The shared economy has become very real and can no longer be
ignored by all businesses. According to PriceWaterhouse Coopers, the shared
economy is likely to grow from $15 billion in 2013 to $335 billion by 2025. Part
of this growth is out of necessity. Cities are becoming very urban and this is
where everyone is migrating to; thriving in a world that increasingly is
getting very crowded. You can’t continue to add more cars, hotels, and other
infrastructure. Instead, people are adjusting and accepting the fact that a
better way is to share the infrastructure in highly concentrated environments. Businesses
will need to adjust to this new reality and recognize several lessons from the
shared economy.
A collection of best practice articles to help grow companies with an emphasis on finance. The goal of the blog is to explain how these best practices work, enabling anyone to put these ideas to immediate use. Articles are written by Matt H. Evans, CPA, CMA, CFM
Monday, March 7, 2016
Friday, February 26, 2016
The New Math for Pricing
It
represents one of the most difficult decisions you will make: What price do I
charge for my products? Many people, including myself, have always held that
pricing should be based on covering all of your costs with some allowance for
profits. However, thanks to Robert Dolan of Harvard Business School, there is a
new math for calculating price that goes beyond the financial numbers.
Monday, February 15, 2016
Welcome to a World of Structural Change
It used to
be economic change would run in cycles. We would experience periods of high
inflation followed by tight monetary policy that led to an economic slow-down.
Today, we have cheap money, no inflation and below average economic output that
is continuous. Economists and the Federal Reserve are perplexed about a key
question: Will we ever experience a full
recovery? The answer is No – we are in an age of structural change where
there are clear winners and losers. It’s like having an economic boom for some
and a depression for others.
Friday, February 5, 2016
Focus on the Process - Part 2 of 2
The words “business process reengineering” still leaves a negative impression for many in the business world. Years ago companies rushed to reengineer their processes to
improve quality and efficiency. However, the end result was less than desirable
– new processes were layered on top of existing processes resulting in more
work with fewer people. Costs were temporarily lowered benefiting investors.
However, other stakeholders in the process, such as employees, were victimized
by reengineering.
Thursday, January 28, 2016
Focus on the Process - Part 1 of 2
All
businesses require processes for the creation of products and services. A
process is a collection of activities that consumes resources and adds value to
the consumer (in the form of products / services) with some form of benefit
paid to the producer. Additionally, all processes have variation – in business
we call this risk. As H. Edward Deming, pioneer in the field of quality
management, points out – If you can better understand variation in a process,
you can plan for it and do things to prevent it.
Tuesday, January 19, 2016
Machines of Loving Grace
Machines
of Loving Grace is the title of a book written by John Markoff. Markoff is
a science writer for the New York Times who has followed technology for the
last 30 years. In the last few years, we have seen an escalation of
technologies, ranging from drones and robots to Artificial Intelligence and the
Internet of Things. This has prompted some of our best thinkers to challenge
what is happening. Stephen Hawking has remarked: “the development of full
artificial intelligence could spell the end of the human race.” Bill Gates and
Elon Musk have both voiced concerns about the birth of super intelligence or
machines that can think.
Thursday, January 7, 2016
Why Customer Retention is so Important to Growth
For many
businesses, the challenge of growth has become exceedingly difficult. Larger
companies seem to grow through acquisition since internal growth above 10% is
not possible. One of the keys to good internal growth is through retention.
Granted, it’s not easy, but if you can somehow retain your customers and get
them to come back, you have created a platform for growth that is much easier
to manage then a growth strategy predicated on acquiring other companies. Acquiring
and integrating other companies is very challenging and requires expertise that
most companies lack, not to mention the very low success rate even if you do
have outside help. Therefore, a growth strategy rooted in retention can be more
viable and sustainable over the long run.
Tuesday, December 29, 2015
Let's Define Best Practices
One of the
most overused terms in business has to be: Best Practices. It seems everyone
(including myself) is always labeling something as a “best practice.” Thanks to
Hackett Benchmarking, a common definition has emerged for best practices.
According to Hackett Benchmarking, a best practice must:
1) Place the
company in a top percentile ranking within its industry.
2) Leverage
and take advantage of technology.
3) Improve
quality and speed, and also lower costs.
4) Give
management more control and influence.
5) And
finally, it has to be working; i.e. it can't be planned but not implemented.
Friday, December 11, 2015
The Three Most Important Skills
It was said
some 20 years ago by the Education President, George H. W. Bush that everyone
should be able to: Speak, Write and
Think. These are the three most important skills everyone should have. Why
are these skills so important? Because they are the most transferable skills a
person will use throughout their life. These skills also create the widest
range of opportunities for people in a world where specific job related skills
can become obsolete. And if you don’t think you need transferable skills, then
consider that the average American will go through 10 to 14 jobs by the age of
38. One out of every four workers has been on the job one year or less
according to the Department of Labor.
