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Performance Improvement - Job Descriptions

A well-considered job description is an area that, too often, is not given the attention it deserves. Since a company’s performance is the sum of each employee’s performance it would make sense to hire individuals who hold the skills to succeed at their job, and therefore the success of the company as a whole. Needs of a company change over time and it is wise to consider hiring those with the ability to learn new skills, or those who have learned other skills in prior jobs. Yet many companies shy away from job descriptions without understanding the impact this has on morale, customer satisfaction and profitability.

The effort placed in defining a particular job description can be the difference between a company that excels and one that trails the competition. Hiring the right person requires an owner or manager to identify the specific skills and knowledge needed for each job. It also helps them determine the right interview questions to ask, identify the best résumés and better evaluate the candidates. Here are several guidelines to assist you in this process.

For improved performance

Every company should have clear goals and an understanding of how each job supports the needs of the company. Corporate goals should be divided into functional goals, functional goals divided into individuals goals. With this structure an employee’s goals will support the higher corporate objectives. Growth oriented organizations also should consider their future needs.

The employee you are looking to hire should have the necessary skills and the ability to grow with the company. This requires that you understand current requirements and hold a vision of what skills are needed to support future plans. If you don’t know what skills they need, how will they know?

You have the choice of hiring to meet future needs or hiring to meet current needs. If you hire to meet current needs there should be a plan to train the employee for future responsibilities. Hire for current ability while considering their potential.

Look to improve the level of skills in your business with each hire. This goes back to the idea of having a keen understanding of company needs and a plan for fulfilling that future vision.

Don’t hire cheap. You will pay the price many times over.

If a new employee is unsure of what you expect of them, what can you expect of them? Provide clear goals and periodic reviews. They want to know how they are doing. They don’t like surprises any more than you do. They especially don’t appreciate a 12 month review where they learn they’ve been underperforming. Keep communicating and advise them frequently.

If you hear “who’s responsibility is this?” too frequently it is probably time to take another look at those descriptions.

Perhaps you are forced to hire a temp because the staff isn't able to get the job done. You may be able to avoid these excess costs. First look at the performance standards for the staff. Are you about to hire a temp because of poor prior hires? Would you be able to avoid hiring a temp if the staff was better trained (in Excel, Word, business software, company policies. Does the staff have a clear understanding of their individual goals and have the tools to perform their job?

Underutilized and poorly implemented software solutions cause excess hiring. Underutilized and poorly trained employees cause excess hiring. Use your resources and dollars wisely.

Likewise, a lack of policies and procedures leads to confusion. Certain individuals will take advantage of this situation, leading to poor morale on the part of others.

By setting clear responsibilities you are able to measure performance.

A company looked to replace the warehouse manager. It wasn’t clearly defined why they were upset with his performance or what they expected of a new manager, just a series of  comments on perceived failures, a “what he didn’t do” at every opportunity. A finger pointing environment. Employees wondered when the finger would point to them and morale suffered. I facilitated a meeting to help the owners define their areas of concern which were found to be centered on lack of visibility and accountability. Further discussion found that they were upset by late customer deliveries, lack of reporting, lack of control and lack of communication with customer service. Listing each item I then asked how they planned to address the situation. They responded, “We need to fire him and hire someone better.” They weren’t able to define “better”. Up to this point there was no mention of why the situation was allowed to go on for over 2 years. Almost knowing the answer I asked for a copy of the job description and of course, there was none. The warehouse manager’s objectives were changing on a weekly basis, there was no guideline, no clear performance standards.

By sitting with them to create a job description and performance expectations they were able to set objectives for the current manager and hold him to these targets. Eventually he failed, he was a poor hire from day one. But with a detailed job description in hand, one that addressed the necessary skills for today and for planned future growth, they were able to hire a competent manager. The new manager, now with clear goals, was able to significantly improve warehouse performance, reduce overtime, improve on-time performance and also generate weekly management reports that provided the desired visibility. In addition, the new manager identified internal obstacles to warehouse performance caused by other departments. His higher level of involvement led to eventual improvement throughout the organization. The finger pointing ended, morale improved, performance improved as each job was better defined.

