The last two commandments



Commandment No 9: Organize not by personality but by function.

When business are first being established, personality rather than functionality is them demonstrated theme. People's preference and personality are selectors for positions rather than competence in a particular function. The influencers in this early stage of enterprise life are: relationship to the CEO; equity participation; lobbying pressure; pressure from key vendors, suppliers or even customers.



With time the CEO must endure the beginning postings with the realization that soon the competent employees will be identified through performance rather than by urgent request.



Employees seem to fall into three categories: finders, grinders, and minders. Finders will migrate to marketing and sales jobs. Grinders will migrate to operations jobs. Minders will migrate to accounting/finance/hr.



Of critical importance is never to allow each of the three groups to emphasize there contribution as being more important than the other two. All are needed in portions and required by the business plan. There is and will always be a natural tension between and among the groups. That tension is productive in that it provides the "checks and balances" needed to keep the organization focused on cash flow.



Commandment 10: Believe in Yourself

This is a call for personal courage in the face of disappointment, disaster, despair, and discontent. There will be countless reasons, many legitimate, for you to fail. Here are some old bromides which seem to refresh a CEO:

• Your selfworth is never the same as your net worth.


• "Never, never, never, never, never give up." Churchhill


• What doesn't kill me makes me stronger.


• "Never take counsel from your fears." Patton


• If it was easy everyone would or could do it.


• Second effort brings touchdowns.


• The difference between success and failure is getting up one more time than you are knocked down.


• "Don't lay there, wrestle!" My last wrestling coach. The sign writ large was displayed so that it could only be read if you were laying down and looking up at the ceiling. Very motivating.

Well those are the 10 Commandments of Business. To summarize:

1. Be customer oriented.

2. Know the life-time value of the customer.

3. Use direct response marketing.

4. Work on your business, not in your business.

5. Garuntee satisfaction.

6. Receive weekly profit and loss statements.

7. Perceived value establishes price.

8. Reward behavior you wish repeated.

9. Organize not by personality but by functionality.

10. Belive in yourself.

To discuss and get help call 530.383.9079 or email me at stoddardconsult@yahoo.com

Commandment 7: Perceived Value Establishes Price
Wow!.... did I learn some lessons from engineers about this rule or commandment. First sub-rule is don't let engineers deal with price....it is way beyond them to comprehend anything but cost+10%.

This commandment requires outside-in thinking. Most engineers and operators think inside-out.
What? Listen close. Outside-in thinking requires us to observe and absorb what the market is telling us about our product, price, promotion, and place decisions. Listening requires humility...also known a "teachableness." Listen GM, Ford, and Chrysler....you are ARROGANT and not teachable....and so you are going to shake the money tree instead of giving us what we want.

A story to illustrate.
When ready to graduate from BYU, I had bought a new Mustang so needed to shed the old chrome and blue 1958 Oldsmobile with the flower decal and the aftermarket a/c unit. We had been driving it for 3 years; it had 200,000+ miles on it..but what a screaming engine!!!!

I listed it for $100. No calls, no buyers. Puzzled, I didn't know what to do. Since I couldn't lower the price, I raised it to $300 and felt guilty doing so. [Inside-out thinking was working overtime.] At the new price I received about a dozen calls, and one fellow actually came over to see the car. He asked for a test drive. We drove around the block. Half way home the engine stalled, the balking ignition switch failed in the middle of the intersection, and the radio quit.

I figured he would walk away. He did. But only after he gave me the cash and I gave him the pink slip.

I couldn't understand what happened.

Here is what happened: nobody wanted a $100 car...it offered no hope of salvation or operation. However, a $300 car offered hope. The customers view determind there was value at both the new price point and with the demonstrated performance.

Commandment 8: Reward behavior you want repeated
Logical enough. But seldom used.
If you want continued performance reward it. The reward must first be appealing to the person. How often the person rewarded comes next. Both are vital to insuring the behavior is repeated.

So there are three elements which require very close attention:
1. First, specify exactly what behavior you wish repeated. The more precisely one does this the more likely the reward system employed will work. Done sloppily the reward system won't work because the person whose behavior is being targeted won't get "it."

2. Second, establish a list or catalogue of rewards which are known or believed to be attractive to the person. Care must be taken to insure inside-out thinking does not rule the day.....outside-in thinking is critically important.

3. Third, determine either at what interval or what rate the reward will be given. Determine if the rate or interval will be either variable or fixed. This design element requires careful and systematic analysis before a final solution can be employed. Much trial and error is likely to be required. Even for the smartest of you.

Finally, start rewarding the behavior you want repeated. Actually it can be done simply and quickly but it does require premeditation...aka...thought.

Call me for further discussion. 530.383.9079 or email me at stoddardconsult@yahoo.com
Note: I am not the author of all these ideas. We all stand on the shoulders of those who came before us and who ride along with us. To them I give great credit for lessons learned.

Ok, so on with the rest of the 10 Commandments of Business.



Commandment # 4: Work on your business not in your business.

Great, so what does that mean?

It means putting down the hammer, or the computer, or stop driving the truck or airplane and work on where your business is going to go. Doing the work can be hired out. Deciding what work to do can only be done by the owner or the CEO.



This doesn't mean one does it in a vacum, one uses the best brains available.



Too many CPA firms flounder because the owner is busy with the eye shades on from December to April, takes a rest after the 15th, and then starts the cycle again. But he never gets new clients because he is too busy doing the work!



So take time to work on your business, not just in your business



Commandment #5 Guarantee Satisfaction

Sounds simple or hard depending on your business. There are all kinds of ways to approach this without fear of going broke or being sued. What matters is if you have a service or a product.



Services

If you offer services, the way to offer the guarantee is to repeat the labor for free or a reduced fee to resolve the problem.



Products

With products you can offer performance guarantees which reflect parts and labor for a specified period of time for their replacement.



Key point: If you aren't willing to stand behind your product or service then your customer will hestitate and begin to look for new options.



Commandment # 6: Review your profit/loss statement weekly

With the advent of computer aided accounting systems the ability to develop a cogent dashboard with practical metrics has never been easier. One just must know what the cash flow is.



The CEO of Terex www.terex.com , Mr. Ron DeFao, told me this about profits, margins, and cash flow:

"Profits for the investors, margins for the ego, and cash flow for the CEO." We were talking at the enormous construction equipment show, Intermat a few years ago. An interesting perspective from a CEO who specializes in taking failing family construction equipment businesses, buys them up, paints the products white, and starts marketing them again. When Ron comes calling, your family business should pay attention. I know of one 90+ year old construction equipment manufacturere who arrogantly showed him the door. Their plant burned down, and they are still milling around trying to figure out what to do two years later.



Review the company p&l statement at least weekly and take appropriate action.

Check back for the next three commandments. They are comming soon!