and integrated strategic visions, values, beliefs, norms, heroes, ongoing shared stories and systems that supported high performance significantly impacted the financial metrics that matter most to executives and their shareholders including but not limited to, revenue growth, employment growth, stock price growth and net income growth. This study cited in Guiding Growth by Mark Lipton and his extensive longitudinal studies also included identical benefits for nonprofit organizations and the metrics important to them and their stakeholders.

So here’s the question. If having a positive and sustainable work culture is so important why are the majority of companies today being driven by other standards and mechanisms? I have several theories and I bet you have some as well. Before we get into some of those “traffic warnings” and subsequent recommendations let’s talk a little bit about culture and how best to understand it.

First of all, your work culture is not just about your people but how their work is engaged and integrated with your strategic vision, values, human resource functions, all of your business initiatives, processes and structures. It’s a system that resists all attempts to segregate these items from the beautiful fabric that they were designed to cohabitate. It’s sort of like the human body. We don’t understand it fully, but we know when it is working and when it is not. Even one important “part” or “passenger” ignored can lead to unexpected challenges and crises. Sort of like the Los Angeles “freeways” at rush hour that I navigated so many years; starts, stops, detours, time wasting delays, frustrations, accidents and unfortunately, even some casualties along the way.

But let’s take heart and not make rocket science out of baking brownies when it comes to evaluating the status of our work cultures. Take a simple and confidential survey of your staff and other sectors critical to your success and ask the following questions: How does it feel at the end of most days to work here or work with us? What brings you joy about your work or partnering with us? What do you believe are our biggest strengths and most needed areas for improvement? How can we make your particular job or work with our company easier and more productive? It may sound too simple but it is where we need to start. Generally, one can spend an hour or two in a company as an outside visitor, talk to a few people or customers that are willing to be candid, most usually the line staff or middle management, and see whether or not the company is on course to arrive at their desired destination or in a number of traffic jams that seem to happen all too frequently.

So let’s assume you have some meaningful data. Where do you begin and how best do you engage your improvement initiatives? Is it more training for your staff? Do you reorganize around the same problems, offload some folks and hope for the best? Do you send more emails reminding all of your passengers about agreed upon values or most recently adopted policies and procedures? Do you write more policies and procedures or ask Human Resources to just “fix it”; or perhaps better, hire a really good “motivational” speaker to get everyone on the same path. I am afraid, at least in my forty years of experience, these types of strategies, although they can have some initial success, often leave leadership and most importantly your passengers frustrated and demoralized.

I would like to offer three reasons why most attempts at culture shifts fail or are relatively short lived and subsequent to these reasons, some recommendations and a question to ponder that you might be able consider or utilize this year to improve your journey.

First, there is a widespread misunderstanding of the current science of human behavior. We are still utilizing business practices that reflect Newtonian principles versus current thinking about how best to inspire our people and customer experiences. I am literally alarmed about how much longitudinal data there is out there on this subject but how little these new realities impact day to day functions in most companies. News flash, command and control systems no longer work and most of our companies are way over structured and under led. People are not machines and we can’t take them apart and put them back together again like we do our cars. You want a living breathing organization that is flexible, responsive, unleashes creativity, solves problems on the line where they happen (versus by a chosen few) and delights your customers.
Recommendation number one: Commit to a well-defined strategic vision and operational values that are integrated into every phase of your business systems and that drives your daily decision making. You need a facilitator for this, or better yet, an executive team that is fully bought into this critical process and has a full understanding about how much difference over time this can make to your bottom line. Keep your human resource functions right alongside your executive functions as cheerleaders and culture stewards for these initiatives and stop utilizing the HR function as a mere enforcement agency or “traffic cop.” In addition to Lipton’s book cited above I would also encourage you talk with someone about resources like Drive, by Daniel Pink, Finding Our Way, by Margaret Wheatley (for that matter anything by Margaret Wheatley), and an unbelievable resource by Dov Seidman by the simple title, How; Why How We Do Everything Means Everything.

Second, when resistance arrives during any engagement process it is more often looked at as an enemy vs. an ally. Mark Lipton refers to this as the Binary Response or the pronounced human tendency to fall back on what is familiar and to avoid those behaviors and ways of thinking that are not part of our familiar repertoire. When we encounter a problem or challenge, we naturally fall back on our practiced approaches. It is fully understood that most CEOs and leadership teams may not have real experience or practice with these natural transitions that occur in any company so when the challenges hit, they avoid the problem all together and get back on a familiar road. Recommendation number two: Get someone on your team that fully understands transition work and can be a guide during the natural resistance phases that are actually expected, needed and normal. A great resource book for this is Managing Transitions, by William Bridges.