Remember, individual performance affects corporate performance. If job descriptions are not your area of expertise it’s time to call up the reserves. An experienced business advisor will help you focus your goals, create effective job descriptions, and help you hire the "right" employee with the "right" skills. This is far better than filling the void with additional headcount with the same uncertain goals while facing the costs associated with continual low performance.

B2B CFO^® partners are experienced in building infrastructures that meet a company’s needs and increase profits. Give me a call (at 631.379.6742) for a no cost/no obligation business analysis. It’s a call worth making.

Keith's insightful and in depth analysis identified strengths and flaws in our organization helping us work towards building a better business. He is open minded and decisive. Keith is a joy to work with and brings a fresh point of view to the business.

Nicole Novick

Product Manager and HR Manager

www.occunomix.com

A CFO's Advice to Entrepreneurs

Posted by Mitchell York under Interviews | Tags: B2B, B2BCFO.com, CFO, small business

I was introduced to Keith Simmons from B2Bcfo.com by my CPA. I don't often get together for a cup of coffee with a stranger, but because my accountant is someone I really trust, I decided to do it. We had no particular agenda except to see if there might be some common interests, and indeed there were. Keith is a partner in a fascinating business that helps small firms have access to expert chief financial officers on a temporary basis. His focus is Long Island and the New York metro area, but his company has partners nationwide. He answers some of my entrepreneur-focused questions here.

What are the biggest mistakes new business owners make when it comes to managing the financial side of their business?

I find fewer than 10% of all businesses-new and established-take the time to create a plan. Lack of planning is the most common error of new business owners. Planning encompasses a lot of territory, including the financial responsibility of supporting your business until the business is able to support you. Eighty percent of new businesses fail in the first year. The primary reason is lack of cash, another is holding a vision that did not meet the reality of the business. As a new business owner your first task is to translate your vision into a business plan and have it critiqued by qualified persons. Include financial and cash flow forecasts. Then on to Plan B showing sales at 50% of the original forecast. Assuming your venture will be self-funded, does the reduced sales forecast still show cash flow in your favor? If not, do you have the financial resources and confidence to contribute additional cash to your business. Companies most often fail because they have no plan, are unable to measure progress against a plan, and don't see the end coming.

A lot of experts talk about having lines of credit available at all times. What if a bank won't extend credit to your small business? Are credit cards a good option? What about shifting balances between credit cards?

Credit can be hard to come by for start-ups. Establish a relationship with your banker, even if they cannot loan. Contact your local Small Business Development Center (SBDC), Community Development Center of Long Island (CDCLI), Long Island Development Center (LIDC) and others to determine if funding is available and the steps necessary to obtain funding. I'd consider credit cards as a good option only when an owner faces a brief shortfall of cash and is confident that the business is able pay off all balances in the short term. Move credit balances to the card with the lowest interest rate and pay on time. Late payments can result in highly unfavorable interest rates.

Do small businesses need to subscribe to Dun & Bradstreet or similar services to know their business credit score?

This is always a good idea. You should review your credit rating quarterly and correct any errors. If you have good credit that is not shown on the report, speak with a credit representative and provide additional credit sources to be added to your report. Go to annualcreditreport.com for a free report of your personal credit rating. The rating agencies are Equifax, TransUnion and Experian. Each allows one free report per year.

I have many small business clients who have problems with collections. Not that their customers aren't going to pay-they just take 60 or 90 days. How can a small business with little leverage over clients speed the cycle?

