To stay competitive, organizations need to continually find opportunities for innovation in key processes such as customer service and product development, and adoption of a new process almost always requires the implementation of new information technology. In his 1990 classic HBR article “Reengineering Work: Don’t Automate, Obliterate,” Michael Hammer argued that IT must drive radical process innovation.

Unfortunately, this creates two problems. First, as Hammer argued, these large investments in new IT systems tend to deliver disappointing results, largely because companies tend to use technology to mechanize old ways of doing business. That is, they leave the existing processes intact and use computers simply to speed them up, rather than redesign them from scratch.

Second, they don’t take enough advantage of the innovative abilities of their people themselves. Employees often feel victimized rather than energized by the changes. They’re subjected to retraining, and they have to radically alter their routines, often in ways that they don’t think will work as well. Hammer nonetheless argued for using the power of information technology to redesign a cross-functional process, then deal with the people issues. Though many workers will resist a new process imposed on them, competitive demands need to override resistance. I heard him say, “We will carry the wounded but shoot the stragglers.”

Hammer’s thinking was very powerful, but I’d challenge that last point. The best way to solve both of these problems — and make innovation efforts stick — is not to impose a new process or technology system, but rather have front-line employees drive the change. You’ll get fewer stragglers, and end up with better ideas — ideas that come from the people who do the work every day and see the most glaring problems. Avoiding a new technology may not be an option, but it shouldn’t come first.

Look at ING, a leading bank in the Netherlands, which sets about process improvement by first getting its employees to recommend changes, ideally in short iterations and with frequent feedback loops, to avoid depleting people’s energy and to decrease the likelihood of going too far down the wrong path.

David Bogaerts and Jael Schuyer are process improvement experts in ING’s IT and operations group. They say their projects are more successful when they follow the sequence of people, then process, then technology. “If you automate too quickly, you don’t find out what the front-line people need,” they explained to me recently. “We stay with manual workflows longer than others. Until you have a clear idea of what people need, you may automate workarounds and waste. For example, we worked with people in our Automating Department to improve their processes (using “Lean” and “Agile” methods), and we are now looking at technology to further improve the processes in ways that will revolutionize them.”

ING acknowledges that it has occasionally neglected to engage workers adequately, with disappointing results. “In the case of a workflow management software project, we bought the tool and told people to use it,” Bogaerts and Schuyer said. “It was technology first, then process, then people, and it didn’t work very well.”

No doubt new technology systems can help bring about dramatic process improvements, no matter how much employees howl about the change. Yet organizations that implement an enterprise system (ERP, CRM, SCM, etc.) frequently underestimate the costs of front-line resistance. The systems force people to change the way they work, and while they eventually adapt, most implementations are delayed, operations suffer temporarily, and revenue can take a hit, as at Hershey Foods and Lumber Liquidators.

Why not tap into their expertise instead of dragging them along? Your investments will be better spent, and your workforce is much more likely to buy into the whole thing. As Bogaerts and Schuyer said to me, when workers identify improvements in their jobs, a new computer system appears as an opportunity to eliminate waste and better serve customers, not as a threat.

Engaging workers as drivers of process changes may seem like it’s slowing things down, particularly in implementing a revolutionary enterprise system. But what’s your alternative? You either pay upfront and get worker ownership and sustainability of changes, or you pay later to get buy-in and overcome resistance. The ride is much smoother when you can have your workers be drivers, not passengers.

Brad Power

Brad Power is a consultant and researcher in process innovation. His current research is on sustaining attention to process management. He is currently conducting research with the Lean Enterprise Institute.

1. Don’t negotiate for a bigger share of the pie. Do work with the other party to make the pie bigger.
2. Don’t use confrontational language that creates defend/attack spirals. Do develop a friendly, trusting relationship with your opposite number.
3. Don’t make concessions without getting something in return. Do think of what the other party will value that won’t cost you much.
4. Don’t agree to a deal that doesn’t meet your must-have needs. Do plan the negotiation with a clear understanding of your BANTA, or your Best Alternative to Negotiated Agreement.
5. Don’t negotiate one issue at a time. Do put everything on the table at the start and encourage your partner to do it so there can be lots of trade-offs.
6. Don’t just keep muddling through if the negotiation seems stuck. Do change the dynamics: Sleep on it, move to a new location, ask for “crazy” ideas that can unleash creativity, or change the negotiators.

How to Keep the Negotiation from Derailing

The longer a negotiation drags on, the less likely it is to get closed, Ann Lawrence, a partner in the law firm DLA Piper, says.

