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Would you like to accomplish more in your company? Here’s how to improve productivity and maximize your output.

Accomplishing more in your company often seems like a tall (but necessary) order. While most of us have some room to improve productivity, it’s a tough balance. Chances are you’re already burning the candle at both ends. Demanding more from your workforce can become demotivating and result in the opposite of the desired effect.

So what’s a CEO to do? How can you improve productivity and maximize your output without burning yourself, or your employees out?

We’d All Like More Hours in the Day

Most entrepreneurs already have much more on their plate than they can reasonably handle. Yet, they’re still seeking ways to accomplish more as they run their business. Competition is fierce and when investors, your workforce, and others rely on you, it means pushing yourself into overdrive.

Like many professionals, you may assume the prospect of accomplishing EVEN more means:

  • – More hours
  • – More work
  • – Less energy
  • – Less family
  • – Less fun

But the prospect of pushing yourself beyond your limits can have negative results including a higher likelihood of burnout. Even though you started your business with joy in your heart, the constant push may cause it to wane. You began the company because you wanted to be able to do the things that you really love to do, now you are responsible for all of it. As your responsibilities snowballed, you recognize significant priorities and so much more to do than you ever expected. The reality of not being able to do it all sunk in. Not to mention, as you assess your team, the realization hits that you have to get the wrong people off the bus.

We all need more time in the day to get our long to-do lists accomplished
via Burst

Yet, even with all these issues and challenges, you are pushing forward to grow your business. You just wish there were more hours in the day or you could prioritize better. How can a CEO increase productivity when you don’t know what to tackle first?

I’ve been there. When you’re facing so many competing priorities, it’s tough to know how to get it all accomplished. I’ve struggled with priorities just like you. Truth be told, I still struggle (it’s human nature). When I was running my business, I often chose the easiest task to tick off the list or attacked the one I was most confident would be successful. While this seems like a good plan at first, in the long run, it’s not the best idea. Accomplishing the “easy job” leaves us spinning our wheels (and overwhelmed by the boulders we still have yet to push up the hill).

Looking at the horizon, you see so many tasks you need to accomplish, so you seek out efficiency and effectiveness in various ways; from improving time management strategies to implementing more effective delegation to attempting a Covey-type “Big Rocks” approach to addressing your priorities. Nevertheless, there are still tasks on the horizon. How do you improve productivity and how do you make decisions on your plan of approach?

Divide Your To-Do List into Four Quadrants

As a good leader, you should have already listened to input from your team on what they see as priorities—AND added those important items to your list. Now you’re faced with even more priorities. How do you accomplish it all?

But really, what is a priority in the first place? Similar to sales theories, which state there are really only three possible objections to any sales pitch, depending on the stage of your business, priorities fall into 4 buckets. These four areas need to be considered holistically for all stakeholders.

Four Areas of Priorities to Improve Productivity:

The decision-making matrix that Stephen Covey espoused was also based on the Eisenhower Matrix
via Wikimedia Commons
    • Quadrant 1: Projects and issues that are both important and urgent. Address these issues immediately—think of situations like a cash flow crisis
    • Quadrant 2: Projects that are important, but not urgent. The focus here should be on achieving long-term goals. These tasks would include items like rebranding or selecting and implementing a new system. Often less important but more urgent goals (Quadrant 3) supersede business goals in this quadrant.
    • Quadrant 3: Projects that are urgent and not important. This area could include timely “favors” for peers, marketing, or networking opportunities. Pinpointing the items that fall into this quadrant is challenging because urgent often feels important (and if it’s unimportant, it organically falls by the wayside). Targeting this area calls for some ruthless weeding of your priorities to eliminate projects that are urgent but truly unimportant to your long-term success. As the Old English proverbs states, “Poor planning on your part does not constitute an emergency on my part.”
    • Quadrant 4: Unimportant and not urgent tasks that add little or no value to the long-term success of your business. This category would include time wasters (that can mask as productive) like networking by socializing on Facebook or checking your fantasy football standings. Eliminate these time wasters from your to-do list. Often cutting these from your day is simple, but requires self-control. If you’re like me, Quadrant 4 is where I spend my time “practicing avoidance techniques.” This, of course, means I’m not addressing something I should be doing in Quadrant 1 or 2.

It’s not to say you should only spend your time on Quadrant 1 and 2 at all times. There are days when you need a brain break, or when doing a favor for a peer can ultimately lead to positive results, or when team building and socializing doesn’t help the work environment.

However, if you’re wondering how a CEO can increase productivity, the simple answer is prioritizing (especially if you’re overwhelmed by your current to-do list). We can’t do it all. If you want to know where your time goes, look at your task manager on your phone, or monitor the time you spend responding back and forth on email, social media, and on Slack. Something’s got to give on your schedule, so you can find more time to spend on the activities that bring your joy (in real life).

Assessing the Scope of Your Important Priorities

Prioritize your to do list based on magnitude and breadth
via Burst

Once you’ve focused on the priorities and tasks that fall into Quadrant 1 & 2, it’s time to decide on a plan of attack. This essentially means, prioritizing your priorities.

Review the list. To assess the scope, we need to add another characteristic: size. The size of the task has two main variables:

Breadth – How wide is the impact within the Company? Does this priority only affect one department (such as implementing a change in a procedure) or does the entire organization need to participate in this initiative (such as selecting and implementing an ERP system)?

Magnitude – How much is the resource commitment needed for the project? Can a couple of people manage it over a short period of time or does it need months of work by many people?

No matter the size of the priority, the plan of attack starts with:

    • – Clearly defining the problem that needs solving or the objective you are seeking. The problem may be anything from eliminating machine downtime to improving cash management, to higher people utilization. Be as specific as possible when you articulate and define the issue.
    • – Determining if you have the right team members, time, and capability to solve the defined issue, or if you will need to pull in outside resources.
    • – Assisting in breaking the analysis and solution into clearly defined steps. What are the milestones within the set timeline to get the project done or accomplish the objective?

Addressing Problems with a Team Approach

For priorities with a wide breadth and of significant magnitude, you will often need outside help. An objective source can help you to identify and vet possible solutions and then implement the selected approach. If you have a strong team and resources available (such as time and materials), you may be able to manage to address the issue internally.  Frequently, CEOs use outside consulting firms to aid in the identification and implementation of large, high priority projects, such as an ERP implementation. Calling in expert guidance will help you save, time, money, and the hassle of going the wrong direction. Remember, you don’t know what you don’t know; sometimes it’s wise to rely on a party with experience.

The narrower breadth and smaller magnitude projects may cascade throughout the organization. It’s important that the team feels involved in the prioritization process. Everyone should keep in mind that their highest priority may not make it to the company’s highest priorities list. Still, allowing team members to identify and complete projects to address their own highest priorities engages the team and encourages broader contributions. Ultimately, this personal buy-in will increase productivity and engagement throughout the organization.

When I ran my company, I gave team members the authority to identify and solve issues that were important to them. For example, getting an outside vendor to write documentation to make tax reporting easier may not bubble up as a corporate priority. But having this documentation was important to the team member who would otherwise spend extra time generating the report. The amount of money requested to cover the documentation easily fit within the budget and was well worth the increase in both productivity and morale.

Properly prioritizing and delegating results in overall success from your team
via Burst

Properly prioritizing, setting clear objectives, and creating the plan for the projects assures positive outcomes from the solutions whether internal or external. Allowing team members to develop personal priorities along with participating in company solutions engages team members in improvements as well as keeps good ideas percolating to the top.

Remember, as CEO, the buck may stop with you, but it’s not your sole responsibility to increase the productivity of the entire company. By clearly defining priorities and creating a plan of attack with team buy-in, you will see positive engagement and support. Ultimately, you set the tone, but burning yourself out won’t make your company more successful in the long run.

Instead, rely on effective delegation and improved prioritization of your tasks. With strong time management, you’ll find time to run your business and still enjoy the journey.

Featured image and post images licensed for use via Burst.

Wondering how to manage team vacation requests, when your staff wants time off? Here’s how to prioritize vacation and why you should promote paid vacation.

Dear CFO,
My company recently implemented a mandatory vacation policy because the CEO believes we will benefit personally from time off, and the company will benefit from a happier, healthier, and more creative workforce. I’m concerned about how to manage team vacation requests. As you know, the workload doesn’t change based on who is in the office. I’m not sure how to make time for my team to take these vacations when we’re already over-worked.
No Vacation in 5 Years, Chattanooga, TN

I can relate to your dilemma. Knowing how to manage team vacation requests is certainly a challenge for any team leader. The workload is constant no matter who is there to perform it.

With a mandatory vacation policy, most employees will (and should) opt to take their vacation. Our company policy was “use it or lose it,” and no one chooses to lose days. With two weeks of vacation, 11 holidays and two personal days, it meant that every employee was out of the office for about a month of each year.

There are two obvious potential answers to the question of how to manage team vacation requests: 1) Staff your team 10% higher to compensate for the “lost” time, or 2) Ask your team to work overtime to make up for the deficit.

While I said those were obvious solutions to the vacation request dilemma, they may not be the right solution. Let’s look at the problem from the perspective of the CEO and get creative, especially since those two costly solutions might not fly anyway.

Why Vacation is Critical for Your Team

Most of your team members are knowledge workers, especially when it comes to their specific role. Optimizing results means relying on the wisdom, experience, and unique perspectives they bring to their job. In addition, chances are high that most of your incoming team is of the Millennial generation. These 20-30-somethings are focused on accomplishment (not time at the office) and using technology to connect and contribute.

In his book The Organized Mind, Daniel J. Levitin discusses the addiction and effects of technology and the fact that the brain uses a disproportionate 20% share of the body’s energy. These two factors support the need for vacations to allow workers to unplug, refuel, and replenish the motivation and creativity needed to perform as knowledge workers.

As a leader, you set the example for your team. If you don’t take your vacation days, or if you’re only taking “working vacations” (i.e. constantly checking your email and calling in), your team knows you don’t value vacation. There is no “do as I say, not as I do” when you are in a leadership role. Additionally, the benefits of vacation extend to managers, CEOs, and team leaders as well as their staff.

