What is the job of a business owner? In this fourth and final edition I add performance to the tasks listed in our previous three issues.
Management types who work for someone always have to perform and they have to report to someone in order to keep their job. A branch manager or a store manager reports to a division director or vice president somewhere. A vice president reports to a president or CEO. Presidents or CEO’s then report to a board of directors representing stockholders. Even the board reports to the stockholders. And each and everyone can be thrown out on their ear if they don’t perform – even if it’s not their fault. So, they have one thing in common – perform or else.
Only in these businesses that we create can we avoid the issue of not performing. Many of us put ourselves in a situation where we are in total power, everyone reports to us and we report to no one. Under those circumstances we can demand of others and not perform ourselves. But the original question is what should an owner be doing? So, let’s consider what a real board of directors would require of a print shop owner if the owner were reporting to the board.
You would be expected to have good profitability where you are today. You could no longer kid yourself that you are building for the future in some mysterious way that no one else in the family understands.
In addition, your performance in sales would not be measured against what you did last year. Rather, your sales performance would be measured against how big the market is where you are and what percentage of the market you owned. And regardless of what percentage of the market you owned, you would be expected to increase it. And, while doing all of this, you would be expected to maintain a good current ratio and days’ cash on hand to protect the business. And, if you didn’t, you would be fired and someone else would be running the business. Sounds like fun, doesn’t it?
Urgency: a real board of directors would put a sense of urgency into the organization by starting with the person running the business – you. Don’t perform now and you don’t get to run the business. This sense of urgency tends to permeate the organization. Corporate America is often rightly faulted for looking only at short-term performance. Although that is a valid criticism, could you image if corporate America operated as we in small business do? We never get there. We never have the profits we need, we never have the current ratio, and we never have the sales. It’s always next year after the next piece of equipment or after we get one more customer.
People and Discipline: a real board of directors would demand far more from the people that we have hired to help us than we do. And we would be the person in charge of enforcing the organizational discipline. (Discipline as we define it is doing what’s most important not what’s most fun. Organizational discipline is defined as making sure everyone else does it too.) “I can’t ask Jimmy to get here when everyone else does because he got his license taken away for too many DUI’s.”
“Janie can’t do the job that I hired her to do, she’s dumb. So, there’s nothing I can do.” We would be required to organize around functions, not people. You need a CSR from 8:30 to 5 p.m. It would no longer be acceptable to hire someone who couldn’t add, think or spell and then let them go home at 2 because they (fill in the blank).” If that happened, you would be fired along with them.
Make and Meet All Budgets: a real board of directors would expect us to plan and then make it happen by using an operating budget. A real board of directors would hold us to a standard of predictability – good or bad. We would be able to predict our sales because we would be very close to our customers. We would have contingency plans based on the probabilities of our customer’s plans. Lacking this, we would be expected to be conservative with our plans – budget on known sales not anticipated sales and make money at that level. Then, if we increased our sales above that level, we would be expected to increase our net income above that level also. Please note, in the companies we follow on a monthly basis – and there’s lots of them – often sales go up yet profits go down. That would not make a real board of directors happy.