Developing and testing new business simulations at CMOE is always a lot of fun. It’s a time when the CMOE staff gets free lunches, prizes, and the opportunity to meet countless new people we ask to join us. So in addition to creating or reworking our products, we create a culture of fun.
This past week I was assigned to pick up the food for a volunteer test group. I went to get Pizza and as I was standing at the payment counter, I noticed a computer screen on this wall. In big, black, block print, it read “LEADERBOARD.” I was immediately excited to see this. As I was waiting for my order to be finished, I was trying to identify what was being tracked by the “leaderboard” and how it worked. It was obvious that the leaderboard was networked with other stores and I quickly noticed that the store I was purchasing from was second from the bottom. This piqued my interest further. I decided to speak with the manager to understand how it worked.
Me: I noticed your leaderboard on the wall; it looks interesting. It appears to be tracking certain success factors and percentages. Do you get rewarded when you hit certain levels of performance? The reason I ask is I work for an organization where we use effective management, measurements, and scorecards to drive bottom line profitability.
Manager: Yeah, it tracks just about everything in the store from the time a phone call was placed to the time the order leaves the store for delivery. Corporate can pull up data on just about anything in the store.
Me: It doesn’t sound like you believe it’s a good thing by the way you are speaking. Do you get recognized or rewarded for hitting certain levels of performance?
Manager: No, it basically indicates what you have to do as a minimum to keep from getting fired.
The manager continued to explain that this tracking system was to help employees have higher levels of customer service, reduced mistakes, and shorten production times, among many other things. While those are great focus areas, I was emotionally deflated by the way he explained it. This employee was telling me that the “Leaderboard,” this scorekeeping system, was the worst thing about his job.
If organizations are to succeed against strong competition and have higher levels of profitability, measurement cannot build fear and negativity into employees. Driving bottom line performance with the right measurement will engage people and get people excited and committed to push performance levels. By using our piles of data, managers can help employees sort out measurements that drive individual results.
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The Value of You We all like to see results. Whether it is in the work we do, our bank account, or other personal activities, results make us feel good. The life of Warren Buffett is a great story about leadership that gets results. He spent decades mastering the financial industry and understanding how to get results. Regardless of how you feel about his approach, philosophy, or business style you cannot argue with the effectiveness and success he and his organization has had. In 2008 Warren Buffets net worth was estimated at $62 billion dollars. Those results were achieve by a lot of focus on the bottom line.
So how does Warren Buffett’s success apply to you? In November 2009, Warren Buffett and Bill Gates participated in a Town Hall meeting at Columbia University. During this event the following question was posed by a student:
Student Question: “Mr. Buffett, Mr. Gates, thank you for being here today. My name is Justin, I’m a second-year MBA, as I get ready to graduate, I was wondering, what’s the one thing that your MBA didn’t prepare you for when you got out into the real world?”
Warren Buffett Response: “Well, I was — it prepared me very well, not the whole degree, but specific professors prepared me very well for what I wanted to go into. I knew I was interested in investing, like I say, from the time I was six or seven years of age. So I was lucky that I found what turned me on early on. And I had these two marvelous professors here at Columbia that just being around — I had read all the stuff they had written. So it wasn’t I was acquiring lots of incremental knowledge but I was getting inspired. They were terrific for me. They treated me like a son. They would take me out to dinner. Ben Graham did the same thing for me. So it gave me confidence in myself. It just propelled me into a field I already love with a terrific tailwind from these professors that believed in me. [APPLAUSE] But let me add one point because — to the MBA situation. Right now, I would pay $100,000 for 10% of the future earnings of any of you. So anybody that wants to see me after this is over — [LAUGHTER] [APPLAUSE] If that’s true, you are a million-dollar asset right now, right, if 10% of you is worth 100,000? You could improve — many of you, and I certainly could have when I got out, just in terms of learning communication skills. You know, it’s not something that is taught. I actually went to a Dale Carnegie course later on in terms of public speaking. But if you improve your value 50% by having better communication skills, that’s another $500,000 in terms of capital value. See me after the class and I’ll pay you 150-thousand.”