“All negotiations need to have a deadline or they may never finish,” according to Huthwaite’s John Golden. “This is not to say that the deadline can’t be extended with the agreement of both parties. If you are buying a fleet of jet fighters, for example, you want to make sure that the service contract meets all contingencies. That could take a while. It doesn’t need to preclude a deadline, however.”

Negotiations that seem endless can create frustration and cause the negotiators to act out. Call attention to the bad behavior, suggests Michelle Lederman of Executive Essentials, an employee training firm. “Not with a pointing of a finger, though,” she adds. Acknowledge that the circumstances are difficult. Schedule a break. Sleeping on it overnight might be helpful.

When anxiety and anger threaten a negotiation, Michael Bechara, managing director of Granite Consulting Group, suggests that the parties put their positions on the shelf and come up with three alternative solutions. This can open the door to a new approach that works.

A stubborn impasse can be resolved with a move to another location. Mark Jankowski, president of Shapiro Negotiations Institute, was involved in a bitter negotiation that pitted the Baltimore Police Chief against his top lieutenant, with each using the media to further his cause and increasing the tension. Mr. Jankowski moved the negotiation from the city to a farm. In the reopened talks he took the position of the lieutenant while his partner represented the police chief. A negotiation that had been deadlocked for months was resolved in an evening.

Creative approaches to making the pie bigger also can keep sales negotiations from reaching an impasse. The Haas School’s Prof. Moore says a buyer or seller who says “This is my final offer” might be stuck in that position because to change it would cause a loss of credibility. “The best approach might be to say I’ll pay the price but I want this and that and that,” he says.

Linda Richardson, the author and sales trainer, suggests that a customer who insists on a 10% discount can be given it — in return for a three-year contract, up-front payment, or changes in terms for delivery or service.

Though a ninth-inning zinger likely is a hardball negotiator’s tactic, don’t assume it is. Mike Schultz, president of the Rain Group sales consultancy, tells of a friend who was selling his midsize technology company to a larger business. The parties agreed in principle on the buyout but after thinking about it the seller realized he was under-pricing his company. He explained his position at the next meeting. The other company grumbled but said fine and the deal was done at the new number, Mr. Schultz reported. With openness and flexibility on each side both enjoyed a satisfying resolution.

ChiefExecutive.Net, by George Nicholas

According to a quarterly Global Business Outlook survey conducted by Duke University and CFO Magazine, CFOs in the United States and Asia are more optimistic this quarter and expect to see an increase in hiring.

873 CFOs from global and public companies  participated in the survey which has been conducted for 64 consecutive quarters and result in the following findings:

• 68% of U.S. CFOs are currently trying to fill vacant job positions
• U.S. finance chiefs plan to expand their workforces by slightly more than 2 percent on average over the next 12 months, a staffing increase that would bring the unemployment rate below 8 percent.
• U.S. CFOs rated their optimism in the nation’s economy at 53 this quarter (on a scale from 0 to 100).

Additionally, there is a stronger employment outlook. “The expected increase in employment is a welcome improvement over last quarter’s 1.5 percent forecast growth rate,” said Kate O’Sullivan, director of content development at CFO Magazine. “It indicates that national unemployment should fall below 8 percent in 2012.”

Click here to read full release.

Perhaps lack of growth is not considered failure by some business owners, but Jay Goltz has a different view. Partially based on his own personal business experience, he discusses how working harder and not realizing the benefits of growth can be the downfall of a company, “there is an uncomfortable place between big and very small, where the owner is still doing a lot of the work and still not making much of a living,” states Goltz. Read the full article “10 reason why some businesses can fail by failing to grow.”

THE CFO CONNECTION ADDS DAVID SCHLOTTMAN
Expands Presence to Florida

Naples, Florida – March 5, 2012 – The CFO Connection has added David Schlottman to its growing team of part-time CFOs serving companies with extensive financial and business management expertise.

Based out of the Naples/Ft Myers area, Schlottman expands the presence of The CFO Connection to the state of Florida.

The CFO Connection is a national firm that provides part-time CFO services to small and mid-sized companies in North and South America. The addition of Schlottman to the firm’s team comes as The CFO Connection ramps up operations to meet increased demand for innovative CFO services that deliver value at reasonable cost. The CFO Connection meets this market need through the part-time CFO model. This model pairs smaller organizations that cannot justify the expense of a full-time CFO with the expertise of seasoned CFOs who provide services on a permanent, part-time basis.

“Dave’s experience steering numerous companies toward more profitable growth makes him the kind of CFO our customers are looking for,” said Bob Thompson, founder and CEO of The CFO Connection.