Wednesday, December 2, 2015
Why Link Pay to Performance
If you
expect to attract and retain the best people, you must have market competitive
pay. Additionally, you have to be willing to accept some level of employee
turnover. The key is to design your pay so that you have targeted turnover;
i.e. you induce turnover of low performing personnel while re-enforcing a
culture of high performance, enabling you to retain top performers. This is why
every company should consider linking pay to performance.
The problem
for many companies is the minimal spread between high and low performers. Most
companies design their pay around a merit matrix that looks like this:
Performance Level | Highest | Above | Below | Lowest |
---|---|---|---|---|
Exceptional | 3.5% | 3.5% | 3.0% | 3.0% |
Exceeds Expectations | 3.0% | 3.0% | 3.0% | 3.0% |
Effective | 2.5% | 2.5% | 2.5% | 2.0% |
Development Needed | 2.5% | 2.5% | 2.0% | 2.0% |
Unacceptable/Poor | 2.5% | 2.0% | 2.0% | 2.0% |
In the above example, the spread between the best and worst performers is a mere 1.5%. In today’s world where companies are fighting to attract and retain top talent, you must be much more aggressive with your merit matrix so that it looks more like this:
Performance Level | Highest | Above | Below | Lowest |
---|---|---|---|---|
Exceptional | 6.5% | 5.5% | 5.0% | 4.0% |
Exceeds Expectations | 6.0% | 5.0% | 4.0% | 3.0% |
Effective | 5.0% | 4.0% | 3.0% | 2.0% |
Development Needed | 2.0% | 1.0% | 0.0% | 0.0% |
Unacceptable/Poor | 0.0% | 0.0% | 0.0% | 0.0% |
In this example, people who don’t perform get no increase. This sends a strong signal to everyone that performance matters and for those who do perform, you will get a serious merit increase. This is one of the most powerful statements any company can make when it comes to retaining the best people. You should also think about the limited money you have to spread around. You want to allocate your limited resources to those people who deliver results. A merit matrix that has distinct differences between low and high performance will do more to communicate and create a culture of high performance than any speech or memo you will issue.
“Variable pay budgets and spending have
nearly doubled in the last 20 years, subsequently emerging as the
pay-for-performance vehicle of choice now and for the foreseeable future. In a
more robust job market, competition for talent exists in every sector. As a
result, we are seeing industries that have traditionally shied away from
providing bonuses, such as agriculture, higher-education and the federal
government, realizing they must establish variable pay programs to compete for
and retain the best talent.” - Ken Abosch, Compensation Leader for Aon Hewitt.
Trying to
retain the best people is becoming increasingly difficult. According to a 2015 survey
conducted by WorldatWork, over 80% of the people surveyed indicated they plan
to leave their job. Contrast this to five years ago when the percentage was
60%. High performers are not going to stick around for the usual 3% raise while
others get 1%.
A final
point concerns the traditional performance review. If you link pay to
performance, you need to rely more on 360 degree feedback that has some
anonymity. This provides an objective, open and honest review process that
serves as your basis for administering your merit matrix. Additionally, your
review process has to be on-going and not just once a year. It should be a
cumulative reflection on how well someone has helped the company meet
department and company goals. And the review process should be both
quantitative and qualitative. For example, the Marketing Manager was able to
help the company meet its sales targets (quantitative), but he also mentored
and grew the capability of our marketing team (qualitative). If you can have a
robust back-end review process coupled with a serious merit matrix (as
described in this article) and combine this with a competitive benefits package,
then you have established the foundation that should enable a high performing workforce.
"It is very difficult, but not impossible, to put a price tag on losing key people and their smarts. As if to emphasize the intangible yet dire nature of these costs, some executives were unable to provide a dollar figure, but simply responded 'incalculable' or 'priceless.' So even if you can't quantify the costs of knowledge loss, you might agree that the cost is often a lot, enough that you would like some options to avoid or minimize these costs. Despite the acknowledged threat, a surprising number of organizations are doing nothing or little about it." - Critical Knowledge Tools by Dorothy Leonard, Walter Swap and Gavin Barton
Download PDF Copy of Article
"It is very difficult, but not impossible, to put a price tag on losing key people and their smarts. As if to emphasize the intangible yet dire nature of these costs, some executives were unable to provide a dollar figure, but simply responded 'incalculable' or 'priceless.' So even if you can't quantify the costs of knowledge loss, you might agree that the cost is often a lot, enough that you would like some options to avoid or minimize these costs. Despite the acknowledged threat, a surprising number of organizations are doing nothing or little about it." - Critical Knowledge Tools by Dorothy Leonard, Walter Swap and Gavin Barton
Download PDF Copy of Article
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