Monetary Value of Learning and Communication
This matters because it illustrates the importance of learning and effective communication. As individuals, it is important to develop ourselves. Whether you get an industry trade degree, look at going through a mini MBA program, or complete a Masters Degree at Columbia University, ongoing development of yourself is important to you, your future success, and ultimately your net worth. Investment in learning will pay huge dividends. If good communication skills are worth an additional $50,000 to Warren Buffet, it’s worth far more to you individually.
Heavily Invested
Ask yourself this question. What would an investor ask you at the annual shareholders of YOU meeting? At a high level, you might hear questions such as:
- Do you understand what it takes for you (and your organization) to win today?
- Do you understand where and how we can increase profit margins?
- Are you cutting operational expense to increase profit margins?
- How can you create distance or differentiation from the competition?
- Is the organization focusing on what matters?
If you can answer those questions, you are doing great. If not, look to refocus your efforts. Educate or develop yourself to the point where you can answer them. You are heavily invested in yourself so what do you want your future earnings look like? Are you a million-dollar person? It’s hard to argue against hard results.
Every one of us likes to see results; whether it’s in the work we do, our investment portfolio, or other activities, good results make us want to celebrate success. Bill Gates has been consistently ranked as one of the world’s wealthiest men. It’s hard to argue with his track record in business or philanthropy. Regardless of his approach, philosophy, or business style you can’t argue with the effectiveness and success he and his organizations have had.
At a recent Town Hall forum for MBA program students at Columbia University, a Masters student asked Bill Gates the following question:
Student Question: My name is Erica and I am a second-year student. My question is for Mr. Gates. What is the most important thing you do every day?
Bill Gates Answer: Well, I do a lot of variety. I think reading a lot, you know, and continuing to learn. I’m in a lot of new areas in the Foundation, education, health. And I love reading a lot. So I think, you know, arming myself with that knowledge and sitting down with people who live the topic and brainstorming with them, that’s what helps me back the right people and make sure I know what’s going on. So I guess I’d say learning is what is the key thing.
“Arming” yourself and your employees with knowledge is so important. What would organizations look like if we “armed” people to be results based leaders who understand how to increase profit and drive bottom line results? This can be done, by exploring and discovering what really matters and how to properly measure results. I’m not talking about more reports, more charts, more graphs, to bore people with. I’m talking about engaging individuals to measure and do it in a way that speaks to them as individuals. It is about how I fit and why I matter.
Whether you’re looking to drive key results of your business or looking to simply educate employees on finance for non financial managers, arming your people with knowledge to be prepared for battle will ensure more focus around winning as an organization. It’s hard to argue with results.
Your people drive your business. Most have the best of intentions when it comes to making a solid contribution to the overall success of the enterprise. They do good work so you give them more work to do. They were your best account rep, your best payables clerk, best welder or project engineer so you made them leaders of people. The problem is that these outstanding individuals have neither the experience nor the training to be outstanding leaders, leaving them ill prepared for the job that they didn’t sign on for in the first place.
Take John for example. John recently became the team leader of 14 people who are responsible for $1,000,000 in production. Doing their very best, John’s team delivers 90% of the million dollar production budget. Managing by instinct, John tends to avoid conflict, uses the relationships with his former co-workers to emotionally bribe them into doing additional work, and measures success in the number of days passed where John manages to fly below the radar of the management team. John deserves better. He needs to be given the tools needed to do his job well. A small investment in his bottom line leadership skills will have a two-fold return: A gift to John that will last a lifetime and the opportunity for you to close your $100,000 budget shortfall.
Who’s holding you back? Who, not what, is standing in the way of your initiatives to increase sales, cut operating expenses and learn how to increase profit margins across the board? There is a John in your organization. He deserves a chance to succeed and continue to grow his contribution to the organization. An investment in John is not just an investment in John; he has 14 people reporting to him and they will also reap the benefits of his development. As John becomes a better leader we create the culture that will meet the demands of your business tomorrow and build ownership and commitment in the next group of potential leaders.