Third, and related to number two there is a strong tendency to let immediate and short term problems be the driver of your journey and along with that an unwillingness to ask for help when it is needed. When I talk to groups about leadership I usually ask them to give me their top five characteristics of quality leaders. I rarely get this one; vulnerability which I believe is an incredible strength of some of the best leaders I know. Knowing when to ask for help and then following through can be one of your biggest strengths as a leader. When more of us figure this out our people will drive our culture and our culture will be the consummate driver of both our profitability and sustainability.

I recently saw a couple of quotes that I would like to close with. Howard Zinn has said you can’t be neutral on a fast moving train. The Dali Lama when asked what should be our most important motivation that will inspire us to do great things shared, “critical thinking followed by meaningful action.” It’s the power of one. You and I may not be able to make a world of difference but we can make a real difference in our world, one person, one company, one organization at a time. More leaders need to stand up and share this message and commitment to beliefs, values and new behaviors that are critically needed to re-energize capitalism in our country in the global economy we now have been in for some time. Or, we can continue to travel the same road in the crowded back seat and get the same results. It’s a choice that all of us have to make.

Jim Lee is the Executive Director of Abilitree, a local nonprofit and a Principal with InvitExcellence, a local coaching and consulting firm.

Way # 4: Increase the effectiveness of the processes in your business so that you achieve the first three.

These days the way we do business can be just as important as what we do. As customers become better educated and more discerning, they often expect more in terms of customer service–the way they are treated and how the product or service delivers. Given that, it’s important to review the processes–those actions that make up your business–and implement strategies and systems to improve them.

This could range from picking up the phone no later than the second ring (which shows you’re attentive to their needs), using “awesome service” to show customers how special they are to you, improving the sales process, better educating your team members on the products and services you offer and more importantly the benefits to the customer of each, going the extra mile when it comes to serving them, and more. Sit down with your team and think about what you could be doing differently to improve the way you do business.

Here is a simple activity your team can use to start examining your current processes and possible improvements.

Using a whiteboard, draw a large square in the middle. On the left side of the square, draw 3 arrows hitting the box. On the right hand side of the box, draw one arrow coming off the box. Call the arrows on the left hand side “inputs” and th eone on the right hand side “output.”

Now get your team to think of any process in the business (for example, the phone process, where inputs represent incoming calls, and outputs represent orders)–literally any process in the business.

Now in the square, write the word “Activity.” Point out that the only way to get more outputs is to change the activity in the box. Taking the phone as an example, it could be that an input is when a customer calls and asks “what’s the price of XYZ?”

The “Activity” in this case could be a team member simply giving the price in response. The customer then says “I’ll call you back,” and there is no output. The only way to have changed that situation was to have changed the activity (what the team member said in handling the call.)

When you start to look at your business as a series of processes, this method of examining your business can produce dramatically positive results. Give it a try.

Paul Svendsen is President of Axia Wealth Management, a registered investment advisor in Bend, Oregon.

Way #3: Increase the average value of each sale.

Every time you get a customer or client into your business, you’ve probably spent thousands of dollars to get them there by the time you add up all the costs of marketing, advertising and so on. So why not leverage that investment and increase the value of their average transaction with you? They are going to spend something, why not add value and have them spend more than they originally intended?

Often people will come to your business with a need of some sort, thinking a certain product or service will solve that need. Many times though, you will have an add-on product or service that could bring them even better results when combined with the original. Given that, and given the value it adds to them and the impact it can have on the growth of your business, you must be considering strategies to increase your average sale.

Track what it is now. Take your total sales and divide that by the number of transactions or invoices for example, and that figure represents your average sale.

From there look at how you could make ‘cross-selling’ systems and packaging work. Cross selling, where customers are offered an additional product or service that complement their initial choice can be very effective. In fact, customers are often receptive.

The key is to sit down with your team and do 3 things. First, write a list of all of your products and services. Next, go to each item and identify what products or services from that list complement each other. Then, agree as a team to suggest those complementary products or services each and every time you are dealing with a customer or client.

Of course the other option available to increase the average value of a sale is to increase your prices! Interestingly, more sellers have problems with the price than buyers. Often people only ask ‘how much is this?’ because they don’t know what else to ask and because we promote a product or service with a price.

Focusing on winning new customers and advertising only will limit the growth and profitability of your business. Be sure to consider getting your customers to come back more often, increasing your average transaction and improving the way you do business.