Being successful as a small business owner requires a high level of confidence. This inner confidence is critical when discussing price and payment terms. Those that lack confidence will sell below market price and fail to discuss terms. Price and terms are both components of the sales discussion. It may be to your advantage to run a D&B report on the client's payment history and be able to discuss any concerns. When you receive an order obtain the name, phone number and email address of the Controller or Head Bookkeeper and the Accounts Payable individual. Send a confirmation to the customer thanking them for the order, a brief description of the product ordered and the agreed terms. Send a copy to the Accounts Payable department. Speak with the accounting department in advance and identify any special information required in order to pay in a timely manner. Do they need a signed PO or Proof of Delivery? Make it your job to make their job easier. Review the terms on their Purchase Order and resolve any discrepancies. During collection calls I look to inject light humor and a knowledge of the difficulties a customer's staff faces, particularly in times of tight cash. They are under great pressure and receive many demanding and offensive calls. I appeal to their human side and they remember me. It keeps me higher on their payment list. If you feel that you will not be paid in full, ask for a good faith payment. Despite your best efforts the customer may pay late, particularly in the current economy. At least know that you have improved your chances for more timely payments. Another option is to obtain Accounts Receivable insurance. There will be a percentage fee and a deductible, but you now have a bit more leverage. You will be able to say, "The agreement with my lender requires that I carry A/R Insurance. When your company's account goes to 60 days I am required to turn it over to my insurer, which will impact your credit rating." Revise the Cash Flow Forecast to incorporate these slower payments.

Does it make sense for most small businesses to accept credit cards for payment?

Accepting credit card payments carries fees of 2% to 5% percent. Are you able to absorb these costs or include then in the price, or worried about their ability to pay at a later date? If this is the case, accept a customer's offer to pay by credit card. This slightly lower cash inflow will be offset by the time you gain to build your business rather than spending time to chase down a customer for payment.

What advice would you give someone who is looking to start a second career after a successful career in corporate life, and wants to be their own boss?

We assume that success in corporate life will transfer into success for our small business. First, make a list of your skills. Then list all the skills and knowledge needed to run your new business. For a sole proprietor this list will include skills in: sales and marketing, presentations, accounting, computer, scheduling. Expect to see many gaps. What skills need development? Attend Core4 and other business training seminars given by the CDCLI, SBDC, organizations and libraries. SBDC at Stony Brook and Farmingdale, Hauppauge Industrial Association and others hold Business Owner roundtables where you can brainstorm your issues.

As children we learned by asking questions.  As adults we are afraid that asking questions might make us look foolish. Better to look foolish and eventually find the answer than not ask questions and suffer a business failure. No question is a bad question. Start with "What question do I ask when I don't know what question to ask?" Ask your accountant, attorney, other business owners, consultants. Each stage of business development faces different issues. Keep asking. Budget funds to hire professional advisors. This decision is often the difference between success or failure. Seasoned experts are available on an as needed basis, whether it be CEO, CFO, CTO, HR or Sales coaches. Each costs significantly less than a full-time executive whose cost is beyond your reach.

I find that a lot of solopreneurs skimp on their image even when they have a great service. Do you agree?

Leave a professional impression. I recommend not using AOL, Gmail, Yahoo, Optonline or similar addresses. Those who want to know more expect to view a website and correspond to an email address that reflects the your website name. Don't scrimp on materials. I receive many comments on the high quality of my business card, brochure and website. Correspondence is printed on 28# or 32# paper. Learn to network. Understand what networking means and how you can assist others. Then network, network, network. DON'T SELL - LISTEN! Identify the needs of the client. Determine if you are the best solution. For example, I've been asked if I'm qualified to perform bookkeeping functions. Yes I am, but I am not the most cost effective solution. It would not feel proper to perform bookkeeping work at CFO rates. With the client in mind, I refer them to a part-time bookkeeper. My client's level of trust grows exponentially. Each of us enjoy landing a new client, be sure you are the best solution. Your integrity will shine through. And don't forget that Plan!

Keith A. Simmons is a partner in B2BCFO® and former Chief Financial Officer of Long Island companies. He works with owners of emerging, small and mid-market businesses to create financial and goal clarity. Goals are transformed into action plans that increase cash, profitability, sales and company value.