Shawn Achor, the author of The Happiness Advantage, found that employees who take time off perform better. Research supports that “when the brain can think positively, productivity improves 31%…and creativity and revenues can triple.”  As a corollary, employee retention increases. Not only are your people happier, healthier, and more productive, but their attitude will influence others on the team.

Addressing the Fears of Encouraging Vacation


Work overload often makes employees hesitant to take vacation time
image via Pixabay

With all these benefits, it seems logical that employers would jump at the chance to promote vacation, but of course, the show (or in this case work) must go on. It’s easy to see the benefits of team vacations on paper. It’s quite another to manage team vacation requests that leave you shorthanded.

The US Travel Association offers some statistics that show just how common the fear is for employees when they fill out their PTO request:

  • 40% of employees are afraid of the mountain of work that they will have upon return.
  • 35% say they are the only ones who can do their jobs.
  • 25% are even afraid of losing their jobs (although the current tight labor situation may impact this stat slightly).

While you may be one of the 28% of leaders who “cringe” at approving time off or the 32% who believe other employees have extra burdens when team members take time off, the fact of the matter is a vacation is still important for morale. If you’re seeking optimal performance from your team members, you need to approve at least some of those requests.

In fact, it could be a fear of judgment or repercussions that is preventing your team from putting in their requests. Yet, if you want to encourage productivity and a positive work environment, vacation is necessary for everyone.

Cruise Planners CEO, Tanya Murphy says, “Before I owned my travel agency, I worked in corporate America. I observed that some of my colleagues wouldn’t take a vacation out of a sense that it would hurt their career ambitions. I took every vacation day I was allowed, and I was promoted several times in my 16-year career. If employees are delivering work while they’re there, then they shouldn’t worry they’ll be seen as a slacker. Take your vacation days!”

As CEO of a small company with a policy of 23 days off per year, I dealt directly with the dilemma of how to manage team vacation requests. The fears of untold piles of work, being the only person who knew the job, or worries about being replaced were very real. In a small company, there are several steps to take to relieve these fears and this is where strong systems and company culture come into play:

    • Every position should have a set of clearly outlined policies and procedures that assure consistent treatment of the company business. This would allow anyone to step in at a moment’s notice to perform the job
    • At least two people should be trained in each position. At my company, we used vacations as an opportunity for “refreshing” the skills of the backup person.
    • Process critical work while a team member is on vacation. For example, the backup person processes cash but filing can wait for the regular team member’s return.
    • Spread some tasks among other team members to alleviate the backlog. All team members recognize that the same consideration applied when they vacationed.
    • Consider hiring a temporary worker to fill the role if circumstances make the aforementioned steps too difficult. If this is a continuing issue, consider ways to streamline some processes.
    • Another option might be to allocate some of your budget to a vacation fund – that the employees may ONLY use for vacation.

How to Encourage and Manage Team Vacation Requests

Encourage your team to take vacation time and make it easy for them to plan around work
image via Pixabay

Vacation policies are usually quite clear on the “what” of the vacation, such as each employee earns one day of vacation a month for the first year, or each employee starts with two weeks of vacation. Often the policy defines the use by an anniversary, fiscal, or calendar year and other details like additional weeks at 5/10/15 years.

However, the application of the “how” of vacations may not be clearly stated in the policy. Many leaders manage team vacation requests by seniority or on a first come/first serve basis. This can be effective, but it may also lead to some tough choices.

To ensure continuity, often departments in an organization have specific times of the month or year where no vacations can be scheduled. For example, retail typically has a no vacation policy for Black Friday. Accounting departments may not allow vacation before the month is closed or at the time of inventory.

It’s important for morale that team members perceive the “how” of vacation use as fair. I found it best to be clear when you outline blackout vacation days. Lay out the schedule at the beginning of the year and allow first come/first serve requests. In my experience, we generally had a policy that two people couldn’t be out at the same time in our small organization. If there was a conflict between vacation requests, it could generally be resolved with a diplomatic conversation.

Alleviating the anxiety around employee vacations requires planning. Once the team member is assured the company has their back with cross-training, policies, and procedures, they should still prepare the team for their absence. Encouraging vacation planning best practices reinforces the message of leadership’s commitment to and the sanctity of vacation time.

Encourage your team to use these vacation planning guidelines:

    • If possible, plan the first day back as a half day to reboot mentally and physically.
    • Review the policies and procedures of the position to ensure that you’re up to date and perform a dry run with the back-up team member.
    • Make the boss or a delegated team member aware of open work and the status of all projects.
    • While no one can predict every concern that comes up, you should share any anticipated hiccups or challenges that might occur during your absence.
    • Clear up as many urgent tasks as possible. Often, the time leading up to a vacation can be very productive, so take advantage and leave the desk clear.
    • Set expectations for action in your emails and voicemail. I would recommend setting the away message to direct correspondence to your backup person. Keep the message brief with just a simple return date.
    • Follow-up with the boss, team members, clients and others at a one week and then three-day timeframe reminding them of the vacation. Offer management an opportunity to resolve any anticipated issues before departure.
    • Only let family or close friends know your whereabouts. There is no need to let the office know where you’re headed.
    • Truly unplug and avoid taking a phone (or at least answering it) on every expedition and excursion within your trip.

These practices encourage employees to really unplug and take a break from the busyness of their position. While it can be tough for some workers to leave the role, ensure them that the office will be just fine without them there for a few days. Focus on the importance of their refreshed return, where they’ll be able to offer a renewed perspective.

This also means, that as a manager, you need to adhere to your vacation policies. Use the opportunity to identify gaps in your cross training and delegation traps. Even when it would be easier to pick up the phone and call a team member on vacation, refrain. Troubleshoot the answer on your own and reinforce your company’s philosophy on vacation time.

Changing your mindset to one that understands and appreciates the benefits of vacation will help you think more creatively and support the full use of vacations for yourself and your team. By encouraging and learning how to effectively manage team vacation requests, you’ll promote a healthy, happy and productive work environment.

Vacations should be a regular (not a once every five years) occurrence. Best wishes that you also get to schedule some time away as you reinforce your company’s new vacation policy.

Featured image via Pixabay. All images licensed for use via Pixabay licensing.

Wondering how to unplug from work? Entrepreneurs, business owners and CEOs often have the toughest time getting a break. What’s keeping you from unplugging?

As the CEO, your job is to lead with vision and build a business that is both scalable and sustainable. If you did your job well, you hired the right people, set the priorities, and gave your team the resources they need to manage the day-to-day operations.

So, why is it so tough to unplug from work? Why do you feel your business can’t survive without you while you take a vacation? Are you afraid to see what your team will do without you there to lead them? If that is the case, you have bigger problems than taking a vacation!

Why We Can’t Unplug from Work

Today’s office culture glorifies busyness. We venerate the person who epitomizes the 60-hour-a-week “Protestant work ethic.” Yet many of us spend countless dollars on the work smarter/not harder program of the month. Add to this the proven addictive nature of technology and it’s no wonder we can’t unplug from work. The truth is, many of us are burning ourselves out and it’s time to STOP!

In the movie Top Gun, Stinger tells Maverick, “your ego is writing checks that your body can’t cash.” Is this not a perfect quote for the CEO who can’t unplug from work and runs themselves into the ground? How often have you gone on vacation (finally) and just as you are starting to relax, you get sick?

Taking time to fully unplug from work and take a vacation makes for a happier and healthier team and CEO
image via Pixabay

Your body and mind NEED recovery time. In his book Mentally Tough, James Loehr speaks repeatedly of the need for recovery after the expenditure of energy (whether mental or physical). Using a checkbook analogy, he refers to the use of energy (writing the checks) and the need to replenish (making deposits) and just like your checkbook, if you don’t make the deposits, you will go bankrupt. Whether high performing athletes or entrepreneurs, the rest and recovery cycle is critical to performance.

I proved this concept to myself when I was in public accounting and working 60 to 90 hours a week during the busy season, bankrupting my reserves. Without fail, when tax season ended every May, I would be out of commission for over a week recovering. Let’s be clear, even if you have a passion for what you are doing – as I did – it’s still energy expenditure and still requires recovery. Make vacation part of that recovery time by turning off stress systems and allowing for recuperation and repair.

Our culture dismisses the importance of vacation as shown by these Nielson Consumer Research Statistics:

  • 52% of people didn’t take all their paid vacation in the last year, leaving an average of 7.2 days unused.
  • 23% of people didn’t take a vacation in the past 12 months.

And yet:

  • 74% believe vacation to be important to their life.
  • 78% who take a vacation (at least 1 per year) are happier and more satisfied.
  • 71% were more satisfied at work when they regularly took a vacation.
  • And 86% of those who took a vacation once a year had stronger family bonds.

The Benefits of Taking a Vacation from Work

While entrepreneurship is a 24/7 job, remember that even the President of the United States takes vacations. Research and anecdotal evidence show that we are at our best when we are well-rested.

When was the last time you had a great idea while in the midst of the busyness of your day? Isn’t an “a-ha moment” more likely to pop into your head when you relax during a nature hike or a warm shower? Vacations allow you to clear your head of the minutia and make room for more creative and strategic thinking. Unplugging from work also helps you rejuvenate and improves your effectiveness when you return to the office. In addition, by stepping away from the helm, you empower your team. The company will get stronger with different thinking, new ideas and an occasional change in decision making.

Take a vacation and trust that your team is smoothly running the show back at the office
image via Pixabay

There are many additional benefits in the workplace that embraces regular vacations, including:

  • A happier team – Vacations reduce tension and stress, promulgating a better mood and higher life satisfaction. The results include a calmer, more energized and happier team.
  • A healthier team – De-stressing gives our bodies time to recuperate. A vacation promotes rest and helps people feel healthier.
  • A more productive team – Research shows that vacations support lowered job stress burnout and absenteeism. Breaks promote the feeling that less effort is required to perform the job.

Keep in mind, the benefits only come when you truly unplug from work. The same payoffs don’t emerge from “working vacations.” In fact, work that masquerades as a vacation may even result in higher negativity and greater levels of disengagement at work.

