Maybe this situation sounds like your business: you have a highly transactional business with lots of customer orders and deliveries. Orders are taken by phone (not online). Once the orders are taken and entered into a database, a manager (or two) checks them for accuracy. Sometimes the managers are busy and mistakes get through — pricing that’s wrong, items specified that you no longer offer, addresses entered incorrectly. Because of this system, you have an error rate of about 5%. At the volume of business you are doing, that means about 10 customers a week are affected, and are they ever angry about it.
So what’s wrong with this system? A few things:
- The employees taking the phone calls from customers are actually trying to avoid picking up the phone. They are paid an hourly wage; they can see each other in the office. It becomes a game of “it’s your turn to answer the phone.”
- Once they do pick up the the phone and are disturbed by customers, they have no incentive to check and double-check their own work. After all, a manager is going to check it anyway. They make $9 an hour and are watching the clock until it’s lunchtime or time to go home.
This was an actual situation in a sizeable business run by a friend of mine. Here’s what happened next:
He hired an outsider (from the same industry) to head up sales. The New Sales Guy has a reputation for being (can we say this on the Internet?) a ballbuster with employees. Very demanding. Customers love him though–he delivers on his promises with fantastic commitment and quality. Here’s what New Sales Guy did:
- Teams. Reorganized the phone-order takers into teams of three: two salespeople and one to do data entry and quality control. The managers were immediately taken out of the order process.
- Performance Linked to Pay. The teams were given responsibility for checking their own orders. There would be no one else to blame for mistakes, as all orders would be easily tracked back to the team. Most importantly, the team received a commission on each order. If the team did its job well, each team-member could earn up to an extra week’s pay every month. If they made errors, no commission.
- First Ring. When the phone rings, if the customer is new, the salesperson who takes the order now gets that customer for life and a small annuity commission on all orders. That new customer belongs to their team.
Sometimes salespeople complain to the boss about New Sales Guy. The boss rightly says, “He’s your boss now, not me. Work it out with him.” The boss now has a lot more time to work on boss-type things.
The error rate on orders is down 90%. It took six weeks to make the changes and “re-educate” everyone. The teams don’t mind so much about New Sales Guy being a ballbuster sometimes, because they have a pocketful of extra cash, which, let’s just say, cushions the blow quite a bit.
Sometimes entrepreneurs can be the victims of their own success. Here’s a situation that may sound familiar: your own a service-oriented business with one full-time employee—you. You have had hundreds of clients over the years. You use subcontractors to do certain jobs that you don’t have time for. You are really busy and business is very good. But you feel overwhelmed. There are a couple of problems you’ve identified.
- The Tail Wagging the Dog: Your have a subcontractor to whom you give a great deal of work. But he’s mercurial. Sometimes he’s prompt and communicative, other times he vanishes. Sometimes he makes you feel like you work for him. Every time you take on a job he’s your go-to guy and it makes you queasy.
- This Business Would Be Great if It Weren’t for the Customers: You have clients who love you and come back to you again and again. But they are constantly late meeting deadlines for feedback that will enable you to get to the next stage of the project. This costs you money and adds to your stress level.
- Small Potatoes: To paraphrase one of my least favorite figures from American history, you go to war with the customers you have, not the customers you wish you had. You have lots of smallish customers who are price sensitive. You wish you had big customers who were less penny-pinching.
Despite the problems, business is good. You feel successful. Just not as successful as you’d like to be. And the level of success you have creates inertia: You don’t want to rock the boat for fear of capsizing. Well, to paraphrase that dreadful American once more, small business is messy. But it can be cleaned up! Corresponding to each problem above, do these things and your effectiveness in, and enjoyment of, your business will soar:
- Show ‘Em Who’s Boss: If you use subs, you must have a locked-down, no-nonsense, no-exception, written and iron-clad contract they sign and live up to. Sounds complex but isn’t. Write down in plain English exactly what you want and expect from your subs, and give that document to a lawyer. She will turn it into a contract. Best $750 you ever spent. (If it costs more than that, get another lawyer.)
- Be a Client-Whisperer. Clients will stop bucking you in the head if you train them! Give them a process for working with you and lay it out at the start of a project. Make sure they understand their responsibility and accountability to the project and its outcomes. Create deadlines that are real. Think about building in incentives for meeting deadlines, or disincentives for failing to meet them (a rebate or a penalty). They will respect your taking a disciplined approach.
