Change comes through people - Part 3

We are continuing to revisit the Key Points raised in the Webinar on “Emotional Intelligence.”

Middle managers need to implement change while managing their employees’ emotions – anxiety, resistance and inappropriate behavior

Notice the tone of this statement and the mandate it sets for middle managers: middle managers need to implement change while managing their employees’ emotions. Here are a couple of questions I raised with the presenters during the Webinar:

1.       How much time, energy and money should a company spend in “emotion management”?

2.       At what point should executives stop and re-think their plans when their top-down actions raise anxiety and resistance from middle management and below to such a level that additional resources must be deployed just to “manage emotions”?

This statement amply demonstrates just how out-of-touch executives and managers in some organizations must be with the rest of their enterprise – i.e., middle management and below on the organization chart. Not only so, but it also shows that these same executives have no idea the damage that their distance from the organization’s “heartbeat” is likely to cause. And, I am not talking about damage to the “peons’ egos or sense of self-worth.” I mean sincerely the damage that is done to their enterprise in measurable terms with which CEOs and CFOs should be concerned – namely, lost Throughput and profits.

Interestingly, when I raised the question regarding when executives should stop and re-think their plans, the presenters of the Webinar pretty much told me that in the face of ego-driven ERP, once the enterprise gets far enough down the traditional ERP path to start raising anxiety and resistance from “the masses,” there is no turning back. It is the rare, rare exception that executive management would dare to stop and rethink the project underway.

This is a sad state of affairs and emphasizes just why traditional ERP – Everything Replacement Projects have such a lousy success rate when it comes to delivering return-on-investment.

Middle managers face the challenge of grasping a change they did not design and negotiating the details with others who are equally removed from strategic decision-making

This seems to get more ridiculous the further we drill-down on the details, doesn’t it? This statement reminds me of a combat situation. Here’s the scenario (in metaphor):

The generals (executive management) have come up with a battle plan – apparently with little or no consultation with the boots on the ground. The generals, in their wisdom, have passed this battle plan down from “on high” and told the lieutenants (middle management) in the field just how they are going to “take that hill.” The lieutenants – many of them being 90-day wonders, fresh out of college and with little practical experience – are now tasked with convincing chief master sergeants, master sergeants, gunnery sergeants and ground troops – some of whom have 15, 20 or even 30 years of “boots on the ground” experience that the plan promulgated by the generals is a good plan and ought to be carried out.

The problem is, the lieutenants do not necessarily understand all of the implications of the plan for those who must carry the weapons and bring the plan to success. They do not comprehend what it takes in day-in, day-out hand-to-hand combat to actually “take the hill.”

Nevertheless, it is the lieutenants’ job to “sell” the plan and “negotiate the details” with the seasoned front-line personnel who actually know the risks that they will be taking.

I think you get the picture. Is it any wonder that a firm operating in this way might experience some problems with their traditional ERP – Everything Replacement Project? Is it any wonder that fewer than half the firms undertaking efforts like this achieve any measurable net benefit from their traditional ERP effort?

No, of course there is no wonder.

Complexity rises for middle managers of change as work demands are modified and multiply, thus creating conflicts

This is a traditional ERP – Everything Replacement Project – after all. Executives have decided to tear the guts out of the entire organization and transplant new technological “guts” in the name of “improvement” that the executives themselves have likely not quantified. To say that “Hope is not a strategy” is an understatement at this point.

Executives have, more likely than not, promulgated a technology “strategy” based on little more than “hope” and the so-called “promises” of the vendors or resellers. Then, these same executives have largely left execution in the hands of lieutenants (see above) and third-parties (e.g., the vendors, resellers and consultants). Then, by some inexplicable stroke of magic executive management expects improved profits to be the result at the other end of this journey. Why else would you spend millions of dollars to disrupt virtually every operation in your enterprise virtually simultaneously and continuously for upwards of 18 months?

Of course “work demands are modified.” A “strategy” (falsely so-called) has been set forward and most of middle management have no idea what that strategy will actually mean for the “boots on the ground.” (See metaphor in previous section.) In this case, it is not “the enemy” forcing a change in plans. As Pogo once said, “We have met the enemy, and it is us.”

Lack of clarity renders new demands uncertain and frequently misunderstood; without clear understanding, managers can be seen as taking wrong actions or no action at all

Given our discussions up to this point, does anyone have an difficulty in understanding just why there might be “lack of clarity” in the traditional ERP – Everything Replacement Project?