How CEOs Can Plan for a Successful Vacation

As the saying goes, “We travel not to escape life, but for life not to escape us.” While a vacation doesn’t necessarily mean an exotic locale, there’s a lot to be said for getting far enough away to avoid the internet (or keeping yourself engaged enough to ignore it).

A certain amount of planning goes into a restful vacation. The first step is deciding who you are as a vacationer and what type of vacation really recharges your batteries. Are you a tour Europe kind of person or a go fishing and enjoy the outdoors type?

Once you’ve settled on your preferred type, then get out the map and start to plan the ideal place to go. Since anticipation improves the benefits of vacation, make sure the time is on your calendar and is held sacrosanct.

Of course, the rest of the logistics of your trip are up to you. If you prefer, employ a vacation specialist like I do to make the experience truly stress-free. My idea of a vacation, when not enjoying the wilderness, is “tell me where and when to show up, give me an informed tour guide, and I will relax.” Or, if you so desire, take the vacation planning responsibility on yourself. The rule is whatever you do—make it as un-stressful as possible.

How to Prepare the Office for Your Absence

Meet with your team before your vacation to make sure everyone is on the same page
image via Pixabay

Of course, you’ll relax a little easier knowing that your team has the tools they need to carry on in your absence. Here are a few steps you can take to ensure your bases are covered before you hand over the office keys and head for the airport.

    • Give Yourself More Time: Start by extending the vacation on your calendar by at least one day at home and one day at work, if possible. Keep your vacation response turned on in your email. This will give you breathing room to unpack and manage your home duties before heading back to the office. The extra day at the office will give you a chance to reboot and shift into work mode before being inundated with what you missed. After a recent weeklong trip to Phoenix, I took a day to reset mentally for the cold weather and to get a handle on emails and other follow-ups from my time out of town.
    • Designate a Surrogate: Update whomever you choose as your surrogate with information on the status of projects and any questions or issues that you anticipate. Assign someone to review your mail and dispatch it to an appropriate team member. When you return, be sure to appreciate and not criticize the role they took or decisions they made while you were out.
    • Delegate: Delegation is the key to freeing up your time. Clear up and/or delegate as many urgent items off your to-do list as you can. Often, the time leading up to a vacation can be very productive. Get it done, hand it off, and leave your desk clear.
    • Leave Clear Instructions: Set expectations for action in your email away message and voicemail; a brief statement of limited access until your return date and who and how to contact if the issue is urgent will suffice. In today’s world, there is no need for anyone to know too many details. I would also suggest that the out of office email only directs to those in your contact list.
    • Give a Reminder: Follow-up with team members, clients, and others at one week and then three days prior to your absence to remind them you will be out of the office and unreachable. Offer an opportunity to resolve any urgent issues before your departure.
    • Don’t Make Yourself Available: If you can, only let family or close friends know your whereabouts. Avoid taking your phone (or at least answering it) on every expedition within your trip. Very few things are so urgent that they can’t be dealt with later. Remind yourself that you aren’t as indispensable as you think. Besides, most true emergencies can’t be handled from hundreds of miles away, anyway. Let go and trust your team.

“It’s important for those in leadership positions to model good vacation-taking behavior. If you never take one, or you’re always working when you do, your team will feel that’s what is expected of them too, regardless of what you say or your company policies. If your company talks the talk regarding vacation, leaders need to walk the walk,” says Tanya Murphy of Cruise Planners.

As a CEO, learning how to unplug from work will help you feel refreshed and recharged. Better yet, you’ll set the bar and lead with example. By modeling good vacation behavior, you’re showing your team that you’re sincere about the importance of vacations. Your team knows that you trust them enough to leave work in their hands. You can rest assured that your systems are working and you’ll return from your vacation a better leader who is well-rested, happy, and healthy.

Featured image via Pixabay. All images licensed for use via Pixabay licensing.


Finding and implementing an ERP system is a big job! Here’s what you need to know to get through the ERP system selection and implementation process.

Dear CFO,
Our company is looking for a new ERP system. My CEO just informed me that I am leading our ERP system selection process as well as participating in the implementation team once we find the right fit. I’ve purchased accounting software in the past but selecting an ERP system seems like a BIG job. Can you give me some tips to help in the process?
ERP System Searching in Idaho

First, let me congratulate you. Obviously, your CEO believes that you are capable of leading the team through the ERP (Enterprise Resource Planning) system selection. You’re right—ERP system selection and implementation is a big and important task. You’ll need to do plenty of homework to select the best system for your company.

Before you begin, there’s one matter to get out of the way: you need the authority to accomplish the objective. So, the first order of business is to make sure the CEO puts the proper priority on the ERP system selection project and participants (in person or via other communication) in the project management and implementation process. If those who are not direct reports miss deadlines during the selection and implementation process, the CEO must validate your authority. The CEO is also responsible for fixing any business issues that exist from lack of discipline to cash flow issues. Frequently the financial department is responsible for taking the lead in ERP system selection, because the system dovetails into the company performance, and enables the reporting management desires.

Before Starting ERP System Selection

There are a few steps you should take before you begin the ERP system selection. These steps will ensure that you know exactly what you’re looking for once you begin your search.

Coordinate communication with your CEO.
Take steps to ensure you’re consistent in your communication cycle on the new ERP system–setting expectations and keeping appropriate team members in the loop. Be prepared to continue with status updates, both formal and informal throughout the ERP system selection and implementation process.

Obtain or create the current workflows for all company operations affected by the new ERP system.

  • If fancy flowcharts exist, use them. If not, a quick and dirty flow chart draft will suffice – it’s highly likely the processes will change with a new system anyway.
  • Documentation should include the details of who, what and where for each step and identify the data collected. Be sure to distinguish what processes are automated today and which ones are manual; that will assist in defining staff needs and systems required to close gaps.
  • The information included in the workflows will guide the system evaluation, including needed changes and system improvements.

Engage the ERP system selection participants.
These team members are usually selected by the CEO and/or department heads in the project planning process; this includes subject matter experts (SMEs) from each area affected by the proposed new ERP system.


Researching and Finding the Right ERP System

When selecting a new system, create a list of needed features to help narrow down what kind of system you need
Image via Pixabay

During the research phase, you’ll be setting up metrics, checks, and balances, so you’re sure to be successful in your ERP system selection. This phase of the process is as much about finding the “best” software as finding the RIGHT software for your company.

Needs / Wants / Nice-to-Haves

Define the needs, wants, and nice-to-haves for each area or department. This is a critical step and worth the time. You will want to make sure that, at the minimum, the software meets the absolute needs of each area of the business. The workflows are a good resource for setting the baseline, but think broadly – you are looking for a new ERP system to improve your business. It’s important to find a system robust enough to carry your company forward. Separate out the needs, wants and nice-to-haves:

  • Needs – Elements critical to performing the operations of the business, eliminating significant pain points, or meeting government or internal reporting requirements. Your business will probably have unique needs that may not be available features in off-the-shelf software.
  • Wants – Elements that improve processes or facilitate reporting but aren’t critical to the regular operations of the business.
  • Nice-to-haves – Items that, if the cost/benefit makes sense, could improve some aspects of processing or reporting.

Score System Features

Set up the needs definition as a scorecard to evaluate each need/want/nice-to-have against the various ERP software features. Be sure to weight the scorecard based on the needs; are all the needs of the same value? Is the end-of-day balancing of the same importance as regulatory compliance or daily reporting? If so, they get the same weight but you may find that the needs have several levels of importance within them.

Data Transfer

Decide how much historical data will transfer to the new system. Frequently, data from older systems isn’t as easily transferable. Companies may decide to keep old systems running for a period of time to provide reference or historical information. A corollary of this is setting a timeline and selecting the expected date of transition to the new system.

Data Clean-up

Begin cleansing your data. For any data exported from your old system, this is the time to clean it up. Start tidying up your data for consistency (addresses, naming conventions) and completeness (adding email addresses, phone number, or other missing data). Once the new ERP system is selected, the data available from the old system is mapped to the new system fields and this may highlight additional data element needs.

Demo Testing

Develop “use case” scenarios to test the demos and evaluate how well the software meets your needs. These should be the exact processes that you use in the business on a regular basis. Provide real data (changing names or identifying information). Some vendors will upload your data to the new ERP system so you can test it in a “sandbox” format.

Enlist Subject Matter Experts (SMEs)

Subject matter experts can help determine what kind of system you need to work across all levels of your business
Image via Pixabay

Engage the SMEs within your company to set up a preliminary project plan and timeline.  You may wish to use a project management tool or simply list the plan in Excel for the initial run.

  • Brainstorm every task required for ERP System implementation – this should be as detailed as possible.
  • Identify the SME for every task.
  • Put the task list in a sequential order.
  • If the details or steps are significant, consider breaking each into sub-projects. There might be sub-projects for every segment of the business. For example, manufacturing’s project might include renaming the inventory item master, updating bills of materials, integrating machine software, training staff, designing reports and dashboards.

Build Excitement

Start to build excitement for the new system amongst your staff and team. The people factor is critical to the successful ERP system implementation. Keeping your team members engaged, informed, and encouraged is important in the long process of ERP system selection and implementation.


The ERP System Selection Process

Once you’ve identified your needs and done your homework, it’s time for the official ERP system selection. This is a big step as you weigh all the factors—cost, capacity, user-friendliness, and more.

Narrow Down the Field

  • Identify industry software within your budget, if available. Recent hires into the departments may able to shed light on other systems they used at previous companies and how well the systems performed. Identify industry association or other comparisons of potential software. For example, the AICPA offers an annual review comparing tax software. Keep in mind, most of the reviews only cover the most generic functions of the software. Also, long-standing industry software may still be operating on “old technology” behind a modern-looking interface. I don’t view this as a deal breaker unless the reporting is too old school.
  • Choose the finalists. Once you have identified several software options, try to quickly narrow down the choices to five (or fewer) and only delve deeply into those finalists.