Paul Svendsen is President of Axia Wealth Management Inc, a registered investment advisor in Bend, Oregon.

Way #2: Increase the number of times they deal with your business.

Many business owners focus their marketing energy on winning customers. But getting your customers to come back to your business more often is more vital to the long-term health and profitability of your business. As is increasing your average sale.

You see, the more frequently your customers purchase from you, the greater your profits. And the greater your profits, the greater the longevity of your business.

Because you paid to acquire that customer on the first sale, every sale after that has no cost to it other than the cost of the goods itself or the labor to complete the service, both of which are covered in the price. So for every sale you make to a past customer, you keep more profits.

It’s like the icing on the cake. And it’s a huge opportunity for your business.

You see, studies show that it costs 6 times more to win a new customer than it does to have an existing customer come back and purchase again. As such, if you can build repeat sales for your business, you will be even more profitable again.

Paul Svendsen is President of Axia Wealth Management Inc., a Registered Investment Advisor in Bend, Oregon.

Way #1: Increase the number of customers of the type you want to have.

When you think about any other strategy, such as cutting costs, it won’t grow your business unless you use the money you save to promote your business. It may let you control your business better and return greater profit, but it won’t grow your business.

To improve your customer acquisitions, target marketing rather than the “shotgun” approach is important. That is, identifying your ideal customer or your “customer profile” can make your marketing more efficient and more results-driven.

People buy the differences they perceive between your business and your competitors. Unique Core Differentiators clearly show the differences to your potential customers.

In fact, they help potential customers understand the added value, expertise, or service you might offer in a succinct, salable way.

There are 3 kinds of UCDs. The first is an actual UCD, something genuinely unique about the way you do business. The second is perceived, that is, people perceive your business or products or services to be different than your competitors, even if they actually are not that different! The third is a created UCD. Here, you create something different about your business–they way you serve people, the processes within your business, or how you actually serve customers.

Selling is not the mystery everybody thinks it is. Put simply, people buy from people they trust. It’s important to think of selling this way:

If a person inquires about something you do, they’re asking for help in solving a problem or a need they might have. If you fail to do everything possible to give customers enough reasons to buy from you, you’ve done them a disservice.

Follow-up systems are critical, too. 80% of sales are made after the 5th contact. That makes it well worth your while to find out more about this area.

Harnessing the power of “word of mouth” by creating a referral system could, in fact, double your business for very little investment. You see, almost every business owner, perhaps yourself too, feels that “word of mouth”–customers talking about you to others–is a huge source of business. And yet, most do not have a system in place to capture these referrals regularly. Most simply leave the customers to their own devices and hope for the best.

After briefly reviewing these ideas, you’ll probably find many ways to win new business that you haven’t tried or in some cases, haven’t even heard of–so try some of these ideas!

Paul Svendsen is President of Axia Wealth Management Inc., a Registered Investment Advisor in Bend, Oregon.

You know, if you think about it, there are really just four ways to grow your business:

Increase the number of customers of the type you want to have;
Increase the number of times customers do business with you;
Increase the average value of each sale;
Increase the effectiveness of each process in your business.

These four factors will give you critical focal points for your business. When combined together, they also give you leverage. For instance, given that you could increase each one of the factors above by just 10 percent (not too difficult a task), the combined effect of that is an impressive 46 percent increase in your business.

For example, creating better scripts for incoming phone calls (improving effectiveness) might have a profound effect on the number of new customers your business creates.

That in itself is an interesting example. You see, when you ask most business people how they can increase the number of customers, they believe better advertising is the way to go. Yet unless you maximize the effectiveness of the process in your business, you might be missing a big opportunity. Let’s explore this a bit.

Suppose you were in a business where the majority of your sales came from phone calls. Further suppose that you wanted to double your sales. Assume you knew that your conversion rate (the number of actual sales you get per 100 calls) was 16 percent. Then, given that you could not change the effectiveness of your advertising, all you need to do to double your sales is to double your conversion rate. You might do this through training or by having much more effective telephone scripts in place, and so on.

Clearly this strategy, which concentrates on the conversion rate (increasing your effectiveness) is likely to cost far less than doubling the number of advertisements you run. Not only that, but there is also another benefit. Let’s say your current advertisement produces 100 prospects and that you convert 16 of them. The likelihood is that you will turn away those remaining 84 (that is, the group of people who will most likely not deal with you again.)

So, as strange as it may sound, if you double the effectiveness of your advertising without changing the conversion rate, you’re actually creating 168 people who will not deal with you now.

That is why it’s critically important to look at the total process.