Maybe it is because, while it is necessary to understand the operation of your organization as a whole – that is, as an integrated “system” – it is not possible to “focus” on the whole organization all at once.

If executives ask themselves the question, “What needs to change in order for our company to start making more money tomorrow than we are making today?” How likely is it that the answer that would come to mind would be, “Everything!”?

My guess is that the answer would never be everything! Typically, the number of things that need to change to begin making more money tomorrow is very small – say, fewer than a half-dozen. And, even if there are a half-dozen, they need not all be undertaken at once. Then, add to that, the fact that among those half-dozen things that need to change, it may probably be found that half or fewer of those things actually require a change in technologies to support the change.

Yet, purveyors of traditional ERP- Everything Replacement Projects will try to convince executives that what needs to change is everything – and then the company will make more money. Unfortunately, many executives are all too willing to believe this is actually “the solution” of which they have always dreamed. “Just pour it in and everything will run smoother, faster, longer and we’ll get better mileage, too.”

Summary

As W. Edwards Deming said, “You do not install knowledge,” and “Knowledge comes from theory.” These executives go far afield from actually helping their organizations improve because they lack a valid “theory” about how their “system” – their enterprise – actually functions in carrying out the customer-to-cash chain of inter-dependent functions and events.

Virtually all of what they need to know lies resident within their own organization in what I call “tribal knowledge.” But such executives as would seek to manage their employees’ emotions through “Emotional Intelligence” – read: manipulation – will never reap the benefit of unlocking the treasure of “tribal knowledge,” because, it seems, this knowledge comes from “the working class” and it is beneath their dignity to learn from “the man that runs the machine.”

It is the executives with such a mind that are the losers as a result. But their employees lose, too. Firms under such management will never be as profitable or durable as they otherwise might be. Employees cannot be paid as much, because profits are too low. Some employees will lose their jobs because the company cannot compete.

This is all too senseless.

©2010 Richard D. Cushing

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Change comes through people - Part 2

If, as we have shown, people do not willy-nilly resist change, let us take a look at just what might be happening in traditional ERP – Everything Replacement Projects – where management feels the need to bring in emotional management specialists to help smooth the way. We will step through the list provided in the Web presentation.

Only 30% of “change initiatives” succeed

Of course, in the context of the presentation, the presenters made it clear that a major contributor to the failure of “change initiatives” is the changing organization’s failure to properly apply emotional intelligence (EI) management to the reactions to change coming from “middle management” and below in the organization’s hierarchy.

One of the things that surprised me about the attitudes expressed in the whole presentation was the us-against-them sense, where it was executives and top managers pitted against the unruly emotions of the lower classes (e.g., middle management and below). With the help of EI, the ruling elite could, in fact, learn to foist things upon the “lower classes” and make them like it – or least squelch outright rebellion in the ranks.

Sadly, in my limited contact with folks from “Big ERP,” their attitudes frequently have reflected this same elitism. Their snobbery seems to be rooted in a sense that “the ruling class has chosen us, so you – the masses – must listen up and fall in line.” I am certain that they are not all this way, but I have no doubt that some are.

I soundly reject this kind of management. I am confident that no one knows more about running the machine than the one who runs the machine day-in and day-out. The people who know best what needs to change in each part of “the system” – the entire organization – are those in the trenches. Most people really want to do a good job and really want the company they work for to succeed. These people frequently fight an uphill battle against poorly thought-out policies, procedures and assumptions promulgated by executives and managers trying to make things “work.”

Apparently, EI dumps on these people, suggesting that what is needed is for the elite to learn how to “manage” the emotions of the working class rather than learn from the wealth of “tribal knowledge” carried about in the hearts and minds of those who “run the machine.”

Is it any wonder, then, that only 30 percent of change initiatives succeed? It is quite likely, if what we are seeing and hearing is, in fact, the attitude of executive management, that only 30 percent of what they promulgate as change is worthy of success. Perhaps only 30 percent of “change” handed down from on-high will really have any positive effect on the ability of the organization to achieve more of its goal, and “the masses” know it better than the executives do.

It takes about five years to see ROI from a typical ERP implementation

No wonder!

The organization we have just seen depicted in the us-versus-them, the executive elite versus the common man, cannot possible be working as an integrated “system.” Not only it is very likely that there are departmental and functional silos within such an organization, having high and nearly impenetrable walls between them; it seems apparent that there is an even higher and more impenetrable wall between “management” and “the workers.”

