Being as processing this information and energy and
Acting as expressing the information and energy.
These are his vertical headings.
But the fun comes when he creates the three horizontal panes. The three panes are;
Context (which reflects the complex situations around us)
Identity (coach and coachee) who I see myself to be, which is affected by the context and
Soma – which Silsbee refers to as our psychobiology (what our body and reactions are telling us).
What is fascinating here is that these are nested with each other and as you receive and process the information and energy these change dynamically.
So, when interacting with a team member, the coach will have in mind a context for the discussion. When sensing into the conversation, the identities of both parties will show up and these can take many forms like; anger, curiosity, fear, concern, and excitement. At the same time, the team member will exhibit their own psychobiology showing up. Changes in body position, the neck getting a burst of colour, eyes looking up or down, twitching and other cues can be given, much like a tell in a poker game. Questions clarifying perspecitves can trigger either person’s soma into action.
Every change that occurs will affect the initial context; it is like a dynamic dance with curiosity at its core. The coach is looking at how this unfolds to determine the next steps. Because it is a highly intentional process, the coachee feels heard and recognised for what they are feeling. The conversation is clean and honest.
Coming back to agility, this process engages both the coach and coachee in a dynamic fluid process that enables both to traverse the complex landscape and be on the same page, or at least close.
In today’s business environment, the presence of complexity means we have to try new things, we can’t analyse in an emergent space, so being flexible and trying new and untested things becomes important. But here’s the thing, a lot of managers don’t like failure or rejection, and this approach requires failing often and failing fast (the hallmark of success in a volatile and uncertain world).
Silsbee’s process leaves egos at the door and gives us the process to be courageous, to venture into unchartered territory, and to put our best foot forward. I recommend Doug’s book as a must-read for today’s business owner.
New Zealand has one of the OECD’s lowest levels of productivity and to stand alone in an uncoupled world this is something we need to improve – and a very practical way to start that improvement is by understanding your businesses labour efficiency.
In his book Simple Numbers, Greg Crabtree details what he refers to as the Labour Efficiency Ratio or LER.
It is a simple calculation as follows:
Sales – Cost of Sales = Gross Profit before Direct Labour.
If you then divide your direct labour costs into the gross profit before direct labour, it tells you how many times direct labour is covered. Generally, a score of anything less than two is problematic with the goal set above three.
Let’s look at some examples where direct labour has been managed differently using automation, more flexible staffing and other approaches. Notice the correlation between the LER and percentage net profit before tax.
Note: it is important to ensure all direct costs are captured in your cost of sales. Too often equipment hire, project travel and accommodation and other direct costs are shown in overhead expenses. These should be recoded as COS to give a true contribution margin. Similarly, direct labour needs to incorporate all those in the making of products or delivery of a service. If supervisors spend more than 50% of their time on the job, then include them as direct labour, otherwise show them as indirect labour as an overhead expense.
As you can see from the examples above, getting productivity up impacts on your bottom line.
So how can the LER be improved? Here are some ideas;
Use subcontractors until there is sufficient business to support a full time equivalent
Employ more part time staff and map them to periods of demand
Ensure people know what is expected of them
Remove obstructions to production
Employ supervisors who are independent and capable of effective supervision
Know your error rate – DIFOT (Delivery In Full On Time) for products or IFOTIS (In Form, On Time, In Specification) for service delivery. Target 98% or better
Follow up on all complaints and respond with a ‘Correction Action Process’
Post Audit Quotes & Estimates
Conduct post audits on project work
Review and recalibrate processes from findings
Constantly incorporate learnings into Standard Operating Procedures (SOPs)
Regularly debrief and reset SOPs – again, people need to know what is expected
Look at using machinery to do the mundane
Look to introduce robotics to significantly increase throughputs
Use systems to capture any manual processes like books or paperwork showing units input, outputs, labour hours etc. Electronically capture and utilise API’s etc to put directly into the system.
Proactive Equipment Maintenance
Ensure your equipment is always functioning at full capacity
Monitor equipment downtime within
Have planned back up processes when failure occurs
Although not related to staffing, the following will favourably affect your LER.
Price increases – when was the last time you put them up?
Tighter terms of trade – stop discounting and provide transparent terms based on volumes and true costs to serve
Improved account management to increase sales
Improved or increased effective marketing
Look at your main basket of goods and get people to bid and achieve EDLP (Every Day Low Pricing)
Ask your suppliers for improved terms – you will be surprised
Know your costings
Forensically cost all your product lines and or services – the devil is in the detail
Know what margins each of your products and services deliver
Re-engineer unprofitable lines or services or delete them
Following all or some of these will improve your business performance.
A guide to Net Profit before Tax
Less than 5% and your business needs life support – meaning its dying.
Between 5 – 10% you are on your way to recovery, but you have a way to go.
Between 10 – 15% you are running a good business, retaining sufficient profit to manage growth and any business shocks.
15% plus puts you in a good niche but keep an eye on your competition. Unless you are nicely niched, over time, you may be seen as too pricey which will encourage new players to enter your market.
These are volatile times, and it is important we have balance sheet strength to help us get through. What is good is different for each business but as a rule of thumb, if you can access resources to sustain you for three months of overheads without any sales, then you will be better off than many others.
Simple Numbers by Greg Crabtree is available on Amazon.