Focus on Usability Specific to YOUR Business

  • Be sure to look at the reporting tools. How flexible are the reports? Are there third-party report add-ons that integrate with the system? Will you be able to generate the reports that management requests (and is it efficient to do so)? For example, behind the scenes, Great Plains Dynamics was 20+ years old, but they updated the reporting to make it very adaptable and user-friendly. Be sure to understand the skill sets required to build reports. Do those skills exist amongst your team or are the requirements new?
  • Make sure the data collection in the system is complete for your needs. For example, if you’re required to file governmental reports on minority contractors your company uses and there’s no data field to identify the minority contractor, you will need a workaround.
  • Provide your “use case” scenarios to the vendor and request a demo version of the software to test. Test under the Pareto principle: meet the exact needs of 80% of your transactions, don’t try to identify and make the ERP system selection based on the outliers. With larger ERP systems, the vendors will typically be more accommodating than vendors of smaller cloud-based software. Don’t believe a task can be done by the software system unless you see it for yourself. If a vendor claims it can be done always say, “show me!”
  • Prioritize when you select software. When using the Pareto principle, measure by several facets: first by cost, then importance. Make sure the most expensive processes are covered by the ERP system, while simultaneously ensuring the most important processes are covered as well (whether they are regulatory or business-driven).
  • Identify how long the software provider has been in business, how many users the company has, and request their upgrade release schedules. If you are under regulations such as HIPAA or GDPR, verify that the software is compliant. Identify the size of the development team that created the ERP system you’re potentially buying. If it was engineered by a small team, you may need to ask about retention packages for key individuals.

Enlist SMEs for More In-Depth Systems Research

  • Obtain three current users for each ERP system you’re exploring and contact them for insights and references. Be sure to have your SMEs talk to users in all areas of the company. If possible, an in-person visit and demonstration is even better. You will be able to see the software in action.
  • Ask about all aspects of the software and user experience. In addition to the use case scenarios, vendor history, and user satisfaction, ask about:
    • User security levels (set-up, access within functions, etc.). Larger systems can offer security on the field level whereas smaller systems may secure access at the module or transaction level.
    • Customer support and maintenance. What is included if you buy a customer support program? How much support is available in the initial learning phase?
    • Set-up process and requirements. In my opinion, this is one of the most important points. The set-up is critical to the successful implementation of a new ERP system. Whoever guides you through the set-up process needs to be intimately familiar with the effects of any choice made in the set-up. Bad set-up creates long-lasting pain. Examples might include: thinking serial number control might be good and then finding out that every single transaction needs the serial number to move it through the system, causing added workload; deciding to treat an item as non-inventory without recognizing that limits the ability to track it; or a simple misidentification of the type of account resulting reporting errors.
    • Release schedule and what might be coming out during your implementation period.
  • Determine the need for all modules of the software based on the interviews with references and your team’s evaluation. This is also the time to decide on the ERP system implementation process: phased or “flip the switch.”

Select Your Finalists

Narrow down your choices. If only one software meets your needs and falls within your budget, you can skip this step. However, if you have 2 or 3 finalists that meet your needs and price seems to be the deciding factor, set up an analysis to compare total costs over a 3 to 5-year period. Consider the following:

  • Maintenance coverage may be included in the first-year implementation plan of some options, but not others.
  • Necessary hardware upgrades to satisfy system requirements; be sure to include software expense for all regions. Typically, software users have to buy a production region, test region, and perhaps others based on the size of your organization.
  • The need for any add-on products such as reporting tools to fulfill the needs analysis.
  • Ongoing annual maintenance costs, user fees, per seat costs, or historical price increases.
  • Consulting or other out-of-pocket implementation costs.


Planning for ERP System Implementation

Creating a visual workflow for your system transition makes it easier to plan the next steps
Image via Pixabay

Once you’ve settled on an ERP system selection, you’re ready to begin implementation. A little foresight and planning will help you avoid any issues as you move forward.

Create a Workflow

As you work on creating or restructuring the workflow for the new ERP system consider:

  • Entering data at the point where you create data.
  • Eliminating multiple touches on the data.
  • Creating exception or control reports to verify processing (for example, cash deposit reports, payroll payments exceeding a certain dollar amount, employee utilization under a certain percent).
  • Eliminating multiple check or approval points (this may involve security levels for managers different from front-end users).
  • Performing comparisons within the system.
  • Optimizing the system capabilities to eliminate redundancy.
  • Standardizing and using file naming conventions and electronic filing capabilities.

Watch Out for Implementation Issues

Be on the lookout for common issues in implementation. Some of these implementation issues include:

  • User security levels are set too tight or too loose. I prefer setting the security levels tight and as the user encounters a roadblock, freeing that capability. This security assures access is available only to the needed parts of the system. Even though some companies prefer more lax security limitation, HIPAA and GDPR considerations should drive set-up and security.
  • Even with thorough evaluation and testing, there will be transactions or reporting that require workarounds. No system meets all the requirements.
  • Team members complain about change, the workload, learning – you name it. This is normal and shouldn’t be discouraging. Continue to communicate the why and the benefits to the company and the user.
  • Something wasn’t set-up right. Many elements of set-up can be changed after implementation, but some are set for life. Hopefully, the problem is correctable. Make sure you know what is administrable and what is not. Have multiple people trained on maintenance during implementation.
  • If you do a data conversion, make sure the team knows how the data migrated, then test the system extensively.

Outline a Transition Plan

Define and outline the transition plan to the new system during project planning (and leave room for adjustments). Transfer of historical data (manual or electronic) is part of the transition to the new ERP system. Some of the detailed information for the implementation may not become available until the software system is purchased. These variables may include transaction volume, staffing, and training. Typically, there are two ways to transition to new software:

  • Concurrent processing for a period – This means the data goes in both systems and the results are compared for agreement prior to fully switching to the new system. Keep in mind, most companies are running lean and concurrent processing puts an undue burden on staff.
  • Cold cutover – This means the use of the new system begins on a specified date. With adequate training and testing, I believe the cold cutover works more efficiently and can save extra work from your staff.

Adopt a clear plan for customer/vendor portals. Opening client or vendor portals involves developing a communication plan as well as a training plan. This will vary from an email to a personal session depending on your customer and vendor base. Most portals are easy to use but don’t neglect the communication of the how and why. Highlight the benefits to their business or organization. This transition to a new ERP System should improve their interactions with your company.

In the most recent ERP system transition that I oversaw, we developed the procedures for each process prior to training. Each person’s training verified the documentation of the procedure and we edited as necessary. Using the procedure outlines and previously processed transactions, we built the historical data using it as training material for the new system.

During the transition to the new ERP system, all team members trained and after each month’s data entry, we ran reports to verify the accuracy and completeness of the processing in the new system. The team was working on real transactions and issues that would arise every day were part of the training. This involved some additional work, but it assured that the training was real world and made for a successful ERP system transition.

ERP system selection and implementation require cross-functional interaction and agreement. When done well, it can be very smooth and will result in real gains from the new system. Good Luck!

Featured image via Pixabay. All images licensed for use via Pixabay licensing.

Considering selecting a new system for your business? Whether it’s a new accounting system, CRM or ERP, here’s how to ensure your upgrade is a move in the right direction.

In the business world, we’re all about systems. Software and programs help us manage all aspects of our office life. But, of course, as time marches on, systems become outdated. If you’re considering an upgrade or update, there’s an art and a science to selecting a new system.

No matter which business system you are trying to replace, your process should always start with exploration. Before you consider selecting a new system, there are some basic questions you need to answer. I may sound like a broken Simon Sinek record, but nearly every business decision you make from acquisition negotiations to systems selection should start with why. Before starting the search for a system, analyze all the reasons why you are seeking to upgrade, replace, or add a new system for your company.

Often, the process of selecting a new system starts with researching on the internet to “find the best investment,” rather than an evaluation of what you are trying to accomplish with the new system. Research-first, ask why later is not a good strategy. You’re setting your company up for extra work, if not a failure.

Without identifying your needs and then evaluating how the new system will potentially meet those needs, you’re susceptible to the sales pitch and biases of the individuals involved in the selection process. Selecting a new system requires self-awareness and analysis—know what’s working and what areas of the business need attention. Be aware that a new system will not solve organizational dysfunction. It can, however, be used as a catalyst for change and improved efficiency you desire. This is why you must start with the big questions before selecting a new system.

Why are you going to invest in the new system?

Selecting a new system for your business operations is a big choice that take a lot of consideration
Image via Pxhere

The question of why is the most important one to ask at the beginning of any new business process. The most common reason for the selection of a new system is to improve the efficiency and the effectiveness of the business in some aspect. That’s a very broad umbrella and unless you define what that looks like in much more detail, the system selection or implementation goals will fall short.

Selecting a new system need not be a big project because, as you know, entrepreneurs tend to be action driven. In an entrepreneurial business, slowing down the action for some deeper thinking makes the entire process easier.

What are the considerations and outcomes expected in changing systems?

Depending on the size of your business, the amount of your day-to-day participation in the actual system change will vary. Depending on your delegation skills and preferences, you may be very involved or fairly hands-off. As CEO, you need to make sure your team has answers to their questions, especially the questions of why and what when selecting a new system and during the implementation process.

Before You Start Researching a New System

Before you start “Googling,” it’s important that you define the need. Are you looking for an accounting system, an HR system, a timekeeping system, or a fully integrated ERP system? Know what solutions you’re seeking and which systems you need to improve before you start your search. If your identified needs change during the process (you started looking for an accounting system, but see the benefits of the ERP), go through the full exercise of exploring why the change once again. You started with an initial rationale and now it’s different — why? Should you still go forward with the change?

Once you’ve explored the why, there are other questions you should explore as you assess your need for a new system:

    • What are our current processes and workflows? How will the new system revise the workflow, and do we have an evaluation and documentation process in place? Do we know the internal costs of our current processes? If not, how can we measure and assess any improvements?
    • Is there discipline and order in the existing processes? Does the right information get in the right place in a timely manner? If not, how will the new system improve discipline? Or, more importantly, how will we need to change our management and expectations to encourage this discipline and ensure success?
    • Are we only trying to eliminate manual processes or are we trying to improve the processes as well? If we “computerize” manual processes, have we missed out on an opportunity for improvement? Should we be following the current processes, altering them for efficiency or even eliminating them all together?
    • How will the selection and implementation impact existing business operations and how will we accommodate the disruption? Can we afford to pay our staff overtime during the new system implementation? What incentives might we consider for staff who puts in extra effort on the system?
    • How will the new system change impact our customers? Will they receive information faster? Will it be more secure? Will there be a lower likelihood of errors? Will our customers even notice the change?
    • If the new system is creating efficiencies, whether in processing or IT, how will we position those efficiencies within the current staff? Will they lose their jobs due to automation, or will they simply move to a different role and take on new tasks? What motivation will current staff have to help with the new system implementation if they could potentially lose their job?