Do you think it’s too hard to find the time? Too hard to find the money? Stop for a moment and do the math. Can you really afford not to?
While conducting a workshop on driving bottom line performance a few years ago for department managers in a chain of supermarkets, I had an interesting experience. One of the participants was a rather elderly and somewhat crusty Bakery Manager. His name was Lynn and at the first session he introduced himself as having been a bakery manager for longer than most of the other attendees had been alive. I took his unusual statement to mean that because of his experience he was unlikely to learn any new tricks or techniques about performance at any workshop, especially one facilitated by me.
You Can’t Teach A Old Dog New Tricks
Over the course of a couple of sessions, Lynn participated just enough to stay out of trouble with his boss, but not enough to gain much advantage as a manager. After the second session he told me privately that with his considerable experience as a manager he didn’t need to attend the sessions, but that he was being forced to attend. He told me, “You know old dogs can’t be taught new tricks. Well, I’m that old dog.” I thought at the time that he was trying to put me on notice that I should back off in trying to change his managerial style.
Lynn’s statement motivated me to look for a way to get his attention so he could benefit from the workshop experience. That’s when I concocted an experiment that not only taught him and his fellow managers a valuable lesson, but also me as well.
In the workshop I asked Lynn if he would help me conduct a “psychological experiment.” Before he could say no, two of his bosses were nodding affirmatively. Truthfully, I had set that reaction up in advance. Shame on me!
With Lynn obviously very reluctant to hear my proposal, I nonetheless pushed on. I told him that the experiment was to test the power of a graph, or scorecard, to motivate hourly employees to change their behavior. I explained that I would help him create a separate scorecard for each of his employees who worked the bakery counter on Saturdays. The scorecards would have the person’s name at the top, and across the bottom x-axis of the graph would be the dates of the next six Saturdays. Up the vertical y-axis would be numbers from 1 to 20.
Driving Results To Increase Profits
His employees would be instructed that each time they mentioned the words “chocolate chip cookie” to any customer in any way on Saturday they could put a mark or dot for that date progressing up from 1 mention of chocolate chip cookie to as many as 20 mentions. The measurement would be voluntary, because about one person in five typically doesn’t like to participate in such exercises that require competition. We would be happy to deal with the four out of five employees who find such exercises fun and exciting. The scorecards would be posted in the bakery back room and employees would be encouraged to keep their scorecard up to date as often as they could during the day. The experiment would use an honor system, where marking scorecards accurately would be up to the employees. Lynn’s responsibility would be to explain the exercise to the employees, have a positive attitude toward the exercise, and, of course, lead by example, because he needed a scorecard too.
At the next two workshop sessions Lynn gave brief progress reports on the project, but didn’t elaborate very much. I became worried that the experiment wouldn’t work and that Lynn might miss the point of it. But those fears were forgotten when Lynn returned to the last session and exclaimed, “Did you know that it’s possible to sell too many chocolate chip cookies?”
Lynn explained that by the second Saturday most of his employees really got into the exercise. It became a Badge of Honor to be recognized as the employee with the highest number of chocolate chip cookie mentions each week. Lynn’s assistant manager had a badge made at a local mall that said, “Chocolate Chip Cookie Champion.” The person with the highest mentions each Saturday got to wear the Champion badge during the following week, which further intensified the competition. Isn’t it interesting how a simple badge can create so much excitement? During the week his employees plotted what they were going to do and how they were going to get the most mentions. Lynn said that he had to adjust the rules because people “were taking unfair advantage.” One employee got on the store PA and mentioned chocolate chip cookies, then walked around the store counting how many customers must have heard her announcement, trying to claim those mentions. Another employee stopped in the middle of taking a cake decorating order and said, “Oh, by the way we sell chocolate chip cookies. Now how do you spell your son’s name?”
Apparently the competition got so intense and the bakery was selling so many cookies that the ovens were consumed with baking cookies, at the expense of the other products that needed oven time. That’s why Lynn exclaimed, “It’s possible to sell too many chocolate chip cookies.”