In such a situation, there cannot be “integration” and the organization cannot possibly be managed as “a system.” When a business enterprise is not managed as a system, the symptoms are consistent:

·         Lower than expected overall performance

·         Sometimes overwhelming challenges in securing or maintaining a sustainable competitive advantage in their markets

·         Financial difficulties

·         Nearly constant fire-fighting by management

·         Rarely meeting customer service expectations

·         Chronic internal conflicts

Not managing the organization as “a system” is a management and cultural issue that cannot be remedied by installing “integrated” software. Technical integration does neither mandates nor assures functional and interpersonal integration across organizational silos. And it certainly does not create integration vertically in the chart of accounts.

With only 30 percent of change initiatives succeeding and the organization continuing to experience all of the symptoms associated with the failure to manage the organization as “a system,” it remains no mystery that it takes five years or longer to see return-on-investment from a traditional ERP – Everything Replacement Project.

Change fosters significant confusion for middle managers, which can spur anxiety and stress, thus impeding or paralyzing decision-making

The change that “confuses” middle management (and below) is the change for which they are not yet convinced of the true benefit to the organization. Intuitively, most managers understand that “good” decisions in a for-profit organization are those leading to actions that will tend to help the organization make more money tomorrow than it is making today. Such actions, naturally, lead to stability and increasing job security.

If executives and managers have really thought through their traditional ERP – Everything Replacement Project – and are well aware of just how (in measurable terms) ripping the guts out of the organization’s infrastructure and replacing it with something that is promoted as being “newer,” “faster,” or “better” will really help the firm make more money tomorrow than it is making today, then let them come forward and explain those details to “middle management” (and below), and the confusion, anxiety and stress will largely be assuaged.

The fact that executives and managers are not forthright with middle management (and below) when a traditional ERP project is undertaken is, for the most part, the executives and managers do not, themselves, know (in measurable terms) just how ripping the guts out of their organization and replacing it with “newer,” “faster,” or “better” will – in reality – help the firm make more money in the future than they are making today. Instead, their decision is likely predicated largely on hope and generalizations supplied by promises from the vendor or reseller of the new technology.

It is, then, no wonder that middle management remains confused, anxious, and full of stress.

[To be continued]

Stay tuned.

©2010 Richard D. Cushing

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Change comes through people - Part 1

Today I attended a Webinar on applying “Emotional Intelligence” or “EI” in the implementation of ERP systems. The name of the organizer and presenters shall go undisclosed because it is not they who are the target of my disagreement. Rather, my disagreement is with the thrust of the application of EI.

Definitions

In the presentation, the following definitions were given:

·         ERP Change Management (CM) – refers to identifying, assessing and managing the elements that are needed to move an organization from its current state to a future state when ERP software is the transaction engine.  The goal is to realize ROI of the project.  The areas addressed include change strategy, leadership, envisioning, project team building, change history and readiness, benefits realization, stakeholder management, communications, approach to handling reluctance and sustaining commitment, Knowledge transfer, organization and business impacts, new skills and ways of working, organization restructuring, roles and responsibilities, alignment with HR processes and the enterprise strategy. [sic]

·         Emotional Intelligence (EI) – refers to the ability to recognize and understand emotions and the skill to apply this awareness to manage ourselves and others through transitions.  Emotional Intelligence is made up of 4 unique skills that cover how one recognizes and understands emotions, manages his or her behavior, and manages relationships.  These skills are self-awareness, self-management, social awareness, and relationship management. [sic]

Key points

Some pertinent points were brought in the course of the presentation, not the least of which were these:

·         Only 30% of “change initiatives” succeed, while 70% of “change initiatives” fail

·         “It takes about five years to see ROI from a [typical] ERP implementation”

·         “Change can foster significant confusion for middle managers, which can spur anxiety and stress that impede or even paralyze decision-making”

·         “Middle managers need to implement change while managing their employees’ emotions, including anxiety, resistance and eager but inappropriate behavior”

·         “These managers face the challenge of grasping a change they did not design and negotiating the details with others, equally removed from the strategic decision-making”

·         “Complexity rises for these managers of change as work demands are modified and multiply, which can create conflicts”

·         “Lack of clarity renders new demands uncertain and frequently misunderstood; without clear understanding, managers can be seen as not taking action or taking the wrong action”

These points all raised many, many questions in my mind, and I hope to speak of them in this article. However, here was the real kicker that came in response to a question at the end of the presentation:

"A lot of ERP decisions are made on the basis of executive ego.... [Therefore], there are a lot of cases where the ERP [software selected] is a mismatch [for the firm]."