- Go Big-Game Hunting: It’s as difficult to service a small account as a big one, so you may as well have the big ones. If you don’t have them right now, is it because you feel unqualified to handle them, or just fearful? Do you honestly believe you can handle bigger clients and service them better than anyone else? If so, the only thing stopping you is, perhaps, not having a locked-down, bolted-in process for managing your business. Get that done and the rest will follow.
I wrote a few weeks ago about my favorite entrepreneurial role model, my dad. He’s 87 now and retired. I think about his business every single day of my life because I grew up with it. We had a gourmet food store on Lexington Avenue and 73rd Street called Service Delicacies. (It’s now a restaurant and bakery that I sometimes walk into, stand in the middle of, and just breathe.) It started out as my mother’s father’s deli, then my dad took it over. He had a thing for fancy foods. He was passionate about customer service. He was always in motion. He was almost all business. The only time I would see him smile was when I looked at him and smiled at him during the busy Saturdays I spent at the store from the age of 12 until I went to college, and even after. So, some lessons from my observations of Jerry York, one of the best entrepreneurs I’ve known:
1. Have an eye for the new. When we went on rare family vacations (usually the Catskills, Poconos or somewhere driveable from Queens) we inevitably wandered into food and farmers’ markets. While my brother and I squirmed, dad pored over the merchandise. Often he would find products being test marketed out of the city. He was the first in New York to offer Maxim Freeze Dried Coffee, around 1963. He found it somewhere in East Nowheresville, PA. He asked the store manager how much he had in stock, and my dad cleaned him out. He paid something like 25 cents a jar for a few dozen jars. The following week the window display of our store featured this revolutionary product in a pyramid display, selling for something like $2.50 a jar. Sold out immediately. Another time it was a salty snack called Bugles and Whistles (same snack, different shape). Same out-of-town trial. Same bazillion percent markup. Those corn chips paid for summer camp for my brother and me for years. Jerry was the first to have sourdough bread flown into from San Francisco. The first to have pre-prepared frozen gourmet entrees and hors d’oeuvres. He could see a trend or a fad, and he didn’t care which it was. It was a thick roll of Twenties in his pocket every day.
2. Packaging, environment and attitude are everything, no matter what the business. Every day the Fink bakery truck delivered loaves of pumpernickel, rye, wheat and white bread which were left by the front door. When the clerks arrived at 7AM they would slice the pumpernickel bread into 1/4-inch stacks and wrap the slices 10 to a pack in cellophane, which they would heat-seal closed with a blow-dryer. The bread went on the counter for sale. The loaf of Fink bread cost dad 50 cents, and he sliced it into about 100 slices, or 10 packages, and sold each package for $1. A 20-bagger in each loaf! Enough to make a venture capitalist proud! How come it worked? Everything in the store was gourmet. When you picked up that package of sliced bread, which set my dad back 5 cents, it was viewed against a backdrop of gourmet foods from around the world. The store was gleaming. Everything was dusted and in order. The clerks’ aprons were gleaming white and pressed. He could have charged $2 for the bread.
3. Let your customers drive your new product development strategy. Phone rings one day and dad answers. “Yes, Mrs. Smith, tomorrow 5 o’clock. Sandwich trays for 30 people. Salmon and cream cheese canapes. Uh hmm. Yes. 900 Park, PH 1, yes, yes. … (pause)….wooden folding chairs…(pause). Of course. Good night, Mrs. Smith, see you tomorrow.” Wooden folding chairs. We don’t carry chairs. Yellow Pages….here we go. Dial. “Deliver two dozen wood folding chairs to Mrs. Smith at 900 Park, Penthouse 1, tomorrow and send me a bill.” Done. Two days later the phone rings. It is Mrs. Smith. “Jerry, you almost ruined my party. Those chairs were disgusting. Broken down and awful looking. If I didn’t know you so well….” It was that call from Mrs. Smith that got my dad into the highly profitable party equipment rental business and eventually out of the food business. The party rental business that my brother took over, grew 10-fold and sold to the largest company in the industry late last year. All because of a Park Avenue lady who needed some folding chairs. The one downside of all this: it hasn’t been possible, in all of Manhattan, to get a really great rare roast beef sandwich on wheat bread, sliced paper-thin, with just a little butter, salt and paper, since 1975.