As a facilitator it was fascinating to see the change in Lynn’s attitude over the six session series of workshops. The crusty Bakery Manager became a champion of measuring, providing instant feedback, and healthy competition. He even told me in the last session that he had “learned a ton of new stuff.”
So how did Lynn’s cookie sales go? In his final report he explained that for as long as he could remember his bakery had sold about 15 dozen chocolate chip cookies on an average Saturday. (Actually, for a bakery the size he managed, 15 dozen is at best only a fair result, so I’m told.) The first Saturday of the project the bakery sold 27 dozen. The second Saturday they sold 36 dozen. The third Saturday they sold 67 dozen. The fourth Saturday they sold 117 dozen. And on the fifth Saturday they broke the bank, or perhaps the ovens, with 157 dozen chocolate chip cookies!
Increasing Profits 10X
The improvement over a month was a ten times increase. How did this happen? Providing frequent feedback to people who otherwise had not much incentive to suggestive sell cookies caused the incredible results. The personalized scorecards each employee had in the back room provided a method to measure performance. Thomas S. Monson once said, “When performance is measured, performance improves. When performance is measured and reported back, the rate of improvement accelerates.”
As Lynn was leaving the last workshop session I asked him, “Well, was this experience worth it?”
With a slight smile on his face Lynn replied, “Maybe it’s possible to teach an old dog a thing or two. Thanks for a great class.”
We have just been though one of the greatest financial crisis in the history of the world. The world goes further into debt. Companies struggle to be profitable. We continue to see the bickering of politicians and watch the business-as-usual with our governments. The wars in foreign countries continue. We continue to watch the further disintegration of the family system and family values. And through all of this, one asks “Where are the leaders?” What is leadership? Who is a leader?
Regardless of our position in life, all of us can and should be leaders. So what is leadership? “Leadership is the ability to decide what is to be done, and then get others to want to do it.” -Dwight D. Eisenhower
Leaders accomplish things by leading. That is, by guiding and helping other people. Dictators issue orders, using fear and punishment to command compliance. Leaders shape people’s opinions and win their enthusiasm, using every available opportunity to send out their message (VISION) and win supporters (Noel Tichy, The Leadership Engine). Dictators break people down to feel inadequate, incapable, and don’t know much about the value people and their power.
What makes a leader? A leader has VISION about what needs to be done. He/she makes changes and helps others to make changes in order to see the VISION through completion.
What is your VISION about leadership? What is the vision that you have about leading your family, in your community, in your employment, in your religious organization, or in your own personal development? As we talk about vision and change, there are a number of tools that can be used to help lead others towards change:
·Situational Leadership by Paul Hersey & Ken Blanchard(1984)
oDirecting
oCoaching
oSupporting
oDelegating
·The Coach by Steven Stowell & Matt Starcevich(1987)
oBe Supportive
oDefine the Topic and Needs
oEstablish Impact
oInitiate a Plan
oGet a Commitment
oConfront Excuses / Resistance
oClarify Consequences
oDon’t Give Up
·The 7 Habits of Highly Effective People by Stephen Covey(1989)
oBe Proactive
oBegin with the End in Mind
oPut First Things First
oThink Win/Win
oSeek First to Understand, then to be Understood
oSynergize
oSharpen the Saw
·Emotional Intelligence by Daniel Goleman(1995)
oSelf-awareness
oSelf-regulation
oMotivation
oEmpathy
oSocial Skill/Team Builders
·E’s of Excellence by Curtis Reese (2000)
oEthic (Work hard and Smart)
oEgo (Strong Ambition to Win)
oEmpathy (Meet their needs)
oEmpower (Help them to Help Themselves)
oEnthusiasm (Full of Energy)
oEducation (Continue to Learn)
oExercise (Stay Healthy)
oExecute (Put your Plan into Action)
Let’s take a closer look at Curtis Reese’s E’s of Excellence and what theymeans. What can you take away from one or more of these areas so that you can be a better leader as you travel down the path of continuous improvement.
·ETHIC
oHow committed are we to the task or job at hand when we are at work?
oDo we go beyond company demands?
oWhy doour services provide value to our customers?
oDo we work beyond the mark, within the norm or outside the box?