Getting Ready for Selecting a New System

After exploring some of the challenging background questions about your company and the need for the new system, it’s time to start the process of selecting a new system. Once again, taking a deep dive on self and company-assessment on the front end will prevent many issues from cropping up down the road.

Here are some important areas to explore as you get ready for selecting a new system:

    • Have we defined what we need from the new system? What are the needs/wants/nice-to-haves that we will need to evaluate the new system against? Are there software comparisons and assessments online that we can use as an assessment starting point?
    • Do we have the right people defining the system needs of the company, to create a comprehensive view of the new system’s impact? Each department carries biases whether financial, manufacturing, marketing, HR, or another area, and these biases can affect their perception of the need for the new system.
    • As we’re selecting a new system, what is the budget range to meet our objectives? Should we determine a hard budget before beginning our search and selecting our new system, or should we seek information first to decide on a relevant budget range? What do we need to consider if we can’t find a new system within our target budget range? How will we determine Plan B?
    • Do we have the right on-staff talent internally to create a decision matrix and facilitate the review process for selecting a new system? Do we need to look externally for an objective resource?
    • If our company is buying a large system, can we request and schedule an onsite demo? In my experience, most demos now take place online. Not unlike those onsite in the past, every system manufacturer claims that “the system can do it all,” so buyers beware. Demand a demo when possible, especially for a large investment in a new system.

Smoothing the System Selection Process

Once you’ve decided on your internal factors like budget, staff, and workflow, it’s time to start selecting a new system. This process includes shopping around and narrowing down your choices.

Here are the steps for selecting a new system (especially) if you have several options to choose from:

    • Which systems are our industry peers and competitors using? Compare the systems not only of your direct peers but of businesses that are the size you aspire to grow into.
    • Do we need to select a new system that’s industry-specific? Do we need to integrate features for manufacturing operations or timekeeping? Will extra features and integration capacity add value to our new system or just complexity?
    • Are we seeking a fully integrated system or integration of multiple “best in class” options? What is the downline cost of each alternative – more conformance to the system, more manual reporting, or systems integration costs? Do the various best-in-class system options integrate and how complex is the process? If we decide on the best-in-class option when selecting a new system, do we have an IT team that can support the 24×7 nature of the new systems? Is our organization moving toward cloud-based systems or SaaS models? Do you prefer to host information as sensitive as finance and HR data? Do you have the system security protocol in place to protect customer data?
    • What are the reporting tools available in each of the new system options, and how do we expect to use the tools?
    • Can we quickly narrow down the new system selections to 2 or 3 choices and only delve deeply into the finalists?
    • Can we contact current users of the new software options and preferably visit them onsite to see how they actually use it? If not, why not?
    • Is the new system we’re considering the right size (cost and complexity) for our current company? Is it scalable to our growth, and will it support where we plan to be in the next 5 years? Can we use the new system in either its most simple or complex form? Are we buying a more robust system than we need or would ever use?
    • How will we evaluate the total cost involved in selecting a new system and the implementation process? Do we have benchmarks? (For example, multiply the system cost by 2 to estimate the additional cost of consulting.) Be sure to include hardware and software costs. Don’t forget the depreciation expense of the new system in your costing models. Areas that are often missed in the cost assessment are the testing regions needed before implementation of the new system and all the development to integrate the new platform. Whatever you estimate for hours, assume 2x. After selecting a new system, your business will likely change during the changeover and implementation process. Incremental changes will need to be accommodated that were not anticipated at the beginning.
    • What are the ongoing costs of the new system? Are there monthly per-seat costs, annual upgrades, etc., and what options do those costs include? In my experience, if you are comparing two or more systems on cost alone, you should consider a 3 to 5-year horizon. For example, if you have a first-year maintenance plan included on one and not the other, or if you need hardware upgrades or additional reporting tools to accommodate one of the systems, be sure to include those costs when selecting a new system.

Planning for the Implementation of the New System

Once you’ve decided on the best new system for your business, the next step is planning for the implementation. There are several assessment questions to explore that will help you create a smooth implementation.

Here are the questions to ask:

    • How will we switch to the new system–running a concurrent system for a timeframe or a cold cutover? Who will decide and what will the decision be based on? If it is a concurrent switch, there is an additional workload to consider? What kinds of testing and preparation are needed for the system change?
    • Do we need to convert customer and company data from the current system to the new system? Data conversion can be costly and time-consuming. It’s rare that data will convert seamlessly from one system to another.
    • Does your data need to be replicated to a database for reporting? Don’t forget to estimate staff time and efforts required for reporting.
    • Who will decide the staff training plan required on the new system and develop the documentation? How and when will process changes be incorporated into the system documentation and training?
    • What should our customers and vendors know about our change? Will the system change be transparent? Will customer or vendor interaction change? If there are differences, how will customers and clients learn how to use the system? Do we need to plan on training? What is the communication plan?
    • Which processes are we willing to change and adapt based on the best practices built into the selected system? Do we need to adjust a “we’ve always done it that way” mentality?
    • Can we move the data into the new system at the time it is created? Can we eliminate extra touches on the data entry process by authorizing appropriate access to the new system for any individual involved with the process?

Selecting a new system is truly an art and a science. System feature implementation varies by the personality and culture of your company. Some companies prefer to seek out ALL possible features available in the new system and attempt to implement the features into the company processes. Other companies may find the skeleton to be enough for their business at first.

Selecting a new system is a science, so make sure you're addressing every component
Image via Pxhere

Since most systems are designed around the common denominators, it will not meet all the needs/wants/nice-to-haves of everyone in the company. Remember there will be trade-offs when selecting a new system. Reporting and integrations with other software systems are often critical to the performance you want to achieve.

It’s important for leadership to be cognizant of the fact that new systems create change and change creates uncertainty. Uncertainty fuels the rumor mill. To counteract concerns and allay fears, as soon as possible, start the communication cycle on the new system. Start setting expectations and giving notice to those who might be involved in selecting a new system and in the implementation process. Explain the why and the what. Continue with regular status updates, both formal and informal.

As with any other new process, setting expectations is key. New systems do not solve business problems. A new system implemented with poor discipline and incorrect data simply means you get bad information faster. Cash flow problems don’t go away with a new system either. However, new systems, when implemented with due diligence on the front end will improve effectiveness and efficiency in the organization. Use the system change to your advantage; a new system is often the catalyst for changes you want to achieve.

Featured image via Pxhere. All images licensed for use via Pxhere licensing.

Recently, a Project Manager in St. Louis asked me about due diligence and acquisition integration. They were coming into the acquisition process with no previous experience. First, we addressed the due diligence process, but the other piece of the acquisition comes during the integration. Integration project management and planning is vital during this step.

Informing the Project Manager that the company is targeting an acquisition puts the manager in a positive place; this means there is time to prepare for the integration. Keep in mind, while targeting and completing the transaction aren’t the same, if the CEO is actively seeking acquisitions, it’s likely a transaction and integration will happen eventually. So once you get the heads up, you should start considering the integration plan.

Integration project planning has to cross multiple levels of the company to be successful
Image via Burst

Smooth integration requires much integration project planning and the implementation of the plan needs to cross organization lines. To ensure this happens, careful integration project management is required. Once acquired, the plan of the target needs to include input of members from each business by including them on the integration project management team as you refine the integration plan. If your CEO clearly defined the “why” and the “what” of the acquisition, your definition of the “how” will be much easier.

The performance of an acquired business often doesn’t meet the projected value, even in large companies with dedicated integration project management teams. For small companies, successful integration is in some ways easier, although still a huge amount of work. The lead integrators in a small company, usually the CEO and finance, are closely familiar with the business, culture, and employees, which isn’t necessarily the case in a larger organization. Integrating the new business is a more intimate affair in a smaller company and therefore, I believe, the likelihood of success can be greater.

Keep in mind that there are tangible and intangible drivers for implementing a successful integration management plan. Both are critical to success and often only the tangible is addressed in the acquisition integration management and strategic plan. The tangible factors are easier to identify, quantify, and develop tactics for integration. Recognizing the intangible factors is also important and the CEO sets the stage for the cultural integration beginning in the evaluation and negotiation process. Once the deal is done, in creating “day one”. It is likely that you will be responsible for the mechanics of making that happen.

Integration Project Management: Planning for Day One

For day one to go as smoothly as possible, it’s important that the integration project management team works together. If you’re overseeing the process you should be sure to do the following:

  • Coordinate with your CEO on the messaging of the day to make sure it is threaded throughout the areas of your responsibility.
  • Anticipate and coordinate the communications for customers, vendors, and other stakeholders. You may be responsible for drafting these as well, unless you are part of a larger organization.
  • Anticipate and coordinate the press release and social media platforms. An outside marketing & PR firm or internal staff may do the actual drafting and release. Be sure the social media team has announcement content with consistent messaging.
  • Prepare for the formal onboarding of new team members. Coordinate with all team members for appropriate introductions and conveying consistent messaging.

General Planning for a Smooth Integration

Initial planning for the tangible elements of acquisition involves thinking about all the elements of your business that are everyday occurrences. Much of the integration process is adjusting the mechanics of the combined entity. Again, clearly defining the “why” of the acquisition will help guide the integration project management team with the general planning for the impact on the acquiring company.

Creating an integration project plan from day 1 will ensure a much smoother transition
Image via Pxhere

It is important to remember that the acquisition is supposed to benefit the whole new company. Spend enough time with the acquisition to identify their best practices that you should adopt. Do NOT shoehorn the acquisition into your company’s mold. Both sides have strengths to bring to the table. The more you optimize the culture, learning curve, and operations, the more successful and smooth the acquisition process will be for all employees.