He can be reached at ksimmons@b2bcfo.com. 631.379.6742

originally published by Executive2Entreprenuer on 10/18/08

http://www.e2ecoaching.com/

http://www.e2ecoaching.com/2008/10/18/a-cfos-advice-to-entrepreneurs/

 Billable Labor Hours

Is it possible that 90% of small and mid-size businesses are subject to incorrect costing? Surprising and disturbing, but that's been my experience. Cost estimating is often a poorly understood science.  And if our cost estimates are incorrect how do we accurately price products and services, or determine profit margins?  Or prepare a realistic budget? And if price is market driven, how do we determine if we are operating at sufficient profit?

When pricing is based on erroneous estimates a company will lose orders due to overpricing or capture unprofitable sales due to underpricing. In either scenario it is the competition who benefits and it is you who will eventually close your business. Since we are not in the business of aiding the competition, we need to take a good look at our costing model.

Cost estimating needs to be a clearly defined process, and by following the proper steps we will achieve accurate estimates. So how do we identify the necessary steps?

Today we document a procedure that allows us to identify the number of labor hours available for sale. But first, can you guess how many billable hours are available from the average employee in one year?

Your estimate here: ­­­_________

Now put that costing hat on, open up your cost estimator notebook and we'll fine tune that estimate!

Billable Labor Hours Worksheet

In our example we have an employee who is paid 40 hours a week, receives 3 weeks vacation, 10 paid holidays, 8 paid sick, and as we are one of the more benevolent employers they also receive bereavement pay and a few days off for good behavior (no overtime in this example). We find that a sizeable portion of payroll and benefits are paid for hours not worked.

Total Hours Paid                     52 weeks x 40 hours =                2080 hours         100%

To calculate the Non-Worked hours:

            Vacation                      15 days x 8 hours =  120 hours

            Holiday                       10 days x 8 hours =    80

            Sick                            8 days x  8 hours =    80

            Bereavement                3 days  x 8 hours =    24

            Other time off               2 days  x 8 hours =    16

   Total Non-Worked Hours                                                        - 320                   -15%

Leaving us with Total Available Hours of                                      1760 hours          85%

So, we pay our employee 100% of the time while they are available only 85% of the time. 

But wait, there is one final step in our labor hours costing process. At best we are in the position to bill 1760 hours to our clients (assuming we bring in enough business to keep the employee productive at all times), but this is rarely achievable. What other factors come into play? These will vary depending on the type of business and would include non-billable hours committed to administrative tasks, clean up, tardiness, etc. Manufacturers face machine inefficiencies and machine downtime that are non-billable.  If we estimate these items require only 3 hours per week, we calculate:

Additional Unbillable Hours   52 weeks x 3 hours =                     -156 hours           -8%

Total Billable Hours  (also known as Chargeable Hours)           1604 hours          77%

It is important for owners to bring in enough new business to keep employees productive every hour they are available to us. If we work IN the business rather than ON the business we can be sure there will be times when there is not enough work for our employees (the Billable % will further decrease), but we will continue to pay them. Hiring anything less than highly qualified individuals, not having well-trained and competent employees, and having outdated or inefficient systems and procedures will cause us to hire additional employees to offset these added inefficiencies. This further adds to our costs and erodes our profitability. Owners who surround themselves with experienced advisors and effective systems are able to maintain a pro-active management approach and thereby ensure their company's operational and financial success.

In Part II we'll look at the true hourly cost of our employee. 
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A B2B CFO helps business owners work ON the business. I work with owners to create timely and accurate reporting systems and build an effective infrastructure that allows owners to keep their finger on the Pulse. Owners are then freed to do what they do best... create goals and build their businesses! In B2B CFO terminology, you are the FINDER. Finders create businesses and maintain and build new customer relationships to ensure the future of their business.  Our book "The Danger Zone" is filled with case studies of the problems faced by owners working IN the business rather than ON the business, and provides practical solutions to help you avoid these dangers and improve your opportunities for success.
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