Schlottman brings more than 30 years of experience to his new role. Before joining The CFO Connection, he served as CFO for a national distributor and manufacturer of custom formwork and shoring equipment. There he helped the company increase its borrowing capacity, implement a cash forecasting system, and set new prices to optimize profitability – all as part of a campaign to facilitate growth and transition from distribution to manufacturing. The following year the company grew by 40%.

Schlottman has had similar success elsewhere. Working with the largest electrical subcontractor in Florida during a time of rapid growth, he put the company on a sound financial footing by introducing strict financial controls and reporting mechanisms. He also implemented a purchasing system that saved the company millions of dollars. And his analysis and ideas to overcome the impact of crushing increases in copper prices allowed the company to continue to grow.

As the CFO for one of the fastest growing burglar alarm companies in Florida, Schlottman also managed 30 acquisitions ranging from $100,000 to $12 million. This enabled the company to grow its account base from 10,000 to more than 72,000 – while increasing revenues by more than 600%.

“I’ve never met a company that doesn’t want to grow,” said Schlottman. “And my focus has always been on helping reach their highest possible potential. I look forward to helping my clients in Florida manage their finances to open up new opportunities and optimize long-term business performance.”

David Schlottman can be reached by email at ds@TheCFOConnection.com or by phone 239-682-9450

Recent studies show that it takes 100 or more applicants to find one qualified candidate. Finding the time to sift through all of the paperwork and emails is one luxury (and skill) few small businesses have these days. An online applicant processing system helps small business cut through resume overload faster and smarter.

Today’s job market is tough, not just for prospective employees, but for employers as well. Recent studies show that it takes 100 or more applicants to find one qualified candidate. Finding the time to sift through all of the paperwork and emails is one luxury (and skill) few small businesses have these days.

Learn more about “resu-mess” and how to manage applicant resumes.

Published January 12, 2012 by David M. Katz, CFO.com

The U.S. Postal Service’s decision to end next-day delivery could tie up millions of dollars in working capital.

Delivery by letter carriers seems so old-fashioned that it’s been called “snail mail” for years. Yet, as it turns out, most of Corporate America’s invoices still get delivered that way. And the U.S. Postal Service’s December 5 decision to move first-class mail to a two-to-three-day standard seems sure to slow down bill collection for companies large and small.

Indeed, the move could cost a U.S. company with $10 billion in revenues up to $100 million in working capital as a result of its impact on accounts receivable, according to Veronica Heald, a practice leader at REL Consulting, a division of The Hackett Group that focuses on working capital. (CFO is developing a working capital benchmarking product in partnership with REL.)

The impact of the mail delay will be felt in at least two ways, says the consultant, who estimates that 60% of payments received in the United States are via checks in the mail. There will be lags in both the distribution of invoices and the receipt of payments, she adds. Click here to read full story.

Small businesses have a responsibility to evaluate their lending relationships and to look for signs of lender fatigue.

One caveat, though: sending out yet another past due notice doesn’t count. Collections-by-mail is an exercise in futility. What you need is direct contact. Pick up the phone and call someone. Most customers will talk to you. If the individual refuses kick it upstairs.

When on the phone, there are three things to remember: commitment, commitment, commitment. Whatever it is – an assurance to pay, a promise to investigate, an agreement to seek authorization – be sure to get some type of commitment. Also be sure to set a clear time to call back for follow up.

If you’re overburdened with collections responsibilities, remember the Pareto principle – namely that roughly 80% of the effects come from 20% of the causes. Applied to collections, this means that approximately 20% of your past due accounts are responsible for 80% of your past due money. Sort your past due accounts from highest to lowest in terms of dollar amount and this will become self-evident. Then, start making your calls top-downward. Keep a record of the commitments and times for your follow-up – and do a new 80/20 analysis every week.

It’s a business truism that what gets measured gets done – and this is as true for collections as for any other aspect of your business. To measure your collections performance, start by calculating your accounts receivable days and use this metric as your benchmark. We’ve seen dramatic results – such as receivable days cut in half in just a matter of months.

It’s also important to keep your collector incentivized. Paying a monthly bonus based on each day of reduction works particularly well. If your monthly sales are $500k then each day would be worth roughly $17k. A $50 bonus for each day reduction is a good deal for everyone. When your receivables are under control, adjust the bonus based on a new target so that you can maintain control and still provide the incentive.

Remember, the squeaky wheel gets the oil. Your customers may have limited resources – but they’ll pay you before they pay a silent vendor.

If you need help setting up a collections program let us know. The CFO Connection will be happy to help.