Your integration project management plan needs to start by asking questions on the changes in the business. Based on the answers, the team will then develop the steps to address each issue. Hopefully, the cost side of these questions was modeled in the forecasts you prepared for the negotiations.

Some areas to examine as part of your integration project management plan:

    • CashWill customers change their deposit habits, directing to your lockbox or location? How will you communicate any change and in what timeframe? Will deposit activity change substantially (large individual deposits periodically or a significant volume of small transactions)? What about credit cards and ACH draws from customers or by vendors? Will vendor payments change to your bank or not? What does your bank need to know about any of these changes? Does this offer an opportunity to restructure bank fees? Does your current bank have the capacity to handle the potential changes or do you need a new relationship?
      Develop a timeline, specific steps, and responsibilities to address the answers.
    • Accounts Receivable – Are the payment terms similar to the current terms? Do the customers pay in the same way (ACH, direct deposit, lockbox, credit card)? Are expected customer balances higher or lower than your current business? How do the expected balances support any line of credit requirements? (Keep in mind an acquisition often includes either new banking needs or renegotiation of current requirements.) What are the implications of changes in distribution channels (adding online, a distributor network, retail locations or other)?
      Develop a timeline, specific steps, and responsibilities to address the answers. Notify customers of any changes in invoicing and deposit procedures, addresses or other changes. Address the transition as part of any long-term contracts as negotiated.
    • Inventory Do you have a comprehensive inventory procedure to employ to assure complete and accurate inventory. Will SKUs increase because of the acquisition? Will there be a consolidation of physical space deciding where, when, and how? How will inventory changes influence related costs (rent, shipping, employees, etc.)?
      Develop a timeline, outline specific steps and allocate responsibilities to address the answers.
    • Accounts PayableCan you consolidate purchasing power? How and when will you consolidate? Do vendor balances and expected payments vary from your business (large periodic payments or small regular payments)? How does that affect cash flow and bank balances?
      Develop a timeline, outline specific steps, and allocate responsibilities to address the answers. Notify vendors of any changes in billing and shipping addresses or other information. Address any long-term contracts as negotiated.
    • Debt – Typically, this changes with the acquisition. Do you have new covenants and reporting requirements?
      Develop a timeline, specific steps, and responsibilities to develop systems to assure compliance.
    • Negotiated Compliance – In the case of our acquisition, we had a lookback provision based on the actual revenue from customers in existence at the time of the acquisition. This required specific reporting for a class of customers. Does the agreement call for any specific reporting to the seller (often required with seller financing) or others involved in the transaction?
      Develop a timeline, specific steps, and responsibilities to develop systems to assure compliance.
    • Other changes – This is the laundry list of things that change because of any location, name, or other changes and often this simply means changing who pays the bill.
      • Update licenses (software, naming rights, etc.), leases, contracts, etc. according to negotiated or legal requirements.
      • Determine the use and integration of phone systems, ERP, CRM, or other systems and the transition plan. Obviously, a single line here understates what is involved. The initial evaluation establishes a timeline for decision and change, keeping in mind the 90-day window. Often an acquisition forces an upgrade in the systems due to volume and or changes in complexity. In the meantime, what actions are required to keep things running?
      • Change of physical space – Often there are long-term lease commitments to deal with. For example, in an acquisition that we did, we were responsible for some high rent space that no longer suited our needs. We moved to a new location (another set of to do’s) and sublet the space. While the sublet payments didn’t cover the entire cost, it did defray the out of pocket expenses. Consider areas you’re integrating two office cultures (which should have been a primary consideration in the acquisition decision), one location’s modern office space and the other’s dingy old warehouse, may breed discontent. It may mean your office space needs an upgrade.
      • New location – The outcome of the acquisition may mean relocating a distribution center more centrally or eliminating excess/redundant facilities. The complexity involves personnel, logistics, notices, etc. During integration project management and planning, the move and/or elimination timeline should begin within the 90-day window, thereby setting expectations. The plan itself need not be complete in that timeframe.

General integration concerns to be aware of:

  • If the reporting entities remain separate, define the allocation of the costs of any of the above.
  • Define the change in each team member’s role. Define the integration of new team members. Are there opportunities for growth on the team?
  • Communication styles play a big role in setting new team members up for success during the restructure. Using some initial testing (DiSC, Myers-Briggs, Culture Index) may help in smoothing potential communication missteps. Your management team can communicate in the way the new team member needs to hear it.

Initial definitions of the “why” and “what” of the integration will help your integration project management team to direct the initial planning. Comprehensive due diligence during this phase will lead to a smooth integration. Remember, this is a team effort and the successful integration is not fully on your shoulders… although sometimes it may feel like it.

If your company is going through an acquisition, you may need further help in the integration. I offer a 2-hour free consult and would be happy to help. Reach out and let me know how I can guide your acquisition process.

Featured image via Pxhere. All images licensed for use via Pxhere and Burst licensing.

Your business made an acquisition…now what? Navigating through post-acquisition territory can be a challenge. Here’s how to plan for this critical time.

Your company made an acquisition. Now what?
Now comes the easy part – NOT!!  Successful post-acquisition integration is more of an art than a science, but a solid implementation plan is critical.

Large companies typically have experienced integration teams that are trained to handle post-acquisition planning and still a significant number of acquisitions fail to perform as expected. Even with the right planning, running your company post-acquisition is a challenge.

How disruptive will the acquisition be to your day-to-day operations? The interruption often depends on the type of acquisition. If the acquisition is stand-alone, there may be little impact on the day-to-day function of your existing operations, whereas integration of a product line or acquisitions for economies of scale may be quite disruptive.

No matter what, as the CEO, you have a significant role to play.

Understanding the Impact Post-Acquisition

Any acquisition is culturally, economically, politically, and to some extent, personally disruptive to every team member of both companies. No matter how solid your team culture, expect some waves. An acquisition also creates uncertainty that often drives employees to exhibit self-preservation behavior.


Post-acquisition is the best time to sit down with your team and get on the same page for moving foward
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To counteract fear of change, it’s incumbent on leadership to communicate with the team. Clearly define the why and what of the acquisition plan. Work to create a shared vision and an environment of trust in the negotiation process. These actions will set up the basics for transparency and form a base of communication. Post-acquisition, this need for transparency still stands. Remember, once the acquisition is complete – communicate, communicate, communicate!


Timeliness of the communication during and post-acquisition is also critical. Immediately after the close, share the company vision with the entire team; explain the expected benefits for all members of the combined organization. Ensure consistent messaging throughout the entire organization.

Don’t make the mistake of assuming people will believe you. I was told that I would survive a merger at one point and, as you might imagine, I took a “we’ll see” attitude and covered my bases anyway. It’s instinctive for employees to protect their own interests.

Communication needs to be consistent, frequent, and ongoing. Err on the side of under-promising and over-delivering. To the extent possible, make any drastic changes within the first 30 days. Whether those changes include replacing management, eliminating duplicate positions, or selling off a product line, get the change over with! If there is unexpected bad news, be transparent explaining potential impact and your planned response.

If the acquisition is a stand-alone, you bought it (at least partially) for the management team; stay out of micromanaging operations and team communication. This does not mean abdicate. You should focus your role of bringing together the resources to gain the expected benefits such as purchasing power improvements or consolidated finance and accounting functions.

If the acquisition is fully integrated, the planning and process pre and post-acquisition are much more complex, broadly affecting the entire organization. Provide resources and tools to enable your team to implement the integration plan, optimize performance, and measure the benefits.

The Role of CEO Post-Acquisition

As the CEO, the team looks to you during a time of transition
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Chances are the acquisition was your brilliant idea, so now what?  In your role as CEO, you will guide the overall success of the acquisition. According to McKinsey, handle the integration well and you can expect 6 to 12% higher returns than those who don’t. Sounds hard, right? That’s why careful strategic planning is critical to your success.

Create DAY 1

As you negotiated the contract, certain performance will be required DAY 1. Creating DAY 1 means making sure that everyone hears the same message. DAY 1 is THE opportunity for a first impression.

  • Celebrate!!!! Whether individual events at multiple locations, a company sponsored lunch, a small gift or remembrance, or a giant teleconference, let everyone know DAY 1 is an important and exciting day. Acknowledge uncertainty, share pertinent details and set expectations. Explain the why and the what. Outline how the acquisition answers those questions.
  • Identify and introduce the integration team. Set the 3 top goals on the agenda for the transition.
  • Communicate directly with customers, vendors, and other stakeholders (using the stakeholder blog), prior to public announcements.
  • Issue the press release and let the world know of your new adventure. Use your social media platforms and website to share the message.
  • Perform formal onboarding for new team members.
  • If possible, meet individually with new team members and provide them with an overview of the vision, mission and their role in the combined company. Remember people often fear change. Explore their concerns and be prepared to address them as soon as possible. Be prepared for skepticism.

Pick Your Top 3 Post-Acquisition Goals

With your new management team, select the top 3 priorities for the post-acquisition integration. These should reflect the why that the acquisition answered. Once selected, engage SMEs (subject matter experts) in the areas of integration to build the timeline. This may mean directing Purchasing to renegotiate purchase contracts with your vendors, consolidating buying power, or conversion to a new ERP system.

Getting everyone to share the same vision and move in the same direction should occur within a 90-day window. The longer the timeframe it takes to implement, the more resistance the company may face internally. Don’t miss the opportunity to revamp and optimize systems. Limited resources mean selecting the best strategy to get the most done in the shortest time.

Pick the Right Team

Picking the right team for your post-acquisition goals is a key step in making an acquisition a success
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In my small company, my controller and I were the acquisition team. If possible, select people from both organizations as team leaders and make sure they understand the vision. Getting unbiased input is important, but you don’t need skeptics in leadership roles who are undermining the process.

Encourage the adoption of best practices from both organizations as the post-acquisition project plan is developed. As with any project plan, there should be SMEs involved from any area or subject affected by the acquisition. A detailed implementation plan is critical to successful integration. While a significant amount of the post-acquisition implementation can be boilerplate, it needs to reflect the negotiated items from the contract.