Mind you: these statements – and, most notably, this final statement – is coming from two professionals serving companies of all sizes in industries including finance, health care, education, and manufacturing. And the presenter’s statement did not stop there. Examples were given in terms of “being the first in an industry,” or “having the biggest Peoplesoft implementation ever,” and more.

Notice also that the presenter did not say, “Sometimes” or “occasionally”; rather, the statement made was that “[a] lot of ERP decisions are made on the basis of executive ego.” And, frankly, my own experience confirms this – if not the original purchase decision, at least the decision to carry on with a project even when the evidence may be almost overwhelming against the net result being a positive one for the firm undertaking a traditional ERP – Everything Replacement Project.

It’s got to work

At an international trade show I attended some years ago, I became involved in a conversation with an executive from a fairly large firm. I asked him if they were considering a new ERP system, at all. His response was, “Oh, no! We are just wrapping up an SAP implementation now – after a little over two years.”

So, I said, “Well, you’re to be congratulated, then. There just aren’t a lot of companies that ever actually ‘wrap up’ a SAP project. It seems that they so frequently become ‘evergreen’ projects for SAP developers and DBAs.”

To this, he chuckled. Then, with renewed earnestness he said, “Well, there are still a few things that aren’t quite right, but we’ve spent so much money already that it’s got to work!”

This is telling, don’t you think? If ego did not initiate this ERP implementation, ego was certainly going to see it through. No executives in that company were going to admit that – after spending some millions of dollars – the ERP solution they selected was not going to work for them!

Dispelling an old myth

Who do you think started the myth that “people hate change” and “people resist change”? Do you think it was started by the people being accused of “resisting” and “hating,” or do you think it was started by those in power – monarchs, politicians, generals and executives – who wanted certain changes to occur, but were having some difficulty in getting “the people” to accept the changes set forth?

I think you will agree with me that it was, most likely, the latter group and not the former that leveled the charge and created the myth.

The following should dispel that myth once and for all – at least for my readers:

The Change	Scope of Change	Comments
Getting married	Monumental	Most people embrace and look forward to this change. They do not resist it. In fact, they dream about it and even plan for it.
Having children	Monumental	Here again, even though this is a huge change in their lives, most people look forward to having children and many even lay out plans in advance for childbearing.
Announcement that one’s salary will be doubled starting next month	Big	This change will likely bring significant lifestyle changes, yet I doubt that many would be found resisting this change.
Announcement that one’s salary will be cut in half beginning next month	Big	The magnitude of this change is equivalent to the magnitude of the change for doubling of one’s salary, yet this change is likely to bring screaming resistance.

The point is, people do not resist change. What people resist are changes about which they are not yet convinced the result for them will be positive. For example, in getting married – even though most candidates for marriage recognize that there may be some down-side to the marriage compact – they are convinced that the change will be a net positive for them in the long run.

With this in mind, in our subsequent posts in this series, we are going to revisit the Key Points raised in the Webinar on “Emotional Intelligence.”

Stay tuned.

©2010 Richard D. Cushing

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On Value Pricing

I pick on software vendors and VARs a lot in my writing, not because I dislike them. Rather, because I believe that the vast majority of them are increasingly shortsighted. Their customers and marketplace are changing rapidly and dramatically and they are staying the same. They remind me of the lawyer profession after the telephone was invented. Attorneys were some of the last businesses to take on the new telephone technology and then, they did it only at the insistence of the clients -- because their clients wanted to call them!

While I have carried around the concept of value-pricing for some years, I cannot claim credit for inventing the concept (I don't know who did, but I'm pretty sure it wasn't me), and I am not foremost among those that promoted it over the years. VeraSage Institute is a leader in helping professional firms develop and institute value-based pricing for their services. In fact, the link underlying the heading of this article will take you to a FREE WEBCAST from Ronald Baker, founder of VeraSage on the topic of "Measure What Matters to Your Customers."

Nevertheless, an email I received included a quote from Luci Swindoll:

"It has been said that sixty-five thousand thoughts float through our minds each day. Every one of those thoughts has the seed of possibility in it. We choose with our will what we'll do with that thought. Will we stay stuck in 'If only...' or 'Why me?' -- or will we open our minds to 'What if?' and 'Why not?'"