·EGO / AMBITION
oI want to provide the very best service because I want to drive results.
oI want to be a top performer because it is who I am.
oOur services are better because we value our cusomter
oI have quiet confidencebecause I believe that success is a journey, not a destination.
·EMPATHY
oWhat are my customers’ needs and how can I help them fulfill those needs?
oHow does my customer, family member, religious leader, community leader, view the situation.
oHow and in what way do our products/services satisfy our customers’ needs.
oI am aware that a statue has never been set-up to honor a critic and understand the metaphor.
·EMPOWER
oAllow others to help you accomplish your goals
oCompliment everyone around you; make them feel good about their contribution.
oRealize that the sole advantage of power is the ability to do more good.
oEmpower your people to make your organization’s services even better by sharing ideas.
·EDUCATION
oBe a general student and always learn.
oKnowledge is POWER!
oThe glory of God is intelligence.
oWhen you stop learning, you stop life itself.
oDon’t learn for the sake of learning, let your knowledge lead to action
oTeach and share your skills with someone else.
·ENTHUSIASM
oEnthusiasm, Energy, and Emotion can all have positive effects on what you do and on the people you come in contact with.
oEven your dog can feel your energy level; be aware of the effect you have on others.
oNo one wants to get a “Kick In The Pants,” but it will raise their level of focus and attention.
oClear your mind of the word “CAN’T.”
·EXERCISE
oYour most important asset is your health. What do you do to protect your health?
oYou buy insurance to cover all your material possessions
oYou need a healthy diet and exercise for both the body and the soul.
·EXECUTE
oLive your goals and make your dreams become reality.
oThere are three kinds of people: those who wonder what happened, those who watch what happens, and those who make things happen. What kind of person are you? What about the people you lead?
Each one of us has the ability to look like a leader and act like a leader just by making minor improvements in our leadership skills each day. James Michener, author of “The Tales of the South Pacific,” wrote; “The master of the art of living makes little distinction between his work and his play, his labor and his leisure, his mind and his body, his information and his recreation, his love and his religion. He hardly knows which is which. He simply pursues his vision of excellence at whatever he does, leading others to decide whether he is working or playing. To him he’s always doing both.”
Interview with Ted Zimmerman on Bottom Line Leadership In 1981 I had the honor of interviewing Ted Zimmerman. You might have a similar reaction to hearing the name as I did when I first heard it, because I had never heard of Ted Zimmerman. As a teenager Ted had been a clerk in the first self-service grocery store in America. Although there has been an unresolved debate concerning when the first self-service store actually opened, and by whom, I will go with the Safeway claim of being first, with Ted Zimmerman working as a clerk in that store on grand opening day.
S.M. Skaggs opened the store in early June 1915 in American Falls, Idaho, and within months sold the store to M.B. Skaggs, one of his six sons. Neither Ted, nor any other witness can pinpoint the date any closer than, “early June.” Prior to the advent of self-service, clerks assembled product orders from a customer provided list. But everything changed on that grand opening day in June 1915 and I was given the privilege of interviewing an elderly gentleman who was a personal witness to that historical event.
The reason for the interview was that Ted Zimmerman was in declining health and it appeared that his story might go forgotten and untold if it wasn’t documented. On the day of the interview near Tacoma, Washington Ted was in good spirits and seemed eager to have his participation in history documented.
After a few cordial preliminaries, I asked, “Is it true that on the first day a cigar box was used as a cash register?” Smiling, Ted said, “Yes, we couldn’t afford a real register for some time. In those early days a cigar box was all we had and it worked just fine, even as we opened more stores.” So the rumor I had heard about a cigar box was true.
Measuring Success
Later in the interview I asked, “In the store’s early days how did the Skaggs brothers measure results or success?” Ted’s response was simple. He said, “At the end of each day we counted the cash in the cigar box and entered the total in a ledger we used to keep track of our sales. It was cash only in those days, because there were no checks or credit cards. That meant our sales for a day was the cash we had in the cigar box at closing time.”