Your team looks to you, the CEO, as the rudder of the ship. The team wants to know the captain has the situation under control. Set expectations, measure results, keep the end in mind as the company navigates through the integration. Celebrate milestones and share progress reports (good and bad). Communicate.

Engage heavily with the new management team members to develop their trust. Engage new team members with existing team members both formally and informally to foster relationships and collaboration. Encourage broad communication of the messages up and down the organization. Participate.

Throughout the post-acquisition integration, encourage discourse on best practices, issues, changing roles, expectations, and concerns. Listen.

An acquisition could be a smart move for your company, provided it’s approached with deliberate planning and an understanding of the struggles that will arise. As the CEO, once you’ve started considering an acquisition, your work as a leader has just begun. Clear, consistent communication and planning are key. With the right approach, your company can emerge stronger and even better post-acquisition.

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Are your business forecasts missing important information? If you don’t forecast the balance sheet, you could be overlooking important data.

Dear CFO,
Whenever our business does forecasts, the owners only care about the P&L (Income Statement). As the Controller, I want the business forecast and budgets to include a balance sheet. How can I convince them it’s equally important to forecast the balance sheet?  I also need to develop a model to forecast the balance sheet, once I convince them.
Expanding my forecasts, Baltimore

It seems like most entrepreneurs only focus on the income statement. In my experience, that sets up the scenario of unexpected cash flow problems for the business.

As you know, the balance sheet is measured at a point in time and reflects all the assets (what is owned) and liabilities (what is owed). The balance sheet captures the net, representing the owner’s equity in the company or the fundamental accounting equation (assets = liabilities + equity). The income statement reflects activity over time.

Why Forecast the Balance Sheet?

Assets and Liabilities

Income, expenses, liabilities, and many other factors are all involved in forecasting the budget sheet
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Auditors typically focus on the balance sheet because it tells the whole story. If you know the beginning and ending assets and liabilities/equity, the income is the difference.

Each account in the balance should be reconciled to supporting documentation at each period end:

  • Cash: reconciled to bank statement.
  • Accounts Receivable: tied to the detail of what each customer owes.
  • Fixed Assets: supported by a list of assets that the company owns.
  • Accounts Payable: reconciled to vendor statements and agreed to the list of what is owed to each vendor.
  • Bank Debt: reconciled to bank loan statements.
  • Other Liabilities: the amounts owed to various sources such as payroll tax deposits, worker’s compensation insurance payments, etc.

By validating the beginning and ending balance sheet, there is a high confidence level in the income statement.

The forecast of income is critical, as it reflects the ability of the company to sell product, pay expenses, and make money. The problem is cash flow. The income statement captures only part of the cash-generation and/or need for cash, the other often over-looked piece of your financial forecast is the balance sheet.

When forecasting the income statement, many of the components have a complementary impact on the forecast of the balance sheet. The income statement tightly integrates with the balance sheet and that drives cash flow.

Balance sheet influences from sales growth:

  • A new customer with longer payment terms (most Fortune 500 have 90+ payment terms) results in increasing accounts receivable.
  • The inventory increases due to more SKUs or faster use of items.
  • Additional equipment purchases or plant expansion to meet the new demand.
  • Increasing repair and maintenance expenses may mean new equipment requirements in the near future.


Another often-overlooked aspect of the balance sheet is the owner’s equity section.

In most small businesses, the amount the owners pay themselves goes through the balance sheet as owners’ draws instead of the income statement as wages. This poses another dilemma when you only look at the income statement. If you don’t have both income and cash flow to support owner withdrawals, the equity section eventually becomes negative because the business is not supporting the amount the owner is withdrawing.

Forecasting the Balance Sheet

Forecasting your business's balance sheet is a detailed process, but when you have the right steps, it's a powerful business tool
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As with any forecast, when forecasting the balance sheet, you should start with what you know. You have historical information that you can use to analyze how the balance sheet changes in relation to the income statement. It is critical to adjust the historical information for new assumptions. For example, if the new growth is through a new customer with extended payment terms or if you are moving ahead with higher deposit requirements, that too will affect the balance sheet forecast.

Let’s start with how we might project the various components as we forecast the balance sheet.

  • Cash – usually a fixed dollar amount that reflects “normal” cash maintained in your bank.
  • Investments – often assumed to be at historical levels unless the forecast expects equipment or plant expansion or other cash need to “use” it.
  • Accounts Receivable – using a benchmark of historical day’s sales in receivable, you can project balances. Adjust this for acquiring customers that do not fit your history. For example, if a large component of your new sales is a 90-day customer, calculate what days sales would have looked like if that customer existed in the past and use that in the forecast.
  • Fixed Assets – consider equipment purchases and/or plant expansions. If you are operating at 80% of capacity and the projected sales growth takes you to 120%, anticipate the expansion with an estimate of the costs of the expansion. For an annual forecast, don’t worry that it may be a longer-term project or break it down year 1, year 2 etc. Don’t forget to adjust depreciation for the change in equipment, here and on the income statement.
  • Other Assets – since these aren’t normally significant, unless you have information to the contrary, use historical levels in terms of dollars, percentage of assets, or other reasonable correlation.
  • Accounts Payable – benchmarking historical payables, typically as they relate to cost of goods sold in manufacturing or total expenses in a service company, gives a reasonable estimate.
  • Other Liabilities – these typically reflect a single outstanding amount such as payroll deposits, an insurance amount, or a payroll and are not significant. Like Other Assets, these can reflect historical levels.
  • Equity – reflect owner draws and the forecasted income. Owners’ draws are particularly important, as this is the only place on the balance sheet they appear.
  • Debt – Use debt as the balancing item on the “balance” sheet. If you have a Line of Credit or Working Capital line dependent on Account Receivable take the appropriate % of receivable to record the amount of the line. If there are investments that you would rather use, adjust there before determining the amount of debt needed. Once all other balance sheet items are forecasted, use debt as the WITTB (an important accounting term meaning What it Takes to Balance) – or the plug.

Once you have done the detail calculations to forecast the balance sheet – DO NOT forget to review it for reasonableness. No matter how logical your assumptions seem, they may generate outcomes that don’t make sense. Look for them!

It’s also very wise to look at your debt agreements to see if your bank will support your forecast. Don’t project 200% sales growth, if you can’t finance it internally or externally. This is where logic and reasonableness come in.

Income Statement Forecast

Just a word here on the income statement forecast: while many income statement line items can be predicted from relationships to sales or historical relationships (fixed and variable components), most often sales predictions are too optimistic. It’s one thing to set stretch goals and quite another to tell your banker that’s the expectation.

While my bent is very conservative, I have seen too many plant expansions, office building moves, and hiring done in anticipation of the “forecasted” sales only to bring the business to its knees with cash flow problems. The mental and physical stress wears the business owner down and prevents actually getting the sales! Be reasonable.

If all of this sounds too complicated, I have a model that brings this into focus. Visit my website to contact me for a free 2-hour consultation.

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Wondering if an advisory board is a good move for your company? Implementing an advisory board is a great way to boost your company’s value.

What constitutes an advisory board? Who should participate on an advisory board? Is an advisory board the right fit for my business? While most private companies aren’t required to have a formal board of directors unless investors or their banks insist, advisory boards bring value to the business. Even if you are the sole owner of your company, there are many reasons why you should consider setting up an advisory board.

Definitions.net identifies the differences between a formal Board of Directors and an advisory board: “An advisory board is a body that advises the management of a corporation, organization, or foundation. Unlike the Board of Directors, the advisory board does not have authority to vote on corporate matters, nor a legal fiduciary responsibility.”

Why Engage an Advisory Board?

A well-selected advisory board adds significant value to your business. As a rule, any business can benefit from a group of wise and experienced outsiders who mentor, share successes and problems with the entrepreneur, and act as a sounding board. As an entrepreneur, you wear many hats and some hats fit better than others. An advisory board fills the gaps and provide guidance in areas where you have less knowledge and expertise.  Alternatively, you can form an advisory board for in-depth expertise in a particular area, such as forming a Medical Advisory Board if you are developing a new drug or medical device.

Considering an Advisory Board? Start Here.

A trustworthy board of advisors will help you put together the pieces of your business to help you achieve the visions you want for your business
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Who you are? Where you are in your business? What exactly do you need in terms of advisory services? Ask these types of questions to refine your thought process on an advisory board. Keep in mind, if you are not going to listen to the input of your board, don’t bother. An advisory board only works if you’re open to their suggestions.

Some questions to ask yourself as you consider implementing an advisory board:

  • Is your business growing? Do you feel you need input in areas outside your expertise such as sales and marketing or more technical fields such as engineering and accounting?
  • Are you considering a geographic expansion of your business? Are you looking for specific expertise in the expansion process itself or knowledge in the new geography?
  • Do you need help on the execution side of your vision?
  • Is industry upheaval requiring more specific industry insights?
  • Are you preparing for an acquisition, product launch, or other significant business change and seeking to avoid missteps?
  • Is your business in a rut? Are you out of new ideas?
  • Has a new competitor moved into your market and you need help responding to the new competitive landscape?
  • Is business running smoothly and are you just looking for suggestions to incrementally improve or monitor progress?
  • Are you willing to be open and honest about your company with outside advisors or will you hold back?
  • Can you deal with honest feedback – no matter what?
  • Can you accept change for the business, even if it goes against your likes and wants?
  • Are you organized enough to follow through on planning and preparing for the advisory board meetings to make productive use of board members time?
  • Are you primarily looking for mentors, a sounding board, accountability, help in dealing with issues, or a specific issue?
  • Are you willing to broaden your thinking based on the insights of the advisory board?

I repeat, if you aren’t going to listen (even though the final decision to implement the advice rests with you) then don’t bother!

Understanding The Who and What of the Advisory Board

Who should sit on the advisory board?

After defining the purpose of the advisory board, the first characteristic to consider is expertise and experience for the role; members who can bring an outside perspective and judgment. Defining what is outside may require thinking broadly. Board diversity brings value, as a Credit Suisse Research Institute study of 2,360 companies showed. Those with at least one woman on the board performed 26% better than comparable companies did. Seeking out divergent opinions is important. Depending on the reason for the advisory board, types of diversity might include differences in geography, social status, technical skills, risk-taking temperament, industry, gender, national origin, etc.