This quote trigger me to reply to the business associate who sent it to me.  Here is my reply:

This brings up an important factor about “knowledge workers.”  Thoughts occur in an instant.  A thought may come into being through years of conscious and subconscious “mulling,” but the thought, when it arrives, is instantaneous.  Breakthrough thoughts are, interestingly, more likely to occur in the shower or in the midst of a long commute, simply because the mind is given opportunity to “think” without a lot of distracting things and “requirements” pressing.  Unfortunately, most businesses are all about “doing” and less about actually taking time to “think.”

Consider this: If an advertising agency staffer has an idea during his morning shower that is worth millions of dollars to one of the firm’s clients, should the agency bill the client for 15 minutes? An hour? What was that “time” worth to the agency and its client?

If the formula for success in a knowledge-based company is nothing more than PROFIT = Capacity * Efficiency * Cost-based Price (e.g., hourly rate), then the only ways for the firm to improve its profits are:
1. Add capacity
2. Work current capacity more hours (i.e., Efficiency)
3. Increase its cost-based rates

However, if the firm discovers value instead of cost, its formula for success becomes PROFIT = Knowledge * Delivered Value.  Under such a circumstance, the advertising agency can bill its client for some share of the value delivered by the multi-million-dollar idea that its staffer had in the shower.  The firm’s profit potential becomes virtually unlimited and, what they need to garner and preserve in the organization – indeed, what the organization needs to value – is more ‘knowledge’ in the organization, not more ‘capacity’ or ‘efficiency.’  Adding capacity only increases overhead that is troublesome in economic downturns, and increasing “efficiency” isn’t always possible (especially in downturns of the economy).

Suppose the advertising agency we are using in our example were to go to its client, and the client agrees that the idea is likely to generate an increase in Throughput (Revenues less Truly Variable Costs) by $4.5 million over the next 12 months. Let us further suppose that the typical billable work for this particular campaign would have been $250,000.  Now, the ad agency makes an offer thus: “We are going to charge you $150,000 (in advance) to put this campaign into effect. And, we will share the risk with you for the expected results as follows: Based on agreed accounting methods for this campaign, you will pay us 15% of your increase in Throughput each month over the next 12 months.”

If the agency-client jointly-concluded estimates are correct, the ad agency will get $150,000 plus $675,000 ($56,250 per month for 12 months) for a total of $825,000.  That’s $575,000 more than the originally estimated $250,000 in hourly billings.

There are multiple advantages to this, not the least of which is the fact that if the firm does this regularly, it will develop an annuity stream of (e.g., monthly, quarterly) income that will sustain the firm during economic downturns and thus allow the firm to hold onto the talent and knowledge it has worked hard to attract to its work environment.

Just some things to think about from the “Thought for the Day.”  What if…?  Why not…?

I owe much of the credit of my response to Ronald Baker and what he presented in the FREE WEBCAST linked above, but the concept has been with me for many, many years.  My thanks to Ron and VeraSage for reminding me just how important it really is.

Please feel free to email me if you would like help in developing value-based pricing at your firm.

(c)2010 Richard D. Cushing

3 Ways to Make More Money

There is an old “saw” that that gets way overworked, and that is: “Every dollar of cost cutting falls directly to the bottom line.” Now, while this is true, most firms today are already operating in a fairly “lean” state – that is to say, they don’t have much “fat” to trim away. Maybe they don’t have any fat at all. If that is the case, then cost-cutting means trimming away at the “meat and bone” of their operations. Doing so will, inevitably, lead to a reduction in the ability of the organization to make more money in the future than it is making today.

Let me show you a better way.

Some definitions

Revenue (R)                               Income from sales

Truly Variable Costs (TVC)   Costs that vary in a direct way with specific incremental revenues where the relationship can be clearly stated in a mathematical formula (e.g., x dollars per unit – as in raw materials; or n% per unit as in sales commissions) but not an estimate (such as an allocation of overhead expenses that are not truly and directly variable with incremental revenues)

Throughput (T)                         Revenue less Truly Variable Costs (T = R – TVC)

Operating Expenses (OE)     All other monies paid out by the organization in support of the production of Throughput that cannot be classified as TVCs

Inventory or Investment (I)        All the money tied up in the organization in support of the production of Throughput

Increasing Revenues

Besides the risk of cutting away “meat and bone” during cost-cutting operations that are so prevalent during economic down-turns, there is another very large down-side to cost-cutting in general. That is this: If you can cut costs or expenses to save – let us be generous – 5% this year, will you be able to do the same thing next year, or the year after that?  Likely the answer is no.

After all, there is a finite limit to cost-cutting. The ultimate in cost-cutting is to simply cut your costs to zero, close the company and go home!

