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+++ S P E C I A L R E P O R T +++
"Using a System (not necessarily a computer)"
By Joe Dweck
4 September 2003

In this report, I've completely skipped over the search, angst, and decision criteria that you will go through in any computer system selection. It doesn't matter whether the system is for Accounts receivable, Point Of Sale, manufacturing, wholesaling or banking. In fact, I am not even considering the installation of a system. The fact is, that many companies are running very well with the worst systems imaginable, and others are cannot function using "the best" system available or recommended for them. The point is that business people need information to run their businesses. That need for information must be met , whether you have a computer or not.

Part of the issue is that most business people strive for automation, thinking that any technological installation will result in a competitive advantage. The truth is that you do need to know what is going on in your business. In essence- don't wait for a system, or anything else to get the information that you need about your business. Find ways of getting the information, or of controlling the problem with secondary means. So let's get to that;

I will assume that you are always 'hondling" for the lowest cost of goods and services and pinching every penny, shutting lights, lowering thermostat settings, re-using paper clips etc. In my years at a large retail chain we couldn't control the cost of goods, it was set by the manufacturer. We could not arbitrarily define our selling price because of competition and the profile that we wanted to present. We couldn't control the rent or utilities, they were not in our hands either. I realized that the only expense that we could save was payroll.

So, I instituted reporting that compared payroll to sales in all of our stores. I even automated the process where the payroll company dropped off a magnetic tape of the payroll data with all of the paychecks every 2 weeks and matched up to the deposit information that we collected for each store every day. However, before the automation we did the report manually, as we do now in my smaller company.

That report was poured over by every executive and supervisor as soon as it was printed. In fact, the bi-weekly meetings were scheduled for the report's printing. Every store's payroll percentage was examined, function by function. That is, cashiers X%, managers Y%, stock people Z%. If a store came in too high, there was much discussion - and hell to pay. If we couldn't run a store with less help, we got creative and made crews that would go from store to store to put away goods, or assistant managers that were shared. We probably had the lowest payroll to sales ratio in the industry, we made the most profit and in the highest cost, most competitive market in the country.

We also always examined this years sales versus last years. We could see trending. We do this today too, examining department sales every week. Now that we have gone national, we examine by account, by territory and by salesperson.
Accounts receivable was (and is) a large issue that also requires rapt attention. We watch our receivables like hawks. We use a combination of Quickbooks and Excel spreadsheets to monitor our accounts. My clerk runs the reports a few days ahead of schedule and makes the calls that are obvious. I get the report at the beginning of the month and review with her the calls that were made. If there is a problem brewing, I make the call, then get a lawyer right away if I don't get the promised response. Our receivables are about $24 million per year. We have about 20 days receivables outstanding at any point in time and our write-offs for debt are 0%. Even the largest accounts (multi billion dollar national health plans) know us by reputation and will not delay sending our checks. They don't want to get our annoying calls. There are services that exist that will do the same thing - that is make collection phone calls BEFORE the invoices are due. The tactic is very, very effective for getting all the money that is due you and on time.

I also believe that the searching for this data every week has a ripple effect.It makes everyone in the organization more responsible and thinking every day. They know that they are responsible for giving correct information and the constant examination keeps the bar high for everyone.

These tactics were also recently laid out in Rudy Guiliani's book "Leadership". In his quest to rein in the greatest, most ungovernable city in the world, he did the same thing. He started meetings at each agency to look at statistics. It didn't matter if it was the Police who looked at calls to 911 or arrests per week, or an emergency call center's record of calls handled per minute, or Sanitation's record of how many tons of trash picked up by how many men. Everything was examined. That is the message in his book about management. Examine everything, measure everything.

As a small example, Guiliani took this city from 2,200 murders per year to the current rate of about 500. New York didn't get a new population of honorable, law abiding people in that period, but we did get bi-weekly Police "CompStat" reviews with all precinct Captains (read as "managers") to monitor how law enforcement was doing and to get criminals off the streets. Now we have the safest city in the world. I don't know about your business, but mine looks pretty simple when compared to controlling and securing the lives of 8 million people, not to mention the building of midtown, reducing corruption etc.

Your business might have comparisons of sales, days of receivables, output per employee per day, or numbers of pencils compared to packages of computer paper. The key is to start watching those items, others items will naturally come in as new reports are added. Use your employees and your meetings to work together to try solutions, and then try other solutions.

I began this report with a red-herring about "systems". The "system" is to be ever vigilant for everything. As a manager or owner, you have to find a way to measure and improve your business. Do not be restrained by not having a computer, or for that matter for having a computer that doesn't provide the information that you really need.

Joe Dweck
 

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Last modified Friday, September 05, 2003