Like your company culture, diversity on your advisory board brings value, whether better understanding your customer, your business, or just improving financial performance. In a diverse board of advisors, not everyone has to be an extrovert – just willing to state their opinion. Often introverts bring additional insights. Using a tool like DiSC or Myers Briggs to assist in communication across diverse members might also be helpful.

While each member of the advisory board should be committed to your success, if you seek only those who agree with you and offer a similar perspective, there’s not much point in forming a board of advisors.

What does an advisory board look like?

Selecting members for your board of advisors might be a challenging process, but having diversity in opinions is a benefit
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A highly effective advisory board needs chemistry and operates within a culture of trust. Effective boards function with dissension and candid conversation. This isn’t easy. Susan Scott’s book “Fierce Conversations” provides tips for getting there.

Advisory boards are not ad hoc events. To be respectful of members’ time and gain insights, highly effective boards of advisors have:

  • A focused objective.
  • A definition of quality participation and contribution expected.
  • A defined term of service (2 or 3-year terms).
  • 3 to 8 members.
  • A deep respect for the knowledge brought by each member.
  • Meetings regularly (quarterly) for a specific duration with a formal agenda and a 12 to 18-month schedule.
  • Agendas and needed prep work distributed with adequate time for review.
  • A standard format for materials provided that is of an appropriate quantity and quality to serve its purpose (unbiased summaries and quick visuals).
  • A trained facilitator or chairman keeping focus and timetables.
  • Periodic communication on “hot topics” and regular business updates.
  • Opportunities to develop personal relationships (dinners, events, outings).
  • A compensation plan (ranging from paying for travel and lodgings to actual money).
  • Members that aren’t employees; outside professionals minimize any self-interest.
  • A plan to disband after completing objectives and retire members who are no longer contributing.

Creating the Advisory Board

After the self-analysis and formalizing the process, you are ready to draft the charter that will clearly communicate the expectations for the board of advisors. Be thorough in your thought process so expectations are clear to those you will approach to join the advisory board.

The charter might look like this:

My company seeks to improve profitability and growth through a six-person board of advisors. Individuals who can contribute will bring technical and industry expertise and have a record of accomplishment. The responsibilities of the advisors:

  • Contribute expertise and ideas to support growth and profitability, as well as the ability to address other issues as they arise.
  • Attend four meetings per year, at least one in person.
  • Review monthly reporting package and be available for questions.
  • Prepare for the quarterly meetings in advance.

The term of service is at least one year, and compensation includes travel and lodging expenses and a stipend of $1500 per year.

The charter may be expanded if there are specific additional considerations (for example, reviewing and commenting on FDA paperwork in the case of a new drug).

To recruit for the advisory board, use your network and those of colleagues. Seek out potential members while keeping in mind the criteria previously identified. A high-functioning advisory board can move your business forward quicker and more successfully than you alone are likely to do. Giving serious consideration to creating an advisory board is the right move for many companies.

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Wondering how to organize those key performance indicators? A KPI dashboard is an essential way to organize the data in one spot. Here’s how to set up a KPI dashboard.

Dear CFO,
My boss recently came back from a seminar and was excitedly going on about setting up a KPIs and dashboards. Is this a new flavor of the day or are the KPIs and dashboards valuable tools for running the company? It seems it’s my job to start the process of collecting and presenting the key performance data.
Wanting to Make a Meaningful Contribution in Kansas City

I can relate to the “flavor of the day” business conundrum, but KPIs aren’t one of them. The term KPI (Key Performance Indicator) has been around for quite a while. One article described KPI as a term that “some brainiac coined … to help identify details that matter for businesses.” Details THAT matter vary BY business, of course, but there are commonalities. Often, the financial area is an effective starting point for developing KPIs and tracking them within the KPI dashboard, primarily because the financial systems already have a lot of numbers available and benchmarks to compare them.

In fact, whether or not you actually call them KPIs, the numbers you track every day, month, or year are likely KPIs. For example, comparing today’s sales from your POS (point of sale system) to yesterday’s is a KPI. Analyzing the financial statement margins by region compared to your budget, industry, and prior year are the top level of KPI analysis.

KPI Works from the Bottom Up

A KPI dashboard is a great way to track goals, progress, and even where to improve your processes
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Rather than identifying a problem at the top level, design your key performance indicators and KPI dashboards to identify the results and issues from the bottom up. Rather than using sales by product line to identify product mix differences within the region, and then further “drilling down” to look at the performance of individuals, a sales dashboard should identify the individual performance, product mix, or another KPI driving the variance. The department head is then responsible for flagging and explaining variances, as well as addressing the plan to meet benchmarks or goals.

KPIs should drive decisions and lead to action. Obviously, the financial department would have limited reach in the above example situation. Senior management must lead, as well as hold all team members accountable.

Common attributes of a good KPI include:

  • Well-defined, measurable information that is readily available or cost-effectively obtained.
  • Measuring a factor that has a direct impact on a specific goal or long-term performance.
  • Effective communication of the performance standards throughout the company, cascaded to responsible departments.
  • Actionable results. You should be able to act on it, holding team members accountable when the indicator digresses from the goal.

Where to Start with Key Performance Indicators

The financial area of your business is often the moderator of the “readily available or cost-effectively obtained” indicator. Frequently, there is so much enthusiasm for the implementation of KPIs that there are too many measures. As a result, it becomes too time-consuming to collect the data and everyone quickly loses interest.

I suggest starting with a few readily available metrics in each department:

  1. Identify 1-3 key performance indicators meaningful to the performance for each level of the company. Don’t overdo it with the number of indicators you take on at once. For company goals, cascade down; for operating objectives (benchmarks), work from the bottom up. Collections and Accounts Receivable may measure accounts over 90 days against a benchmark (less than 5% of total receivables) or a goal (reducing aging of over 90-day accounts to less than 5% of total receivables – thereby expecting a downward trend). Sales might measure against a goal (5 new customers each month or increasing average ticket to $500 or increase close rate to 50%). Check out this smorgasbord of KPI choices to help you get started – don’t pick too many!
  2. Determine the best time frame for setting and evaluating goals/benchmarks. Are you seasonal and therefore monthly goals vary significantly? Can you set an annual goal and expect to capture 1/12 of the goal each month? Do you expect it to take 6 months to reduce the 90-day receivables or is the goal to reduce by the end of the year?
  3. Determine the data elements needed to get the data for your KPI dashboard. For example, does the accounting system age accounts receivable? Is the average dollar value of the ticket available (or the elements needed – the number of tickets and sales dollars)? Is there a sales funnel that measures conversion to sales?
  4. If the data elements aren’t readily available, identify what needs to happen to get the needed data and whether are you able to capture and use it cost-effectively.
    • Review the existing systems within your organization to determine where to potentially capture the data. For example, to measure pipeline, you need to know outstanding quotes. Do you track quotes? If you track quotes, do you “close” them when it becomes evident you aren’t getting the business? Do quotes over x days still belong in the pipeline? Does your system track history to identify how many quotes convert to actual business?
    • The key to readily available data is taking full advantage of proper set up of your systems. What are the capabilities of your systems? CRM systems usually measure the sales funnel (calls to quotes to order). Basic accounting systems often have industry specific processing that can collect data (QuickBooks allows for the classification of quotes – won/lost, etc.)
    • Beware of GIGO (garbage in/garbage out). With any system, there are ways to scam or carelessly enter data. Optimizing the systems to capture data as it occurs increases the likelihood of complete and accurate data. For example, if all sales calls are required to go through the system, quotes prepared in the system, quotes converted to orders, and orders invoiced, there is little room for finagling. The process itself encourages accuracy.
  5. Everyone in the company must understand their role in the KPI implementation and why it’s important. Everyone means everyone: CEO, department head, and support personnel. Senior management must lead and enforce accountability as well as monitor response to variances from benchmarks or goals through a well-defined reporting structure.
  6. Verify the accuracy of the metrics on a periodic basis, as well as the reporting and actions. Incorporate this process into the monthly financial statement close and manager’s meetings at the direction of the CEO.

Establishing a KPI Dashboard to Manage the Information  

A KPI dashboard should be implemented and useful at all levels of your business - from the CEO to assistants and managers
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A KPI dashboard visually represents the performance of KPIs against benchmarks or goals. The most detailed KPI dashboard is at the lowest level of the company and the KPIs and related progress are consolidated as they move higher in the organization.

  1. Determine the parameters used to judge the performance against a goal. If you are 10% below your goal, should you take corrective action or just investigate? Should your company be 75% of the way to the target on September 30th or is your business seasonal (like retail) and only expected to be at 20% of the goal? The choice of percent vs. dollars isn’t critical to the success of the KPI dashboard, but rather that the KPIs are clear. Each person in the company should have the capacity and resources to reach their benchmarks.
  2. Determine a visual representation of the KPI at each level of the organization.
    • Department level – In the sales department, you may choose racehorses staggered with the “closest to goal” salesperson in the lead (whether the salesperson is closest to achieving the percent of the goal or the actual dollars). The achievement of the accounts receivable aging goal (reduce 90-day accounts to < 5% of total receivables) might show a trend line in green if it’s heading in the right direction or simply highlight the percent in red if going the wrong direction.
    • Senior management – The KPI dashboard may only show year-to-date sales with a color (red, yellow/amber, green) to show the progress. This KPI dashboard may not even reflect a report on the accounts receivable unless the A/R was off track or had a significant impact on cash flow. Consolidate data as you move up the hierarchy.
    • Some departments in your company may need more fun and competition to motivate them. Others may find success by staying focused on day-to-day performance. Keep the company culture and culture of the individual departments in mind as you plan your KPI dashboards.

Once a year, as part of your planning process, evaluate the efficacy and importance of the KPIs you’ve selected as your measurements. You may find the need to change them, add new indicators, and eliminate those that no longer add value. System improvements for data collection and evaluation can become part of the next year’s KPIs and should be added to your KPI dashboard to give you a constant snapshot of your company.

If the list of potential KPIs or keeping track of the data via a KPI dashboard still seems overwhelming, you’re welcome to contact me for a free 2-hour consultation.

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