However, there is no theoretical upward limit to increasing revenues. No company has ever become an industry leader through cost-cutting. Companies gain industry leadership through finding and leveraging a competitive advantage that provides value to customers while employing labor and capital effectively.

So, let us consider what happens when a company increases revenues by five percent in lieu of cutting costs by that same five percent:

Scenario Number 1: A Five Percent (5%) Increase in Revenues
All Values in 1,000's
	Year 1					Change		Year 2
Sales	$      50,000						5.0%		$        52,500
Direct Materials	$      20,000		40%						$        21,000
Operating Expenses	$      26,000								$        26,000
Inventory	$      10,000								$        10,000
Total Assets	$      30,000								$        30,000
Net Operating Income	$        4,000						37.5%		$          5,500
Metrics
Net Profit	8.00%						31.0%		10.48%
Return On Assets	13.33%						37.5%		18.33%
Cash Flow (Note 1)	$        4,500						33.3%		$          6,000
Note 1: Assumes $500 in amortizations

Here we have a $50 million-a-year company that grows its revenues by five percent. They have direct materials costs (read: TVCs) that average 40% and operating expenses of $26 million annually. To complete the picture, the firm carries $10 million in Inventory and has total assets of $30 million. Increasing their revenues by 5% increases the firms bottom-line by a hefty 37.5% (from $4 million to $5.5 million). Net profit zoomed upward 31% and $1.5 million in cash was liberated in the firm. (Cash is always good – especially in a recession.)

Leaning the inventory

Now we will take another look at how to make more money even if you do not believe that you can presently increase revenues. What happens if our example company reduces their inventory by 20 percent?

Scenario Number 2: A 20% Decrease in Inventory
All Values in 1,000's
	Year 1						Change		Year 2
Sales	$      50,000								$        50,000
Direct Materials	$      20,000		40%						$        20,000
Operating Expenses	$      26,000						-2.0%		$        25,500
Inventory	$      10,000						-20.0%		$          8,000
Total Assets	$      30,000								$        28,000
Net Operating Income	$        4,000						12.5%		$          4,500
Metrics
Net Profit	8.00%						12.5%		9.00%
Return On Assets	13.33%						20.5%		16.07%
Cash Flow (Note 1)	$        4,500						66.7%		$          7,500
Cash flow includes (a) cash liberated from inventory, plus (b) cash savings in operating expenses based on 25% carrying cost of inventory reduction.
Note 1: Assumes $500 in amortizations

This looks pretty good, too, does it not? By reducing our inventories, we also reduce our carrying costs. Carrying inventory at this company costs about 25 percent annually (or about $500,000 per year). This alone adds 12.5 percent to the bottom line. But here is the big gain: $2.5 million in cash is liberated -- $2 million from the inventory reduction itself and another $500,000 from the reduction in Operating Expenses. (Remember: Cash is a good thing – especially in a recession!)

The double-whammy

What does this company look like if they both increase revenues by five percent and are able to cut their inventories by 20 percent?

Scenario Number 3: A Five Percent (5%) Increase in Revenues + A 20% Decreae in Inventories
All Values in 1,000's
	Year 1						Change		Year 2
Sales	$      50,000						5.0%		$        52,500
Direct Materials	$      20,000		40%						$        21,000
Operating Expenses	$      26,000						-2.0%		$        25,500
Inventory	$      10,000						-20.0%		$          8,000
Total Assets	$      30,000								$        28,000
Net Operating Income	$        4,000						50.0%		$          6,000
Metrics
Net Profit	8.00%						42.9%		11.43%
Return On Assets	13.33%						60.7%		21.43%
Cash Flow (Note 1)	$        4,500						100.0%		$          9,000
Cash flow includes (a) cash liberated from inventory, plus (b) cash savings in operating expenses based on 25% carrying cost of inventory reduction.
Note 1: Assumes $500 in amortizations

These numbers sing, don’t they? A 50 percent increase in Net Operating Income as it soars from $4 million to $6 million, showing a 42.9 percent increase in Net Profits and liberating an astounding $4 million in cash.

What does it take?

Get these kinds of results takes nothing more than understanding your business in ways you have not previously understood it – as a system. All you need to do is get you and your management team to understand and fully agree upon those few things that need to change in order to:

·         Increase Revenues or Throughput

·         Decrease Inventories or other demands for new Investment

·         Cutting or holding-the-line on Operating Expenses while supporting substantial growth

I can help.  Contact me at rcushing(at)geewhiz2roi.com and get started today.

©2010 Richard D. Cushing