Ted explained more about the ledger, “We kept track of daily sales in one column and added the days of the week into a weekly total in the next column. The weekly totals then added up to a monthly total, and so forth.”
I asked, “What other measurements were used in the early stores?” He said, “It didn’t take long to learn that when an owner isn’t managing the store that labor cost can get out of hand. So we divided the weekly labor cost in dollars, by the weekly sales dollars and called it Labor Percent. It was easy to know your labor dollars, because we paid the help in cash right out of the cigar box each Friday.”
I continued, “How was Labor Percent used to manage a store?”
He explained, “We figured out Labor Percent benchmarks so we could tell within a week or so if a manager was using too much labor. As you can suspect, there wasn’t much of a problem with a manager using too little labor. Figuring Labor Percent each week gave us an easy way to look at the biggest controllable expense we had.”
Overall Gross Margin Ted described another bottom line measurement used in those early stores. He continued, “At first we kind of stumbled onto things as we opened new stores. By knowing our sales for a period of time, what it cost to purchase the products we sold, and how much inventory we had on hand, we could figure out an overall gross margin percent for the store. That made it possible for us to help a manager whose gross might be lower than other stores. If a gross was low it meant that something was wrong. It gave us something to look at and work on.”
My next question was, “How long did it take for the company to develop a Profit and Loss Statement?”
Ted wasn’t sure about the answer, but clarified, “I know it wasn’t for a while, because none of us had much accounting background. But after a while I think it was a bookkeeper that started to make them. When we got used to them, they came out every few months. Then, when the company got bigger the P&Ls came out each month.”
Measurements for Success I summarized to Ted, “So what you are telling me is that the primary measurements for success in the early days of self-service grocery were:
1. Sales Per Week, 2. Labor Percent Per Week 3. Store Gross Profit Percent After An Inventory 4. A monthly Profit and Loss Statement.
Is that correct?” Thinking for a minute he said, “That’s about it and it worked pretty good for us in those days.”
Having heard this piece of history, consider this: “What has changed in measuring bottom line results or success in the grocery industry from 1915 until today?” The answer is: the cigar box, and not much else. That’s why, “The more things change, the more they stay the same.” The sad truth is that almost all retail stores today function with the same four primary measurements that were used almost a century ago. With the unbelievably sophisticated POS systems, scanning, computers, and expensive software, can’t we do any better than what Ted and his colleagues did so long ago?
Consider the cost of an empty cigar box and ledger, compared to the cost of today’s highly computerized POS systems. If Ted and the Skaggs brothers could get four critical measurements out of a cigar box, how much valuable information should we get and use from a POS system that can cost hundreds of thousands of dollars?
How well do you use the information supplied by your POS and accounting systems? Is your organization’s bottom line leadership and measurement strategies stuck in 1915, or have they progressed beyond the four standard measurements into more specific and motivational ways to measure results?
Pennies Lead To Profits, Dollars Lead To More Profits In an industry where dollars of sales only produce a few pennies of profit, do you honestly believe that measuring bottom line results on a weekly and monthly basis, and only in a manner that hasn’t been improved in almost a century, is adequate? I don’t think so! Give these ideas some thought and then consider how much information coming from your front-end and accounting systems are being used, and how much is going to waste. Remember, if we don’t actually use the information that comes out of the POS system, we might as well use a cigar box.
Me: I noticed your leaderboard on the wall; it looks interesting. It appears to be tracking certain success factors and percentages. Do you get rewarded when you hit certain levels of performance? The reason I ask is I work for an organization where we use effective management, measurements, and scorecards to drive bottom line profitability.
“Arming” yourself and your employees with knowledge is so important. What would organizations look like if we “armed” people to be 
Your people drive your business. Most have the best of intentions when it comes to making a solid contribution to the overall success of the enterprise. They do good work so you give them more work to do. They were your best account rep, your best payables clerk, best welder or project engineer so you made them leaders of people. The problem is that these outstanding individuals have neither the experience nor the training to be outstanding leaders, leaving them ill prepared for the job that they didn’t sign on for in the first place.
